PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 20, 2000)
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-37034
[LOGO]
$1,100,000,000
International Business Machines Corporation
Armonk, New York (914) 499-1900
FLOATING RATE NOTES DUE 2004
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INTEREST PAYABLE ON MARCH 10, JUNE 10, SEPTEMBER 10 AND DECEMBER 10
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THE NOTES ARE REDEEMABLE IN WHOLE IF CERTAIN EVENTS OCCUR INVOLVING CHANGES IN UNITED STATES
TAXATION, AS SET FORTH IN THIS PROSPECTUS SUPPLEMENT. APPLICATION HAS BEEN MADE TO LIST THE
NOTES ON THE LUXEMBOURG STOCK EXCHANGE.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY
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PER NOTE................................ 100% 0.10% 99.90%
TOTAL................................... $1,100,000,000 $1,100,000 $1,098,900,000
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS ARE TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE UNDERWRITERS EXPECT TO DELIVER THE NOTES TO PURCHASERS IN BOOK-ENTRY FORM
ONLY THROUGH THE DEPOSITORY TRUST COMPANY, CLEARSTREAM, LUXEMBOURG OR THE
EUROCLEAR SYSTEM, AS THE CASE MAY BE, ON SEPTEMBER 10, 2002.
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DEUTSCHE BANK SECURITIES
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
SALOMON SMITH BARNEY
SEPTEMBER 5, 2002
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE
OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS SUPPLEMENT.
THE NOTES ARE OFFERED GLOBALLY FOR SALE IN THOSE JURISDICTIONS IN THE UNITED
STATES, CANADA, EUROPE, ASIA AND ELSEWHERE WHERE IT IS LAWFUL TO MAKE SUCH
OFFERS. SEE "OFFERING RESTRICTIONS."
Concurrently with the offering of the Notes, IBM is offering $600,000,000
aggregate principal amount of its 4.25% Notes due 2009. Neither offering is
contingent upon the other.
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
International Business Machines Corporation................. S-3
Use of Proceeds............................................. S-4
Capitalization.............................................. S-4
Ratio of Earnings From Continuing Operations to Fixed
Charges................................................... S-4
Selected Financial Data..................................... S-5
Management.................................................. S-7
Description of Notes........................................ S-9
United States Taxation...................................... S-16
Underwriters................................................ S-21
Offering Restrictions....................................... S-22
Legal Opinions.............................................. S-23
Listing and General Information............................. S-23
PROSPECTUS
Summary..................................................... 3
Ratios of Earnings to Fixed Charges and Earnings to Combined
Fixed Charges and Preferred Stock Dividends............... 4
Where You Can Find More Information......................... 5
Description of the Company.................................. 6
Use of Proceeds............................................. 6
Description of the Debt Securities.......................... 6
Description of the Preferred Stock.......................... 18
Description of the Depositary Shares........................ 19
Description of the Capital Stock............................ 22
Description of the Warrants................................. 22
Plan of Distribution........................................ 24
Legal Opinions.............................................. 24
Experts..................................................... 24
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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 for the purpose of giving
information with regard to the Company. The Company accepts full responsibility
for
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the accuracy of the information contained in this prospectus supplement and the
accompanying prospectus and confirms, having made all reasonable inquiries, that
to the best of its knowledge and belief, there are no other facts the omission
of which would make any statement herein or in the prospectus misleading in any
material respect.
We cannot guarantee that listing will be obtained on the Luxembourg Stock
Exchange. Inquiries regarding our listing status on the Luxembourg Stock
Exchange should be directed to our Luxembourg listing agent, Kredietbank S.A.,
Luxembourg, 43, Boulevard Royal, L-2955 Luxembourg.
The distribution of this prospectus supplement and prospectus and the
offering of the Notes in certain jurisdictions may be restricted by law. Persons
into whose possession this prospectus supplement and the prospectus come should
inform themselves about and observe any such restrictions. This prospectus
supplement and the prospectus do not constitute, and may not be used in
connection with an offer or solicitation by anyone in any jurisdiction in which
such offer or solicitation is not authorized or in which the person making such
offer or solicitation is not qualified to do so or to any person to whom it is
unlawful to make such offer or solicitation. See "Offering Restrictions."
References herein to "$" and "dollars" are to the currency of the United
States. The financial information presented herein has been prepared in
accordance with Generally Accepted Accounting Principles in the United States.
INTERNATIONAL BUSINESS MACHINES CORPORATION
International Business Machines Corporation (IBM or the "Company") was
incorporated in the State of New York on June 16, 1911, as the
Computing-Tabulating-Recording Co. (C-T-R), a consolidation of the Computing
Scale Co. of America, the Tabulating Machine Co., and The International Time
Recording Co. of New York. In 1924, C-T-R adopted the name International
Business Machines Corporation.
