Rule 424(b)(3)
File No. 333-72304
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 21, 2001)
U.S. $1,380,000,000
[PITNEY BOWES LOGO]
GLOBAL MEDIUM-TERM NOTES
----------
Pitney Bowes Inc. may use this prospectus supplement to offer the notes
from time to time.
The following terms may apply to the notes. The final terms of each note
will be described in a pricing supplement.
o They will mature twelve months or more after their date of issue.
o They will not be redeemable by us or repayable at the option of the
holder, unless the pricing supplement states otherwise.
o They may be denominated in U.S. dollars or in a foreign currency or
composite currency.
o They may bear interest at a fixed or floating interest rate, may be
issued at a discount and may be zero coupon notes that do not bear
interest. Floating interest rates may be based on any of the following
formulas:
-- commercial paper rate -- CD rate
-- LIBOR -- CMT rate
-- EURIBOR -- federal funds rate
-- prime rate -- another rate specified in the
-- treasury rate pricing supplement
o They may be issued as indexed notes.
o They may be issued in individually certificated or book-entry form.
o Interest will be paid on fixed rate notes on February 1 and August 1
of each year and at maturity, unless otherwise specified in a pricing
supplement. Interest will be paid on floating rate notes on dates
determined at the time of issuance and specified in a pricing
supplement.
o They will be issued in minimum denominations of $1,000 and multiples
of $1,000, unless otherwise specified in a pricing supplement.
o They will have an aggregate initial offering price not greater than
U.S. $1,380,000,000 (or the equivalent thereof in other currencies) or
any greater or lesser amount that we may specify from time to time in
a subsequent prospectus supplement.
o They will be offered from time to time on a reasonable best efforts
basis by the agents named below on our behalf. In addition, the agents
may purchase notes from us for resale to investors, and we may sell
notes directly to investors on our own behalf where legally permitted.
Application has been made for notes issued during the period of twelve
months from the date of this prospectus supplement to be listed on the
Luxembourg Stock Exchange. Each pricing supplement with respect to notes which
are to be so listed will be delivered to the Luxembourg Stock Exchange on or
before the date of issue of those notes. We may also issue notes which will not
be listed on any securities exchange or which will be listed on additional or
other securities exchanges. We will specify in the pricing supplement whether
the notes will be listed on the Luxembourg Stock Exchange or another securities
exchange or will be unlisted.
We expect to receive between $1,377,930,000 and $1,369,650,000 of the
proceeds from the sale of the notes after paying estimated agents' commissions
of between $2,070,000 and $10,350,000 (or the equivalent thereof in other
currencies) and before deducting the expenses of the offering of the notes
estimated by us at $300,000. The exact proceeds to us will be set at the time of
issuance.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
JPMORGAN
ABN AMRO INCORPORATED
BARCLAYS CAPITAL
CITIGROUP
DEUTSCHE BANK SECURITIES
GOLDMAN, SACHS & CO.
MORGAN STANLEY
April 18, 2003
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT PAGE
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Incorporation by Reference .............................................. S-3
Ratio of Earnings to Fixed Charges ...................................... S-3
Capitalization .......................................................... S-4
Summary Financial Data .................................................. S-5
Management .............................................................. S-6
Description of Notes We May Offer ....................................... S-7
Risks Relating to Indexed Notes ......................................... S-31
Foreign Currency Risks .................................................. S-33
United States Taxation .................................................. S-34
Supplemental Plan of Distribution ....................................... S-39
Validity of Notes ....................................................... S-41
Listing and General Information ......................................... S-41
Annex A--Form of Pricing Supplement ..................................... S-43
PROSPECTUS PAGE
----
About This Prospectus ................................................... 2
Special Note Regarding Forward-Looking Statements ....................... 2
Pitney Bowes Inc. ....................................................... 3
Use of Proceeds ......................................................... 3
Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed
Charges and Preferred and Preference Stock Dividends ................. 4
Description of Debt Securities .......................................... 5
Description of Preferred Stock and Preference Stock ..................... 14
Description of Common Stock ............................................. 17
Description of Depositary Shares ........................................ 23
Plan of Distribution .................................................... 25
Validity of the Securities .............................................. 26
Experts ................................................................. 26
Where You Can Find More Information ..................................... 26
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus supplement and the accompanying prospectus. We are
offering to sell the notes and seeking offers to buy the notes only in
jurisdictions where offers and sales are permitted. The information contained in
this prospectus supplement and the accompanying prospectus is accurate only as
of the date of this prospectus supplement and the date of the accompanying
prospectus, regardless of the time of delivery of this prospectus supplement and
the accompanying prospectus or any sale of the notes.
This prospectus supplement and the accompanying prospectus include
particulars given in compliance with the rules governing the listing of
securities on the Luxembourg Stock Exchange. The Luxembourg Stock Exchange takes
no responsibility for the contents of this document, makes no representation as
to its accuracy or completeness, and expressly disclaims any liability
whatsoever for any loss howsoever arising from or in reliance upon the whole or
any part of the contents of this prospectus supplement and the prospectus. We
accept full responsibility for the accuracy of the information contained in this
prospectus supplement and the accompanying prospectus and, having made all
reasonable inquiries, confirm that to the best of our knowledge and belief there
are no other facts the omission of which would make any statement contained in
this prospectus supplement and the accompanying prospectus misleading.
Unless the context indicates otherwise, the words "Pitney Bowes", "we",
"our", "ours" and "us" refer to Pitney Bowes Inc., and the words "you" and
"your" refer to holders and owners of beneficial interests in the notes.
S-2
INCORPORATION BY REFERENCE
We file annual, quarterly and special reports and other information with
the SEC. You may read and copy any document we file at the SEC's Public
Reference Room located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the Public Reference
Room. You may also read our SEC filings, including the complete registration
statement and all of the exhibits to it, on the SEC's web site at
http://www.sec.gov. Copies of our SEC filings will also be available free of
charge at the main office of Dexia Banque Internationale a Luxembourg S.A. in
Luxembourg.
The SEC allows us to "incorporate by reference" much of the information we
file with them, which means that we can disclose important information to you by
referring you directly to those publicly available documents. The information
incorporated by reference is considered to be part of this prospectus
supplement. In addition, information we file with the SEC in the future will
automatically update and supersede information contained in this prospectus
supplement and the accompanying prospectus.
In addition to the documents listed in the accompanying prospectus, we
incorporate by reference the documents listed below and any filings we make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, as amended, until we sell all of the debt securities we are offering
with this prospectus supplement:
o Our Annual Report on Form 10-K for the year ended December 31, 2002,
which incorporates by reference portions of our definitive proxy
statement filed on March 26, 2003.
o Our Current Reports on Form 8-K filed on January 30, March 19 and
April 17, 2003.
RATIO OF EARNINGS TO FIXED CHARGES
The following table presents the ratio of our earnings to fixed charges
excluding minority interest for the years indicated:
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
2002 2001 2000 1999 1998
------ ------ ------ ------ ------
3.72 4.19 4.21 4.66 3.78
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.
These ratios have been reclassified to reflect (1) the discontinued
operations associated with the spin-off of Pitney Bowes' Office Systems
business, now known as Imagistics International Inc., on December 3, 2001; (2)
the sale of Atlantic Mortgage & Investment Corporation in 2000; and (3) the sale
of operations and assets of Colonial Pacific Leasing Corporation in 1998.
Interest expense and the portion of rent which is representative of the interest
factor of these discontinued operations have been included in fixed charges in
the computation. If these amounts had been excluded, the ratio of earnings to
fixed charges excluding minority interest would be 3.72 for 2002, 4.35 for 2001,
4.37 for 2000, 4.92 for 1999 and 4.42 for 1998.
S-3
CAPITALIZATION
The following table shows our consolidated capitalization as of December
31, 2002:
DECEMBER 31,
2002
--------------
(IN THOUSANDS)
Notes payable and current portion of long-term obligations ....... $ 1,647,338
Long-term debt ................................................... 2,316,844
Preferred stockholders' equity in a subsidiary company ........... 310,000
Stockholders' equity:
Cumulative preferred stock, $50 par value, 4% convertible
(600,000 shares authorized; 488 shares outstanding) ......... 24
Cumulative preference stock, no par value, $2.12 convertible
(5,000,000 shares authorized; 52,897 shares outstanding) .... 1,432
Common stock, $1 par value (480,000,000 shares authorized;
235,373,782 shares outstanding)(1) .......................... 323,338
Capital in excess of par value ................................... --
Retained earnings ................................................ 3,848,562
Accumulated other comprehensive income ........................... (121,615)
Treasury stock, at cost .......................................... (3,198,414)
-----------
Total stockholders' equity .................................... $ 853,327
-----------
Total capitalization ........................................ $ 5,127,509
===========
----------
(1) Net of 87,964,130 shares of treasury stock and excluding 21,174,613 shares
reserved for issuance upon exercise of outstanding stock options and
conversion of outstanding preferred shares and preference shares.
Except as described in this prospectus supplement, the accompanying
prospectus or in the documents incorporated by reference in the accompanying
prospectus, there has been no material change in our consolidated capitalization
since December 31, 2002.
S-4
SUMMARY FINANCIAL DATA
We derived the information presented below from our audited financial
statements for the years presented. The information is only a summary and you
should read it together with the financial information incorporated by reference
in the accompanying prospectus.
YEAR ENDED DECEMBER 31,
---------------------------------------
1999 2000 2001 2002
------- ------- ------- -------
(IN MILLIONS)
INCOME STATEMENT DATA:
Total revenues ......................... $ 3,812 $ 3,881 $ 4,122 $ 4,410
Costs and expenses ..................... 2,988 3,078 3,356 3,790
Income from continuing operations before
income taxes ......................... 824 803 766 619
Provision for income taxes ............. 261 240 252 182
Income from continuing operations ...... 563 563 514 438
Discontinued operations ................ 73 64 (26) 38
Cumulative effect of accounting change . -- (5) -- --
Net income ............................. $ 636 $ 623 $ 488 $ 476
DECEMBER 31,
---------------------------------------
1999 2000 2001 2002
------- ------- ------- -------
(IN MILLIONS)
BALANCE SHEET DATA:
Cash and cash equivalents .............. $ 254 $ 198 $ 232 $ 315
Total assets ........................... 8,223 7,901 8,318 8,732
Long-term debt ......................... 1,998 1,882 2,419 2,317
Stockholders' equity ................... 1,626 1,285 891 853
S-5
MANAGEMENT
DIRECTORS
NAME POSITION
----- ------------------------------------------------------------------------------
Linda G. Alvarado .......... President and Chief Executive Officer, Alvarado Construction, Inc.
Colin G. Campbell .......... Chairman and President, The Colonial Williamsburg Foundation
Michael J. Critelli ........ Chairman and Chief Executive Officer, Pitney Bowes Inc.
Jessica P. Einhorn ......... Dean, Paul H. Nitze School of Advanced International Studies of the
Johns Hopkins University
Ernie Green ................ President, Ernie Green Industries, Inc.
Herbert L. Henkel .......... Chairman, President and Chief Executive Officer, Ingersoll-Rand Company Limited
James H. Keyes ............. Chairman, Johnson Controls, Inc.
John S. McFarlane .......... Former President and Chief Executive Officer, Nexsi Systems Corporation
Eduardo R. Menasce ......... President, Enterprise Solutions Group, Verizon Communications Inc.
Michael I. Roth ............ Chairman and Chief Executive Officer, The MONY Group Inc.
David L. Shedlarz .......... Executive Vice President and Chief Financial Officer, Pfizer Inc.
Robert E. Weissman ......... Retired Chairman, IMS Health Incorporated
EXECUTIVE OFFICERS
NAME POSITION
----- ------------------------------------------------------------------------------
Michael J. Critelli ........ Chairman and Chief Executive Officer
Brian M. Baxendale ......... Executive Vice President and President, Enterprise Relationship Development
Gregory E. Buoncontri ...... Senior Vice President and Chief Information Officer
Michele Coleman Mayes ...... Senior Vice President and General Counsel
Karen M. Garrison .......... Executive Vice President and Group President, Pitney Bowes Business Services
Arlen F. Henock ............ Vice President-Finance
Luis A. Jimenez ............ Senior Vice President and Chief Strategy Officer
Matthew S. Kissner ......... Executive Vice President and Group President, Information Based Solutions and
Document Messaging Technologies
Murray D. Martin ........... Executive Vice President and Group President, Global Mailing Systems
Bruce P. Nolop ............. Executive Vice President and Chief Financial Officer
Johnna G. Torsone .......... Senior Vice President and Chief Human Resources Officer
The business address for each of the above persons and the location of our
principal executive offices are One Elmcroft Road, Stamford, Connecticut
06926-0700, United States.
S-6
DESCRIPTION OF NOTES WE MAY OFFER
This section is a summary of the material terms that are common to the
particular debt securities offered here, referred to as notes. This summary
supplements, and is qualified by reference to, the description of the general
terms and provisions of the debt securities in the accompanying prospectus that
is attached to this prospectus supplement. However, if any particular term of
the notes described here is inconsistent with any general terms described in the
accompanying prospectus, the particular term will control.
When we issue any particular note or notes, we will specify their
particular terms in a pricing supplement to this prospectus supplement. The
terms of any particular notes may be different from or in addition to the terms
summarized here. The interest-related information described here or in the
accompanying prospectus does not apply to zero coupon notes, which are described
below.
In this section, we use some terms that have been given special meaning in
the senior debt indenture or the notes or explained in the accompanying
prospectus. You should refer to the accompanying prospectus and to the senior
debt indenture, which has been filed with the SEC as an exhibit to the
registration statement, for a complete definition of these terms. See "Where You
Can Find More Information" in this prospectus supplement for information about
how to obtain a copy of the senior debt indenture. We have also provided
definitions for some of the more important terms here.
When we say "holders" in this section, we mean those who own notes
registered in their own names and not those who own beneficial interests in
notes registered in "street name" or in book-entry notes held through a
depositary and represented by a global note or notes. Owners of beneficial
interests in the notes should read the subsection below entitled "--Book-Entry
System" and the subsection entitled "Description of Debt Securities--Global
Securities" in the accompanying prospectus for information about procedures
applicable to indirect beneficial interests in notes.
The notes constitute a single series of senior debt securities ranking PARI
PASSU with each other under the senior debt indenture dated as of February 15,
2002 between us and SunTrust Bank, as trustee. We explain what the senior debt
indenture is on page 5 of the accompanying prospectus. The notes are limited in
their aggregate principal amount to U.S. $1,380,000,000, less an amount equal to
the aggregate offering amount of any other debt or equity securities we may
issue from time to time pursuant to the accompanying prospectus, including any
other series of medium-term notes. We may increase the size of this series if in
the future we determine that we may want to sell additional notes. For a
description of the rights attached to different series of debt securities under
the senior debt indenture, see "Description of Debt Securities" in the
accompanying prospectus.
We may, from time to time, without the consent of the holders of any notes,
reopen an issue of notes and issue additional notes with the same terms
(including maturity and interest payment terms) as notes issued on an earlier
date. After such additional notes are issued they will be fungible with the
previously issued notes to the extent specified in the applicable pricing
supplement.
STATED MATURITY AND MATURITY
The day on which the principal amount of your note is scheduled to become
due and payable is called the "stated maturity" of the principal, which will be
a date twelve months or more from the issuance date of the note. This date will
be specified on the face of the note and in the pricing supplement relating to
the note. The principal may become due and payable sooner, by reason of
redemption, acceleration after a default or otherwise. The day on which the
principal actually becomes due and payable, whether at the stated maturity or
earlier, is called the "maturity" of the principal.
We also use the terms "stated maturity" and "maturity" to refer to the
dates when other payments become due and payable. For example, we may refer to a
regular interest payment date when an installment of interest is scheduled to
become due as the stated maturity of that installment. When we refer to the
stated maturity or the maturity of a note without specifying a particular
payment, we mean the stated maturity or maturity, as the case may be, of the
principal.
S-7
CURRENCY OF NOTES
Amounts that become due and payable on your note will be payable in a
currency, including any composite currency, specified on the face of the note
and in the related pricing supplement. This specified currency may be U.S.
dollars, a foreign currency or a composite currency. In some cases, a note may
have different specified currencies for principal and interest. You will have to
pay for your notes by delivering the requisite amount of the specified currency
for the principal to an agent named in the related pricing supplement, unless
other arrangements have been made between us or between you and that agent. We
will make payments on your notes in the applicable specified currency, except as
otherwise described below under "-- Payment of Principal and Interest".
TYPES OF NOTES
We will issue two main types of notes, which are distinguishable by the
manner in which they bear interest:
o FIXED RATE NOTES. A note of this type will bear interest at a fixed
rate described in the applicable pricing supplement. Fixed rate notes
include zero coupon notes, which bear no interest and are instead
issued at a price lower than the principal amount.
o FLOATING RATE NOTES. A note of this type will bear interest at rates
that are determined by reference to an interest rate formula. In some
cases, the rates may also be adjusted by adding or subtracting a
spread or multiplying by a spread multiplier, and there may be a
minimum rate or a maximum rate. The various interest rate formulas,
including the commercial paper rate, the prime rate, LIBOR, EURIBOR,
the treasury rate, the CD rate, the federal funds rate and the CMT
rate, and other features are described below in "--Interest Rates
--Floating Rate Notes". If your note is a floating rate note, the
particular formula and any adjustments that apply to the interest rate
for your note will be specified or described in your pricing
supplement.
The notes may also be distinguished by the prices at which they are
originally issued or by the fact that the amounts payable on them at maturity or
otherwise will depend on variable factors. There are three types:
o ORIGINAL ISSUE DISCOUNT NOTES. A note of this type is issued at a
price lower than its principal amount and provides that, upon
redemption or acceleration of its maturity, an amount less than its
principal amount will be payable. A note issued at a discount from its
principal amount may, for U.S. federal income tax purposes, be
considered an original issue discount note, regardless of the amount
payable upon redemption or acceleration. See "United States
Taxation-Tax Consequences to United States Holders-Original Issue
Discount" below for further information about tax consequences of an
investment in original issue discount notes. An original issue
discount note may be a zero coupon note or may bear interest at a
fixed or floating rate.
o INDEXED NOTES. A note of this type provides that the principal amount
payable at its maturity, and/or the amount of interest payable on an
interest payment date, will be determined by reference to a currency
exchange rate, composite currency, commodity price or any other
financial or non-financial index described in your pricing supplement.
If you are a holder of an indexed note, you may receive a principal
amount at maturity that is greater than or less than the face amount
of your note depending upon the value of the applicable index at
maturity. That value may fluctuate over time. If you purchase an
indexed note, your pricing supplement will include information about
the relevant index and about how amounts to become payable will be
determined by reference to that index. You should read carefully that
information and the section below entitled "Risks Relating to Indexed
Notes".
o AMORTIZING NOTES. If you are a holder of an amortizing note, you will
receive payments of principal and interest in installments over the
life of the notes. Unless otherwise specified in your pricing
supplement, interest on each amortizing note will be computed on the
basis of a 360-day year of twelve 30-day months. Payments on
amortizing notes will be applied first to interest due and payable and
then to the reduction of the unpaid principal amount. Further
information concerning additional terms of amortizing notes will be
specified in your pricing supplement, including a table of repayment
information for the amortizing notes.
S-8
We may also issue notes whose maturity may be extended or which may be
renewed, as discussed below:
o EXTENSION OF MATURITY. The applicable pricing supplement may indicate
that we have the option to extend the stated maturity of any note,
other than an amortizing note, for one or more periods up to but not
beyond a date specified in the pricing supplement. If we have this
option, the pricing supplement will describe the procedures relating
to it.
o RENEWABLE NOTES. The applicable pricing supplement may indicate that
any note, other than an amortizing note, will mature unless the term
of all or any portion of the note is renewed as described in the
pricing supplement.
DENOMINATION OF NOTES
Unless we specify differently in the pricing supplement relating to your
note, the authorized denominations will be $1,000 and integral multiples of
$1,000 above that. If your note is denominated in a specified currency other
than U.S. dollars, the authorized denominations for that note will be 1,000
units of that specified currency and integral multiples of 1,000 units above
that unless we indicate otherwise in the applicable pricing supplement.
REDEMPTION AND REPAYMENT
Unless otherwise specified in your pricing supplement, we will not provide
any sinking fund for your note.
Unless the applicable pricing supplement specifies a redemption
commencement date, on which we may redeem a note, or a repayment date, on which
a note may be repayable at the option of the holder, the notes will not be
redeemable by us or repayable at the option of the holder before their stated
maturity.
If your pricing supplement specifies a redemption commencement date or
repayment date, your pricing supplement will also specify one or more redemption
or repayment prices, expressed as a percentage of the principal amount of your
note, and the redemption or repayment period or periods during which the
redemption prices or repayment prices will apply. If your note is redeemable at
our option or repayable at the option of the holder, as specified in your
pricing supplement, it will be redeemable or repayable only at any time on or
after the specified redemption commencement date or repayment date for a limited
period, as specified in your pricing supplement, at the specified redemption
price or repayment price applicable to the redemption period or repayment period
for your note together with interest accrued to the redemption date or repayment
date.
If we exercise an option to redeem any notes, we will give to the holder
written notice of the principal amount of the notes to be redeemed not less than
30 days nor more than 60 days before the applicable redemption date. We will
give the notice by first-class mail, postage prepaid, to the holder at the
address appearing in the security register. In the case of notes listed on the
Luxembourg Stock Exchange, we will also notify you and the Luxembourg Stock
Exchange in the manner specified under "--Notices".
If we redeem less than the entire principal amount of a note, the principal
amount of the note that remains outstanding after the redemption must be an
authorized denomination for that note and must not be less than the minimum
authorized denomination. If we redeem less than all the notes that have the same
terms to maturity, the trustee will select the notes to be redeemed by a method
that the trustee considers fair and appropriate.
If a note represented by a global note is repayable at the holder's option,
only the depositary or the common depositary, as the registered holder, can
exercise the repayment option. Any indirect beneficial owners who own beneficial
interests in the global note and wish to exercise a repayment option must give
proper and timely instructions to their banks or brokers through which they hold
their interests, requesting that they notify the depositary, as applicable, to
exercise the repayment option on their behalf. Different firms have different
deadlines for accepting instructions from their customers, and you should take
care to act promptly enough to ensure that your request is given effect by the
depositary or the common depositary before the applicable deadline for exercise.
STREET NAME AND OTHER INDIRECT BENEFICIAL OWNERS SHOULD CONTACT THEIR BANKS
OR BROKERS FOR INFORMATION ABOUT HOW TO EXERCISE A REPAYMENT OPTION IN A TIMELY
MANNER.
S-9
All instructions given by indirect beneficial owners to their banks or
brokers to exercise a repayment option will be irrevocable. In addition, at the
time any indirect beneficial owner gives instructions to exercise a repayment
option, the indirect beneficial owner must cause the bank or broker through
which he or she owns an interest in the global note to transfer the bank's or
broker's interest in the global note to the trustee.
If the option of the holder to elect repayment as described above is deemed
to be a "tender offer" within the meaning of Rule 14e-1 under the Securities
Exchange Act of 1934, as amended, we will comply with Rule 14e-1 as then in
effect to the extent applicable.
We may at any time purchase notes at any price or prices in the open market
or otherwise. Notes so purchased by us may, at our discretion, be held, resold
or surrendered to the trustee for cancellation.
REDEMPTION FOR TAX REASONS
If specified in the applicable pricing supplement that, as a result of:
o any change in or amendment to, or proposed change in or proposed
amendment to, the laws (including any regulations promulgated or
rulings published thereunder) of the United States or any political
subdivision thereof or therein affecting taxation, which becomes
effective after the date of the applicable pricing supplement or which
proposal is made after such date,
o any change in the official application or interpretation of such laws,
including any official proposal for such a change in the application
or interpretation of such laws, which change is announced or becomes
effective after the date of the applicable pricing supplement or which
proposal is made after such date, or
o any action taken by any taxing authority of the United States which
action is taken or becomes generally known after the date of the
applicable pricing supplement, or any commencement of a proceeding in
a court of competent jurisdiction in the United States after such
date, whether or not such action was taken or such proceeding was
brought with respect to us,
there is, in any such case, in the written opinion of independent legal counsel
to us of recognized standing, a reasonable possibility that we have or may
become obligated to pay additional amounts (as described below under "--Payment
of Additional Amounts"), then such notes may be redeemed, as a whole but not in
part, at our option at any time thereafter, upon notice to the trustee and the
holders of the notes as described above under "--Redemption and Repayment" at a
redemption price equal to 100% of the principal amount of the notes to be
redeemed together with accrued interest thereon to the date fixed for
redemption. Notwithstanding the above, we may not redeem the notes until such
time as we would be obligated to pay such additional amounts on the next
interest payment date.
PAYMENT OF ADDITIONAL AMOUNTS
If specified in the applicable pricing supplement, we will pay to any
non-United States holder (as defined below) such additional amounts as may be
necessary in order that every net payment in respect of the principal of or any
premium or interest on such note, after deduction or withholding by us or any
paying agent for or on account of any present or future tax, assessment or
governmental charge imposed upon or as a result of such payment by the United
States or any political subdivision or taxing authority thereof or therein, will
not be less than the amount provided for in such note to be then due and payable
before any such deduction or withholding for or on account of any such tax,
assessment or governmental charge. The foregoing obligation to pay such
additional amounts shall not apply to:
(a) any tax, assessment or other governmental charge which would not have
been so imposed but for:
o the existence of any present or former connection between the holder
(or a fiduciary, settlor, beneficiary, member or shareholder of, or
holder of a power over, such holder, if such holder is an estate,
trust, partnership or corporation) and the United States, including,
without limitation, the holder (or such fiduciary, settlor,
beneficiary, member, shareholder, or holder of a power) being or
having been a citizen or resident or treated as a resident thereof or
being or having been engaged in a trade or business therein or being
or having been present therein or having or having had a permanent
establishment therein; or
S-10
o the holder's present or former status as a personal holding company or
foreign personal holding company or controlled foreign corporation for
United States federal income tax purposes or corporation which
accumulates earnings to avoid United States federal income tax;
(b) any tax, assessment or other governmental charge to the extent that it
would not have been so imposed but for the presentation by the holder of such
note for payment on a date more than ten days after the date on which such
payment becomes due and payable or the date on which payment thereof is duly
provided for, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer, personal property or
excise tax or any similar tax, assessment or governmental charge;
(d) any tax, assessment or other governmental charge which is payable
otherwise than by withholding from payments in respect of principal of or any
premium or interest on any note;
(e) any tax, assessment or other governmental charge imposed on interest
received by a holder or beneficial owner of a note because such holder actually
or constructively owns 10% or more of the total combined voting power of all
classes of our stock entitled to vote within the meaning of Section 871(h)(3) of
the United States Internal Revenue Code of 1986, as amended;
(f) any tax, assessment or other governmental charge imposed as a result of
the failure to comply with certification, information, documentation, reporting
or other similar requirements concerning the nationality, residence, identity or
connection with the United States of the holder or beneficial owner of the note,
if such compliance is required by statute or by regulation of the United States
Treasury Department, as a precondition to relief or exemption from such tax,
assessment or other governmental charge (including backup withholding);
(g) any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of the principal of or any premium
or interest on any note, if such payment can be made without such withholding by
at least one other paying agent;
(h) any tax, assessment or other governmental charge required to be
withheld on a payment to an individual pursuant to any European Union Directive
on taxation of savings implementing the conclusions of the ECOFIN (European
Union's Economic and Finance Ministers) Council meeting of 26-27 November 2000
or any law implementing or complying with, or introduced in order to conform to,
such Directive; or
(i) any combination of items (a), (b), (c), (d), (e), (f), (g) and (h);
nor will such additional amounts be paid to any holder who is a fiduciary or
partnership or other than the sole beneficial owner of the note to the extent a
settlor or beneficiary with respect to such fiduciary or a member of such
partnership or a beneficial owner of the note would not have been entitled to
payment of such additional amounts had such beneficiary, settlor, member or
beneficial owner been the holder of the note.
The notes are subject in all cases to any tax, fiscal or other law or
regulation or administrative or judicial interpretation applicable thereto.
Except as specifically provided under this heading "--Payment of Additional
Amounts" and under the heading "--Redemption for Tax Reasons", we shall not be
required to make any payment with respect to any tax, assessment or governmental
charge imposed by any government or political subdivision or taxing authority
thereof or therein.
As used under this heading "--Payment of Additional Amounts" and under the
headings "--Redemption for Tax Reasons" and "United States Taxation--Tax
Consequences to Non-United States Holders", the term "United States" means the
United States of America (including the States and the District of Columbia) and
its territories, its possessions and other areas subject to its jurisdiction.
"United States holder" has the meaning set forth in "United States Taxation--Tax
Consequences to United States Holders" and "non-United States holder" has the
meaning set forth in "United States Taxation--Tax Consequences to Non-United
States Holders" below.
DEFEASANCE
Unless otherwise specified in the applicable pricing supplement, all of the
defeasance and covenant defeasance provisions of the indenture described under
"Description of Debt Securities--Defeasance and Discharge" and
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"Description of Debt Securities--Defeasance and Covenant Defeasance" in the
accompanying prospectus will apply to the notes. In general, we expect these
provisions to apply to each note that has a specified currency of U.S. dollars
and is not a floating rate or indexed note.
Under current federal income tax law, full defeasance and discharge of our
payment obligations with respect to the notes would be treated as a taxable
exchange of the notes for an issue of obligations of the defeasance trust or a
direct interest in the cash and securities deposited in the trust. In that case,
indirect beneficial owners of the notes would recognize gain or loss as if these
owners had actually received the trust obligations or the cash or securities
deposited, as the case may be, in exchange for their notes. After that, indirect
beneficial owners would be required to include in income an amount that might be
different from what would be includible in the absence of full defeasance and
discharge. We may only effect full defeasance if we deliver to the trustee an
opinion of counsel based on an IRS ruling or other change in U.S. federal income
tax law stating that the holders will not recognize any gain or loss for U.S.
federal income tax purposes as a result of this deposit, as discussed under
"Description of Debt Securities-Defeasance and Covenant Defeasance" in the
accompanying prospectus.
Under current federal income tax law, unless accompanied by other changes
in the terms of the notes, covenant defeasance would not be treated as a taxable
exchange. We may only effect covenant defeasance if we deliver to the trustee an
opinion of counsel stating that the holders will not recognize any gain or loss
for U.S. federal income tax purposes as a result of the deposit, as discussed
under "Description of Debt Securities--Defeasance and Covenant Defeasance" in
the accompanying prospectus.
INFORMATION TO BE CONTAINED IN YOUR PRICING SUPPLEMENT
The pricing supplement relating to your note will describe the following
terms:
o the specified currency with respect to your note and, if the specified
currency is other than U.S. dollars, specified other terms relating to
your note, including the authorized denominations and the exchange
rate agent which will determine the relevant exchange rate;
o the price, expressed as a percentage of the aggregate principal amount
of the notes to which the pricing supplement relates, at which your
note will be issued;
o the date on which your note will be issued;
o the date on which your note will mature;
o whether your note is a fixed rate note or a floating rate note;
o if your note is a fixed rate note, the annual rate at which the note
will bear interest, if any, and the interest payment date or dates, if
different from those specified below;
o if your note is a floating rate note, the interest rate basis for the
note and, if applicable, the calculation agent, the index maturity,
the spread or spread multiplier, the maximum rate, the minimum rate,
the initial interest rate, the interest payment dates, the regular
record dates, the calculation date, the interest determination dates
and the interest reset dates, all as described below, with respect to
the floating rate note;
o whether your note is an original issue discount note, and if so, the
yield to maturity;
o whether your note is an indexed note, and if so, the principal amount
of the note payable at stated maturity, or the amount of interest
payable on an interest payment date, as determined by reference to the
applicable index, in addition to other information relating to the
indexed note;
o whether your note is an amortizing note, and if so, repayment
information with respect to installments of principal and interest;
o whether your note may be redeemed at our option, or repaid at your
option, before the stated maturity and, if so, the provisions relating
to redemption or repayment;
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o whether we have the option to extend the stated maturity of your note,
as described under "--Types of Notes--Extension of maturity" above;
o whether your note is a renewable note, as described under "--Types of
Notes--Renewable notes" above;
o whether your note will be represented by a global note to be held only
in book-entry form or issued as an individual note in certificated
form and, if your note is to be held in book-entry form, information
with respect to the depositary or depositaries, the form of any
legends and any circumstances, in addition to those described under
"--Book-Entry System" below, in which the global note or notes may be
exchanged for individual notes in certificated form;
o whether your note will be listed on the Luxembourg Stock Exchange or
any other securities exchange or whether the notes will be unlisted;
and
o any other terms of your note consistent with the provisions of the
indenture.
If a note is issued as an individual note in certificated form, it may be
presented for registration of transfer or exchange at the corporate trust office
of the trustee in Atlanta, Georgia. You will not have to pay any service charge
for registration of transfer or exchange of any individual note in certificated
form, but we may require you to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with the transfer or
exchange.
INTEREST RATES
Interest rates offered by us on the notes may differ depending upon, among
other things, prevailing market interest rates and the aggregate principal
amount of notes purchased in any single transaction. We may change interest
rates or formulas and other terms of notes from time to time, but any change of
this kind will not affect any note already issued or as to which we have
accepted an offer to purchase.
FIXED RATE NOTES
Each fixed rate note, except any zero coupon note, will bear interest from
and including its date of issue or from and including the most recent date to
which interest on the note has been paid or duly provided for. Interest will
accrue on the principal of a fixed rate note at the fixed annual rate stated on
the face of the note and in the applicable pricing supplement until the
principal is paid or made available for payment. Unless otherwise specified in
the applicable pricing supplement, interest on each fixed rate note will be
payable semiannually each February 1 and August 1, which we call the "interest
payment dates", and at maturity or upon earlier redemption or repayment. Each
payment of interest due on an interest payment date will include interest
accrued to but excluding that interest payment date. Unless otherwise indicated
in the applicable pricing supplement, interest on fixed rate notes will be
computed on the basis of a 360-day year of twelve 30-day months. We will pay
interest on each interest payment date and at stated maturity or upon earlier
redemption or repayment as specified below under "--Payment of Principal and
Interest".
FLOATING RATE NOTES
Each floating rate note will bear interest from and including its date of
issue or from and including the most recent date to which interest on the note
has been paid or duly provided for. Interest will accrue on the principal of a
floating rate note at the annual rate determined according to the interest rate
formula stated in the note and in the applicable pricing supplement until the
principal is paid or made available for payment. We will pay interest on each
interest payment date and at maturity as specified below under "--Payment of
Principal and Interest".
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INTEREST RATE BASIS. We currently expect that we may issue floating rate
notes that bear interest at a rate based on one or more of the following base
rates:
o the commercial paper rate
o the prime rate
o LIBOR
o EURIBOR
o the treasury rate
o the CD rate
o the federal funds rate
o the CMT rate
We may also issue floating rate notes that bear interest at a rate based on
any other interest rate basis or formula that may be agreed to by us and the
purchaser of a note and stated in the applicable pricing supplement.
In some cases, the base interest rate for a floating rate note may be
adjusted by adding or subtracting a number of basis points, which we call a
"spread", or multiplying the base interest rate by a percentage, which we call a
"spread multiplier". One basis point is 0.01%. Your pricing supplement will
specify any spread or spread multiplier applicable to your note.
In some cases, the interest rate on a floating rate note will be affected
by the period to maturity of the instrument or obligation on which the interest
rate formula is based, as specified in the applicable pricing supplement. We
refer to this as the "index maturity".
The base rate, whether or not adjusted, may also be limited by a maximum
rate, a minimum rate or both. In addition, a floating rate note may bear
interest at the lowest or highest or average of two or more interest rate
formulas. If you purchase a floating rate note, your pricing supplement will
indicate your base rate and whether any of these other features will apply and,
if so, what they are.
Whether or not a maximum rate applies, the interest rate on a floating rate
note will in no event be higher than the maximum rate permitted by New York law,
as it may be modified by U.S. law of general application. Under present New York
law, the maximum rate of interest is 25% annually on a simple interest basis,
with some exceptions. This legal limit does not apply to floating rate notes in
which $2,500,000 or more has been invested.
The notes, including any zero coupon note, may be issued with original
issue discount as defined for U.S. federal income tax purposes. Holders of notes
issued with original issue discount may be required to include amounts of
accrued interest in gross income for federal income tax purposes before
receiving the cash to which that income is attributable. See "United States
Taxation--Tax Consequences to United States Holders--Original Issue Discount"
for further information about the federal income tax consequences of an
investment in notes issued with original issue discount.
INTEREST RESET DATES. The rate of interest on each floating rate note will
be reset daily, weekly, monthly, quarterly, semi-annually or annually on a date
called an "interest reset date", as specified in the applicable pricing
supplement. The interest reset date will be:
o for floating rate notes that reset daily, each "market day", as
defined in the third paragraph after this one;
o for floating rate notes, other than treasury rate notes, that reset
weekly, the Wednesday of each week;
o for treasury rate notes that reset weekly, the Tuesday of each week,
except as provided below;
o for floating rate notes that reset monthly, the third Wednesday of
each month;
o for floating rate notes that reset quarterly, the third Wednesday of
March, June, September and December;
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o for floating rate notes that reset semi-annually, the third Wednesday
of two months of each year as specified in the applicable pricing
supplement; and
o for floating rate notes that reset annually, the third Wednesday of
one month of each year as specified in the applicable pricing
supplement.
However, the interest rate in effect from the date of issue to the first
interest reset date for a floating rate note will be the initial interest rate
specified in the applicable pricing supplement. We refer to this rate as the
"initial interest rate".
If any interest reset date for any floating rate note would otherwise be a
day that is not a market day for the floating rate note, the interest reset date
for the floating rate note will be postponed to the next day that is a market
day for the floating rate note. However, in the case of a LIBOR note, if the
next market day is in the next succeeding calendar month, the interest reset
date will be the immediately preceding market day.
When we say "market day", we mean:
o with respect to any note, unless otherwise provided in this
definition, any day that is a "business day", as defined below, in The
City of New York;
o with respect to LIBOR notes only, any business day in The City of New
York that is also a "London business day", as defined below;
o with respect to notes denominated in a specified currency other than
U.S. dollars or euro only, any day that is a business day both in The
City of New York and in the principal financial center in the country
of the specified currency; and
o with respect to notes denominated in euro, any date that is a business
day in The City of New York that is also a day on which the
Trans-European Automated Real-Time Gross Settlement Express Transfer,
or TARGET, System or any successor system is open for business.
"Business day", when used with respect to any place, means each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in that place are authorized or obligated by law to close.
"London business day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
INTEREST DETERMINATION DATES. The interest rate that takes effect on an
interest reset date will be determined by reference to a particular date called
the "interest determination date" as follows:
o for a commercial paper rate note, for a prime rate note, for a CD rate
note, for a federal funds rate note and for a CMT rate note, the
second market day preceding the interest reset date;
o for a LIBOR note (other than LIBOR notes for which the index currency
is euro), the second London business day preceding the interest reset
date, except that the interest determination date pertaining to an
interest reset date for a LIBOR note for which the index currency is
pounds sterling will be that interest reset date;
o for a EURIBOR note or euro LIBOR note, the second TARGET settlement
day preceding the interest reset date; and
o for a treasury rate note, the day of the week in which the interest
reset date falls on which treasury bills would normally be auctioned.
Treasury bills are usually sold at auction on the Monday of each week,
unless that day is a legal holiday, in which case the auction is
usually held on the following Tuesday, except that the auction may be
held on the preceding Friday. If, as the result of a legal holiday, an
auction is so held on the preceding Friday, that Friday will be the
interest determination date for the interest reset date occurring in
the next succeeding week. If an auction date falls on any interest
reset date for a treasury rate note, then that interest reset date
will instead be the first market day immediately following that
auction date.
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CALCULATION DATES. As described in the preceding paragraph, the interest
rate that takes effect on a particular interest reset date is to be determined
by reference to the corresponding interest determination date. However, the
interest rate will actually be determined on the "calculation date". The
calculation date will be the earlier of the following:
o the tenth calendar day after the interest determination date or, if
that tenth calendar day is not a market day, the next succeeding
market day; and
o the market day immediately preceding the interest payment date or the
maturity date, whichever is the day on which the next payment of
interest will be due.
CALCULATION OF INTEREST. The calculation agent for any floating rate notes
will be specified in the applicable pricing supplement. So long as any floating
rate notes are listed on or by the Luxembourg Stock Exchange and the rules of
such exchange so require, we will maintain a calculation agent for such floating
rate notes, and we will notify the holders of such floating rate notes in the
manner specified under "--Notices" in the event that we appoint a calculation
agent with respect to such floating rate notes other than the calculation agent
designated as such in the applicable pricing supplement.
For each floating rate note, the calculation agent will determine, on the
corresponding calculation date, the interest rate that takes effect on each
interest reset date. In addition, the calculation agent will calculate the
amount of interest that has accrued during each interest period-that is, from
and including the original issue date, or the last date to which interest has
been paid or duly provided for, to but excluding the payment date. For each
interest period, the amount of accrued interest will be calculated by
multiplying the face amount of the floating rate note by an accrued interest
factor for the interest period. This factor will equal the sum of the interest
factors calculated for each day during the interest period. The interest factor
for each day will be expressed as a decimal. Unless otherwise specified in your
note and the applicable pricing supplement, the interest factor for each day
will be calculated by dividing the interest rate, also expressed as a decimal,
applicable to that day by 360, in the case of commercial paper rate notes, prime
rate notes, LIBOR notes, EURIBOR notes, CD rate notes and federal funds rate
notes, or by the actual number of days in the year, in the case of treasury rate
notes and CMT rate notes. The interest rate factor for notes to which two or
more interest rate formulas apply will be calculated in each period in the same
manner as if only the lowest or highest formula or the average of the formulas
applied, as described in the applicable pricing supplement.
The calculation agent will promptly notify the trustee (and, in the case of
floating rate notes listed on the Luxembourg Stock Exchange, the Luxembourg
paying agent) of each determination of the interest rate. The calculation agent
will also notify the trustee (and, in the case of floating rate notes listed on
the Luxembourg Stock Exchange, the Luxembourg paying agent) of the interest
rate, the interest amount, the interest period and the interest payment date
related to each interest reset date as soon as such information is available.
The trustee and the Luxembourg paying agent will make such information available
to the holders of such notes upon request and, in the case of notes listed on
the Luxembourg Stock Exchange, the Luxembourg Stock Exchange. The calculation
agent's determination of any interest rate, and its calculation of the amount of
interest for any interest period, will be final and binding in the absence of
manifest error.
All percentages resulting from any calculation relating to a note will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upwards. For
example, 9.876545% (or .09876545) will be rounded to 9.87655% (or .0987655) and
9.876544% (or .09876544) will be rounded to 9.87654% (or .0987654). All U.S.
dollar amounts used in or resulting from these calculations will be rounded to
the nearest cent or, in the case of notes denominated in a specified currency
other than U.S. dollars, to the nearest corresponding hundredth of a unit.
Amounts of one-half cent, or five one-thousandths of a unit, or more will be
rounded upward.
We describe below the methods for determining interest rates of the various
floating rate notes we may offer.
COMMERCIAL PAPER RATE NOTES. Commercial paper rate notes will bear interest
at rates calculated with reference to the commercial paper rate and the spread
or spread multiplier, if any, and will be payable on the dates specified on the
face of the commercial paper rate note and in the applicable pricing supplement.
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Unless otherwise indicated in the applicable pricing supplement, commercial
paper rate means, with respect to any interest reset date, the money market
yield, calculated as described in the second paragraph after this one, of the
annual rate, quoted on a bank discount basis, for the relevant interest
determination date for commercial paper having the specified index maturity as
published by the Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest Rates" or any successor
publication of the Board of Governors of the Federal Reserve System, which we
call "H.15(519)", under the heading "Commercial Paper-Non-financial".
If the commercial paper rate cannot be determined as described above, then
the rate will be determined in accordance with the following procedures:
o If that rate is not published before 3:00 P.M., New York City time, on
the relevant calculation date, then the commercial paper rate with
respect to the relevant interest reset date will be the money market
yield of that rate on the relevant interest determination date for
commercial paper having the specified index maturity as available
through the worldwide web site of the Board of Governors of the
Federal Reserve System at http://www.bog.frb.fed.us/releases/h.15/
update, or any successor site or publication of the Board of Governors
of the Federal Reserve System, which we call "H.15 daily update",
under the heading "Commercial Paper--Non-financial", or another
recognized electronic source. An index maturity of one month or three
months will be deemed to be equivalent to an index maturity of 30 days
or 90 days, as the case may be.
o If by 3:00 P.M., New York City time, on the relevant calculation date
that rate is not yet published in either H.15(519) or H.15 daily
update or another recognized electronic source, the calculation agent
will calculate the commercial paper rate with respect to that interest
reset date, and that rate will be the money market yield of the
arithmetic mean of the offered annual rates, as of 11:00 A.M., New
York City time, on that interest determination date, of three leading
dealers of commercial paper in The City of New York selected by the
calculation agent for commercial paper of the specified index maturity
placed for an industrial issuer whose senior unsecured bond rating is
"AA", or the equivalent, from a nationally recognized rating agency.
These three dealers may include one or more of the agents named on the
cover of this prospectus supplement or their affiliates.
o If fewer than three dealers selected by the calculation agent are
quoting as mentioned above, the commercial paper rate with respect to
that interest reset date will be the commercial paper rate in effect
on that interest determination date or, if that interest determination
date is the first interest determination date, the initial interest
rate.
When we say "money market yield", we mean a yield, expressed as a
percentage, calculated in accordance with the following formula:
money market yield = 100 x 360 x D
---------------
360 - (D x M)
In the above formula, "D" refers to the annual rate for commercial paper
quoted on a bank discount basis and expressed as a decimal; and "M" refers to
the actual number of days in the period from the interest reset date to but
excluding the next interest reset date, or the maturity, redemption or repayment
date, as appropriate.
PRIME RATE NOTES. Prime rate notes will bear interest at rates calculated
with reference to the prime rate and the spread or spread multiplier, if any,
and will be payable on the dates specified on the face of the prime rate note
and in the applicable pricing supplement.
Unless otherwise indicated in the applicable pricing supplement, prime rate
means, with respect to any interest reset date, the rate stated for the relevant
interest determination date in H.15(519) under the heading "Bank Prime Loan" or
any successor heading.
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If the prime rate cannot be determined as described above, the rate will be
determined in accordance with the following procedures:
o If that rate is not published before 3:00 P.M., New York City time, on
the related calculation date, then the prime rate will be the rate on
the relevant interest determination date as published in H.15 daily
update opposite the caption "Bank Prime Loan" or another recognized
electronic source.
o If that rate is not published before 3:00 P.M., New York City time, on
the relevant calculation date in either H.15(519) or H.15 daily update
or another recognized electronic source, then the prime rate with
respect to that interest reset date will be the arithmetic mean of the
rates of interest publicly announced by each bank that appears on the
"Reuters Screen USPRIME1 Page" as that bank's prime rate or base
lending rate as in effect for that interest determination date. The
"Reuters Screen USPRIME1 Page" is the display designated as page
"USPRIME1" on the Reuters Monitor Money Rates Service, or any
successor service, or any other page that may replace the USPRIME1
page on that service or any successor service for the purpose of
displaying prime rates or base lending rates of major United States
banks.
o If fewer than four rates as described in the preceding bullet point
appear on the Reuters Screen USPRIME1 Page for that interest
determination date, the prime rate with respect to that interest reset
date will be the arithmetic mean of the prime rates or base lending
rates, quoted on the basis of the actual number of days in the year
divided by 360, as of the close of business on that interest
determination date by four major money center banks in The City of New
York selected by the calculation agent. These banks may include
affiliates of the agents named on the cover of this prospectus
supplement.
o If fewer than four quotations as described in the preceding bullet
point are so provided, then the prime rate will be the arithmetic mean
of four prime rates, quoted on the basis of the actual number of days
in the year divided by 360, as of the close of business on that
interest determination date as furnished in The City of New York by
the major money center banks, if any, that have provided quotations of
this kind and by a reasonable number of substitute banks or trust
companies organized and doing business under the laws of the United
States or of any state of the United States, which have equity capital
of at least $500 million and are supervised by federal or state
authority and are selected by the calculation agent to provide this
rate or rates. These banks or trust companies may include affiliates
of the agents named on the cover of this prospectus supplement.
o If the banks or trust companies selected by the calculation agent are
not quoting as mentioned above, the prime rate will be the prime rate
in effect on that interest determination date or, if the interest
determination date is the first interest determination date, the
initial interest rate.
LIBOR NOTES. LIBOR notes will bear interest at rates calculated with
reference to the London interbank offered rate, which we call "LIBOR", and the
spread or spread multiplier, if any, and will be payable on the dates specified
on the face of the LIBOR note and in the applicable pricing supplement.
Unless otherwise indicated in the applicable pricing supplement, the
calculation agent will determine LIBOR with respect to any interest reset date
in accordance with the following provisions:
With respect to any interest determination date, LIBOR will be:
o If "LIBOR Reuters" is specified in the applicable pricing supplement,
the arithmetic mean of the offered rates, or the offered rate if the
designated LIBOR page, as defined in the second paragraph after this
one, by its terms provides only for a single rate, for deposits in the
index currency, as defined in the third paragraph after this one,
having the index maturity specified in the pricing supplement,
commencing on the applicable interest reset date, that appear or
appears on the designated LIBOR page as of 11:00 A.M., London time, on
that interest determination date, or
o If "LIBOR Telerate" is specified in the applicable pricing supplement
or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable pricing supplement as the method of calculating LIBOR, the
rate for deposits in the index currency having the index maturity
specified in the pricing supplement, commencing on the relevant
interest reset date, that appears on the designated LIBOR page as of
11:00 A.M., London time, on that interest determination date.
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o If fewer than two offered rates, if LIBOR Reuters is specified in the
applicable pricing supplement, or if no rate of this kind appears, if
LIBOR Telerate applies as described in the preceding bullet point or
if LIBOR Reuters is specified and the designated LIBOR page by its
terms only provides for a single rate, as applicable, LIBOR on that
interest determination date will be determined in accordance with the
provisions described below.
With respect to an interest determination date on which fewer than two
offered rates appear, or no rate appears, as the case may be, on the designated
LIBOR page as described above:
o The calculation agent will request the principal London office of each
of four major reference banks in the London interbank market, as
selected by the calculation agent, to provide the calculation agent
with its offered quotation for deposits in the index currency for the
period of the index maturity designated in the applicable pricing
supplement, commencing on the interest reset date, to prime banks in
the London interbank market at approximately 11:00 A.M., London time,
on that interest determination date and in a principal amount that is
representative for a single transaction in the index currency in that
market at that time. These banks may include affiliates of the agents
named on the cover of this prospectus supplement.
o If at least two quotations as described in the preceding bullet point
are provided, LIBOR determined on that interest determination date
will be the arithmetic mean of those quotations.
o If fewer than two quotations are so provided, LIBOR determined on that
interest determination date will be the arithmetic mean of the rates
quoted at approximately 11:00 A.M. in the principal financial center
for the country of the index currency on that interest determination
date by three major banks in that principal financial center selected
by the calculation agent for loans in the index currency to leading
European banks, having the index maturity designated in the applicable
pricing supplement and in a principal amount that is representative
for a single transaction in the index currency in that market at that
time. These banks may include affiliates of the agents named on the
cover of this prospectus supplement.
o If fewer than two quotations are so provided or if the banks so
selected by the calculation agent are not quoting as mentioned in the
preceding bullet point, LIBOR determined on that interest
determination date will be LIBOR in effect on that interest
determination date or, if that interest determination date is the
first interest determination date, the initial interest rate.