IBM uses advanced information technology to provide customer solutions. The
Company operates primarily in a single industry using several segments that
create value by offering a variety of solutions that include, either singularly
or in some combination, technologies, systems, products, services, software and
financing.
IBM is the ultimate parent for a group of companies, including subsidiaries
and other organizations, operating in over 150 countries around the world.
Organizationally, the Company's major operations comprise a Global Services
segment; three hardware products segments--Enterprise Systems, Personal and
Printing Systems and Technology; a Software segment; a Global Financing segment;
and an Enterprise Investment segment. The segments are determined based on
several factors, including customer base, homogeneity of products, technology
and delivery channels.
IBM offers its products through its global sales and distribution
organizations. The sales and distribution organization has both a geographic
focus (in the Americas, Europe/Middle East/Africa, and Asia Pacific) and a
specialized and global industry focus. In addition, this organization includes a
global sales and distribution effort devoted exclusively to small and medium
businesses. IBM also offers its products through a variety of third-party
distributors and resellers, as well as through its on-line channels.
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USE OF PROCEEDS
The net proceeds from the sale of the Notes after deducting expenses to be
paid by IBM are estimated to be $1,098,420,000 and will be used for general
corporate purposes.
CAPITALIZATION
The following table sets forth the consolidated capitalization of IBM at
June 30, 2002, and as adjusted to give effect to the issuance of the Notes
offered hereby and $600,000,000 aggregate principal amount of IBM's 4.25% Notes
due 2009.
JUNE 30, 2002
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OUTSTANDING AS ADJUSTED
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(DOLLARS IN MILLIONS)
Short-term debt............................................. $ 9,571 $ 9,571
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Long-term debt:
International Business Machines Corporation............... 14,018 15,718
Consolidated subsidiaries................................. 2,252 2,252
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Total long-term debt.................................... $16,270 $17,970
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Stockholders' equity
Common stock--par value $0.20 per share 14,520 14,520
Shares authorized: 4,687,500,000
Shares issued: 1,917,722,795
Retained earnings......................................... 30,742 30,742
Treasury stock--at cost................................... (23,074) (23,074)
Shares: 223,399,338
Accumulated gains and losses not affecting retained
earnings................................................ (793) (793)
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Total stockholders' equity.............................. 21,395 21,395
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Total capitalization.................................... $47,236 $48,936
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Notes:--
Except as described in this prospectus supplement, the accompanying
prospectus or the documents we incorporate by reference, there has been no
material change to the consolidated capitalization and indebtedness of IBM since
June 30, 2002 to the date of this document.
From January 31, 1995 through June 30, 2002 IBM repurchased approximately
$47.5 billion of its capital stock under a series of authorizations from IBM's
Board of Directors that total $52.0 billion.
RATIO OF EARNINGS FROM CONTINUING OPERATIONS TO FIXED CHARGES
The ratio of earnings from continuing operations to fixed charges has been
computed by dividing earnings from continuing operations before income taxes
(which excludes (a) amortization of capitalized interest and (b) IBM's share in
the income and losses of less than 50% owned affiliates) and fixed charges
(excluding capitalized interest) by fixed charges. "Fixed charges" consist of
interest expense, capitalized interest and that portion of rental expense deemed
to be representative of interest.
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -------------------------------------------------------
JUNE 30, 2002 2001 2000 1999 1998 1997
---------------- -------- -------- -------- -------- --------
Ratio of earnings from continuing operations
to fixed charges........................... 4.7 7.9 7.0 7.0 4.9 5.1
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SELECTED FINANCIAL DATA
The following consolidated summary sets forth selected financial data for
IBM and its subsidiaries for the six-month period ended June 30, 2002 and each
of the years in the five-year period ended December 31, 2001. The selected
financial data for the interim period ended June 30, 2002 was derived from IBM's
unaudited interim financial statements for the six-month period ended June 30,
2002. The selected financial data for the years ended December 31, 1997 through
December 31, 2001 has been derived from audited financial statements and IBM's
unaudited financial data included in the Current Report on Form 8-K dated
August 28, 2002. The following summary should be read in conjunction with the
financial information incorporated in this prospectus supplement and
accompanying prospectus by reference to other documents. See "Where You Can Find
More Information" in the accompanying prospectus.