When we say "designated LIBOR page", we mean:
o if "LIBOR Reuters" is specified in the applicable pricing supplement,
the display on the Reuters Monitor Money Rates Service on the page
specified in the pricing supplement, or any successor service or page,
for the purpose of displaying the London interbank offered rates of
major banks for the applicable index currency; or
o if "LIBOR Telerate" is specified in the applicable pricing supplement
or neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable pricing supplement as the method for calculating LIBOR, the
display on Moneyline Telerate, Inc., or any successor service, on page
3750 if the U.S. dollar is the index currency or with respect to any
other index currency, on the page specified in the pricing supplement,
or any successor service or page, for the purpose of displaying the
London interbank offered rates of major banks for the applicable index
currency.
When we say "index currency", we mean the currency, including composite
currencies, specified in the applicable pricing supplement as the currency for
which LIBOR will be calculated. If no currency is specified in the applicable
pricing supplement, the index currency will be U.S. dollars.
When we say "principal financial center", we mean the capital city of the
country issuing the currency or composite currency in which any payment on the
relevant notes is to be made or, solely with respect to the calculation of
LIBOR, the index currency. However, the principal financial center will be The
City of New York with respect to U.S. dollars, Sydney with respect to Australian
dollars, Toronto with respect to Canadian dollars, Zurich with respect to Swiss
francs and Johannesburg with respect to South African rand.
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EURIBOR NOTES. EURIBOR notes will bear interest at rates calculated with
reference to EURIBOR and the spread and/or spread multiplier, if any, and will
be payable on the dates specified on the face of the EURIBOR notes and in the
applicable pricing supplement.
Unless we otherwise specify in the applicable pricing supplement,
"EURIBOR", for each interest determination date relating to a EURIBOR note,
means the rate for deposits in euro as sponsored, calculated and published
jointly by the European Banking Federation and ACI--The Financial Market
Association, or any company established by the joint sponsors for purposes of
compiling and publishing that rate, for the index maturity specified in the
applicable pricing supplement as that rate appears on the display on Moneyline
Telerate, Inc., or any successor service, on page 248 or any other page as may
replace page 248 on that service as of 11:00 A.M., Brussels time.
The following procedures will be followed if the rate cannot be determined
as described above:
o If the above rate does not appear on Telerate page 248 by 11:00 A.M.,
Brussels time, on the relevant interest determination date, the
calculation agent will request the principal Euro-zone office of each
of four major banks in the Euro-zone interbank market, as selected by
the calculation agent, to provide the calculation agent with its
offered rate for deposits in euro, at approximately 11:00 A.M.,
Brussels time, on the interest determination date, to prime banks in
the Euro-zone interbank market for the index maturity specified in the
applicable pricing supplement commencing on the applicable interest
reset date, and in a principal amount not less than the equivalent of
U.S. $1 million in euro that is representative of a single transaction
in euro in that market at that time. If at least two quotations are so
provided, EURIBOR will be the arithmetic mean of those quotations.
o If fewer than two quotations as described in the preceding bullet
point are so provided, EURIBOR will be the arithmetic mean of the
rates quoted by four major banks in the Euro-zone, as selected by the
calculation agent at approximately 11:00 A.M., Brussels time, on the
applicable interest determination date for loans in euro to leading
European banks for a period of time equivalent to the index maturity
specified in the applicable pricing supplement, commencing on that
interest reset date in a principal amount not less than the equivalent
of U.S. $1 million in euro that is representative of a single
transaction in euro in that market at that time.
o If the banks so selected by the calculation agent are not quoting as
described in the preceding bullet point, EURIBOR determined on that
interest determination date will be EURIBOR in effect on that interest
determination date or, if that interest determination date is the
first interest determination date, the initial interest rate.
"Euro-zone" means the region comprised of member states of the European
Union that adopt the single currency in accordance with the treaty establishing
the European Community, as amended by the treaty on European Union.
TREASURY RATE NOTES. Treasury rate notes will bear interest at rates
calculated with reference to the treasury rate and the spread or spread
multiplier, if any, and will be payable on the dates specified on the face of
the treasury rate note and in the applicable pricing supplement.
Unless otherwise indicated in the applicable pricing supplement, treasury
rate means, with respect to any interest determination date, the rate from the
most recent auction of direct obligations of the United States, which we call
"treasury bills", having the index maturity specified in the pricing supplement,
as that rate appears on either Telerate Page 56 or Telerate Page 57 under the
heading "INVESTMENT RATE".
If the treasury rate cannot be determined as described above, then that
rate will be determined in the following manner:
o If that rate is not so published by 3:00 P.M., New York City time, on
the relevant calculation date, the bond equivalent yield of the rate
for the applicable treasury bills as published in H.15 daily update,
or other recognized electronic source used for the purpose of
displaying the applicable rate, under the caption "U.S. Government
Securities/Treasury Bills/Auction High".
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o If that rate is not so published by 3:00 P.M., New York City time, on
the relevant calculation date in H.15 daily update or another
recognized electronic source, the auction average rate, expressed as a
bond equivalent yield, on the. basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis, for that auction as
otherwise announced by the United States Department of the Treasury.
o If that rate is not announced by the United States Department of the
Treasury, or if the auction is not held, the bond equivalent yield of
the rate on the applicable interest determination date of treasury
bills having the index maturity specified in the applicable pricing
supplement published in H.15 (519) under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market".
o If that rate is not so published by 3:00 P.M., New York City time, on
the related calculation date, the rate on the applicable interest
determination date of the applicable treasury bills as published in
H.15 daily update, or other recognized electronic source used for the
purpose of displaying the applicable rate, under the caption "U.S.
Government Securities/Treasury Bills/Secondary Market".
o If the results of that auction of treasury bills having the specified
index maturity are not published or reported as provided above by 3:00
P.M., New York City time, on that calculation date, or if no auction
of treasury bills having the specified index maturity is held during
that week, then the treasury rate will be calculated by the
calculation agent and will be a yield to maturity, expressed as a bond
equivalent yield, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis, of the arithmetic mean of
the secondary market bid rates as of approximately 3:30 P.M., New York
City time, on that interest determination date, of three leading
primary United States government securities dealers in The City of New
York selected by the calculation agent for the issue of treasury bills
with a remaining maturity closest to the specified index maturity.
These dealers may include one or more of the agents named on the cover
of this prospectus supplement or their affiliates.
o If fewer than three dealers so selected by the calculation agent are
quoting as described in the preceding bullet point, the treasury rate
with respect to that interest reset date will be the treasury rate in
effect on that interest determination date or, if that interest
determination date is the first interest determination date, the
initial interest rate.
CD RATE NOTES. CD rate notes will bear interest at rates calculated with
reference to the CD rate and the spread or spread multiplier, if any, and will
be payable on the dates specified on the face of the CD rate note and in the
applicable pricing supplement.
Unless otherwise indicated in the applicable pricing supplement, CD rate
means, with respect to any interest reset date, the rate for the relevant
interest determination date for negotiable certificates of deposit having the
specified index maturity as published in H.15(519) under the heading "CDs
(Secondary Market)", or any successor heading.
If the CD rate cannot be determined as described above, then that rate will
be determined in accordance with the following procedures:
o If that rate is not published before 3:00 P.M., New York City time, on
the relevant calculation date, then the CD rate with respect to the
relevant interest reset date will be the rate on that interest
determination date for negotiable U.S. dollar certificates of deposit
having the specified index maturity as published in H.15 daily update
under the heading "CDs (secondary market)", or any successor heading,
or another recognized electronic source.
o If by 3:00 P.M., New York City time, on that calculation date that
rate is not published in either H.15(519) or H.15 daily update or
another recognized electronic source, the CD rate with respect to that
interest reset date will be calculated by the calculation agent and
will be the arithmetic mean of the secondary market offered rates, as
of 10:00 A.M., New York City time, on that interest determination
date, of three leading nonbank dealers of negotiable U.S. dollar
certificates of deposit in The City of New York selected by the
calculation agent for negotiable certificates of deposit of major
United States money center banks of the highest credit standing, in
the market for negotiable U.S. dollar certificates of deposit, with a
remaining maturity closest to the specified index maturity in an
amount that is representative for a
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single transaction in that market at that time. These dealers may
include one or more of the agents named on the cover of this
prospectus supplement or their affiliates.
o If fewer than three dealers so selected by the calculation agent are
quoting as described in the preceding bullet point, the CD rate with
respect to that interest reset date will be the CD rate in effect on
that interest determination date or, if that interest determination
date is the first interest determination date, the initial interest
rate.
FEDERAL FUNDS RATE NOTES. Federal funds rate notes will bear interest at
rates calculated with reference to the federal funds rate and the spread or
spread multiplier, if any, and will be payable on the dates specified on the
face of the federal funds rate note and in the applicable pricing supplement.
Unless otherwise indicated in the applicable pricing supplement, federal
funds rate means, with respect to any interest reset date, the rate on the
relevant interest determination date for federal funds having the index maturity
specified in the applicable pricing supplement as published in H.15(519) under
the heading "Federal Funds (Effective)", as displayed on Moneyline Telerate,
Inc., or any successor service, on page 120, or any other page that may replace
that page.
If the federal funds rate cannot be determined as described above, then
that rate will be determined in accordance with the following procedures:
o If that rate is not published by 3:00 P.M., New York City time, on the
relevant calculation date, then the federal funds rate with respect to
that interest reset date will be the rate on that interest
determination date as published in H.15 daily update under the heading
"Federal funds (Effective)", or any successor heading, or another
recognized electronic source.
o If by 3:00 P.M., New York City time, on that calculation date that
rate is not published in either H.15(519) or H.15 daily update or
another recognized electronic source, the federal funds rate with
respect to that interest reset date will be calculated by the
calculation agent and will be the arithmetic mean of the rates as of
9:00 A.M., New York City time, on that interest determination date for
the last transaction in overnight federal funds arranged by three
leading brokers of federal funds transactions in The City of New York
selected by the calculation agent . These brokers may include one or
more of the agents named on the cover of this prospectus supplement or
their affiliates.
o If fewer than three brokers so selected by the calculation agent are
quoting as described in the preceding bullet point, the federal funds
rate with respect to that interest reset date will be the federal
funds rate in effect on that interest determination date or, if that
interest determination date is the first interest determination date,
the initial interest rate.
CMT RATE NOTES. CMT rate notes will bear interest at the interest rates,
calculated with reference to the CMT rate and the spread and/or spread
multiplier, if any, and will be payable on the dates specified on the face of
the CMT rate note and in the applicable pricing supplement.
Unless otherwise specified in the applicable pricing supplement, CMT rate
means, with respect to any interest reset date, the rate displayed on the
"designated CMT Telerate page", as defined in the second paragraph after this
one, under the caption ". . . Treasury Constant Maturities . . . Federal Reserve
Board Release H.15 . . . Mondays Approximately 3:45 p.m.", or any successor
caption, under the column for the "designated CMT maturity index", as defined in
the third paragraph after this one, for:
o if the designated CMT Telerate page is 7051, the rate on the related
interest determination date; and
o if the designated CMT Telerate page is 7052, the week or the month, as
specified in the applicable pricing supplement, ended immediately
preceding the week or month, as applicable, in which the related
interest determination date occurs.
If the CMT rate cannot be determined as described above, then that rate
will be determined in accordance with the following procedures:
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o If that rate is no longer displayed on the relevant page, or is not
displayed before 3:00 P.M., New York City time, on the relevant
calculation date, then the CMT rate with respect to that interest
determination date will be that treasury constant maturity rate, or if
the designated CMT Telerate page is 7052, the one-week or one-month,
as applicable, average rate, for the designated CMT maturity index as
published in the relevant H.15(519).
o If that rate is no longer published, or is not published by 3:00 P.M.,
New York City time, on that calculation date, then the CMT rate for
that interest determination date will be that treasury constant
maturity rate or other United States Treasury rate, or if the
designated CMT Telerate page is 7052, the one-week or one-month, as
applicable, average rate, for the designated CMT maturity index, for
the interest determination date with respect to that interest reset
date as may then be published by either the Board of Governors of the
Federal Reserve System or the United States Department of the Treasury
that the calculation agent determines to be comparable to the rate
formerly displayed on the designated CMT Telerate page and published
in the relevant H.15(519).
o If that information is not published by 3:00 P.M., New York City time,
on the related calculation date, then the CMT rate for the interest
determination date will be calculated by the calculation agent and
will be a yield to maturity, based on the arithmetic mean of the
secondary market closing offer side prices as of approximately 3:30
P.M., New York City time, on the interest determination date reported,
according to their written records, by three leading primary United
States government securities dealers, which we call "reference
dealers", in The City of New York selected by the calculation agent
for the most recently issued direct noncallable fixed rate obligations
of the United States, which we call "treasury notes", with an original
maturity of approximately the designated CMT maturity index and a
remaining term to maturity of not less than the designated CMT
maturity index minus one year.
o If the calculation agent cannot obtain three treasury notes quotations
as described in the preceding bullet point, the CMT rate for that
interest determination date will be calculated by the calculation
agent and will be a yield to maturity based on the arithmetic mean of
the secondary market offer side prices as of approximately 3:30 P.M.,
New York City time, on the interest determination date of three
reference dealers in The City of New York, for treasury notes with an
original maturity of the number of years that is the next highest to
the designated CMT maturity index and a remaining term to maturity
closest to the designated CMT maturity index and in an amount of at
least $100,000,000.
o The three reference dealers referred to in the two preceding bullet
points will be selected from five reference dealers in The City of New
York selected by the calculation agent and eliminating the highest
quotation, or, if there is equality, one of the highest, and the
lowest quotation, or, if there is equality, one of the lowest. The
reference dealers may include one or more of the agents named on the
cover of this prospectus supplement or their affiliates.
o If three or four, and not five, of the reference dealers are quoting
as described above, then the CMT rate will be based on the arithmetic
mean of the offer prices obtained and neither the highest nor the
lowest of the quotes will be eliminated.
o If fewer than three reference dealers selected by the calculation
agent are quoting as described above, the CMT rate will be the CMT
rate in effect on that interest determination date or, if the interest
determination date is the first interest determination date, the
initial interest rate.
o If two treasury notes with an original maturity as described above
have remaining terms to maturity equally close to the designated CMT
maturity index, the quotes for the treasury note with the shorter
remaining term to maturity will be used.
When we say "designated CMT Telerate page", we mean the display on the
Moneyline Telerate Service, or any successor service, on the page designated in
the applicable pricing supplement for the purpose of displaying treasury
constant maturities as reported in H.15(519), or any successor page. If no page
of this kind is specified in the applicable pricing supplement, the designated
CMT Telerate page will be 7052, for the most recent week.
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When we say "designated CMT maturity index", we mean the original period to
maturity of the U.S. Treasury securities specified in the applicable pricing
supplement with respect to which the CMT rate will be calculated, which will be
either 1, 2, 3, 5, 7, 10, 20 or 30 years. If no maturity is specified in the
applicable pricing supplement, the designated CMT maturity index will be two
years.
BOOK-ENTRY SYSTEM
Unless we specify differently in the pricing supplement relating to your
note, your note will be represented by a global note or notes registered in the
name of Cede & Co. and deposited in the book-entry system maintained by The
Depository Trust Company, which we refer to as "DTC". If specified in the
applicable pricing supplement, notes denominated in currencies other than U.S.
dollars may also be issued in book-entry form and registered in the name of a
nominee of a common depositary for Clearstream Banking S.A., or "Clearstream,
Luxembourg", and Euroclear Bank S.A./N.V., as operator of the Euroclear System,
or "Euroclear". See "--Special Provisions Relating to Certain Foreign Currency
Notes" below. We sometimes refer to DTC, Clearstream, Luxembourg and Euroclear
as the "clearing systems". So long as notes are in book-entry form, all
investors in those notes will be indirect beneficial owners, and you will not be
able to become a direct holder of those notes except under the special
circumstances described below. You should read the subsection "Description of
Debt Securities--Global Securities" in the accompanying prospectus for general
information about this type of arrangement and your rights under this type of
arrangement.
Upon issuance, all book-entry notes of the same series bearing interest, if
any, at the same rate or under the same formula, having the same date of
issuance, redemption or repayment provisions, if any, specified currency, stated
maturity and other terms will be represented by one or more global notes. Each
global note representing book-entry notes will be deposited with, or on behalf
of, the relevant depositary or common depositary.
Upon the issuance of a global note representing book-entry notes, the
relevant clearing system will credit the accounts of persons holding through it
with the respective principal or face amount of the book-entry notes represented
by the global note. These accounts will be designated initially by the agents
through which the notes were sold, or by us if the notes are offered and sold
directly by us. Ownership of beneficial interests in a global note will be
limited to those financial institutions that have accounts with the relevant
clearing system or persons that may hold interests through them. Ownership of
beneficial interests in a global note by participants will be shown on records
maintained by the relevant clearing system, and ownership of beneficial
interests in a global note by persons that hold interests through participants
will be shown on records maintained by those participants, and the transfer of
these ownership interests will be effected only through those records.
Payment of principal of or any premium or interest on book-entry notes
represented by any global note will be made to the depositary or the common
depositary, as applicable, or its nominee, as the sole registered owner and the
sole holder of the global note. Neither we, the trustee nor any of our agents
will have any responsibility or liability for any aspect of the clearing
systems' or the common depositary's records relating to beneficial ownership
interests in the global notes, for payments made on account of these beneficial
ownership interests or for maintaining, supervising or reviewing the records of
any clearing system or the common depositary relating to these beneficial
ownership interests.
We expect that upon receipt of any payment on any global note, the relevant
clearing system will credit, on its book-entry registration and transfer system,
the accounts of the participants with payments in amounts proportionate to their
respective beneficial interests in the principal or face amount of the global
note as shown on its records. Payments by these participants to owners of
beneficial interests in a global note held through the participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for customer accounts registered in street name, and will
be the sole responsibility of these participants.
No global note representing book-entry notes may be exchanged in whole or
in part for notes registered in the name of any person other than the applicable
depositary or common depositary or its nominee, and no transfer of a global note
representing book-entry notes in whole or in part may be registered in the name
of any person other than the depositary or the common depositary or their
respective nominees, unless:
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o the common depositary or any of the clearing systems is unwilling or
unable to discharge its responsibilities properly or, in the case of
DTC, has ceased to be a clearing agency registered under the
Securities Exchange Act of 1934 and we do not appoint a successor
depositary registered as a clearing agency under that Act within 90
days,
o we in our sole discretion determine under the indenture that the
global note will be so exchangeable or transferable,
o any event has occurred and is continuing which, after notice or lapse
of time or both, would become an event of default with respect to the
securities of the series of which the global note is a part, or
o there exist the circumstances, if any, in addition to or in lieu of
those described above that may be described in the applicable pricing
supplement.
Unless the applicable pricing supplement specifies different authorized
denominations, any global note that is exchangeable as described in the
preceding paragraph will be exchangeable for individually certificated notes
issuable in denominations of $1,000 and integral multiples of $1,000 and
registered in the names that the depositary or common depositary holding the
global note will direct. We expect that these directions will be based upon
directions received by the clearing systems from participants with respect to
ownership of beneficial interests in the global note. Except as described above,
a global note is not exchangeable, except for a global note of like denomination
to be registered in the name of the depositary or the common depositary or their
respective nominees. If we issue individually certificated notes, so long as the
notes are listed on the Luxembourg Stock Exchange, we will maintain a paying
agent and a transfer agent in Luxembourg. We will also publish a notice in
Luxembourg in the LUXEMBURGER WORT or other newspaper of general circulation in
Luxembourg if we change the paying agent or transfer agent in Luxembourg and
notify the Luxembourg Stock Exchange.
The laws of some jurisdictions require that some kinds of purchasers of
securities take physical delivery of the securities in individually certificated
form. The limits described above and laws of the kind described in the preceding
sentence may impair the ability to transfer beneficial interests in a global
note.
We understand that under existing industry practices, if we request any
action of holders or if an owner of a beneficial interest in a global note
desires to give or take any action which a holder is entitled to give or take
under the indenture, the clearing systems would authorize the participants
holding the relevant beneficial interests to give or take the action, and they
would authorize beneficial owners owning through them to give or take the action
or would otherwise act upon the instructions of beneficial owners owning through
them.
SPECIAL PROVISIONS RELATING TO CERTAIN FOREIGN CURRENCY NOTES
If specified in the applicable pricing supplement, notes denominated in
currencies other than U.S. dollars may also be issued in the form of a DTC
global note as well as an international global note registered in the name of a
nominee for a common depositary for Euroclear and Clearstream, Luxembourg. In
such cases, the following provisions will apply to trading in the secondary
market:
o TRADING BETWEEN EUROCLEAR AND/OR CLEARSTREAM, LUXEMBOURG PARTICIPANTS.
Secondary market transfers of book-entry interests in the
international global note to purchasers of book-entry interests in the
international global note will be conducted in accordance with the
normal rules and operating procedures of Euroclear and Clearstream,
Luxembourg and will be settled using the conventional procedures
applicable to eurobonds.
o TRADING BETWEEN DTC PARTICIPANTS. Secondary market transfers of
book-entry interests in the DTC global note between DTC participants
will occur in the ordinary way in accordance with DTC rules and will
be settled using the procedures applicable to United State corporate
debt obligations if payment is effected in United States dollars, or
free of payment if payment is not effected in United States dollars.
Where payment is not effected in United States dollars, separate
payment arrangements outside DTC are required to be made between DTC
participants.
o TRADING BETWEEN DTC SELLER AND EUROCLEAR/CLEARSTREAM, LUXEMBOURG
PURCHASER. When book-entry interests in notes are to be transferred
from the account of a DTC participant holding a beneficial interest
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in a DTC global note to the account of a Euroclear or Clearstream,
Luxembourg accountholder wishing to purchase a beneficial interest in
an international global note, the DTC participant will deliver
instructions for delivery to the relevant Euroclear or Clearstream,
Luxembourg accountholder to DTC by 12:00 noon, New York City time, on
the settlement date. Separate payment arrangements are required to be
made between the DTC participant and the relevant Euroclear or
Clearstream, Luxembourg accountholder. On the settlement date, DTC
will instruct the trustee to (1) decrease the amount of notes
registered in the name of Cede & Co. and evidenced by the DTC global
note and (2) increase the amount of notes registered in the name of
the nominee of the common depositary for Euroclear and Clearstream,
Luxembourg and evidenced by the international global note. Book-entry
interests will be delivered free of payment to Euroclear or
Clearstream, Luxembourg for credit to the relevant accountholder on
the first business day following the settlement date.
o TRADING BETWEEN EUROCLEAR/CLEARSTREAM, LUXEMBOURG SELLER AND DTC
PURCHASER. When book-entry interests in the notes are to be
transferred from the account of a Euroclear or Clearstream, Luxembourg
accountholder to the account of a DTC participant wishing to purchase
a beneficial interest in the DTC global note, the Euroclear or
Clearstream, Luxembourg accountholder must send to Euroclear or
Clearstream, Luxembourg delivery free of payment instructions within
its established deadline one business day prior to the settlement
date. Euroclear or Clearstream, Luxembourg will in turn transmit
appropriate instructions to the common depositary for Euroclear and
Clearstream, Luxembourg to arrange delivery to the DTC participant on
the settlement date. Separate payment arrangements are required to be
made between the DTC participant and the relevant Euroclear and
Clearstream, Luxembourg accountholder, as the case may be. On the
settlement date, the common depositary for Euroclear and Clearstream,
Luxembourg will (1) transmit appropriate instructions to the trustee
who will in turn deliver such book-entry interests in the notes free
of payment to the relevant account of the DTC participant and (2)
instruct the trustee to decrease the amount of notes registered in the
name of the nominee of the common depositary for Euroclear and
Clearstream, Luxembourg evidenced by the international global note,
and to increase the amount of Notes registered in the name of Cede &
Co. evidenced by the DTC global note.
THE CLEARING SYSTEMS
DTC has advised us that DTC is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered under the Securities Exchange Act of 1934. DTC was
created to hold the securities of its participants and to facilitate the
clearance and settlement of securities transactions among its participants in
these securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers,
including the agents named on the cover of this prospectus supplement, banks,
trust companies, clearing corporations, and other organizations. Some of the
participants and/or their representatives are shareholders in DTC. Access to
DTC's book-entry system is also available to others, including banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Clearstream, Luxembourg has advised us that it is incorporated as a bank
under Luxembourg law. Clearstream, Luxembourg holds securities for its
participants and facilitates the clearance and settlement of securities
transactions between Clearstream, Luxembourg participants through electronic
book-entry changes in accounts of Clearstream, Luxembourg participants, thus
eliminating the need for physical movement of certificates. Clearstream,
Luxembourg provides to its participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream, Luxembourg
interfaces with domestic markets in a number of countries. Clearstream,
Luxembourg has established an electronic bridge with Euroclear, to facilitate
settlement of trades between Clearstream, Luxembourg and Euroclear. As a
registered bank in Luxembourg, Clearstream, Luxembourg is subject to regulation
by the Luxembourg Commission for the Supervision of the Financial Sector.