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED ----------------------------------------------------
FOR THE PERIOD: JUNE 30, 2002 2001 2000 1999 1998 1997
--------------- ---------------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS EXCEPT RATIOS AND PER SHARE AMOUNTS)
Revenue................................ $37,681 $83,067 $85,089 $83,334 $77,548 $75,802
Income from continuing operations...... 1,729 8,146 7,874 7,359 5,469 5,528
(Loss)/Income from discontinued
operations........................... (481) (423) 219 353 859 565
Net income............................. 1,248 7,723 8,093 7,712 6,328 6,093
Earnings/(loss) per share of common
stock:
Basic
Continuing operations.............. 1.01 4.69 4.45 4.06 2.92 2.80
Discontinued operations............ (0.28) (0.24) 0.12 0.20 0.46 0.29
------- ------- ------- ------- ------- -------
Total............................ 0.73 4.45 4.58+ 4.25+ 3.38 3.09
Assuming dilution
Continuing operations.............. 0.98 4.59 4.32 3.93 2.84 2.72
Discontinued operations............ (0.28) (0.24) 0.12 0.19 0.45 0.28
------- ------- ------- ------- ------- -------
Total............................ 0.71+ 4.35 4.44 4.12 3.29 3.00
Reported net income from continuing
operations........................... 1,729 8,146 7,874 7,359 NA NA
Add: Goodwill amortization net of tax
effects.............................. -- 262 436 420 NA NA
------- ------- ------- ------- ------- -------
Adjusted net income from continuing
operations........................... 1,729 8,408* 8,310* 7,779* NA NA
Basic earnings per share from
continuing operations:
Reported net income from continuing
operations......................... 1.01 4.69 4.45 4.06 NA NA
Goodwill amortization................ -- 0.15 0.25 0.24 NA NA
------- ------- ------- ------- ------- -------
Adjusted basic earnings per share
from continuing operations......... 1.01 4.85*+ 4.70* 4.29*+ NA NA
Diluted earnings per share from
continuing operations:
Reported net income from continuing
operations......................... 0.98 4.59 4.32 3.93 NA NA
Goodwill amortization................ -- 0.15 0.24 0.22 NA NA
------- ------- ------- ------- ------- -------
Adjusted diluted earnings per share
from continuing operations......... 0.98 4.74* 4.56* 4.15* NA NA
Reported net income:................... 1,248 7,723 8,093 7,712 NA NA
Add: Goodwill amortization net of tax
effects.............................. -- 262 436 420 NA NA
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YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED ----------------------------------------------------
FOR THE PERIOD: JUNE 30, 2002 2001 2000 1999 1998 1997
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(DOLLARS IN MILLIONS EXCEPT RATIOS AND PER SHARE AMOUNTS)
Adjusted net income.................... 1,248 7,985* 8,529* 8,132* NA NA
Basic earnings per share:
Reported net income.................. 0.73 4.45 4.58 4.25 NA NA
Goodwill amortization................ -- 0.15 0.25 0.24 NA NA
------- ------- ------- ------- ------- -------
Adjusted basic earnings per share.... 0.73 4.60* 4.83* 4.49* NA NA
Diluted earnings per share:
Reported net income.................. 0.71 4.35 4.44 4.12 NA NA
Goodwill amortization................ -- 0.15 0.24 0.22 NA NA
------- ------- ------- ------- ------- -------
Adjusted diluted earnings per
share.............................. 0.71 4.50* 4.68* 4.34* NA NA
Cash dividends paid on common stock.... 497 956 909 859 814 763
Per share of common stock............ 0.29 0.55 0.51 0.47 0.43 0.3875
Investment in plant, rental machines
and other property................... 2,524 5,660 5,616 5,959 6,520 6,793
Return on stockholders' equity......... 23.7% 35.1% 39.7% 39.0% 32.6% 29.7%
AT END OF PERIOD:
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Total assets........................... $84,211 $88,313 $88,349 $87,495 $86,100 $81,499
Net investment in plant, rental
machines and other property.......... 14,712 16,504 16,714 17,590 19,631 18,347
Working capital........................ 4,126 7,342 7,474 3,577 5,533 6,911
Total debt............................. 25,841 27,151 28,576 28,354 29,413 26,926
Stockholders' equity................... 21,395 23,614 20,624 20,511 19,433 19,816
* These amounts have been adjusted to exclude goodwill amortization, which is
no longer recorded under Statement of Financial Accounting Standards (SFAS)
No. 142, "Goodwill and Other Intangible Assets." In July 2001, the Financial
Accounting Standards Board issued SFAS No. 142. This standard eliminates the
amortization of goodwill, requires annual impairment testing of goodwill and
introduces the concept of indefinite life intangible assets. The new rule
also prohibits the amortization of goodwill associated with business
combinations that close after June 30, 2001. An initial impairment test of
goodwill must be performed in 2002 as of January 1, 2002. The company
completed this initial transition impairment test and determined that its
goodwill is not impaired.
+ Does not total due to rounding.
"NA" means "Not Adjusted."
The documents incorporated by reference in this prospectus supplement and
prospectus include IBM's annual consolidated financial statements for the years
ended December 31, 2000 and 2001 and IBM's interim consolidated financial
statements for the six-month period ended June 30, 2002. Financial Statements
which are incorporated by reference in the prospectus supplement may be obtained
free of charge at the offices of the Paying Agent in Luxembourg.
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MANAGEMENT
BOARD OF DIRECTORS
The composition of IBM's Board of Directors as of the date of this
prospectus supplement was:
NAME PRINCIPAL ACTIVITIES OUTSIDE OF IBM
------------------------------------------ ------------------------------------------------------------
Cathleen Black............................ President, Hearst Magazines, a division of The Hearst
Corporation
Kenneth I. Chenault....................... Chairman and Chief Executive Officer, American Express
Company
Juergen Dormann........................... Chairman of the Supervisory Board, Aventis S.A.
Louis V. Gerstner, Jr..................... Member, Board of Directors, Bristol-Myers Squibb Company
Nannerl O. Keohane........................ President and Professor of Political Science, Duke
University
Charles F. Knight......................... Chairman of the Board, Emerson Electric Company
Minoru Makihara........................... Chairman, Mitsubishi Corporation
Lucio A. Noto............................. Managing Partner, Midstream Partners LLC
Samuel J. Palmisano....................... Member, Board of Trustees, The Johns Hopkins University
John B. Slaughter......................... President and Chief Executive Officer, National Action
Council for Minorities in Engineering, Inc.
Sidney Taurel............................. Chairman of the Board, President and Chief Executive, Eli
Lilly and Company
Alex Trotman.............................. Chairman, Imperial Chemical Industries, PLC
Charles M. Vest........................... President and Professor of Mechanical Engineering,
Massachusetts Institute of Technology
The business address of each director is New Orchard Road, Armonk, New York
10504.
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EXECUTIVE OFFICERS OF IBM (AS OF THE DATE OF THIS PROSPECTUS SUPPLEMENT)
Chairman of the Board:
Louis V. Gerstner, Jr.(1)
President and Chief Executive Officer:
Samuel J. Palmisano(1)
Senior Vice Presidents:
Nicholas M. Donofrio, Group Executive
Douglas T. Elix, Group Executive
J. Bruce Harreld, Strategy
Paul M. Horn, Research
Jon C. Iwata, Communications
John R. Joyce, Chief Financial Officer
John E. Kelly III, Group Executive
Abby F. Kohnstamm, Marketing
J. Michael Lawrie, Group Executive
Edward M. Lineen, General Counsel
Mark Loughridge, Group Executive
J. Randall MacDonald, Human Resources
Steven A. Mills, Group Executive
Robert W. Moffat, Jr., Group Executive
Linda S. Sanford, Group Executive
William M. Zeitler, Group Executive
Vice Presidents:
Jesse J. Greene, Jr., Treasurer
Daniel E. O'Donnell, Secretary
Robert F. Woods, Controller
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(1) Member of the Board of Directors.
S-8
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes supplements,
and to the extent inconsistent, replaces the description of the general terms
and provisions of the debt securities set forth in the prospectus.
GENERAL
The Notes will be issued under an Indenture (the "Senior Indenture") dated
as of October 1, 1993, between the Company and JPMorgan Chase Bank, as Trustee,
as supplemented by the First Supplemental Indenture dated as of December 15,
1995, filed as an exhibit to the Registration Statement of which the
accompanying prospectus is a part. The Notes will be unsecured and will have the
same rank as all of IBM's other unsecured and unsubordinated debt. The Notes
will bear interest from September 10, 2002, at the floating rate of interest
described below under "--Interest." Interest on the Notes will be payable
quarterly on March 10, June 10, September 10 and December 10 commencing
December 10, 2002, to the persons in whose names such securities are registered
at the close of business on the March 1, June 1, September 1 or December 1
preceding each March 10, June 10, September 10 or December 10, payable in equal
quarterly installments. Unless previously redeemed, repurchased or cancelled as
provided below, the Notes will mature at par on September 10, 2004.
The Notes will be subject to defeasance and covenant defeasance as provided
in "Description of the Debt Securities--Satisfaction and Discharge; Defeasance"
in the accompanying prospectus. The Notes will be issued in denominations of
$1,000 and integral multiples of $1,000.