Clearstream, Luxembourg participants are recognized financial institutions
around the world, including underwriters, securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. In the
United States, Clearstream,
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Luxembourg participants are limited to securities brokers and dealers.
Clearstream, Luxembourg participants may include the agents. Other institutions
that maintain a custodial relationship with a Clearstream, Luxembourg
participant may obtain indirect access to Clearstream, Luxembourg.
Euroclear has advised us that it was created in 1968 to hold securities for
its participants and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, thus eliminating the need for physical movement of certificates and
risk from lack of simultaneous transfers of securities and cash. Euroclear
provides various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries. Euroclear is operated by
Euroclear Bank S.A./N.V., under contract with Euroclear Clearance Systems, S.C.,
a Belgian cooperative corporation. All operations are conducted by Euroclear
Bank, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with Euroclear Bank, not the Euroclear Clearance Systems.
Euroclear Clearance Systems establishes policy for Euroclear on behalf of
Euroclear participants. Euroclear participants include banks, including central
banks, securities brokers and dealers and other professional financial
intermediaries and may include the agents. Indirect access to Euroclear is also
available to other firms that clear through or maintain a custodial relationship
with a Euroclear participant, either directly or indirectly. Euroclear Bank has
advised us that it is licensed by the Belgian Banking and Finance Commission to
carry out banking activities on a global basis. As a Belgian bank, it is
regulated and examined by the Belgian Banking Commission. Securities clearance
accounts and cash accounts with Euroclear Bank are governed by the terms and
conditions governing use of Euroclear and the related operating procedures of
the Euroclear System, and applicable Belgian law, which we refer to collectively
as the "terms and conditions". The terms and conditions govern transfers of
securities and cash within Euroclear, withdrawals of securities and cash from
Euroclear, and receipts of payments with respect to securities in Euroclear. All
securities in Euroclear are held on a fungible basis without attribution of
specific certificates to specific securities clearance accounts. Euroclear Bank
acts under the terms and conditions only on behalf of Euroclear participants and
has no record of or relationship with persons holding through Euroclear
participants.
PAYMENT OF PRINCIPAL AND INTEREST
IN ADDITION TO THIS SUBSECTION, YOU SHOULD READ CAREFULLY THE SUBSECTION
ENTITLED "DESCRIPTION OF DEBT SECURITIES--GLOBAL SECURITIES" IN THE ACCOMPANYING
PROSPECTUS AND THE SUBSECTION ENTITLED "--BOOK-ENTRY SYSTEM" ABOVE IN THIS
PROSPECTUS SUPPLEMENT FOR INFORMATION ABOUT GENERAL PROCEDURES THAT WE MAY
FOLLOW IN MAKING PAYMENTS TO YOU.
Interest and, in the case of amortizing notes, principal will be payable to
the registered holder at the close of business on the regular record date next
preceding each interest payment date. However, interest payable at maturity,
redemption or repayment will be payable to the registered holder to whom
principal will be payable. In the case of a global note, that registered holder
will be the depositary, the common depositary or its nominee. The first payment
of interest and in the case of amortizing notes, principal, on any note
originally issued between a regular record date and an interest payment date
will be made on the interest payment date following the next succeeding regular
record date to the registered holder on that next succeeding regular record
date.
Unless otherwise indicated in the applicable pricing supplement, the
"regular record date" means:
o with respect to any fixed rate note, the January 15 or July 15 next
preceding each interest payment date, whether or not that date is a
business day, and
o with respect to any floating rate note, the date 15 calendar days
before each interest payment date, whether or not that date is a
market day.
PAYMENT DATES
INTEREST PAYMENT DATES. Unless otherwise indicated in the applicable
pricing supplement and except as provided below, interest will be payable on the
dates specified below, which we call "interest payment dates":
o in the case of floating rate notes that reset daily, weekly or
monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as
indicated in the applicable pricing supplement;
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o in the case of floating rate notes that reset quarterly, on the third
Wednesday of March, June, September and December of each year;
o in the case of floating rate notes that reset semi-annually, on the
third Wednesday of the two months of each year specified in the
applicable pricing supplement; and
o in the case of floating rate notes that reset annually, on the third
Wednesday of the month specified in the applicable pricing supplement.
In each case, interest will also be payable at maturity, including upon
redemption or repayment.
Payments of interest on any fixed rate note or floating rate note with
respect to any interest payment date will include interest accrued to but
excluding that interest payment date or date of maturity, as the case may be.
ADJUSTMENTS TO PAYMENT DATES. The following are some special cases where,
absent the following adjustments, a payment date would fall on a day that is not
a market day or business day:
o If an interest payment date, other than at maturity, with respect to
any floating rate note would otherwise fall on a day that is not a
market day for that note, that interest payment date will be the next
succeeding market day for the note and interest will accrue to that
market day, or, in the case of a LIBOR note, if that day falls in the
next calendar month, the next preceding market day.
o If the maturity of any floating rate note falls on a day that is not a
market day, the required payment of principal or any premium or
interest will be made on the next succeeding market day, or, in the
case of a LIBOR note, if that day falls in the next calendar month,
the next preceding market day, as if made on the date the payment was
due. No interest will accrue on the payment for the period from and
after the date of maturity to the date of the payment on the next
succeeding market day.
o If any interest payment date or the maturity of a fixed rate note
falls on a day that is not a business day, the required payment of
principal or any premium or interest will be made on the next
succeeding business day as if made on the date the payment was due. No
interest will accrue on the payment for the period from and after the
interest payment date or the maturity, as the case may be, to the date
of the payment on the next succeeding business day.
HOW WE WILL MAKE PAYMENTS ON GLOBAL NOTES
We will make payments on a global note, including a book-entry only note,
in accordance with the policies of the clearing systems as in effect from time
to time.
PAYMENTS DUE IN U.S. DOLLARS. We will make payments directly to the
depositary, the common depositary or their respective nominees, as applicable,
and not to any beneficial owners who own beneficial interests in the global
note. We will do this by making the funds available to the trustee on any
interest payment date or at maturity or upon a redemption or repayment date. The
trustee will then make the payments to the depositary or the common depositary,
as applicable. In the case of global notes for which DTC is the depositary, DTC
will allocate and make the payments to DTC participants that hold interests in
the notes in accordance with its existing procedures. In the case of global
notes held by a common depositary for Clearstream, Luxembourg and Euroclear, the
common depositary will allocate the payments to Clearstream, Luxembourg and
Euroclear in accordance with their existing procedures and Clearstream,
Luxembourg and Euroclear will allocate and make payments to their respective
participants in accordance with their respective procedures. An indirect
beneficial owner's right to receive those payments will be governed by the rules
and practices of the clearing systems and the banks or brokers through which the
indirect beneficial owner holds a beneficial interest in the note. Neither we
nor the trustee have any responsibility or liability for payments by any
depositary, common depositary, clearing system or the banks or brokers.
BOOK-ENTRY ONLY AND OTHER INDIRECT BENEFICIAL OWNERS SHOULD CONSULT THEIR
BANKS OR BROKERS FOR INFORMATION ON HOW THEY WILL RECEIVE PAYMENTS.
PAYMENTS DUE IN OTHER CURRENCIES. We understand that, under DTC's current
practice, DTC elects to have all payments on a global note for which it is the
depositary made in U.S. dollars, regardless of the specified currency
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for the payment, unless notified by a bank or broker participating in its
book-entry system, through which an indirect beneficial owner's beneficial
interest in the global note may be held, that it elects to receive payment in
the specified currency.
PAYMENTS DUE WITH RESPECT TO GLOBAL NOTES HELD BY DTC AND DENOMINATED IN
OTHER CURRENCIES WILL BE MADE IN U.S. DOLLARS UNLESS THE HOLDER TIMELY REQUESTS
OTHERWISE.
Unless otherwise specified in the applicable pricing supplement, an
indirect beneficial owner of an interest in a global note held by DTC that is
denominated in a currency other than U.S. dollars may elect to receive all or
part of the payments on that note in that other currency, provided that the
following steps have been properly followed and completed by all parties
involved:
o The indirect beneficial owner must notify the bank or broker, through
which its interest is held, of its election. If the election is with
respect to any interest payment, the notification must be made on or
before the applicable record date. If the election is with respect to
any payment of principal or premium, the notification must be made on
or before the 15th day before the maturity, redemption or repayment
date, as the case may be.
o The bank or broker must then notify DTC of the indirect beneficial
owner's election on or before the third business day after the record
date or after that 15th day.
o DTC must then notify the trustee of the election on or before the
fifth business day after the record date or that 15th day.
If complete instructions are received by the bank or broker and forwarded
by the bank or broker to DTC and by DTC to the trustee, on or before the dates
noted above, the trustee, in accordance with DTC's instructions, will make the
payments to you or your bank or broker by wire transfer of immediately available
funds to an account maintained by the payee with a bank located in the country
issuing the specified currency or in another jurisdiction outside the United
States acceptable to us and the trustee.
If the foregoing steps are not properly completed, you will receive
payments in U.S. dollars.
In addition, in the case of imposition of exchange controls or any other
circumstances beyond our control, we may pay in U.S. dollars the payments due in
other currencies. See the subsection entitled "--Currency Exchange Controls"
below for information about procedures applicable to payments under these
circumstances.
INDIRECT BENEFICIAL OWNERS WHO OWN BENEFICIAL INTERESTS IN A GLOBAL NOTE
HELD BY DTC AND DENOMINATED IN A CURRENCY OTHER THAN U.S. DOLLARS SHOULD CONSULT
THEIR BANKS OR BROKERS FOR INFORMATION ON HOW TO REQUEST PAYMENT IN THE
SPECIFIED CURRENCY.
If the pricing supplement provides for both a DTC global note and an
international global note or for only an international global note, then a
holder of a beneficial interest in any DTC global note will receive all payments
under the DTC notes in United States dollars, unless such holder makes an
election, as described herein, for payment in the specified currency.
Distributions of principal and interest with respect to the international global
note will be credited, in the specified currency, to the extent received by
Euroclear or Clearstream, Luxembourg, to the cash accounts of Euroclear or
Clearstream, Luxembourg customers in accordance with the relevant clearing
system's rules and procedures.
HOW WE WILL MAKE PAYMENTS ON INDIVIDUALLY CERTIFICATED NOTES
PAYMENTS DUE IN U.S. DOLLARS. If you hold an individually certificated
note, and the principal of or any premium or interest due on the note at
maturity or upon redemption or repayment is due in U.S. dollars, we will make
that payment to you in immediately available funds when you surrender the note
at the corporate trust office of the trustee in Atlanta, Georgia, or if the note
is listed on the Luxembourg Stock Exchange at that time, at the office of the
Luxembourg paying agent. You must present the note to the trustee or the
Luxembourg paying agent in time for them to make any payments in accordance with
their normal procedures.
If an interest payment due in U.S. dollars on an individually certificated
note is due other than at maturity or upon earlier redemption or repayment, we
will make the payment by check mailed to the address of the person
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entitled to the payment as it appears in the security register. Alternatively,
we may wire transfer the payment to an account as may have been appropriately
designated by that person.
PAYMENTS DUE IN OTHER CURRENCIES. Unless otherwise specified in the
applicable pricing supplement, payments of interest with respect to any
individually certificated note to be made in a specified currency other than
U.S. dollars will be made by check mailed to the address of the holder of the
note as that address appears in our security register. All checks payable in a
specified currency other than U.S. dollars will be drawn on a bank located
outside the United States. Payments at maturity of principal of or any premium
or interest with respect to any individually certificated note to be made in a
specified currency other than U.S. dollars will be made by wire transfer in
immediately available funds to an account requested by the holder, provided that
the account is with a bank located in the country issuing the specified
currency. In the case of payment of principal or any premium or interest due at
maturity, you must surrender the individually certificated note to the trustee
or the Luxembourg paying agent in time for them to make the payments in
accordance with their normal procedures.
To designate an account for wire payment, the holder must give the trustee
or the Luxembourg paying agent appropriate wire instructions at least 15 days
before maturity. Any instructions, once properly given, will remain in effect
unless and until you properly give new instructions in the manner described
above. We will pay any administrative costs imposed by banks for making payments
by wire transfer, but holders of the notes must bear any tax, assessment or
governmental charge imposed upon the payments.
PAYMENTS DUE WITH RESPECT TO INDIVIDUALLY CERTIFICATED NOTES DENOMINATED IN
OTHER CURRENCIES WILL BE MADE IN U.S. DOLLARS UNLESS THE HOLDER TIMELY REQUESTS
OTHERWISE.
CONVERSION TO U.S. DOLLARS
We are required to pay principal of or any premium or interest on notes in
the specified currency of the notes. Unless otherwise specified in the
applicable pricing supplement, however, any payment due on a note denominated in
a specified currency other than U.S. dollars will be converted by the exchange
rate agent specified in the applicable pricing supplement to U.S. dollars for
payment to holders.
When we are required to make payments to a holder in U.S. dollars of an
amount due from us in another currency, either on a global note or an
individually certificated note as described above, we will determine the U.S.
dollar amount the holder receives as follows. The exchange rate agent will
request currency bid quotations from three recognized foreign exchange dealers
in The City of New York on the second business day before the payment due date,
for purchase by the quoting dealer of the specified currency for U.S. dollars
for settlement on the relevant payment date. One or more of these three dealers
may be the exchange rate agent or an agent listed on the cover of this
prospectus supplement. The currency bid quotations will be requested on an
aggregate basis, for all holders scheduled to receive U.S. dollar payments of
amounts payable on the same date in the same specified currency. Each quoting
dealer must commit to executing a contract. The U.S. dollar amount the holder
receives will be based on the highest currency bid quotation received by the
exchange rate agent as of 11:00 A.M, New York City time, on the date of
quotation. If the exchange rate agent determines that three currency bid
quotations are not available on the second business day before the payment due
date, the payment will be made in the specified currency. A holder that receives
payment in U.S. dollars will bear all associated currency exchange costs, which
will be deducted from the payment.
CURRENCY EXCHANGE CONTROLS
If we are obligated to make any payment in a specified currency other than
U.S. dollars, and the specified currency is not available due to the imposition
of exchange controls or other circumstances beyond our control, we will be
entitled to satisfy our obligation by making the payment in U.S. dollars on the
basis of the most recently available noon buying rate in The City of New York
for cable transfers of the specified currency as quoted by the Federal Reserve
Bank of New York. The foregoing will apply to any note, whether in global or
individually certificated form, and to any payment, including a payment at
maturity. Any payment made under the circumstances and in a manner described
above will not constitute an event of default under the indenture.
All determinations referred to above made by the exchange rate agent will
be at its sole discretion, except to the extent expressly provided in this
prospectus supplement or in the applicable pricing supplement that any
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determination requires our approval. In the absence of manifest error, the
exchange rate agent's determination will be conclusive for all purposes and
binding on holders of the notes and us, and the exchange rate agent will have no
liability for its determinations.
NOTICES
For so long as any notes are listed on the Luxembourg Stock Exchange and
the rules of the Luxembourg Stock Exchange so require, all notices regarding
such notes shall be published in a daily newspaper of general circulation in
Luxembourg, which is expected to be the LUXEMBURGER WORT.
Until such time as any individually certificated notes are issued in
relation to any notes that are represented by global notes deposited with, or on
behalf of, DTC, as depositary, and registered in the name of Cede & Co., or
registered in the name of a nominee for, and deposited with, a common depositary
for Euroclear and Clearstream, Luxembourg (and provided that, if such notes are
also listed on the Luxembourg Stock Exchange, the rules of the Luxembourg Stock
Exchange so permit), we may instead deliver the relevant notice to Euroclear and
Clearstream, Luxembourg for communication by them to investors. Any such notice
shall be deemed to have been given to the relevant investors on the seventh day
after the day on which such notice was given to Euroclear and Clearstream,
Luxembourg.
We understand that, under existing industry practices, in the event that we
request any action of holders of notes represented by a global note, or a holder
of such notes desires to give or take any action which a holder is entitled to
give or take under the indenture, DTC, Euroclear or Clearstream, Luxembourg, as
applicable, would authorize the participants holding the relevant beneficial
interests to give or take this action, and the participants would authorize
beneficial owners owning through participants to give or take this action or
would otherwise act upon the instructions of beneficial owners owning through
them.
RISKS RELATING TO INDEXED NOTES
In addition to potential foreign currency risks as described below under
"Foreign Currency Risks", an investment in indexed notes presents significant
risks not associated with other types of securities. If we issue indexed notes,
we will describe relevant risks associated with any particular indexed note more
fully in the applicable pricing supplement. Indexed notes may present a high
level of risk, and you may lose your entire investment if you purchase indexed
notes.
The treatment of indexed notes for United States federal income tax
purposes is often unclear due to the absence of any authority specifically
addressing the issues presented by any particular indexed note. Prospective
purchasers of indexed notes are urged to review the applicable pricing
supplement and consult with their own tax advisers.
LOSS OF PRINCIPAL OR INTEREST
The principal amount of an indexed note payable at maturity, and/or the
amount of interest payable on an interest payment date, will be determined by
reference to one or more of the following indices:
o currencies, including baskets of currencies;
o commodities, including baskets of commodities;
o securities, including baskets of securities; or
o any other index.
The direction and magnitude of the change in the value of the relevant
index will determine either the principal amount of an indexed note payable at
maturity or the amount of interest payable on an interest payment date or both.
The terms of a particular indexed note may or may not include a guaranteed
return of a percentage of the face amount at maturity or a minimum interest
rate. Accordingly, if you invest in an indexed note, you may lose all or a
portion of the principal invested in an indexed note and may receive no interest
on the note.
Additionally, if the formula used to determine the amount of principal of
or any premium or interest payable with respect to the notes contains a multiple
or leverage factor, the effect of any change in the applicable currency,
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commodity, security or other index will be increased. The historical experience
of the relevant currencies, commodities, securities or other indices should not
be taken as an indication of future performance of these currencies,
commodities, securities or other indices during the term of any note.
VOLATILITY
Some currencies, commodities, securities and other indices are highly
volatile. The expected principal amount payable at maturity of an indexed note
based on a volatile index or the interest rate on an indexed note of this kind
may vary substantially from time to time. Because the principal amount payable
at the maturity of an indexed note or the interest payable on the note is
generally calculated based on the value of the relevant index on a specified
date or over a limited period of time, volatility in the index increases the
risk that the return on the indexed note may be adversely affected by a
fluctuation in the level of the relevant index.
The volatility of an index may be affected by political or economic events,
including governmental actions, or by the activities of participants in the
relevant markets. Any of these could adversely affect the value of an indexed
note.
AVAILABILITY AND COMPOSITION OF INDICES
Some indices reference several different currencies, commodities,
securities or other financial instruments. The compiler of an index of this kind
typically reserves the right to alter the composition of the index and the
manner in which the value of the index is calculated. An alteration of this kind
may result in a decrease in the value of or return on an indexed note which is
linked to that index.
An index may become unavailable due to various factors including war,
natural disasters, cessation of publication of the index, or suspension of or
disruption in trading in the currency or currencies, commodity or commodities,
security or securities or other financial instrument or instruments comprising
or underlying the index. If an index becomes unavailable, the determination of
principal of or interest on an indexed note may be delayed or an alternative
method may be used to determine the value of the unavailable index. Alternative
methods of valuation are generally intended to produce a value similar to the
value resulting from reference to the relevant index. However, it is unlikely
that the alternative methods of valuation will produce values identical to those
which would be produced were the relevant index to be used. An alternative
method of valuation may result in a decrease in the value of or return on an
indexed note.
Indexed notes may be linked to indices which are not commonly utilized or
have been recently developed. The lack of a trading history may make it
difficult to anticipate the volatility or other risks applicable to an indexed
note of this kind. In addition, there may be less trading in these indices or
the assets underlying these indices, which could increase the volatility of
these indices and decrease the value of or return on indexed notes relating to
these indices.
CREDIT RATINGS
The credit ratings assigned to our medium-term note program reflect the
rating agencies' opinion of our ability to make payments on the notes when due
and do not reflect the impact of the factors discussed above on the market value
of indexed notes. Accordingly, you should consult your own financial and legal
advisers as to the risks entailed by an investment in indexed notes.
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FOREIGN CURRENCY RISKS
With respect to any note on which we may make payments of principal,
premium or interest with reference to a currency or currencies other than U.S.
dollars or which are denominated in a currency other than U.S. dollars, the
applicable pricing supplement will include information with respect to any
applicable current foreign exchange controls and may include a section on
historical exchange rates for the specified currency. We refer to these types of
notes as "foreign currency notes". If we provide any historical exchange rate
information in the applicable pricing supplement, you should not regard this
information as indicative of the range of, or trends in, fluctuations in
currency exchange rates that may occur in the future.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND PRICING
SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN FOREIGN CURRENCY
NOTES. YOU SHOULD CONSULT YOUR OWN FINANCIAL AND LEGAL ADVISERS ABOUT THE RISKS
OF AN INVESTMENT IN FOREIGN CURRENCY NOTES. IF YOU ARE UNSOPHISTICATED WITH
RESPECT TO FOREIGN CURRENCY TRANSACTIONS, THESE NOTES ARE NOT AN APPROPRIATE
INVESTMENT FOR YOU.
THE INFORMATION IN THIS SECTION "FOREIGN CURRENCY RISKS" APPLIES TO YOU
ONLY IF YOU ARE A UNITED STATES RESIDENT. WE DISCLAIM ANY RESPONSIBILITY TO
ADVISE PROSPECTIVE PURCHASERS WHO ARE RESIDENTS OF COUNTRIES OTHER THAN THE
UNITED STATES WITH RESPECT TO ANY MATTERS THAT MAY AFFECT THE PURCHASE, HOLDING
OR RECEIPT OF PAYMENTS OF PRINCIPAL OF AND INTEREST ON THE NOTES. IF YOU ARE NOT
A UNITED STATES RESIDENT, YOU SHOULD CONSULT YOUR OWN FINANCIAL AND LEGAL
ADVISERS WITH REGARD TO THESE MATTERS.
EXCHANGE RATES AND EXCHANGE CONTROLS
If you invest in foreign currency notes, significant risks that are not
associated with a similar investment in a security denominated in U.S. dollars
may apply to your investment. These risks include, for example, the possibility
of significant changes in rates of exchange between the U.S. dollar and the
various foreign currencies or composite currencies and the possibility of the
imposition or modification of foreign exchange controls by either the U.S. or
foreign governments. These risks depend on economic and political events over
which we have no control, including the supply of and demand for the relevant
currencies. In recent years, rates of exchange between the U.S. dollar and some
foreign currencies have been highly volatile, and volatility of this kind may be
expected in the future. Fluctuations in any particular exchange rate that have
occurred in the past are not necessarily indicative, however, of fluctuations in
the rate that may occur during the term of any note. Depreciation of a specified
currency other than U.S. dollars against the U.S. dollar would result in a
decrease in the effective yield of the note below its coupon rate, and could
result in a loss to you on a U.S. dollar basis.
Governments have imposed from time to time and may in the future impose
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at a note's maturity. Even if there are no
actual exchange controls, the specified currency for any particular note might
not be available at the note's maturity. In that event, we will repay in U.S.
dollars on the basis of the most recently available noon buying rate in The City
of New York for cable transfers for the specified currency as quoted by the
Federal Reserve Bank of New York. See "Description of Notes We May
Offer--Payment of Principal and Interest" for a discussion of these payment
procedures.
Currently, there are limited facilities in the United States for conversion
of U.S. dollars into foreign currencies, and vice versa. Accordingly, payments
on notes made in a specified currency other than U.S. dollars are likely to be
made from an account with a bank located in the country issuing the specified
currency. See "Description of Notes We May Offer--Payment of Principal and
Interest" for a discussion of these payment procedures.
Unless otherwise specified in the applicable pricing supplement, foreign
currency notes will not be sold in, or to residents of, the country issuing the
specified currency in which particular notes are denominated.
GOVERNING LAW AND JUDGMENTS
The notes will be governed by and construed in accordance with the laws of
the State of New York. If an action based on the notes were commenced in a court
in the United States, it is likely that the court would grant judgment relating
to the notes only in U.S. dollars. It is not clear, however, whether, in
granting judgment, the rate of conversion into U.S. dollars would be determined
with reference to the date of default, the date judgment is rendered or some
other date. New York statutory law provides, however, that a court will render a
judgment in the foreign currency of the underlying obligations and that the
judgment will be converted into U.S. dollars at the rate of exchange prevailing
on the date of the entry of the judgment.
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UNITED STATES TAXATION
In the opinion of Davis Polk & Wardwell, the following are the material
U.S. federal tax consequences of ownership and disposition of the notes. This
discussion only applies to notes purchased by those initial holders who purchase
notes at the "issue price", which will equal the first price to the public (not
including bond houses, brokers or similar persons or organizations acting in the
capacity of underwriters, placement agents or wholesalers) at which a
substantial amount of the notes is sold for money, and to notes held as capital
assets.
This discussion does not describe all of the tax consequences that may be
relevant to a holder in light of his particular circumstances or to holders
subject to special rules, such as:
o certain financial institutions;
o insurance companies;
o dealers in securities or foreign currencies;
o tax-exempt organizations;
o persons holding notes as part of a hedge;
o United States holders, as defined below, whose functional currency is
not the U.S. dollar;
o partnerships or other entities classified as partnerships for U.S.
federal income tax purposes; or
o persons subject to the alternative minimum tax.
If a partnership holds notes, the tax treatment of a partner will generally
depend upon the status of the partner and upon the activities of the
partnership. If you are a partner of a partnership holding notes, we recommend
that you consult your own tax adviser.
This section deals only with notes that are due to mature 30 years or less
from the date on which they are issued. The U.S. federal income tax consequences
of owning notes that are due to mature more than 30 years from their date of
issue will be discussed in an applicable pricing supplement.
This summary is based on the Internal Revenue Code of 1986, as amended to
the date of this prospectus supplement, administrative pronouncements, judicial
decisions and final, temporary and proposed Treasury Regulations, changes to any
of which subsequent to the date of this prospectus supplement may affect the tax
consequences described in this section. Persons considering the purchase of
notes are urged to consult their own tax advisers with regard to the application
of the U.S. federal income tax laws to their particular situations as well as
any tax consequences arising under the laws of any state, local or foreign
taxing jurisdiction.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
As used in this section, the term "United States holder" means a beneficial
owner of a note that is for U.S. federal income tax purposes (a) a citizen or
resident of the United States; (b) a corporation, or other entity taxable as a
corporation for U.S. federal income tax purposes, created or organized in or
under the laws of the United States or of any political subdivision of the
United States; or (c) an estate or trust the income of which is subject to U.S.
federal income taxation regardless of its source. The term United States holder
also includes certain former citizens and residents of the United States.
PAYMENTS OF INTEREST
Interest paid on a note will be taxable to a United States holder as
ordinary interest income at the time it accrues or is received in accordance
with the holder's method of accounting for U.S. federal income tax purposes
provided that the interest is qualified stated interest, as defined below.
Special rules governing the treatment of interest paid with respect to original
issue discount notes, including certain floating rate notes, foreign currency
notes and indexed notes, are described under "--Original Issue Discount,"
"--Foreign Currency Notes" and "--Indexed Notes" below.
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ORIGINAL ISSUE DISCOUNT
A note that is issued at an issue price less than its stated redemption
price at maturity will be considered to have been issued at an original issue
discount for U.S. federal income tax purposes and will be referred to as an
"original issue discount note" unless the note satisfies a de minimis threshold,
as described below, or is a short-term note, as defined below. 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 (other than in debt instruments of the issuer) 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 or,
subject to certain conditions, based on one or more indices.
If the difference between a note's stated redemption price at maturity and
its issue price is less than a de minimis amount, i.e., 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 original issue discount.
Holders of notes with a de minimis amount of original issue discount will
include this original issue discount in income, as capital gain, on a pro rata
basis as principal payments are made on the note.
A United States holder of original issue discount notes will be required to
include any qualified stated interest payments in income in accordance with the
holder's method of accounting for U.S. federal income tax purposes. United
States holders of original issue discount notes that mature more than one year
from their date of issuance will be required to include original issue discount
in income for U.S. federal income tax purposes as it accrues, in accordance with
a constant yield method based on a compounding of interest, before the receipt
of cash payments attributable to this income. Under this method, United States
holders of original issue discount notes generally will be required to include
in income increasingly greater amounts of original issue discount in successive
accrual periods.
A holder may make a "constant yield election" to include in gross income
all interest that accrues on any note, including stated interest, original issue
discount, de minimis original issue discount, and unstated interest, in
accordance with a constant yield method based on the compounding of interest.
A note that matures one year or less from its date of issuance, which we
call a "short-term note", will be treated as being issued at a discount and none
of the interest paid on the note will be treated as qualified stated interest.
In general, a cash method United States holder of a short-term note is not
required to accrue the discount for U.S. federal income tax purposes unless it
elects to do so. Holders who so elect and certain other holders, including those
who report income on the accrual method of accounting for U.S. federal income
tax purposes, are required to include the discount in income as it accrues on a
straight-line basis, unless another election is made to accrue the discount
according to a constant yield method based on daily compounding. In the case of
a holder who is not required and who does not elect to include the discount in
income currently, any gain realized on the sale, exchange or retirement of the
short-term note will be ordinary income to the extent of the discount accrued on
a straight-line basis, or, if elected, according to a constant yield method
based on daily compounding, through the date of sale, exchange or retirement. In
addition, those holders will be required to defer deductions for any interest
paid on indebtedness incurred to purchase or carry short-term notes in an amount
not exceeding the accrued discount until the accrued discount is included in
income.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a note, a United States holder
will recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement and the holder's adjusted tax basis
in the note. A United States holder's adjusted tax basis in a note will equal
the cost of the note to the holder, increased by the amounts of any original
issue discount previously included in income by the holder with respect to the
note and reduced by any principal payments that do not constitute qualified
stated interest, as defined above. For these purposes, the amount realized does
not include any amount attributable to accrued interest. Amounts attributable to
accrued interest are treated as interest as described under "--Payments of
Interest" above.
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Except as described below, gain or loss realized on the sale, exchange or
retirement of a note will generally be capital gain or loss and will be
long-term capital gain or loss if at the time of sale, exchange or retirement
the note has been held for more than one year. Exceptions to this general rule
apply, in the case of a short-term note, to the extent of any accrued discount
not previously included in the Holder's taxable income. See "--Original Issue
Discount" above for information about these exceptions. In addition, other
exceptions to this general rule apply in the case of certain foreign currency
notes. See "--Foreign Currency Notes" below for information about these
exceptions.
FOREIGN CURRENCY NOTES
The rules applicable to notes that are denominated in a currency or
currency unit other than the U.S. dollar, which we refer to as "foreign currency
notes", are complex and their application may depend on the holder's particular
U.S. federal income tax situation.
A United States holder who uses the cash method of accounting and who
receives a payment of qualified stated interest in U.S. dollars will be required
to include the amount of this payment in income upon receipt. A cash method
holder who receives a payment of qualified stated interest in a foreign
currency, or who receives proceeds from a sale, exchange or other disposition
attributable to accrued interest, with respect to a foreign currency note will
be required to include in income the U.S. dollar value of the foreign currency
payment determined based on a spot rate on the date the payment is received,
regardless of whether the payment is in fact converted to U.S. dollars at that
time, and this U.S. dollar value will be the United States holder's tax basis in
the foreign currency.
In the case of an accrual method taxpayer, a United States holder will be
required to include in income the U.S. dollar value of the amount of interest
income, including original issue discount, that has accrued and is otherwise
required to be taken into account with respect to a foreign currency note during
an accrual period. The U.S. dollar value of the accrued income will be
determined by translating the 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. The
United States holder will recognize ordinary income or loss with respect to
accrued interest income on the date the interest payment or proceeds from the
sale, exchange or other disposition attributable to accrued interest is actually
received. The amount of ordinary income or loss recognized will equal the
difference between the amount of the payment (or, where a holder receives
foreign currency, the U.S. dollar value of the foreign currency payment
received, determined based on a spot rate on the date the payment is received)
in respect of the accrual period and the U.S. dollar value of interest income
that has accrued during the accrual period, as determined above. Rules similar
to these rules apply in the case of a cash method taxpayer required to currently
accrue original issue discount.
A United States holder may elect to translate interest income, including
original issue discount, 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, if the date of receipt is
within five business days of the last day of the interest accrual period (or
your taxable year), the spot rate on the date of receipt. A United States holder
that makes this election must apply it consistently to all debt instruments from
year to year and cannot change the election without the consent of the Internal
Revenue Service.
Original issue discount on a foreign currency note is to be determined in
the relevant foreign currency.
A United States holder's tax basis in a foreign currency note, and the
amount of any subsequent adjustment to the holder's tax basis, will be the U.S.
dollar value of the foreign currency amount paid for such foreign currency note,
or of the foreign currency amount of the adjustment, determined on the date of
the purchase or adjustment. A United States holder who purchases a foreign
currency note with previously owned foreign currency will recognize ordinary
income or loss in an amount equal to the difference, if any, between the United
States holder's tax basis in the foreign 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 (a) the U.S. dollar value of the foreign currency
principal amount of the note, determined on the date the payment is received or
the note is disposed of, and (b) the U.S. dollar value of the foreign currency
principal amount of the note,
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determined on the date the United States holder acquired the note. Payments
received attributable to accrued interest will be treated in accordance with the
rules applicable to payments of interest on foreign currency notes described
above. The foreign currency gain or loss will be recognized only to the extent
of the total gain or loss realized by a United States holder on the sale,
exchange or retirement of the foreign currency note. The source of the foreign
currency gain or loss will be determined by reference to the residence of the
holder or the "qualified business unit" of the holder on whose books the note is
properly reflected. Any gain or loss realized by these holders in excess of the
foreign currency gain or loss will be capital gain or loss except, in the case
of a short-term note, to the extent of any discount not previously included in
the holder's income.
A United States holder will have a tax basis in any foreign currency
received on the sale, exchange or retirement of a foreign currency note equal to
the U.S. dollar value of the foreign currency, determined at the time of sale,
exchange or retirement. A cash method taxpayer who buys or sells a foreign
currency note that is traded on an established securities exchange as defined in
the applicable Treasury Regulations is required to translate units of foreign
currency paid or received 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 the
purchase or sale. An accrual method taxpayer may elect the same treatment for
all purchases and sales of foreign currency obligations. This election cannot be
changed without the consent of the Internal Revenue Service. Any gain or loss
realized by a United States holder on a sale or other disposition of foreign
currency, including its exchange for U.S. dollars or its use to purchase foreign
currency notes, will be ordinary income or loss.
United States holders are urged to consult their own tax advisers regarding
the U.S. federal income tax consequences of the ownership and disposition of
foreign currency notes.
INDEXED NOTES AND RENEWABLE, EXTENDIBLE AND AMORTIZING NOTES
The U.S. federal income tax treatment of indexed notes and renewable,
extendible and amortizing notes depends on the specific terms of the notes.
Prospective purchasers of such notes are urged to review the applicable pricing
supplement and consult with their own tax advisers.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information returns will be filed with the Internal Revenue Service in
connection with payments on the notes and the proceeds from a sale or other
disposition of the notes. A United States holder will be subject to U.S. backup
withholding tax on these payments if the United States holder fails to provide
its taxpayer identification number to the paying agent and comply with certain
certification procedures or otherwise establish an exemption from backup
withholding. The amount of any backup withholding from a payment to a United
States holder will be allowed as a credit against the United States holder's
U.S. federal income tax liability and may entitle the United States holder to a
refund, provided that the required information is furnished to the Internal
Revenue Service.
TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
As used in this subsection, the term "non-United States holder" means a
beneficial owner of a note that is, for U.S. federal income tax purposes: (a) an
individual who is classified as a nonresident for U.S. federal income tax
purposes; (b) a foreign corporation; or (c) a foreign estate or trust.
Subject to the discussions below concerning backup withholding and
certification requirements:
o payments of principal and interest, including original issue discount,
if any, on the notes by the Company or any paying agent to any
non-United States holder will not be subject to U.S. federal
withholding tax, provided that, in the case of interest,
o the 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 and is not a controlled foreign
corporation related, directly or indirectly, to the Company
through stock ownership; and
o if the note is a registered note, the certification requirement
described below has been fulfilled with respect to the beneficial
owner, as discussed below; and
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o a non-United States holder of a note will not be subject to U.S.
federal income tax on gain realized on the sale, exchange or other
disposition of the note, unless the gain is effectively connected with
the conduct by the holder of a trade or business in the United States.
A holder who is an individual present in the United States for 183
days or more in the taxable year of disposition and who is not
otherwise a resident of the United States for U.S. federal income tax
purposes should consult his or her own tax adviser regarding the U.S.
federal income tax consequences of the sale, exchange or other
disposition of a note.
CERTIFICATION REQUIREMENT
In the case of a registered note, interest and original issue discount will
not be exempt from withholding tax unless the beneficial owner of that note
certifies on Internal Revenue Service Form W-8BEN, under penalties of perjury,
that it is not a United States person. The exemption will not apply to
contingent interest if the amount of the interest is determined with reference
to the financial performance of the Company or a related person or with
reference to changes in the value of the Company's or a related person's assets.
Unless otherwise provided in the applicable pricing supplement, the Company does
not expect to pay this type of interest.
If a non-United States holder of a note is engaged in a trade or business
in the United States, and if interest, including original issue discount, on the
note is effectively connected with the conduct of this trade or business, the
non-United States holder will generally be taxed in the same manner as a United
States holder, except that the holder will be required to provide to the Company
a properly executed Internal Revenue Service Form W-8ECI in order to claim an
exemption from withholding tax. These holders should consult their own tax
advisers with respect to other U.S. tax consequences of the ownership and
disposition of notes including the possible imposition of a 30% branch profits
tax.
U.S. FEDERAL ESTATE TAX
A note or coupon held by an individual may be subject to U.S. federal
estate tax as a result of the individual's death if:
o the individual was a United States Holder;
o at the time of the individual's death, interest payments on the note
would have been subject to U.S. federal withholding tax (without
regard to satisfaction of the certification requirement described
above); or
o at the time of the individual's death, interest payments on the note
would have been effectively connected to the conduct by the holder of
a trade or business in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information returns will be filed with the United States Internal Revenue
Service in connection with payments on the notes and the proceeds from a sale or
other disposition of the notes. A non-United States holder may be subject to
U.S. backup withholding tax on these payments unless the non-United States
holder complies with certification procedures to establish that it is not a
United States person. The certification procedures required to claim the
exemption from withholding tax on interest and original issue discount described
above will satisfy the certification requirements necessary to avoid the backup
withholding tax as well. The amount of any backup withholding from a payment to
a non-United States holder will be allowed as a credit against the non-United
States holder's U.S. federal income tax liability and may entitle the non-United
States holder to a refund, provided that the required information is furnished
to the Internal Revenue Service.
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SUPPLEMENTAL PLAN OF DISTRIBUTION
J.P. Morgan Securities Inc., ABN AMRO Incorporated, Barclays Capital Inc.,
Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Goldman, Sachs &
Co. and Morgan Stanley & Co. Incorporated, whom we call the "agents", and we
have entered into a distribution agreement dated as of April 18, 2003 with
respect to the notes. The agents have agreed to use their reasonable best
efforts to solicit purchases of the notes if we satisfy the conditions specified
in the distribution agreement. We have the right to accept offers to purchase
notes and may reject any proposed purchase of the notes. The agents may also
reject any offer to purchase notes. We will pay the agents a commission on any
notes sold through the agents. The commission will range from 0.150% to 0.750%
of the principal amount of the notes depending on the maturity of the notes;
provided, however, that commissions with respect to notes with a stated maturity
of more than 30 years will be negotiated between us and the applicable agent at
the time of sale.
We may also sell notes to agents who will purchase the notes as principals
for their own accounts. Any sale of this kind will be made at a price equal to
the issue price specified in the applicable pricing supplement, less a discount.
Unless otherwise stated, the discount will equal the applicable commission on an
agency sale of notes of the same maturity. Any notes the agents purchase as
principals may be resold at the market price or at other prices determined by
the agents at the time of resale.
The agents may resell any notes they purchase to other brokers or dealers
at a discount which may include all or part of the discount the agents received
from us. If all the notes are not sold at the initial offering price, the agents
may change the offering price and the other selling terms.
We may sell notes directly on our own behalf. No commission will be paid on
any notes sold directly by us. In addition, we have reserved the right to accept
offers to purchase notes through additional agents on substantially the same
terms and conditions, including commission rates, as would apply to purchases of
notes under the distribution agreement referred to above. We have also reserved
the right to appoint additional agents to solicit offers to purchase notes. Any
additional agents will be named in the applicable pricing supplement.
Although the final use of proceeds from any sale of the notes has not yet
been determined, the proceeds might be used to pay indebtedness owed to
affiliates of an agent and, if an amount in excess of 10% of the aggregate net
proceeds of any sale of notes is so applied, that sale of notes will be made in
accordance with Rule 2710(c)(8) of the NASD Conduct Rules.
The agents, whether acting as agents or principals, may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933. We have agreed
to indemnify the several agents against certain liabilities, including
liabilities under the Securities Act of 1933.
The agents may sell to dealers who may resell to investors, and the agents
may pay all or part of the discount or commission they receive from us to the
dealers. These dealers may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933.
The notes are a new issue of securities with no established trading market
and are not expected to be listed on any securities exchange in the United
States. Application has been made for notes issued during the period of twelve
months from the date of this prospectus supplement to be listed on the
Luxembourg Stock Exchange. We will specify in the applicable pricing supplement
whether the notes will be listed on the Luxembourg Stock Exchange or another
securities exchange or will be unlisted. We do not know how liquid the trading
market for the notes will be.
We estimate that our share of the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $300,000.
In connection with the offering, the agents may purchase and sell notes in
the open market. These transactions may include short sales, stabilizing
transactions and purchases to cover positions created by short sales.
o Short sales involve the sale by the agents of a greater number of
notes than they are required to purchase in the offering.
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o Stabilizing transactions consist of certain bids or purchases of notes
made for the purpose of preventing or retarding a decline in the
market price of the notes while the offering is in progress.
o 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.
o Penalty bids permit the agents to reclaim a selling concession from a
syndicate member when the notes originally sold by the syndicate
member are purchased in a syndicate covering transaction or
stabilizing purchase.
Any of these transactions may have the effect of preventing or retarding a
decline in the market price of the notes. They may also cause the price of the
notes to be higher than it would otherwise be in the absence of these
transactions. The agents may conduct these transactions in the over-the-counter
market or otherwise. If the agents commence any of these transactions, the
agents may discontinue them at any time.
In the ordinary course of their business, the agents and some of their
affiliates have engaged in, and may in the future engage in, investment and
commercial banking transactions and financial advisory services with us and some
of our affiliates.
No action has been taken by us that would permit a public offering of the
notes or possession or distribution of this prospectus supplement, the
accompanying prospectus, any pricing supplement or any other offering material
in any jurisdiction outside the United States where action for that purpose is
required. Each agent will be required to agree that it will comply with all
applicable laws and regulations in force in any jurisdiction in which it
purchases, offers or sells any notes or possesses or distributes this prospectus
supplement, the accompanying prospectus, any applicable pricing supplement or
any other offering material and will obtain any consent, approval or permission
required by it for the purchase, offer or sale by it of any notes under the laws
and regulations in force in any jurisdiction to which it is subject or in which
it makes such purchases, offers or sales and we shall have no responsibility for
such purchases, offers or sales. In particular, each agent will be required to
agree on the terms set out below.
UNITED KINGDOM. Each agent will represent and agree that:
(a) in relation to notes which have a maturity of one year or more, it has
not offered or sold and, prior to the expiry of the period of six
months from the issue date of such notes, will not offer or sell any
such notes to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted
and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations
1995, as amended;
(b) it has only communicated or caused to be communicated and will only
communicate or cause to be communicated any invitation or inducement
to engage in investment activity (within the meaning of section 21 of
the United Kingdom Financial Services and Markets Act 2000 (the
"FSMA")) received by it in connection with the issue or sale of any
notes in circumstances in which section 21(1) of the FSMA does not
apply to us; and
(c) it has complied and will comply with all applicable provisions of the
FSMA with respect to anything done by it in relation to any issue of
notes in, from or otherwise involving the United Kingdom.
JAPAN.Unless otherwise specified in the applicable pricing supplement, the
notes have not been, and will not be, registered under the Securities and
Exchange Law of Japan (the "Securities and Exchange Law"), and each agent will
be required to represent and agree that it will not offer or sell any of the
notes, directly or indirectly, in Japan or to, or for the benefit of, any
resident of Japan (which term as used herein means any person resident in Japan,
including any corporation or other entity organized under the laws of Japan), or
to others for re-offering or resale, directly or indirectly, in Japan or to any
resident of Japan except in compliance with the Securities and Exchange Law and
any other applicable laws and regulations of Japan.
GERMANY. Each agent will be required to confirm that it is aware of the
fact that no German selling prospectus (VERKAUFSPROSPEKT) has been or will be
published with respect to the notes and that it will comply with the
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Securities Selling Prospectus Act (the "German Act") of Germany (WERTPAPIER
VERKAUFSPROSPEKTGESETZ). In particular, each agent will be required to undertake
not to engage in public offering (OFFENTLICHE ANGEBOT) within the meaning of the
German Act or other selling activities in Germany with respect to the notes
otherwise than in accordance with the German Act and any other act replacing or
supplementing the German Act and all other applicable laws and regulations.
THE NETHERLANDS. Each agent will be required to represent and agree that it
has not, directly or indirectly, offered or sold and will not, directly or
indirectly, offer or sell in The Netherlands any notes with a denomination of
less than 450,000 (or its foreign currency equivalent) other than to persons who
trade or invest in securities in the conduct of a profession or business (which
include banks, stockbrokers, insurance companies, pension funds, other
institutional investors and finance companies and treasury departments of large
enterprises) unless one of the other exemptions from or exemptions to the
prohibition contained in Article 3 of the Dutch Securities Transactions
Supervision Act 1995 (WET TOEZICHT EFFECTENWERKEER 1995) is applicable and the
conditions attached to such exemption or exception are complied with.
The applicable pricing supplement may set out further restrictions on the
offering or sale of the notes depending on the currency of such notes and the
jurisdictions into which such notes are being offered.
VALIDITY OF NOTES
The validity of the notes will be passed upon for us by Michele Coleman
Mayes, Esq., Senior Vice President and General Counsel of Pitney Bowes Inc., and
by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, and
for the agents by Sullivan & Cromwell LLP, 125 Broad Street, New York, New York
10004. The opinions of Ms. Mayes, Davis Polk & Wardwell and Sullivan & Cromwell
LLP will be based upon, and subject to, assumptions as to future actions
required to be taken in connection with the issuance and sale of notes and as to
other events which may affect the validity of notes but which cannot be
ascertained on the date of the opinions.
LISTING AND GENERAL INFORMATION
Application has been made for permission to list the notes on the
Luxembourg Stock Exchange. The Luxembourg Stock Exchange has allocated number
12848 for listing purposes. In connection with the listing application, the
Articles of Incorporation and the Bylaws of Pitney Bowes and a legal notice
relating to the issuance of the notes have been deposited before listing with
the REGISTRE DE COMMERCE ET DES SOCIETES A LUXEMBOURG, where copies of the
documents may be obtained upon request. So long as any notes listed on the
Luxembourg Stock Exchange are outstanding, copies of the above documents,
together with this prospectus supplement, the accompanying prospectus, the
indenture, our current annual report (including audited financial statements)
and quarterly reports and other periodic reports incorporated by reference in
the accompanying prospectus, as well as all future annual reports (including
audited financial statements), quarterly reports and other periodic reports
incorporated by reference in the accompanying prospectus, will be made available
free of charge at the main office of Dexia Banque Internationale a Luxembourg
S.A. in Luxembourg. As the parent company, Pitney Bowes conducts its operations
directly and through various subsidiaries. Pitney Bowes' Annual Report on Form
10-K for the year ended December 31, 2002 contains a list of all of its
subsidiaries. We do not publish any non-consolidated financial statements. Dexia
Banque Internationale a Luxembourg S.A. will act as intermediary in Luxembourg
between us and the holders of the notes so long as the notes remain in global
form. As long as the notes are listed on the Luxembourg Stock Exchange, we will
maintain a listing agent in Luxembourg. The initial listing agent in Luxembourg
is Dexia Banque Internationale a Luxembourg S.A.
The documents incorporated by reference in the accompanying prospectus,
copies of the annual reports, quarterly reports, this prospectus supplement and
accompanying prospectus and all relevant pricing supplements will be available
free of charge at the main office of Dexia Banque Internationale a Luxembourg
S.A. in Luxembourg.
Other than as disclosed or contemplated in this prospectus supplement or
the accompanying prospectus or in the documents incorporated by reference in
these documents, there has been no material adverse change in our financial
position since December 31, 2002, the date of our last audited financial
statements.
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Other than as disclosed or contemplated in this prospectus supplement or
the accompanying prospectus or in the documents incorporated by reference in
these documents, neither we nor any of our subsidiaries is involved in
litigation, arbitration or administrative proceedings relating to claims or
amounts that are material in the context of the issue of the notes.
Resolutions relating to the issue and sale of the notes were adopted by our
board of directors on July 9, 2001.
If specified in the applicable pricing supplement, notes may, when issued,
be accepted for clearance through DTC, Clearstream, Luxembourg, Euroclear or
such other clearing systems as are specified in the applicable pricing
supplement and, in the case of notes listed on the Luxembourg Stock Exchange,
acceptable to the Luxembourg Stock Exchange.
We have given an undertaking in connection with the listing of any notes on
the Luxembourg Stock Exchange to the effect that, so long as any such notes
remain outstanding and listed on such exchange, in the event of any material
adverse change in our business or financial position that is not reflected in
this prospectus supplement and the accompanying prospectus as then amended or
supplemented (including the documents incorporated by reference), we will
prepare an amendment or supplement to this prospectus supplement or publish a
new document for use with any subsequent offering and listing of any notes by
us.
The Luxembourg Stock Exchange takes no responsibility for the contents of
this document, makes no representation as to its accuracy or completeness and
expressly disclaims any liability whatsoever for any loss howsoever arising from
or in reliance upon the whole or any part of the contents of this prospectus
supplement or the accompanying prospectus.
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ANNEX A--FORM OF PRICING SUPPLEMENT
Set out below is substantially the form of pricing supplement which is
expected to be completed for each issuance of notes listed on the Luxembourg
Stock Exchange and offered and sold pursuant to this prospectus supplement and
the accompanying prospectus. Prospective investors should refer to this
prospectus supplement and the accompanying prospectus for a description of the
specific terms and conditions of the particular issuance of notes.
Pricing Supplement dated _______________ Rule 424(b)(3)
(To Prospectus dated November 21, 2001 and File No. 333-72304
Prospectus Supplement dated April 18, 2003) ISIN No. _______
Common Code: _______
PITNEY BOWES INC.