IBM may, without the consent of the holders of Notes, issue additional notes
having the same ranking and the same interest rate, maturity and other terms as
the applicable Notes, provided however, that no such additional notes may be
issued unless such additional notes are fungible with the applicable Notes for
U.S. federal income tax purposes. Any additional notes having such similar
terms, together with the applicable Notes, will constitute a single series of
notes under the Senior Indenture. No additional notes may be issued if an event
of default has occurred with respect to the applicable series of Notes.
IBM has appointed J.P. Morgan Bank Luxembourg S.A., as paying agent and
transfer agent in Luxembourg with respect to the Notes in definitive form. As
long as the Notes are listed on the Luxembourg Stock Exchange, the Company will
maintain a paying agent and transfer agent in Luxembourg, and any change in the
Luxembourg paying agent and transfer agent will be published in Luxembourg. See
"--Notices" below.
INTEREST
Interest on the Notes will accrue from and including September 10, 2002, to
but excluding the first interest payment date and then from and including the
immediately preceding interest payment date to which interest has been paid or
duly provided for to but excluding the next interest payment date or maturity
date, as the case may be. We refer to each of these periods as an "interest
period." The amount of accrued interest that we will pay for any interest period
can be calculated by multiplying the face amount of the Note by an accrued
interest factor. This accrued interest factor is computed by adding the interest
factor calculated for each day from September 10, 2002, or from the last date we
paid interest to you, to the date for which accrued interest is being
calculated. The interest factor for each day is computed by dividing the
interest rate applicable to that day by 360.
When we use the term "business day," we mean any day on which dealings in
United States dollars are transacted in the London interbank market (a "London
business day"), except a Saturday, a
S-9
Sunday or a legal holiday in The City of New York on which banking institutions
are authorized or obligated by law, regulation or executive order to close.
The interest rate on the Notes will be calculated by the calculation agent
appointed by us, initially JPMorgan Chase Bank, and will be equal to LIBOR plus
0.125%. The calculation agent will reset the interest rate on each interest
payment date and on September 10, 2002, each of which we refer to as an
"interest reset date." The second London business day preceding an interest
reset date will be the "interest determination date" for that interest reset
date. The interest rate in effect on each day that is not an interest reset date
will be the interest rate determined as of the interest determination date
pertaining to the immediately preceding interest reset date. The interest rate
in effect on any day that is an interest reset date will be the interest rate
determined as of the interest determination date pertaining to that interest
reset date.
"LIBOR" will be determined by the calculation agent in accordance with the
following provisions:
(a) With respect to any interest determination date, LIBOR will be the
rate for deposits in United States dollars having a maturity of three months
commencing on the first day of the applicable interest period that appears
on Telerate Page 3750 as of 11:00 a.m., London time, on that interest
determination date. If no rate appears, LIBOR for that interest
determination date will be determined in accordance with the provisions
described in (b) below.
(b) With respect to an interest determination date on which no rate
appears on Telerate Page 3750, as specified in (a) above, the calculation
agent will request the principal London offices of each of four major
reference banks in the London interbank market, as selected by the
calculation agent (after consultation with us), to provide the calculation
agent with its offered quotation for deposits in United States dollars for
the period of three months, commencing on the first day of the applicable
interest period, 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
United States dollars in that market at that time. If at least two
quotations are provided, then LIBOR on that interest determination date will
be the arithmetic mean of those quotations. If fewer than two quotations are
provided, then LIBOR on the interest determination date will be the
arithmetic mean of the rates quoted at approximately 11:00 a.m., in The City
of New York, on the interest determination date by three major banks in The
City of New York selected by the calculation agent (after consultation with
us) for loans in United States dollars to leading European banks, having a
three-month maturity and in a principal amount that is representative for a
single transaction in United States dollars in that market at that time. If,
however, the banks selected by the calculation agent are not providing
quotations in the manner described by the previous sentence, LIBOR
determined as of that interest determination date will be LIBOR in effect on
that interest determination date.
"Telerate Page 3750" means the display designated as "Page 3750" on Bridge
Telerate, Inc., or any successor service, for the purpose of displaying the
London interbank rates of major banks for United States dollars.
All percentages resulting from any calculation of the interest rate on the
Notes will be rounded to the nearest one hundred-thousandth of a percentage
point with five one millionths of a percentage point rounded upwards (E.G.,
9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and all
dollar amounts used in or resulting from such calculation on the Notes will be
rounded to the nearest cent (with one-half cent being rounded upward). Each
calculation of the interest rate on the Notes by the calculation agent will (in
the absence of manifest error) be final and binding on the noteholders and us.
S-10
We will notify the Luxembourg Stock Exchange of the newly established
interest rate and the amount of interest payable on the following interest
payment date no later than the first day of each interest period.
So long as any of the Notes remains outstanding, there will at all times be
a calculation agent. Initially, JPMorgan Chase Bank will act as calculation
agent. If that bank is unable or unwilling to continue to act as the calculation
agent or if it fails to calculate properly the interest rate on the Notes for
any interest period, we will appoint another leading commercial or investment
bank engaged in the London interbank market to act as calculation agent in its
place. The calculation agent may not resign its duties without a successor
having been appointed.
NOTICES
Notices to holders of the Notes will be sent by mail to the registered
holders and will be published, whether the Notes are in global or definitive
form, and so long as the Notes are listed on the Luxembourg Stock Exchange, in a
daily newspaper of general circulation in Luxembourg. It is expected that
publication will be made in Luxembourg in the LUXEMBURGER WORT. Any such notice
shall be deemed to have been given on the date of such publication or, if
published more than once, on the date of the first such publication. So long as
the Notes are listed on the Luxembourg Stock Exchange, any appointment of or
change in the Luxembourg paying agent and transfer agent will be published in
Luxembourg in the manner set forth above.
REPLACEMENT NOTES
In case of mutilation, destruction, loss or theft of any definitive Note,
application for replacement is to be made at the office of the Trustee. Any such
definitive Note will be replaced by the Trustee in compliance with such
procedures, and on such terms as to evidence any indemnity, as the Company and
the Trustee may require and subject to applicable laws and regulations of the
Luxembourg Stock Exchange. All costs incurred in connection with the replacement
of any definitive Note will be borne by the holder of the Note. Mutilated or
defaced definitive Notes must be surrendered before new ones will be issued.
APPLICABLE LAW
The Notes will be governed by and construed in accordance with the internal
laws of the State of New York.
PAYMENTS OF ADDITIONAL AMOUNTS
IBM will, subject to the exceptions and limitations set forth below, pay as
additional interest on the Notes such additional amounts as are necessary in
order that the net payment by us or a paying agent of the principal of and
interest on the Notes to a holder who is not a United States person (as defined
below), after deduction for any present or future tax, assessment or other
governmental charge of the United States or a political subdivision or taxing
authority of or in the United States, imposed by withholding with respect to the
payment, will not be less than the amount provided in the Notes to be then due
and payable; provided, however, that the foregoing obligation to pay additional
amounts shall not apply:
(1) to any tax, assessment or other governmental charge that is imposed
or withheld solely by reason of the holder, or a fiduciary, settlor,
beneficiary, member or shareholder of the holder if the holder is an estate,
trust, partnership or corporation, or a person holding a power over an
estate or trust administered by a fiduciary holder, being considered as:
(a) being or having been present or engaged in a trade or business in
the United States or having had a permanent establishment in the United
States;
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(b) having a current or former relationship with the United States,
including a relationship as a citizen or resident of the United States;
(c) being or having been a foreign or domestic personal holding
company, a passive foreign investment company or a controlled foreign
corporation with respect to the United States or a corporation that has
accumulated earnings to avoid United States federal income tax;
(d) being or having been a "10-percent shareholder" of IBM as defined
in section 871(h)(3) of the United States Internal Revenue Code or any
successor provision; or
(e) being a bank receiving payments on an extension of credit made
pursuant to a loan agreement entered into in the ordinary course of its
trade or business;
(2) to any holder that is not the sole beneficial owner of the Notes, or
a portion of the Notes, or that is a fiduciary or partnership, but only to
the extent that a beneficiary or settlor with respect to the fiduciary, a
beneficial owner or member of the partnership would not have been entitled
to the payment of an additional amount had the beneficiary, settlor,
beneficial owner or member received directly its beneficial or distributive
share of the payment;
(3) to any tax, assessment or other governmental charge that is imposed
otherwise or withheld solely by reason of a failure of the holder or any
other person to comply with certification, identification or information
reporting requirements concerning the nationality, residence, identity or
connection with the United States of the holder or beneficial owner of the
Notes, if compliance is required by statute, by regulation of the United
States Treasury Department or by an applicable income tax treaty to which
the United States is a party as a precondition to exemption from such tax,
assessment or other governmental charge;
(4) to any tax, assessment or other governmental charge that is imposed
otherwise than by withholding by us or a paying agent from the payment;
(5) to any tax, assessment or other governmental charge that is imposed
or withheld solely by reason of a change in law, regulation or
administrative or judicial interpretation that becomes effective more than
15 days after the payment becomes due or is duly provided for, whichever
occurs later;
(6) to any estate, inheritance, gift, sales, excise, transfer, wealth or
personal property tax or similar tax, assessment or other governmental
charge;
(7) to any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of principal of or interest on
any Notes, if such payment can be made without such withholding by any other
paying agent;
(8) to any Notes where such withholding is imposed on a payment to an
individual and is required to be made pursuant to any European Union
Directive on the taxation of savings implementing the conclusions of the
ECOFIN Council meeting of 26th to 27th November, 2000 or any law
implementing or complying with, or introduced in order to conform to, such
Directive;
(9) to any Notes presented for payment by, or on behalf of, a holder who
would have been able to avoid such withholding or deduction by presenting
the relevant Notes to another paying agent in a member state of the European
Union; or
(10) in the case of any combination of items (1), (2), (3), (4), (5),
(6), (7), (8) and (9).