Global Medium-Term Notes
--------------------------------------------------------------------------------
Principal amount: Interest rate (if fixed rate note):
Issue price: Initial interest rate (if floating rate note):
Agent's discount or commission: Original issue date:
Net proceeds to Pitney Bowes: Stated maturity date:
--------------------------------------------------------------------------------
Interest accrual date (if other than original issue date):
Interest payment dates:
Regular record dates:
If floating rate note:
Interest rate basis or bases:
Spread (+/-):
Spread multiplier:
Maximum interest rate limitation, if any:
Minimum interest rate limitation, if any:
Index maturity:
Interest reset dates:
Interest determination dates:
Calculation agent (if other than SunTrust Bank):
Calculation date:
Original issue discount: [ ] Yes [ ] No
Issue price:
Total amount of OID:
Yield to maturity:
Initial accrual period OID:
Day count convention:
[ ] Actual/360
[ ] Actual/actual
[ ] 30/360
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Redemption:
[ ] The notes cannot be redeemed prior to the stated maturity date.
[ ] The notes can be redeemed prior to the stated maturity date.
Initial redemption date:
Initial redemption percentage: ____%
Annual redemption percentage reduction: ____% until redemption
percentage is 100% of the principal amount.
Tax redemption: [ ] Yes [ ] No
Repayment:
[ ] The notes cannot be repaid prior to the stated maturity date.
[ ] The notes can be repaid prior to the stated maturity date at the
option of the holder of the notes.
Optional repayment date(s):
Optional repayment price(s):
Additional amounts payable: [ ] Yes [ ] No
Specified currency (if other than U.S. dollars):
Authorized denomination (if other than U.S. $1,000 and integral multiples
thereof):
Trustee, registrar, authenticating and paying agent: SunTrust Bank
Exchange rate agent, if any:
Additional paying agent, if any:
Depositaries:
[ ] Clearstream Banking S.A. and Euroclear Bank S.A./N.V., as operator
of the Euroclear System
[ ] The Depository Trust Company, Clearstream Banking S.A. and Euroclear
Bank S.A./N.V., as operator of the Euroclear System
Form:
[ ] Book-entry (global note to be held on behalf of The Depository Trust
Company)
[ ] Book-entry (global note to be held by a common depositary for
Clearstream Banking S.A. and Euroclear Bank S.A./N.V., as operator
of the Euroclear System)
[ ] Book-entry (global note to be held by The Depository Trust Company
and a common depositary)
Agent:
[ ] J.P. Morgan Securities Inc.
[ ] ABN AMRO Incorporated
[ ] Barclays Capital Inc.
[ ] Citigroup Global Markets Inc.
[ ] Deutsche Bank Securities Inc.
[ ] Goldman, Sachs & Co.
[ ] Morgan Stanley & Co. Incorporated
[ ] Other:________________
Agent acting in the capacity as indicated below:
[ ] Agent [ ] Principal
S-44
Other provisions:
Responsibility:
We accept responsibility for the information contained in this pricing
supplement.
Signed on behalf of Pitney Bowes Inc.
By:_____________________________________
Duly authorized
THE ABOVE TERMS HAVE BEEN COMPLETED AS APPLICABLE.
S-45
This Page Intentionally Left Blank.
$2,000,000,000
[PITNEY BOWES LOGO]
DEBT SECURITIES
PREFERRED STOCK
PREFERENCE STOCK
DEPOSITARY SHARES
----------
We may offer and issue debt securities and shares of our preferred and
preference stock from time to time. The debt securities and shares of preferred
or preference stock may be convertible into or exchangeable for shares of our
common stock or other securities. We may offer and issue preferred stock and
preference stock either directly or represented by depositary shares. This
prospectus describes the general terms of these securities and the general
manner in which we will offer them. We will provide the specific terms of these
securities in supplements to this prospectus. The prospectus supplements will
also describe the specific manner in which we will offer these securities.
----------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------
We may offer these securities in amounts, at prices and on terms determined
at the time of offering. We may sell the securities directly to you, through
agents we select, or through underwriters and dealers we select. If we use
agents, underwriters or dealers to sell these securities, we will name them and
describe their compensation in a prospectus supplement.
----------
The date of this prospectus is November 21, 2001.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS, IN
THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND IN MATERIAL WE FILE WITH THE SEC. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. WE
ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, THE SECURITIES DESCRIBED IN
THIS PROSPECTUS ONLY WHERE OFFERS AND SALES ARE PERMITTED. SINCE INFORMATION
THAT WE FILE WITH THE SEC IN THE FUTURE WILL AUTOMATICALLY UPDATE AND SUPERSEDE
INFORMATION CONTAINED IN THIS PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT, YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS OR IN ANY PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN
THE DATE ON THE FRONT OF THE DOCUMENT.
----------
TABLE OF CONTENTS
PAGE
-----
About This Prospectus ..................................................... 2
Special Note Regarding Forward-Looking Statements ......................... 2
Pitney Bowes Inc. ......................................................... 3
Use of Proceeds ........................................................... 3
Ratio of Earnings to Fixed Charges and Ratio of Earnings
to Fixed Charges and Preferred and Preference Stock Dividends ........... 4
Description of Debt Securities ............................................ 5
Description of Preferred Stock and Preference Stock ....................... 14
Description of Common Stock ............................................... 17
Description of Depositary Shares .......................................... 23
Plan of Distribution ...................................................... 25
Validity of the Securities ................................................ 26
Experts ................................................................... 26
Where You Can Find More Information ....................................... 26
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission, referred to as the SEC in this prospectus,
utilizing a shelf registration process. Under this shelf registration process,
we may issue, from time to time, up to $2,000,000,000 of debt securities,
preferred stock, preference stock and depositary shares. Each time we issue any
securities under the registration statement, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement together with the additional information described under
the heading "Where You Can Find More Information."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
In this prospectus and in the documents we incorporate by reference, we may
state our views about our future performance. These views, which constitute
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995, involve risks and uncertainties that are difficult to predict and may
cause our actual results to differ materially from the results discussed in
those forward-looking statements. Some of the factors that may significantly
affect our performance are discussed in "Management's Discussion and Analysis of
Financial Condition and Results of Operations," which is contained in our most
recent Annual Report on Form 10-K that is on file with the SEC.
2
PITNEY BOWES INC.
Pitney Bowes was organized in 1920 and is a Delaware corporation.
Pitney Bowes operates in three segments:
o GLOBAL MAILING--Global Mailing includes worldwide revenues from the
rental of postage meters and the sale, rental and financing of mailing
equipment, including mail finishing and software-based mail creation
equipment; software-based shipping, transportation and logistics
systems; and related supplies and services.
o ENTERPRISE SOLUTIONS--Enterprise Solutions consists of Pitney Bowes
Management Services and Document Messaging Technologies. Pitney Bowes
Management Services includes revenues from facilities management
contracts for advanced mailing, reprographic, document management and
other high-value services. Document Messaging Technologies includes
revenues from the sale, service and financing of high speed,
software-enabled production mail systems, sortation equipment,
incoming mail systems, electronic statement, billing and payment
solutions and mailing software.
o CAPITAL SERVICES--Capital Services provides large ticket financing and
fee-based programs covering a broad range of products and other
financial services. Products financed include both commercial and
non-commercial aircraft, over-the-road trucks and trailers,
locomotives, railcars, rail and bus facilities, office equipment and
high-technology equipment, such as data processing and communications
equipment.
On December 11, 2000, Pitney Bowes announced that its Board of Directors
approved a formal plan to spin off Pitney Bowes' Office Systems business to
stockholders as an independent, publicly-traded company. The transaction is
expected to be completed by the end of the fourth quarter of 2001.
The world headquarters of Pitney Bowes are located at One Elmcroft Road,
Stamford, Connecticut 06926-0700 (telephone: 203-356-5000).
USE OF PROCEEDS
We expect to use the net proceeds from sales of the securities described in
this prospectus to repay short-term debt, to repurchase our common stock, to
refinance our other indebtedness from time to time and for other general
corporate purposes, including possible acquisitions. We will describe our
intended use of the proceeds from a particular offering of securities in the
related prospectus supplement. Funds not required immediately for any of the
previously mentioned purposes may be temporarily invested in marketable
securities.
3
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED AND PREFERENCE STOCK DIVIDENDS
The following table presents the ratio of our earnings to fixed charges
excluding minority interest for the periods indicated:
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------- ---------------------------------------
2001 2000 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ----
4.72 4.34 4.37 4.92 4.42 4.10 3.58
The following table presents the ratio of our earnings to fixed charges and
preferred and preference stock dividends excluding minority interest for the
periods indicated:
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------- ---------------------------------------
2001 2000 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ----
4.71 4.34 4.37 4.92 4.42 4.10 3.57
For the purpose of computing the above ratios, 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. These ratios have
been reclassified to reflect Pitney Bowes' Office Systems business, which Pitney
Bowes plans to spin off to its stockholders in 2001, Atlantic Mortgage &
Investment Corporation, which Pitney Bowes sold in 2000, and Colonial Pacific
Leasing Corporation, whose operations and assets Pitney Bowes sold in 1998, as
discontinued operations. Interest expense and the portion of rent which is
representative of the interest factor of these discontinued operations have been
excluded from fixed charges in the computation. If these amounts had been
included, the ratio of earnings to fixed charges excluding minority interest
would be 4.54 for first half 2001, 4.21 for first half 2000, 4.21 for 2000, 4.66
for 1999, 3.78 for 1998, 4.00 for 1997 and 3.54 for 1996. If these amounts had
been included, the ratio of earnings to fixed charges and preferred and
preference stock dividends excluding minority interest would be 4.53 for first
half 2001, 4.19 for first half 2000, 4.21 for 2000, 4.65 for 1999, 3.78 for
1998, 4.00 for 1997 and 3.54 for 1996.
4
DESCRIPTION OF DEBT SECURITIES
DEBT MAY BE SENIOR OR SUBORDINATED
We will issue the senior debt securities under one or more senior debt
indentures and the subordinated debt securities under one or more subordinated
debt indentures. We will appoint a trustee to act in a fiduciary capacity under
each of these indentures. In this prospectus we refer to these senior debt
indentures as our "senior debt indenture" and to these subordinated debt
indentures as our "subordinated debt indenture". We have filed the form of our
senior debt indenture and subordinated debt indenture as exhibits to the
registration statement of which this prospectus is a part.
The senior debt securities will be part of our senior debt and will rank
equally with all of our other unsecured and unsubordinated debt. The
subordinated debt securities will be junior in right of payment to all of our
"senior indebtedness", as defined in our subordinated debt indenture. If this
prospectus is being delivered in connection with a series of subordinated debt
securities, the accompanying prospectus supplement or the information we
incorporate in this prospectus by reference will indicate the approximate amount
of senior indebtedness outstanding as of the end of the most recent fiscal
quarter preceding the date of that prospectus supplement. Neither indenture
limits our ability to incur additional senior indebtedness.
We have summarized below the material provisions of the indentures and the
debt securities, or indicated which material provisions will be described in the
related prospectus supplement. These descriptions are only summaries, and each
investor should refer to the applicable indenture, which contains the terms and
definitions summarized below as well as additional information regarding the
debt securities.
Any reference to particular sections or defined terms of the applicable
indenture in any statement under this heading qualifies the entire statement and
incorporates by reference the applicable section or definition into that
statement. The indentures are substantially identical, except for the provisions
relating to limitations on liens and limitations on sales and leasebacks, which
are included in the senior debt indenture only, and to subordination, which are
included in the subordinated indenture only.
We may issue debt securities from time to time in one or more series. The
debt securities may be denominated and payable in U.S. dollars or foreign
currencies. We may also issue debt securities, from time to time, with the
principal amount or interest payable on any relevant payment date to be
determined by reference to one or more currency exchange rates, securities or
baskets of securities, commodity prices or indices. Holders of these types of
debt securities will receive payments of principal or interest that depend upon
the value of the applicable currency, security or basket of securities,
commodity or index on the relevant payment dates. As a result, you may receive a
payment of principal on any principal payment date, or a payment of interest on
any interest payment date, that is greater than or less than the amount of
principal or interest otherwise payable on those dates, depending upon the value
on those dates of the applicable currency, security or basket of securities,
commodity or index. Information as to the methods for determining the amount of
principal or interest payable on any date, the currencies, securities or baskets
of securities, commodities or indices to which the amount payable on that date
is linked and any material United States federal income tax considerations will
be provided in the applicable prospectus supplement.
Debt securities may bear interest at a fixed rate, which may be zero, or a
floating rate. Debt securities bearing no interest or interest at a rate that at
the time of issuance is below the prevailing market rate may be sold at a
discount below their stated principal amount. We refer to debt securities of
this kind that are sold at a discount as "original issue discount securities".
We may, without the consent of the existing holders of any series of debt
securities, issue additional debt securities having the same terms so that the
existing debt securities and the new debt securities form a single series under
the applicable indenture.
5
TERMS SPECIFIED IN PROSPECTUS SUPPLEMENT
The prospectus supplement will contain, where applicable, the following
terms of, and other information relating to, any offered debt securities:
o title;
o whether the debt securities are senior or subordinated;
o aggregate principal amount and purchase price;
o currency in which the debt securities are denominated and/or in which
principal, and premium, if any, and/or interest, if any, is payable,
if not U.S. dollars;
o authorized denominations, if other than $1,000 and integral multiples
of $1,000;
o date of maturity;
o the interest rate or rates or the method by which a calculation agent
will determine the interest rate or rates, if any;
o the interest payment dates, if any;
o any repayment, redemption, prepayment or sinking fund provisions,
including any redemption notice provisions;
o the name of the trustee and any authenticating agent, paying agent,
transfer agent or registrar for the debt securities;
o whether we will issue the debt securities in definitive form or in the
form of one or more global securities;
o the terms on which holders of the debt securities may convert or
exchange these securities into our common stock, preferred stock or
preference stock or other securities of Pitney Bowes or other issuers;
o information as to the methods for determining the amount of principal
or interest payable on any date and/or the currencies, securities or
baskets of securities, commodities or indices to which the amount
payable on that date is linked;
o any special United States federal income tax consequences applicable
to the debt securities being issued; and
o any other specific terms of the debt securities, including any
additional events of default or covenants, and any terms required by
or advisable under applicable laws or regulations.
REGISTRATION AND TRANSFER OF DEBT SECURITIES
Holders may exchange their debt securities for debt securities of smaller
denominations or combine them into fewer debt securities of larger
denominations, as long as the total principal amount is not changed. You may not
exchange your debt securities for securities of a different series or having
different terms, unless your prospectus supplement says you may.
You may present debt securities for exchange and transfer in the manner, at
the places and subject to any restrictions described in the applicable
prospectus supplement. We will provide you those services free of charge,
although you may have to pay any tax or other governmental charge payable in
connection with any exchange or transfer, as provided in the applicable
indenture.
If any of the debt securities are held in global form, the procedures for
transfer of interests in those securities will depend upon the procedures of the
depositary for those global securities. See "- Global Securities" for more
information about those provisions.
DEFEASANCE AND COVENANT DEFEASANCE
Unless the prospectus supplement states otherwise, we will be able to
discharge all of our obligations, other than administrative obligations such as
facilitating transfers and exchanges of certificates and replacement of lost or
mutilated certificates, relating to a series of debt securities under an
indenture by depositing cash and/or U.S.
6
Government obligations with the trustee in an amount sufficient to make all the
remaining payments of principal, premium and interest on those debt securities
when those payments are due. We can do this only if we have delivered to the
trustee, among other things, an opinion of counsel based on a United States
Internal Revenue Service ruling or other change in U.S. federal income tax law
stating that holders will not recognize any gain or loss for U.S. federal income
tax purposes as a result of this deposit.
We can also avoid having to comply with the restrictive covenants in the
senior debt indenture, such as the limitation on liens and the limitation on
sale and leaseback transactions, by depositing cash and/or U.S. Government
obligations with the trustee in an amount sufficient to make all the remaining
payments of principal, premium and interest on the outstanding debt securities
when those payments are due. We can do this only if we have delivered to the
trustee, among other things, an opinion of counsel stating that holders of those
securities will not recognize any gain or loss for U.S. federal income tax
purposes as a result of this deposit.
SUBORDINATION PROVISIONS
There are contractual provisions in the subordinated debt indenture that
may prohibit us from making payments on our subordinated debt securities.
Subordinated debt securities are subordinate and junior in right of payment, to
the extent and in the manner stated in the subordinated debt indenture, to all
of our senior indebtedness, including the debt securities we have issued and
will issue under the senior debt indenture.
The subordinated debt indenture defines senior indebtedness generally as
obligations of, or guaranteed or assumed by, Pitney Bowes for borrowed money or
evidenced by bonds, notes or debentures or other similar instruments or incurred
in connection with the acquisition of property, and amendments, renewals,
extensions, modifications and refundings of any of that indebtedness. The
subordinated debt securities and any other obligations specifically designated
as being subordinate in right of payment to senior indebtedness are not senior
indebtedness as defined in the subordinated debt indenture.
The subordinated debt indenture provides that, unless all principal of and
any premium or interest on the senior indebtedness has been paid in full, or
provision has been made to make those payments in full, no payment of principal
of, or any premium or interest on, any subordinated debt securities may be made
in the event:
o of any insolvency or bankruptcy proceedings, or any receivership,
liquidation, reorganization, assignment for the benefit of creditors
or other similar proceedings involving us or a substantial part of our
property;
o a default has occurred in the payment of principal, any premium,
interest or other monetary amounts due and payable on any senior
indebtedness, and that default has not been cured or waived or has not
ceased to exist;
o there has occurred any other event of default with respect to senior
indebtedness that permits holders or any trustee of the senior
indebtedness to accelerate the maturity of the senior indebtedness,
even if that maturity is not in fact accelerated, and that event of
default has not been cured or waived or has not ceased to exist; or
o that the principal of and accrued interest on any subordinated debt
securities have been declared due and payable upon an event of default
as defined under the subordinated debt indenture and that declaration
has not been rescinded and annulled as provided under the subordinated
debt indenture.
If the trustee under the subordinated debt indenture or any holders of the
subordinated debt securities receive any payment or distribution that is
prohibited under the subordination provisions, then the trustee or the holders
will have to repay that money to the holders of the senior indebtedness.
Even if the subordination provisions prevent us from making any payment
when due on the subordinated debt securities of any series, we will be in
default on our obligations under that series if we do not make the payment when
due. This means that the trustee under the subordinated debt indenture and the
holders of debt securities of that series can take action against us, but they
will not receive any money until the claims of the holders of senior
indebtedness have been fully satisfied.
The subordinated debt indenture allows the holders of senior indebtedness
to obtain a court order requiring us and any holder of subordinated debt
securities to comply with the subordination provisions.
7
COVENANTS RESTRICTING LIENS, MERGERS AND OTHER SIGNIFICANT CORPORATE ACTIONS
IN THE FOLLOWING DISCUSSION, WE USE A NUMBER OF CAPITALIZED TERMS WHICH
HAVE SPECIAL MEANINGS UNDER THE INDENTURES. WE PROVIDE DEFINITIONS OF THESE
TERMS UNDER "--DEFINITIONS" BELOW.
LIMITATION ON LIENS. The senior debt indenture provides that so long as any
of the senior debt securities remains outstanding, we will not, nor will we
permit any Restricted Subsidiary to, issue, assume, guarantee or become liable
for any Indebtedness if that Indebtedness is secured by a Mortgage upon any
Principal Domestic Manufacturing Plant or upon any shares of stock or
Indebtedness of any Restricted Subsidiary without in any such case effectively
providing that the senior debt securities will be secured equally and ratably
with (or prior to) that Indebtedness, except that the foregoing restrictions
will not apply to:
o Mortgages on property of any corporation existing at the time that
corporation is acquired by us or a Restricted Subsidiary (including by
way of merger or consolidation) or at the time of a sale, lease or
other disposition of substantially all of the properties of a
corporation to us or a Restricted Subsidiary, as long as that Mortgage
is not extended to cover any property previously owned by us or a
Restricted Subsidiary;
o Mortgages on property of a corporation existing at the time the
corporation first becomes a Restricted Subsidiary;
o Mortgages on any property existing on the date securities are first
issued under that indenture or when we acquired that property;
o Mortgages securing any Indebtedness that a wholly-owned Restricted
Subsidiary owes to us or another wholly-owned Restricted Subsidiary;
o Mortgages that we enter into within specified time periods to finance
the acquisition, repair, improvement or construction of any property;
o mechanics' liens, tax liens, liens in favor of a governmental body to
secure progress payments or the acquisition of real or personal
property from the governmental body, and other specified liens which
were not incurred in connection with any borrowing of money, as long
as we are contesting those liens in good faith or those liens do not
materially impair the use of any Principal Domestic Manufacturing
Plant;
o Mortgages arising from any judgment, decree or order of a court in a
pending proceeding;
o any extension, renewal or replacement of any of the Mortgages
described above, as long as the amount of Indebtedness secured does
not exceed the amount originally secured plus any fees incurred in
connection with the refinancing.
Notwithstanding the above, we may issue, assume or guarantee, and may
permit any Restricted Subsidiary to issue, assume or guarantee, secured
Indebtedness which would otherwise be subject to the foregoing restrictions,
provided that the total of the aggregate amount of that Indebtedness then
outstanding, excluding secured Indebtedness permitted under the foregoing
exceptions, does not exceed 15% of Consolidated Net Tangible Assets.
THE SUBORDINATED DEBT INDENTURE DOES NOT INCLUDE ANY LIMITATION ON OUR
ABILITY TO INCUR THESE TYPES OF LIENS.
LIMITATION ON SALES AND LEASEBACKS. Under the senior debt indenture, we and
our Restricted Subsidiaries are not allowed to enter into any sale and leaseback
arrangement involving a Principal Domestic Manufacturing Plant which has a term
of more than three years, except for sale and leaseback arrangements between us
and a wholly-owned Restricted Subsidiary or between wholly-owned Restricted
Subsidiaries, unless:
o we enter into the sale and leaseback transaction within 180 days after
the Principal Domestic Manufacturing Plant is acquired, constructed or
placed into service by us;
o the rent that we pay under the related lease is reimbursed under a
contract between us or a Restricted Subsidiary and the United States
Government or one of its agencies or instrumentalities;
8
o the aggregate amount of all Attributable Debt with respect to sale and
leaseback transactions plus all Indebtedness secured by Mortgages on
Principal Domestic Manufacturing Plants (with the exception of secured
Indebtedness which is excluded as described under "- Limitations on
Liens" above) does not exceed 15% of Consolidated Net Tangible Assets;
or
o we apply an amount equal to, in the case of a sale or transfer for
cash, the lesser of the net proceeds of the sale or transfer of the
Principal Domestic Manufacturing Plant and the net book value, or, in
the case of a sale or transfer otherwise than for cash, the lesser of
the fair market value of the Principal Domestic Manufacturing Plant
and the net book value, within 180 days of the effective date of the
sale and leaseback arrangement to the retirement of our or a
Restricted Subsidiary's Indebtedness, which may include the senior
debt securities. However, we cannot satisfy this test by retiring
Indebtedness that we were otherwise obligated to repay within the
180-day period.
THE SUBORDINATED DEBT INDENTURE DOES NOT INCLUDE ANY LIMITATIONS ON SALES
AND LEASEBACKS.
CONSOLIDATION, MERGER OR SALE OF ASSETS. The senior debt indenture provides
that we will not consolidate or merge with or into any other corporation and
will not sell, lease or convey our properties and assets as an entirety, or
substantially as an entirety, to another corporation if, as a result of that
action, any of our assets would become subject to a mortgage, unless either:
o that mortgage could be created under the senior debt indenture without
equally and ratably securing the senior debt securities; or
o the senior debt securities will be secured equally and ratably with or
prior to the Indebtedness secured by that mortgage.
Each of the indentures provides that we may consolidate or merge or sell
all or substantially all of our assets if:
o we are the continuing corporation or if we are not the continuing
corporation, the continuing corporation is organized and existing
under the laws of the United States of America or any state of the
United States or the District of Columbia and assumes by supplemental
indenture the due and punctual payment of the principal of, and
premium, if any, and interest, if any, on, the debt securities and the
due and punctual performance and observance of all of the covenants
and conditions of the applicable indenture to be performed by us; and
o we are not, or the continuing corporation is not, in default in the
performance of any covenant or condition of the applicable indenture
to be performed by us immediately after the merger, consolidation or
sale of assets.
DEFINITIONS
"Attributable Debt" in respect of a sale and leaseback arrangement is
defined in the senior debt indenture to mean, at the time of determination, the
lesser of:
o the sale price of the Principal Domestic Manufacturing Plant to be
leased multiplied by a fraction the numerator of which is the
remaining portion of the base term of the lease and the denominator of
which is the base term of the lease; and
o the total rental payments under the lease discounted to present value
using an interest factor determined in accordance with generally
accepted financial practice. However, if we cannot readily determine
that interest factor, we will use an annual rate of 11%, compounded
semiannually. We will also exclude from rental payments any amounts
paid on account of property taxes, maintenance, repairs, insurance,
water rates and other items which are not payments for property
rights.
"Consolidated Net Tangible Assets" is defined in the senior debt indenture
to mean as of any particular time, the aggregate amount of assets after
deducting current liabilities, goodwill, patents, copyrights, trademarks, and
other intangibles, in each case as shown on our most recent consolidated
financial statements prepared in accordance with U.S. generally accepted
accounting principles.
9
"Consolidated Net Worth" is defined in the senior debt indenture to mean
the sum of (1) the par value of our capital stock, (2) our capital in excess of
par value and (3) retained earnings, in each case as shown on our most recent
consolidated financial statements prepared in accordance with U.S. generally
accepted accounting principles.
"Indebtedness" is defined in the senior debt indenture to mean any notes,
bonds, debentures or other similar indebtedness for money borrowed.
"Mortgage" is defined in the senior debt indenture to mean a mortgage,
security interest, pledge or lien.