The Notes are subject in all cases to any tax, fiscal or other law or
regulation or administrative or judicial interpretation applicable to the Notes.
Except as specifically provided under this heading "--Payments of Additional
Amounts" and under the heading "--Redemption for Tax Reasons," IBM shall not be
required to make any payment with respect to any tax, assessment or other
governmental
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charge imposed by any government or a political subdivision or taxing authority
of, or in any government or political subdivision.
As used under this heading "--Payments of Additional Amounts" and under the
heading "--Redemption for Tax Reasons", the term "United States" means the
United States of America (including the states and the District of Columbia) and
its territories, possessions and other areas subject to its jurisdiction,
"United States person" means any individual who is a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States, any state of the United States or the
District of Columbia (other than a partnership that is not treated as a United
States person under any applicable Treasury regulations), or any estate or trust
the income of which is subject to United States federal income taxation
regardless of its source.
REDEMPTION FOR TAX REASONS
If, as a result of any change in, or amendment to, the laws (or any
regulations or rulings promulgated under the laws) of the United States (or any
political subdivision or taxing authority of or in the United States), or any
change in, or amendments to, an official position regarding the application or
interpretation of such laws, regulations or rulings, which change or amendment
is announced or becomes effective on or after the date of this prospectus
supplement, IBM becomes, or based upon a written opinion of independent counsel
selected by IBM, will become obligated to pay additional amounts as described
herein under the heading "--Payments of Additional Amounts" with respect to the
Notes, then IBM may at its option redeem, in whole, but not in part, the Notes
on not less than 30 nor more than 60 days prior notice, at a redemption price
equal to 100% of their principal amount, together with interest accrued but
unpaid on those Notes to the date fixed for redemption.
BOOK-ENTRY, DELIVERY AND FORM
The Notes will be issued in the form of one or more fully registered Global
Notes (the "Global Notes") which will be deposited with, or on behalf of, The
Depository Trust Company, New York, New York (the "Depositary" or "DTC") and
registered in the name of Cede & Co., the Depositary's nominee. Beneficial
interests in the Global Notes will be represented through book-entry accounts of
financial institutions acting on behalf of beneficial owners as direct and
indirect participants in the Depositary.
Investors may elect to hold interests in the Global Notes through the
Depositary, Clearstream Banking Luxembourg S.A. ("Clearstream") or Euroclear
Bank S.A., as operator of the Euroclear System ("Euroclear") if they are
participants in such systems, or indirectly through organizations which are
participants in such systems. Clearstream and Euroclear will hold interests on
behalf of their participants through customers' securities accounts in
Clearstream's and Euroclear's names on the books of their respective
depositaries, which in turn will hold such interests in customers' securities
accounts in the depositaries' names on the books of the Depositary. Citibank,
N.A. will act as depositary for Clearstream and JPMorgan Chase Bank will act as
depositary for Euroclear (in such capacities, the "U.S. Depositaries"). Except
as described below, the Global Notes may be transferred, in whole and not in
part, only to another nominee of the Depositary or to a successor of the
Depositary or its nominee.
The Depositary has advised IBM as follows: the Depositary 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
pursuant to the provisions of Section 17A of the Exchange Act. The Depositary
holds securities deposited with it by its participants and facilitates the
settlement of transactions among its participants in such securities through
electronic computerized book-entry changes in accounts of the participants,
thereby eliminating
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the need for physical movement of securities certificates. The Depositary's
participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own the Depositary.
Access to the Depositary book-entry system is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Clearstream advises that it is incorporated under the laws of Luxembourg as
a bank. Clearstream holds securities for its customers ("Clearstream Customers")
and facilitates the clearance and settlement of securities transactions between
Clearstream Customers through electronic book-entry transfers between their
accounts. Clearstream provides to Clearstream Customers, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Clearstream interfaces with domestic securities markets in over 30 countries
through established depository and custodial relationships. As a bank,
Clearstream is subject to regulation by the Luxembourg Commission for the
Supervision of the Financial Sector (Commission de Surveillance du Secteur
Financier). Clearstream Customers are recognized financial institutions around
the world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. Clearstream's
U.S. customers are limited to securities brokers and dealers and banks. Indirect
access to Clearstream is also available to other institutions such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Clearstream Customer.