"Principal Domestic Manufacturing Plant" is defined in the senior debt
indenture to mean any manufacturing or processing plant or warehouse (other than
any plant or warehouse which, in the opinion of our Board of Directors, is not
material to our total business), including land and fixtures, which is owned by
us or a subsidiary, located in the United States and has a gross book value
(without deduction of any depreciation reserves) on the determination date of
more than 1% of our Consolidated Net Worth.
"Restricted Subsidiary" is defined in the senior debt indenture to mean any
Subsidiary of ours which
o is organized under the laws of the United States or any state of the
United States or the District of Columbia;
o transacts all or a substantial part of its business in the United
States; and
o owns a Principal Domestic Manufacturing Plant.
However, "Restricted Subsidiary" does not include Pitney Bowes Credit
Corporation or any other Subsidiary which
o is primarily engaged in providing or obtaining financing for the sale
or lease of products that we or our Subsidiaries sell or lease or is
otherwise primarily engaged in the business of a finance company; or
o is primarily engaged in the business of owning, developing or leasing
real property other than a Principal Domestic Manufacturing Plant.
"Subsidiary" is defined in both indentures to mean any corporation of which
at least a majority of the outstanding voting stock is owned by us, or by us and
one or more Subsidiaries, or by one or more Subsidiaries.
EVENTS OF DEFAULT, WAIVER AND NOTICE
The indentures provide that the following events will be events of default
with respect to the debt securities of a series:
o we default in the payment of any interest on the debt securities of
that series for 30 days or more;
o we default in the payment of any principal or premium on the debt
securities of that series on the date that payment was due;
o we default in making any sinking fund payment on the debt securities
of that series on the date that payment was due;
o we breach any of the other covenants applicable to that series of debt
securities and that breach continues for 90 days or more after we
receive notice from the trustee or the holders of at least 25% of the
aggregate principal amount of debt securities of that series;
o we commence bankruptcy or insolvency proceedings or consent to any
bankruptcy relief sought against us; or
o we become involved in involuntary bankruptcy or insolvency proceedings
and an order for relief is entered against us, if that order remains
in effect for more than 60 consecutive days.
The prospectus supplement may specify additional events of default that may
be applicable to debt securities of a series.
10
The trustee or the holders of 25% of the aggregate principal amount of debt
securities of a series may declare all of the debt securities of that series to
be due and payable immediately if an event of default with respect to a payment
occurs. The trustee or the holders of 25% of the aggregate principal amount of
debt securities of each affected series voting as one class may declare all of
the debt securities of each affected series due and payable immediately if an
event of default with respect to a breach of a covenant occurs. The trustee or
the holders of 25% of the aggregate principal amount of debt securities
outstanding under the applicable indenture voting as one class may declare all
of the debt securities outstanding under that indenture due and payable
immediately if a bankruptcy event of default occurs. The holders of a majority
of the aggregate principal amount of the debt securities of the applicable
series or number of series may annul a declaration or waive a past default with
respect to that series except for a continuing payment default and only if all
other events of default with respect to that series have been cured or waived.
If any of the affected debt securities are original issue discount securities,
by principal amount we mean the amount that the holders would be entitled to
receive by the terms of that debt security if the debt security were declared
immediately due and payable.
The holders of a majority in principal amount of the debt securities of any
or all series affected and then outstanding will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the applicable trustee under the indentures. Notwithstanding the foregoing, a
trustee will not have to follow any direction unless the holders of the debt
securities offer to reimburse the trustee for the costs, expenses and
liabilities which the trustee might incur in compliance with the request.
If we have placed funds on deposit with the trustee to avoid having to
comply with the restrictive covenants in the senior debt indenture and the debt
securities are declared due and payable because of an event of default, the
funds on deposit will be sufficient to pay amounts due on the debt securities at
the time of their stated maturity, but may not be sufficient to pay amounts due
on the debt securities at the time the debt securities are declared due and
payable. In that case, we would remain liable for any deficiency.
Each indenture requires that we file a certificate each year with the
applicable trustee stating that there are no defaults under the indenture. Each
indenture permits the applicable trustee to withhold notice to holders of debt
securities of any default other than a payment default if the trustee considers
it in the best interests of the holders.
MODIFICATION OF INDENTURES
We can enter into a supplemental indenture with the applicable trustee to
modify any provision of the applicable indenture or any series of debt
securities without obtaining the consent of the holders of any debt securities
if the modification does not adversely affect the holders in any material
respect. In addition, we can generally enter into a supplemental indenture with
the applicable trustee to modify any provision of the indenture or any series of
debt securities if we obtain the consent of the holders of a majority of the
aggregate principal amount of outstanding debt securities of each affected
series voting as one class. However, we need the consent of each affected holder
in order to:
o change the date on which any payment of principal or interest on any
debt security is due;
o reduce the amount of any principal, interest or premium due on any
debt security;
o change the currency or location of any payment;
o impair the right of any holder to bring suit for any payment after its
due date; or
o reduce the percentage in principal amount of debt securities required
to consent to any modification or waiver of any provision of the
indenture or the debt securities.
FORM OF DEBT SECURITIES
Each debt security will be represented either by a certificate issued in
definitive form to a particular investor or by one or more global securities
representing the entire series of securities issued at one time. Certificated
securities in definitive form and global securities will be issued in registered
form. Definitive securities name you or your nominee as the owner of the
security and, in order to transfer or exchange these securities or to receive
payments other than interest or other interim payments, you or your nominee must
physically deliver the securities to the trustee, registrar, paying agent or
other agent, as applicable. Global securities name a depositary or its
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nominee as the owner of the debt securities represented by the global
securities. The depositary maintains a computerized system that will reflect the
beneficial ownership of the securities through accounts maintained by
broker/dealers, banks, trust companies or other representatives, as we explain
more fully below under "--Global Securities."
GLOBAL SECURITIES
We may issue the debt securities of any series in the form of one or more
fully registered global securities that will be deposited with a depositary or
with a nominee for a depositary identified in the prospectus supplement relating
to that series and registered in the name of the depositary or its nominee.
Unless we specify a different depositary in a prospectus supplement, the
depositary for any global securities we issue will be The Depository Trust
Company, or DTC, New York, New York. In that case, one or more global securities
will be issued in a denomination or aggregate denominations equal to the portion
of the aggregate principal or face amount of outstanding registered securities
of the series to be represented by the global securities. Unless and until the
depositary exchanges a global security in whole or in part for securities in
definitive registered form, the global security may not be transferred except in
whole or in part by the depositary to a nominee of the depositary or by a
nominee of the depositary to the depositary or another nominee of the depositary
or by the depositary or any of its nominees to a successor of the depositary or
a nominee of that successor.
If not described below, any specific terms of the depositary arrangement
with respect to any portion of a series of securities to be represented by a
global security will be described in the prospectus supplement relating to that
series. We anticipate that the following provisions will apply to all depositary
arrangements.
Ownership of beneficial interests in a global security will be limited to
persons that have accounts with the depositary for that global security, which
we call "participants", or persons that may hold interests through participants.
Upon the issuance of a global security, the depositary for the global security
will credit, on its book-entry registration and transfer system, the
participants' accounts with the respective principal or face amounts of the
securities represented by the global security beneficially owned by those
participants. The accounts to be credited will be designated by any dealers,
underwriters or agents participating in the distribution of the securities.
Ownership of beneficial interests in the global security will be shown on, and
the transfer of those ownership interests will be effected only through, records
maintained by the depositary for the global security, with respect to interests
of participants, and on the records of participants, with respect to interests
of persons holding through participants.
The laws of some states may require that some purchasers of securities take
physical delivery of their securities in definitive form. Those laws may impair
the ability to own, transfer or pledge beneficial interests in global
securities.
So long as the depositary for a global security, or its nominee, is the
registered owner of the global security, the depositary or its nominee, as the
case may be, will be considered the sole owner or holder of the debt securities
represented by the global security for all purposes under the applicable
indenture. Except as described below, owners of beneficial interests in a global
security will not be entitled to have the securities represented by a global
security registered in their names, will not receive or be entitled to receive
physical delivery of their securities in definitive form and will not be
considered the owners or holders of the securities under the applicable
indenture. Accordingly, each person owning a beneficial interest in a global
security must rely on the procedures of the depositary for that global security
and, if that person is not a participant, on the procedures of the participant
through which that person owns its interest, to exercise any rights of a holder
under the applicable indenture. We understand that under existing industry
practices, if we request any action of holders or if an owner of a beneficial
interest in a global security desires to give or take any action which a holder
is entitled to give or take under the applicable indenture, the depositary for
that global security would authorize the participants holding the relevant
beneficial interests to give or take that action, and those participants would
authorize beneficial owners owning through those participants to give or take
that action or would otherwise act upon the instructions of beneficial owners
holding through them.
Payments of principal, premium, if any, and interest, if any, on debt
securities represented by a global security registered in the name of a
depositary or its nominee will be made to the depositary or its nominee, as the
case may be, as the registered owner of the global security. We and the trustees
or any of our or their agents will not
12
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in the global
security or for maintaining, supervising or reviewing any records relating to
those beneficial ownership interests.
We expect that the depositary for any debt securities represented by a
global security, upon receipt of any payment of principal, premium, interest or
other distribution of underlying securities or commodities to holders in respect
of the global security, will immediately credit participants' accounts in
amounts proportionate to their respective beneficial interests in the global
security as shown on the records of the depositary. We also expect that payments
by participants to owners of beneficial interests in the global security held
through those participants will be governed by standing customer instructions
and customary practices, as is now the case with the securities held for the
accounts of customers in bearer form or registered in "street name," and will be
the responsibility of those participants.
DTC has advised us 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 under Section 17A of the Securities
Exchange Act of 1934. DTC was created to hold securities of its participants and
to facilitate the clearance and settlement of securities transactions among its
participants through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
which (and/or representatives of which) are also owners of DTC. Access to DTC's
book-entry systems 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.
If the depositary for any debt securities represented by a global security
is at any time unwilling or unable to continue as depositary or ceases to be a
clearing agency registered under the Exchange Act, and we do not appoint a
successor depositary registered as a clearing agency under the Exchange Act
within 90 days, we will issue the debt securities in definitive form in exchange
for that global security. We will also issue debt securities of any series in
definitive form in exchange for the global securities representing the
securities of that series if any event occurs and is continuing which, after
notice or lapse of time, or both, would become an event of default with respect
to the securities of that series. In addition, we may at any time and in our
sole discretion determine not to have any of the debt securities of a series
represented by one or more global securities and, in that event, will issue debt
securities of that series in definitive form in exchange for all of the global
security or securities representing those debt securities. Any securities issued
in definitive form in exchange for a global security will be registered in such
name or names as the depositary will instruct the relevant trustee. We expect
that those instructions will be based upon directions received by the depositary
from participants with respect to ownership of beneficial interests in the
global security.
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DESCRIPTION OF PREFERRED STOCK AND PREFERENCE STOCK
The following description of the material terms of our preferred stock and
preference stock is based on the provisions of our restated certificate of
incorporation, as amended. For more information as to how you can obtain a
current copy of our restated certificate of incorporation, see "Where You Can
Find More Information."
Our restated certificate of incorporation, as amended, authorizes the
issuance of 600,000 shares of cumulative preferred stock, par value $50.00 per
share, 5,000,000 shares of preference stock, without par value, and 480,000,000
shares of common stock, par value $1.00 per share.
PREFERRED STOCK
We may issue preferred stock from time to time in one or more series,
without stockholder approval. Subject to limitations prescribed by law, our
board of directors is authorized to determine the voting powers, if any,
designations and powers, preferences and rights, and the qualifications,
limitations or restrictions, for each series of preferred stock that may be
issued and to fix the number of shares of each series.
At August 31, 2001, there were 488 shares of our 4% Convertible Cumulative
Preferred Stock outstanding. Each share of our outstanding 4% preferred stock is
entitled to cumulative dividends at the rate of $2 per year, can be redeemed at
our option, in whole or in part at any time, at a price of $50 per share, plus
dividends accrued to the redemption date, and is convertible into 24.24 shares
of our common stock, subject to anti-dilution adjustment.
DIVIDENDS. Holders of preferred shares of each series will be entitled to
receive, when and as declared by our board of directors out of funds legally
available for the payment of dividends, cumulative dividends at the rate
determined by our board of directors for that series, and no more. Dividends on
the preferred shares will accrue from the date fixed by our board of directors
for that series. Unless we have declared and paid in full all dividends payable
on all of our outstanding preferred shares for the current period and all prior
periods, we will not be allowed to make any dividend payments on any class of
stock that is subordinate to our preferred shares and we will not be allowed to
redeem or otherwise repurchase any shares of any class of stock which ranks
equally with or subordinate to our preferred shares.
Accrued and unpaid dividends on the preferred shares will not bear
interest.
REDEMPTION. The terms, if any, on which preferred shares of any series may
be redeemed will be described in a prospectus supplement.
If we decide to redeem fewer than all of the outstanding preferred shares
of any series, we will determine the method of selecting which shares to redeem.
CONVERSION OR EXCHANGE RIGHTS. The prospectus supplement relating to any
series of preferred stock that is convertible or exchangeable will state the
terms on which shares of that series are convertible into or exchangeable for
shares of common or preference stock or another series of preferred stock of
Pitney Bowes or securities of any third party.
LIQUIDATION. In the event of our voluntary or involuntary liquidation,
before any distribution of assets will be made to the holders of any class of
shares ranking subordinate to the preferred shares as to assets, the holders of
the preferred shares of each series will be entitled to receive out of our
assets available for distribution to our shareholders the sum of the par value
for that series and all accrued and unpaid dividends on those shares. In the
event of a voluntary liquidation, the holders of preferred shares also will
receive the premium, if any, assigned to that series. The holders of all series
of preferred shares are entitled to share ratably, in accordance with the
respective amounts payable on their shares, in any distribution upon liquidation
which is not sufficient to pay in full the aggregate amounts payable on all of
those shares. After payment in full of the liquidation price of the preferred
shares, the holders of those shares will not be entitled to any further
participation in any distribution of our assets. Neither the consolidation or
merger of Pitney Bowes with or into any other corporation or corporations, nor
the merger or consolidation of any other corporation into and with Pitney Bowes,
will be deemed to be a voluntary or involuntary liquidation if the transaction
is consented to by the holders of 662/3% of the outstanding preferred shares.
However, the sale, exchange or transfer of all or substantially all of the
assets of Pitney Bowes
14
will be deemed a voluntary liquidation of Pitney Bowes for purposes of payment
of the liquidation price of the preferred shares.
VOTING. The preferred shares of a series will not be entitled to vote,
except as provided below or in the applicable prospectus supplement unless
required by applicable law. Unless otherwise indicated in the prospectus
supplement relating to a series of preferred shares, each share of a series will
be entitled to one vote on matters on which holders of that series are entitled
to vote. However, we may not alter certain rights and preferences of the
preferred shares without the affirmative vote of the holders of at least
two-thirds of the affected outstanding preferred shares, voting as a class. In
addition, whenever dividends on the preferred shares are in arrears in an
aggregate amount equal to six quarterly dividend periods or we fail to retire or
repurchase any shares of preferred stock that we are obligated to retire or
repurchase, then the holders of all series of outstanding preferred shares,
voting as a class, will be entitled to elect one-third of the total number of
directors, but not less than three directors. We may not increase the amount of
preferred shares or authorize or create any shares of any other class of stock
ranking equal to the preferred shares as to dividends or assets or otherwise
without the consent of the holders of at least a majority of all the outstanding
preferred shares, voting as a class.
PREFERENCE STOCK
We may issue preference stock from time to time in one or more series,
without stockholder approval. The preference shares rank as to dividends and
assets junior to the preferred shares but senior to the common stock and to any
other capital stock of Pitney Bowes that we may authorize in the future, other
than capital stock that ranks senior or equal to the preference shares and that
is authorized as described below under "--Voting". Each series of preference
shares will rank equally to each other series of preference shares as to
dividends and assets, unless the prospectus supplement relating to a particular
series of preference shares states that the shares of that series rank junior to
the other series of preference shares as to dividends or assets or both.
Subject to the limitations prescribed by law, our board of directors is
authorized to determine the voting powers, if any, designations and powers,
preferences and rights, and the qualifications, limitations or restrictions for
each series of preference stock that may be issued and to fix the number of
shares of each series.
At August 31, 2001, there were 59,774 shares of $2.12 Convertible
Preference Stock outstanding. Each share of our outstanding $2.12 preference
stock is entitled to cumulative dividends at the rate of $2.12 per year, can be
redeemed at our option, in whole or in part at any time, at a price of $28 per
share, plus dividends accrued to the redemption date, and is convertible into 16
shares of our common stock, subject to anti-dilution adjustment.
DIVIDENDS. Holders of preference shares of each series will be entitled to
receive, when and as declared by our board of directors out of funds legally
available for the payment of dividends, cumulative dividends at the rate
determined by our board of directors for that series, and no more. Dividends on
the preference shares will accrue from the date fixed by our board of directors
for that series. Because the preference shares rank junior to the preferred
shares, unless we have declared and paid in full all dividends payable on all of
our outstanding preferred shares for the current period and all prior periods,
we will not be allowed to make any dividend payments on the preference shares
and we will not be able to redeem or repurchase any preference shares. We will
also not be allowed to make any dividend payment on any series of preference
shares unless at the same time we pay dividends, in the same proportion to the
preferential dividend rates, for each other series of preference shares ranking
equally with that series. In addition, unless we have paid in full all dividends
payable on all of our outstanding preference shares for the current period and
all prior periods, we will not be allowed to make any dividend payments on any
class of stock that is subordinate to our preference shares and we will not be
allowed to redeem or otherwise repurchase any shares of any class of stock which
ranks equally with or subordinate to our preference shares.
REDEMPTION. The terms, if any, on which preference shares of any series may
be redeemed will be described in a prospectus supplement.
If we decide to redeem fewer than all of the outstanding preference shares
of any series, we will determine the method of selecting which shares to redeem.
15
CONVERSION OR EXCHANGE RIGHTS. The prospectus supplement relating to any
series of preference stock that is convertible or exchangeable will state the
terms on which shares of that series are convertible into or exchangeable for
shares of common stock or another series of preference stock of Pitney Bowes or
securities of any third party.
LIQUIDATION. In the event of our voluntary or involuntary liquidation,
before any distribution of assets is made to the holders of any class of shares
ranking as to assets subordinate to the preference shares, the holders of the
preference shares of each series will be entitled to receive out of our assets
available for distribution to our shareholders the preferential amount, in cash,
that will be determined by our board of directors for that series when that
series is established and all accrued and unpaid dividends on those shares, but
the holders of the preference shares will not be entitled to receive the
liquidation price of their shares until the liquidation price of the preferred
shares outstanding at the time has been paid in full. The holders of all series
of preference shares are entitled to share ratably, in accordance with the
respective amounts payable on their shares, in any distribution upon liquidation
which is not sufficient to pay in full the aggregate amounts payable on those
shares, except to the extent that the prospectus supplement relating to a
particular series of preference shares states that the shares of that series
rank junior to the other series of preference shares as to dividends or assets.
After payment in full of the liquidation price of the preference shares, the
holders of those shares will not be entitled to any further participation in any
distribution of our assets.
VOTING. The preference shares of a series will not be entitled to vote,
except as provided below or in the applicable prospectus supplement and as
required by applicable law. Unless otherwise indicated in the prospectus
supplement relating to a series of preference shares, each share of a series
will be entitled to one vote on matters on which holders of that series are
entitled to vote. Notwithstanding the foregoing, we may not create, authorize or
increase the authorized amount of any class of stock having preference or
priority as to dividends or assets over the preference shares without the
affirmative vote of the holders of at least two-thirds of the preference shares,
irrespective of series. We may not increase the authorized amount of preference
stock or of any previously authorized class of stock ranking equally with the
preference stock as to dividends or assets, or authorize or create any class of
stock ranking equally with the preference stock as to dividends or assets,
without the consent of the holders of a majority of the outstanding preference
shares, irrespective of series. Whenever dividends on the preference shares are
in arrears in an aggregate amount equal to six quarterly dividend periods, then
the holders of preference shares, voting as a class, will be entitled to elect
two directors.
16
DESCRIPTION OF COMMON STOCK
The following description of the material terms of our common stock is
based on the provisions of our restated certificate of incorporation, as
amended. For more information as to how you can obtain a current copy of our
restated certificate of incorporation, see "Where You Can Find More
Information".
We do not intend to offer common stock directly with this prospectus. We
may issue debt securities or preferred or preference stock under this prospectus
that are convertible into Pitney Bowes' common stock. If a series of securities
is convertible into common stock, the prospectus supplement will state the
initial conversion price per share at which the securities may be converted.
Subject to the rights of the holders of any of our preferred stock or
preference stock then outstanding, holders of common stock are entitled to one
vote per share on matters to be voted on by our stockholders and to receive
dividends, if any, when declared from time to time by our board of directors in
its discretion out of legally available funds. Upon our liquidation or
dissolution, holders of common stock are entitled to receive proportionately all
assets remaining after payment of all liabilities and liquidation preference on
any shares of preferred stock or preference stock outstanding at the time.
Holders of common stock have no preemptive or other subscription rights other
than the rights described below under "--Stockholder Rights Agreement", and
there are no conversion rights or redemption or sinking fund provisions with
respect to common stock. As of August 31, 2001, there were approximately
244,829,461 shares of our common stock outstanding, net of 78,508,451 shares of
treasury stock, and approximately 18,772,315 shares reserved for issuance upon
exercise of outstanding stock options and conversion of our 4% preferred shares
and $2.12 preference shares. All of our outstanding common stock is fully paid
and non-assessable, which means that the holders have paid their purchase price
in full and we may not ask them for additional funds, and all of the shares of
common stock that may be offered with this prospectus will be fully paid and
non-assessable when issued.
The transfer agent and registrar for our common stock is First Chicago
Trust Company of New York, a division of Equiserve LP.
Our common stock is listed on the New York Stock Exchange under the ticker
symbol "PBI".
STOCKHOLDER RIGHTS AGREEMENT
On December 11, 1995, we entered into a stockholder rights agreement. The
material provisions of that rights agreement are summarized below. However,
since the terms of our rights agreement are complex, this summary may not
contain all of the information that is important to you. For more information,
you should read the agreement, which is filed as an exhibit with the SEC. See
"Where You Can Find More Information" for information on how to obtain a copy.
Our rights agreement currently provides that each share of our outstanding
common stock has one right to purchase one-two-hundredth of a share of our
Series A Junior Participating Preference Stock. The purchase price per
one-two-hundredth of a share of preference stock under the stockholder rights
agreement is $97.50. The rights are not exercisable until they separate from the
common stock, as described below.
Initially, the rights under our rights agreement are attached to
outstanding certificates representing our common stock, but the rights will be
represented by separate certificates on the day 10 days after someone acquires
at least 20% of our common stock, or approximately 10 days after someone
commences a tender offer for at least 20% of our outstanding common stock.
After the rights separate from our common stock, certificates representing
the rights will be mailed to record holders of the common stock. Once
distributed, the rights certificates alone will represent the rights. All shares
of our common stock issued prior to the date the rights separate from the common
stock have been and will be issued with the rights attached. Until the rights
separate from the common stock, each right will be transferable only with the
related share of common stock. The rights will expire on February 20, 2006
unless we redeem or exchange them earlier.
17
If an acquiring person obtains or has the right to obtain at least 20% of
our common stock and none of the events described in the next paragraph have
occurred, then each right will entitle the holder to purchase for $97.50 a
number of shares of our common stock having a then current market value of
$195.00.
If an acquiring person obtains or has the right to obtain at least 20% of
our common stock, then each right will entitle the holder to purchase for $97.50
a number of shares of common stock of the acquiring person having a then current
market value of $195.00 if any of the following occurs:
o we merge into another entity;
o an acquiring entity merges into us; or
o we sell 50% or more of our assets or earning power.
Under our rights agreement, any rights that are or were owned by an
acquiring person of more than 20% of our outstanding common stock will be null
and void.
Our rights agreement contains exchange provisions which provide that after
an acquiring person obtains 20% or more, but less than 50%, of our outstanding
common stock, our board of directors may, at its option, exchange all or part of
the then outstanding and exercisable rights for shares of our common stock, at
an exchange ratio of one share of common stock or one two-hundredth of a share
of Series A Junior Participating Preference Stock per right.
Our board of directors may, at its option, redeem all of the outstanding
rights at a redemption price of $0.005 per right, subject to adjustment, prior
to the earlier of (1) the time that an acquiring person obtains 20% or more of
our outstanding common stock, or (2) the final expiration date of the rights
agreement. The ability to exercise the rights will terminate upon the action of
our board of directors ordering the redemption of the rights, and the only right
of the holders of the rights will be to receive the redemption price.
Holders of rights will have no rights as stockholders, such as the right to
vote or receive dividends, simply by virtue of holding the rights. The rights
agreement includes anti-dilution provisions designed to prevent efforts to
diminish the effectiveness of the rights.
For so long as the rights are redeemable, we may amend the rights agreement
in any respect. At any time when the rights are no longer redeemable, we may
amend the rights in any respect that does not adversely affect the holders of
rights.
Our rights agreement contains provisions that have anti-takeover effects.
The rights may cause substantial dilution to a person or group that attempts to
acquire us without conditioning the offer on a substantial number of rights
being acquired, redeemed or declared invalid. Accordingly, the existence of the
rights may deter acquirors from making takeover proposals or tender offers.
However, the rights are not intended to prevent a takeover, but rather are
designed to enhance the ability of our board of directors to negotiate with an
acquiror on behalf of all of the stockholders.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation provides that a director of Pitney Bowes
will not be liable to Pitney Bowes or its stockholders for monetary damages for
breach of fiduciary duty as a director, except in certain cases where liability
is mandated by the Delaware General Corporation Law.
Our certificate of incorporation also provides for indemnification, to the
fullest extent permitted by the Delaware General Corporation Law, of any person
made or threatened to be made a party to any action, suit or proceeding by
reason of the fact that the person is or was a director or officer of Pitney
Bowes, or, at the request of Pitney Bowes, serves or served as a director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, against all expense, liability and loss
(including attorneys' fees, judgments, fines, Employee Retirement Income
Security Act excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by that person in connection with
the action, suit or proceeding. Our certificate of incorporation also provides
that, to the extent authorized from time to time by our board of directors,
Pitney Bowes may provide to employees and other agents of Pitney Bowes rights of
indemnification and to receive
18
payment or reimbursement of expenses, including attorneys' fees, that are
similar to the rights conferred by the certificate of incorporation on directors
and officers of Pitney Bowes or persons serving at the request of Pitney Bowes
as directors, officers, employees or agents of any other enterprise.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of the Delaware General Corporation Law applies to Pitney
Bowes. In general, Section 203 prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an "interested stockholder", as
defined in Section 203, for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes a merger, asset sale or a transaction resulting in a
financial benefit to the interested stockholder. An "interested stockholder", as
defined in Section 203, is a person who, together with affiliates and
associates, owns (or, in certain cases, within the preceding three years, did
own) 15% or more of the corporation's outstanding voting stock. Under Section
203, a business combination between Pitney Bowes and an interested stockholder
is prohibited unless it satisfies one of the following conditions:
o before the stockholder became an interested stockholder, the board of
directors of Pitney Bowes must have approved either the business
combination or the transaction that resulted in the stockholder
becoming an interested stockholder;
o upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of Pitney Bowes outstanding at the
time the transaction commenced, excluding, for purposes of determining
the number of shares outstanding, shares owned by persons who are
directors and officers; or
o the business combination is approved by the board of directors of
Pitney Bowes and authorized at an annual or special meeting of the
stockholders by the affirmative vote of at least 66 2/3 % of the
outstanding voting stock which is not owned by the interested
stockholder.
See also "--Certain Anti-Takeover Matters--Vote Required for Certain
Business Combinations" below for information abouT provisions in our certificate
of incorporation that impose requirements similar to those of Section 203.
CERTAIN ANTI-TAKEOVER MATTERS
Our certificate of incorporation and by-laws include a number of provisions
that may have the effect of encouraging persons considering unsolicited tender
offers or other unilateral takeover proposals to negotiate with our board of
directors rather than pursue non-negotiated takeover attempts. These provisions
include:
VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS. Our certificate of
incorporation generally requires the affirmative vote of the holders of at least
80% of the voting power of the then outstanding shares of capital stock of
Pitney Bowes entitled to vote generally in the election of directors, which we
call "voting stock", voting together as a single class, in addition to any other
affirmative vote required by law or the certificate of incorporation, to
approve:
o any merger or consolidation of Pitney Bowes or any of its subsidiaries
with an "interested stockholder", as defined in the certificate of
incorporation and described below, or any other corporation which is,
or after the merger or consolidation would be, an affiliate of an
interested stockholder;
o any sale, lease, exchange, mortgage, pledge, transfer or other
disposition to or with any interested stockholder or any affiliate of
any interested stockholder of any assets of Pitney Bowes or any of its
subsidiaries having an aggregate fair market value of $50,000,000 or
more;
o the issuance or transfer by Pitney Bowes or any of its subsidiaries of
any securities of Pitney Bowes or any of its subsidiaries to any
interested stockholder or any affiliate of any interested stockholder
in exchange for cash, securities or other property having an aggregate
fair market value of $50,000,000 or more;
o the adoption of any plan or proposal for the liquidation or
dissolution of Pitney Bowes proposed by or on behalf of an interested
stockholder or any affiliate of any interested stockholder; or
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o any reclassification of securities or recapitalization of Pitney
Bowes, or any merger or consolidation of Pitney Bowes with any of its
subsidiaries or any other transaction which has the effect of
increasing the proportionate share of the outstanding shares of any
class of equity or convertible securities of Pitney Bowes or any of
its subsidiaries which is directly or indirectly owned by any
interested stockholder or any affiliate of any interested stockholder.
An "interested stockholder" means any person, other than Pitney Bowes or
any of its subsidiaries, who or which:
o beneficially owns, directly or indirectly, more than 20% of the voting
power of the outstanding shares of voting stock;
o is an affiliate of Pitney Bowes and at any time within the two-year
period immediately before the date in question beneficially owned,
directly or indirectly, 20% or more of the voting power of the then
outstanding voting stock; or
o is the assignee of any shares of voting stock which were at any time
within the two-year period immediately before the date in question
beneficially owned by an interested stockholder, if the assignment of
those shares occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning of the
Securities Act of 1933.
The special voting requirement described above will not apply to a
transaction of any of the kinds described above, and that transaction will
require only any affirmative vote that is required by law and any other
provisions of our certificate of incorporation, if either:
o a majority of our "disinterested directors" approve the transaction;
"disinterested director" means any director who is unaffiliated with
the interested stockholder and was a member of the board of directors
before the interested stockholder became an interested stockholder,
and any successor of a disinterested director who is unaffiliated with
the interested stockholder and is recommended to succeed the
disinterested director by a majority of disinterested directors then
on the board; or
o all of the following conditions are met:
- the aggregate amount of the cash and the fair market value as of
the date of consummation of the transaction of consideration
other than cash to be received per share by holders of common
stock in the transaction is at least equal to the higher of the
following: (a) the highest per share price paid by the interested
stockholder for any shares of common stock acquired by it within
the two-year period immediately before the first public
announcement of the proposal of the transaction, which we call
the "announcement date", or in the transaction in which it became
an interested stockholder, whichever is higher, and (b) the fair
market value per share of common stock on the announcement date
or the date on which the interested stockholder became an
interested stockholder, whichever is higher;
- the aggregate amount of the cash and the fair market value as of
the date of consummation of the transaction of consideration
other than cash to be received per share by holders of shares of
any other class of outstanding voting stock is at least equal to
the highest of the following: (a) the highest per share price
paid by the interested stockholder for any shares of that class
of voting stock acquired by it within the two-year period
immediately before the announcement date or in the transaction in
which it became an interested stockholder, whichever is higher;
(b) the highest preferential amount per share to which the
holders of shares of that class of voting stock are entitled upon
any voluntary or involuntary liquidation, dissolution or winding
up of Pitney Bowes; and (c) the fair market value per share of
that class of voting stock on the announcement date or the date
on which the interested stockholder became an interested
stockholder, whichever is higher;
- the consideration to be received by holders of a particular class
of outstanding voting stock will be in cash or in the same form
as the interested stockholder has previously paid for shares of
that class of voting stock; if the interested stockholder has
paid for shares of any class of voting stock with
20
varying forms of consideration, the consideration for that class
will be either cash or the form used to acquire the largest
number of shares of that class previously acquired by it;
- after the interested stockholder has become an interested
stockholder and before the consummation of the transaction: (a)
except as approved by a majority of the disinterested directors,
Pitney Bowes has not failed to declare and pay at the regular
date any full quarterly dividends on the outstanding preferred
stock or preference stock; (b) except as approved by a majority
of the disinterested directors, Pitney Bowes has not reduced the
annual rate of dividends on the common stock or failed to
increase that rate to reflect any reclassification of the
outstanding shares of common stock, including any reverse stock
split; (c) the interested stockholder has not become the
beneficial owner of any additional shares of voting stock except
as part of the transaction which results in the interested
stockholder becoming an interested stockholder;
- after the interested stockholder has become an interested
stockholder, the interested stockholder has not received the
benefit, except proportionately as a stockholder, of any loans,
advances, guarantees, pledges or other financial assistance or
any tax credits or other tax advantages provided by Pitney Bowes;
and
- a proxy or information statement describing the proposed
transaction and complying with the requirements of the Exchange
Act and the rules and regulations under that Act has been mailed
to public stockholders of Pitney Bowes at least 30 days before
the consummation of the transaction, whether or not the proxy or
information statement is required to be mailed under that Act.
CLASSIFIED BOARD OF DIRECTORS. Our certificate of incorporation provides
for a board of directors divided into three classes, with one class to be
elected each year to serve for a three-year term. As a result, at least two
annual meetings of stockholders may be required for the stockholders to change a
majority of our board of directors. In addition, the stockholders of Pitney
Bowes can only remove directors, with or without cause, by the affirmative vote
of the holders of at least 80% of the outstanding shares of voting stock, voting
together as a single class. Except to the extent that the holders of preferred
stock and preference stock have the right to fill vacancies on the board of
directors in some circumstances, vacancies on our board of directors may be
filled only by our board of directors. The classification of directors and the
inability of stockholders to remove directors without the vote of at least 80%
of the outstanding shares of voting stock or to fill vacancies on the board of
directors make it more difficult to change the composition of our board of
directors, but promote a continuity of existing management.
ADVANCE NOTICE REQUIREMENTS. Our by-laws establish advance notice
procedures with regard to stockholder proposals relating to the nomination of
candidates for election as directors or other business to be brought before
meetings of stockholders of Pitney Bowes. These procedures provide that notice
of stockholder proposals of these kinds must be timely given in writing to the
Secretary of Pitney Bowes before the meeting at which the action is to be taken.
Generally, to be timely, notice of stockholder proposals other than nomination
of director candidates must be received at the principal executive offices of
Pitney Bowes not less than 90 days before an annual meeting at which the
proposals are to be presented, and notice of stockholder nominations of director
candidates to be presented at an annual or special meeting must be received not
later than (1) 90 days before the annual meeting or (2) the close of business on
the seventh day following the date on which notice of the special meeting is
first given to stockholders, as applicable. The notice must contain certain
information specified in the by-laws.
NO ABILITY OF STOCKHOLDERS TO CALL SPECIAL MEETINGS. Our certificate of
incorporation and by-laws deny stockholders the right to call a special meeting
of stockholders, except to the extent that holders of preferred stock or
preference stock have the right to call a special meeting in some circumstances.
Our certificate of incorporation and by-laws provide that, except to that
extent, only the board of directors may call special meetings of the
stockholders.
NO WRITTEN CONSENT OF STOCKHOLDERS. Our certificate of incorporation
requires all stockholder actions to be taken by a vote of the stockholders at an
annual or special meeting, and does not permit our stockholders to act by
written consent without a meeting.
AMENDMENT OF BY-LAWS AND CERTIFICATE OF INCORPORATION. Our certificate of
incorporation requires the approval of not less than 80% of the voting power of
all outstanding shares of voting stock, voting as a single class, to amend any
of the provisions of the certificate of incorporation and by-laws described in
this section. Those
21
provisions make it more difficult to dilute the anti-takeover effects of our
by-laws and our certificate of incorporation.
BLANK CHECK PREFERRED AND PREFERENCE STOCK. Our certificate of
incorporation provides for 600,000 authorized shares of preferred stock and
5,000,000 authorized shares of preference stock. The existence of authorized but
unissued shares of preferred and preference stock may enable the board of
directors to render more difficult or to discourage an attempt to obtain control
of Pitney Bowes by means of a merger, tender offer, proxy contest or otherwise.
For example, if in the due exercise of its fiduciary obligations, the board of
directors were to determine that a takeover proposal is not in the best
interests of Pitney Bowes, the board of directors could cause shares of
preferred or preference stock to be issued without stockholder approval in one
or more private offerings or other transactions that might dilute the voting or
other rights of the proposed acquiror or insurgent stockholder or stockholder
group. In this regard, the certificate of incorporation grants our board of
directors broad power to establish the rights and preferences of authorized and
unissued shares of preferred and preference stock. The issuance of shares of
preferred or preference stock could decrease the amount of earnings and assets
available for distribution to holders of shares of common stock. The issuance
may also adversely affect the rights and powers, including voting rights, of
those holders and may have the effect of delaying, deterring or preventing a
change in control of Pitney Bowes.
22
DESCRIPTION OF DEPOSITARY SHARES
We may, at our option, elect to offer fractional shares of preferred stock
or preference stock, rather than full shares of preferred stock or preference
stock. If we exercise this option, we will issue to the public receipts for
depositary shares, and each of these depositary shares will represent a fraction
(to be set forth in the applicable prospectus supplement) of a share of a
particular series of preferred stock or preference stock.
The shares of any series of preferred stock or preference stock underlying
the depositary shares will be deposited under a deposit agreement between us and
a bank or trust company selected by us. The depositary will have its principal
office in the United States and a combined capital and surplus of at least
$50,000,000. Subject to the terms of the deposit agreement, each owner of a
depositary share will be entitled, in proportion to the applicable fraction of a
share of preferred stock or preference stock underlying the depositary share, to
all the rights and preferences of the preferred stock or preference stock
underlying that depositary share. Those rights may include dividend, voting,
redemption, conversion and liquidation rights.
The depositary shares will be evidenced by depositary receipts issued under
a deposit agreement. Depositary receipts will be distributed to those persons
purchasing the fractional shares of preferred stock or preference stock
underlying the depositary shares, in accordance with the terms of the offering.
The following description of the material terms of the deposit agreement, the
depositary shares and the depositary receipts is only a summary and you should
refer to the forms of the deposit agreement and depositary receipts that will be
filed with the SEC in connection with the offering of the specific depositary
shares.
Pending the preparation of definitive engraved depositary receipts, the
depositary may, upon our written order, issue temporary depositary receipts
substantially identical to the definitive depositary receipts but not in
definitive form. These temporary depositary receipts entitle their holders to
all the rights of definitive depositary receipts. Temporary depositary receipts
will then be exchangeable for definitive depositary receipts at our expense.
DIVIDENDS AND OTHER DISTRIBUTIONS. The depositary will distribute all cash
dividends or other cash distributions received with respect to the underlying
stock to the record holders of depositary shares in proportion to the number of
depositary shares owned by those holders.
If there is a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary shares
that are entitled to receive the distribution, unless the depositary determines
that it is not feasible to make the distribution. If this occurs, the depositary
may, with our approval, sell the property and distribute the net proceeds from
the sale to the applicable holders.
WITHDRAWAL OF UNDERLYING PREFERRED OR PREFERENCE STOCK. Unless we say
otherwise in a prospectus supplement, holders may surrender depositary receipts
at the principal office of the depositary and, upon payment of any unpaid amount
due to the depositary, be entitled to receive the number of whole shares of
underlying preferred or preference stock and all money and other property
represented by the related depositary shares. We will not issue any partial
shares of preferred or preference stock. If the holder delivers depositary
receipts evidencing a number of depositary shares that represent more than a
whole number of shares of preferred or preference stock, the depositary will
issue a new depositary receipt evidencing the excess number of depositary shares
to that holder.
REDEMPTION OF DEPOSITARY SHARES. If a series of preferred stock or
preference stock represented by depositary shares is subject to redemption, the
depositary shares will be redeemed from the proceeds received by the depositary
resulting from the redemption, in whole or in part, of that series of underlying
stock held by the depositary. The redemption price per depositary share will be
equal to the applicable fraction of the redemption price per share payable with
respect to that series of underlying stock. Whenever we redeem shares of
underlying stock that are held by the depositary, the depositary will redeem, as
of the same redemption date, the number of depositary shares representing the
shares of underlying stock so redeemed. If fewer than all the depositary shares
are to be redeemed, the depositary shares to be redeemed will be selected by lot
or proportionately, as may be determined by the depositary.
VOTING. Upon receipt of notice of any meeting at which the holders of the
underlying stock are entitled to vote, the depositary will mail the information
contained in the notice to the record holders of the depositary shares
underlying the preferred stock or preference stock. Each record holder of the
depositary shares on the record date
23
(which will be the same date as the record date for the underlying stock) will
be entitled to instruct the depositary as to the exercise of the voting rights
pertaining to the amount of the underlying stock represented by that holder's
depositary shares. The depositary will then try, as far as practicable, to vote
the number of shares of preferred stock or preference stock underlying those
depositary shares in accordance with those instructions, and we will agree to
take all actions which may be deemed necessary by the depositary to enable the
depositary to do so. The depositary will not vote the underlying shares to the
extent it does not receive specific instructions from the holders of depositary
shares underlying the preferred stock or preference stock.
CONVERSION OF PREFERRED OR PREFERENCE STOCK. If the prospectus supplement
relating to the depositary shares says that the deposited preferred or
preference stock is convertible into or exchangeable for common stock or
preferred or preference stock of another series of Pitney Bowes or securities of
any third party, the following will apply. The depositary shares, as such, will
not be convertible into or exchangeable for any securities of Pitney Bowes or
any third party. Rather, any holder of the depositary shares may surrender the
related depositary receipts to the depositary with written instructions to
instruct us to cause conversion or exchange of the preferred or preference stock
represented by the depositary shares into or for whole shares of common stock or
shares of another series of preferred or preference stock of Pitney Bowes or
securities of the relevant third party, as applicable. Upon receipt of those
instructions and any amounts payable by the holder in connection with the
conversion or exchange, we will cause the conversion or exchange using the same
procedures as those provided for conversion or exchange of the deposited
preferred or preference stock. If only some of the depositary shares are to be
converted or exchanged, a new depositary receipt or receipts will be issued for
any depositary shares not to be converted or exchanged.
AMENDMENT AND TERMINATION OF THE DEPOSITARY AGREEMENT. The form of
depositary receipt evidencing the depositary shares and any provision of the
deposit agreement may at any time be amended by agreement between us and the
depositary. However, any amendment which materially and adversely alters the
rights of the holders of depositary shares will not be effective unless the
amendment has been approved by the holders of at least a majority of the
depositary shares then outstanding. The deposit agreement may be terminated by
us or by the depositary only if (a) all outstanding depositary shares have been
redeemed or converted or exchanged for any other securities into which the
underlying preferred or preference stock is convertible or exchangeable or (b)
there has been a final distribution of the underlying stock in connection with
our liquidation, dissolution or winding up and the underlying stock has been
distributed to the holders of depositary receipts.
CHARGES OF DEPOSITARY. We will pay all transfer and other taxes and
governmental charges arising solely from the existence of the depositary
arrangements. We will also pay charges of the depositary in connection with the
initial deposit of the underlying stock and any redemption of the underlying
stock. Holders of depositary receipts will pay other transfer and other taxes
and governmental charges and those other charges, including a fee for any
permitted withdrawal of shares of underlying stock upon surrender of depositary
receipts, as are expressly provided in the deposit agreement to be for their
accounts.
REPORTS. The depositary will forward to holders of depositary receipts all
reports and communications from us that we deliver to the depositary and that we
are required to furnish to the holders of the underlying stock.
LIMITATION ON LIABILITY. Neither we nor the depositary will be liable if
either of us is prevented or delayed by law or any circumstance beyond our
control in performing our respective obligations under the deposit agreement.
Our obligations and those of the depositary will be limited to performance in
good faith of our respective duties under the deposit agreement. Neither we nor
the depositary will be obligated to prosecute or defend any legal proceeding in
respect of any depositary shares or underlying stock unless satisfactory
indemnity is furnished. We and the depositary may rely upon written advice of
counsel or accountants, or upon information provided by persons presenting
underlying stock for deposit, holders of depositary receipts or other persons
believed to be competent and on documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY. The depositary may resign at any
time by delivering notice to us of its election to resign. We may remove the
depositary at any time. Any resignation or removal will take effect upon the
appointment of a successor depositary and its acceptance of the appointment. The
successor depositary must be appointed within 60 days after delivery of the
notice of resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and surplus
of at least $50,000,000.
24
PLAN OF DISTRIBUTION
We may sell the securities being offered by this prospectus in four ways:
o directly to purchasers;
o through agents;
o through underwriters; and
o through dealers.
We may directly solicit offers to purchase our securities or we may
designate agents to solicit offers to purchase those securities. We will, in the
prospectus supplement relating to an offering, name any agent that could be
viewed as an underwriter under the Securities Act of 1933 and describe any
commissions we must pay. Any agent will be acting on a best efforts basis for
the period of its appointment or, if indicated in the applicable prospectus
supplement, on a firm commitment basis. Agents, dealers and underwriters may be
customers of, engage in transactions with, or perform services for us in the
ordinary course of business.
As one of the means of direct issuance of securities, we may utilize the
services of any available electronic auction system to conduct an electronic
`dutch auction' of the offered securities among potential purchasers who are
eligible to participate in the auction of those offered securities, if so
described in the prospectus supplement.
If any underwriters are utilized in the sale of the securities in respect
of which this prospectus is delivered, we will enter into an underwriting
agreement with them at the time of sale to them and we will set forth in the
prospectus supplement relating to that offering their names and the terms of our
agreement with them.
If a dealer is utilized in the sale of the securities in respect of which
the prospectus is delivered, we will sell those securities to the dealer, as
principal. The dealer may then resell those securities to the public at varying
prices to be determined by such dealer at the time of resale.
Remarketing firms, agents, underwriters and dealers may be entitled under
agreements which they may enter into with us to indemnification by us against
some types of civil liabilities or to contribution in respect of those
liabilities, including liabilities under the Securities Act of 1933. Remarketing
firms, agents, underwriters and dealers may be customers of or engage in
transactions with or perform services for us in the ordinary course of business.
If we so indicate in the prospectus supplement, we will authorize agents,
underwriters or dealers to solicit offers by the types of purchasers specified
in the prospectus supplement to purchase offered securities from us at the
public offering price set forth in the prospectus supplement under delayed
delivery contracts providing for payment and delivery on a specified date in the
future. These contracts will be subject to only those conditions described in
the prospectus supplement, and the prospectus supplement will set forth the
commission payable for solicitation of those offers.
Any underwriter, agent or dealer utilized in the initial offering of
securities will not confirm sales to accounts over which it exercises
discretionary authority without the prior specific written approval of its
customer.
25
VALIDITY OF THE SECURITIES
Unless otherwise specified in a prospectus supplement, the validity of the
securities in respect of which this prospectus is being delivered will be passed
on for us by Sara E. Moss, Esq., Senior Vice President and General Counsel of
Pitney Bowes, and by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New
York 10017, and, 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, 2000, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed this prospectus as part of a registration statement on Form
S-3 with the SEC. The registration statement contains exhibits and other
information that are not contained in this prospectus. In particular, the
registration statement includes as exhibits copies of the forms of our senior
and subordinated indentures. Our descriptions in this prospectus of the
provisions of documents filed as exhibits to the registration statement or
otherwise filed with the SEC are only summaries of the documents' material
terms. If you want to review any of these documents, you should obtain the
documents by following the procedures described in the paragraph below.
We file annual, quarterly and special reports and other information with
the SEC. You may read and copy any document we file at the SEC's Public
Reference Room located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the Public Reference
Room. You may also read our SEC filings, including the complete registration
statement and all of the exhibits to it, through the SEC's web site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" much of the information we
file with them, which means that we can disclose important information to you by
referring you directly to those publicly available documents. The information
incorporated by reference is considered to be part of this prospectus. In
addition, information we file with the SEC in the future will automatically
update and supersede information contained in this prospectus and the
accompanying prospectus supplement.
We incorporate by reference the documents listed below and any filings made
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of the initial registration statement and before the effectiveness of
the registration statement and after the effectiveness of the registration
statement until we sell all of the securities we are offering with this
prospectus:
o Our Annual Report on Form 10-K for the year ended December 31, 2000
(which incorporates by reference portions of our proxy statement dated
March 23, 2001).
o Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
2001 and June 30, 2001.
o Our Current Reports on Form 8-K filed February 1, 2001, February 8,
2001, April 13, 2001, April 18, 2001, April 19, 2001 (two reports),
May 17, 2001, June 5, 2001 (two reports), June 15, 2001, July 2, 2001,
July 3, 2001, July 19, 2001 and October 23, 2001.
o Our Form 8-A filed February 16, 1996 and Form 8-A/A filed January 16,
1998.
You may obtain free copies of any of these documents by writing or
telephoning us at Pitney Bowes Inc., World Headquarters, One Elmcroft Road,
Stamford, Connecticut, 06926-0700, telephone (203) 356-5000.
26
PRINCIPAL AND REGISTERED OFFICE OF THE ISSUER
PITNEY BOWES INC.
World Headquarters
One Elmcroft Road
Stamford, Connecticut 06926
TRUSTEE, PRINCIPAL PAYING AGENT AND SECURITY REGISTRAR
SUNTRUST BANK
25 Park Place
24th Floor
Atlanta, Georgia 30303
LUXEMBOURG LISTING AGENT, PAYING AGENT AND TRANSFER AGENT
DEXIA BANQUE INTERNATIONALE A LUXEMBOURG S.A.
69, route d' Esch
L-1470 Luxembourg
LEGAL ADVISERS
TO PITNEY BOWES INC. AS TO TO THE AGENTS AS TO
MATTERS OF UNITED STATES LAW MATTERS OF UNITED STATES LAW
DAVIS POLK & WARDWELL SULLIVAN & CROMWELL LLP
450 Lexington Avenue 125 Broad Street
New York, New York 10017 New York, New York 10004
AUDITORS
TO PITNEY BOWES INC.
PRICEWATERHOUSECOOPERS LLP
300 Atlantic Street
Stamford, Connecticut 06901
This Page Intentionally Left Blank.
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U.S. $1,380,000,000
[PITNEY BOWES LOGO]
GLOBAL MEDIUM-TERM NOTES
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PROSPECTUS SUPPLEMENT
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JPMORGAN
ABN AMRO INCORPORATED
BARCLAYS CAPITAL
CITIGROUP
DEUTSCHE BANK SECURITIES
GOLDMAN, SACHS & CO.
MORGAN STANLEY
APRIL 18, 2003
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