Distributions with respect to the Notes held through Clearstream will be
credited to cash accounts of Clearstream Customers in accordance with its rules
and procedures, to the extent received by the U.S. Depositary for Clearstream.
Euroclear advises that it was created in 1968 to hold securities for its
participants ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any 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. (the "Euroclear Operator"), under
contract with Euroclear Clearance Systems, S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative 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 Underwriters. 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.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian law
(collectively, 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.
The Euroclear Operator 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.
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Distributions with respect to the Notes held beneficially through Euroclear
will be credited to the cash accounts of Euroclear Participants in accordance
with the Terms and Conditions, to the extent received by the U.S. Depositary for
Euroclear.
Euroclear further advises that investors that acquire, hold and transfer
interests in the Notes by book-entry through accounts with the Euroclear
Operator or any other securities intermediary are subject to the laws and
contractual provisions governing their relationship with their intermediary, as
well as the laws and contractual provisions governing the relationship between
such an intermediary and each other intermediary, if any, standing between
themselves and the Global Notes.
The Euroclear Operator advises as follows: Under Belgian law, investors that
are credited with securities on the records of the Euroclear Operator have a
co-property right in the fungible pool of interests in securities on deposit
with the Euroclear Operator in an amount equal to the amount of interests in
securities credited to their accounts. In the event of the insolvency of the
Euroclear Operator, Euroclear Participants would have a right under Belgian law
to the return of the amount and type of interests in securities credited to
their accounts with the Euroclear Operator. If the Euroclear Operator did not
have a sufficient amount of interests in securities on deposit of a particular
type to cover the claims of all Participants credited with such interests in
securities on the Euroclear Operator's records, all Participants having an
amount of interests in securities of such type credited to their accounts with
the Euroclear Operator would have the right under Belgian law to the return of
their pro rata share of the amount of interests in securities actually on
deposit.
Under Belgian law, the Euroclear Operator is required to pass on the
benefits of ownership in any interests in securities on deposit with it (such as
dividends, voting rights and other entitlements) to any person credited with
such interests in securities on its records.
Individual certificates in respect of the Notes will not be issued in
exchange for the Global Notes, except in very limited circumstances. If DTC
notifies IBM that it is unwilling or unable to continue as a clearing system in
connection with the Global Notes, or ceases to be a clearing agency registered
under the Exchange Act, and a successor clearing system is not appointed by IBM
within 90 days after receiving such notice from DTC or upon becoming aware that
DTC is no longer so registered, IBM will issue or cause to be issued individual
certificates in registered form on registration of transfer of, or in exchange
for, book-entry interests in the Notes represented by such Global Notes upon
delivery of such Global Notes for cancellation. In the event that individual
certificates are issued, holders of the Notes will be able to receive payments
(including principal and interest) on the Notes and effect transfer of the Notes
at the offices of IBM's paying agent and transfer agent in Luxembourg,
J.P. Morgan Bank Luxembourg S.A.
Title to book-entry interests in the Notes will pass by book-entry
registration of the transfer within the records of Clearstream, Euroclear or
DTC, as the case may be, in accordance with their respective procedures.
Book-entry interests in the Notes may be transferred within Clearstream and
within Euroclear and between Clearstream and Euroclear in accordance with
procedures established for these purposes by Clearstream and Euroclear.
Book-entry interests in the Notes may be transferred within DTC in accordance
with procedures established for this purpose by DTC. Transfers of book-entry
interests in the Notes among Clearstream and Euroclear and DTC may be effected
in accordance with procedures established for this purpose by Clearstream,
Euroclear and DTC.
A further description of the Depositary's procedures with respect to the
Global Notes is set forth in the prospectus under "Description of the Debt
Securities--Global Securities." The Depositary has confirmed to IBM, the
Underwriters and the trustee that it intends to follow such procedures.
GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES
Initial settlement for the Notes will be made in immediately available
funds. Secondary market trading between DTC participants will occur in the
ordinary way in accordance with the Depositary's
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rules and will be settled in immediately available funds using the Depositary's
Same-Day Funds Settlement System. Secondary market trading between Clearstream
Customers and/or Euroclear Participants will occur in the ordinary way in
accordance with the applicable rules and operating procedures of Clearstream and
Euroclear and will be settled using the procedures applicable to conventional
Eurobonds in immediately available funds.
Cross-market transfers between persons holding directly or indirectly
through the Depositary on the one hand, and directly or indirectly through
Clearstream Customers or Euroclear Participants, on the other, will be effected
in the Depositary in accordance with the Depositary's rules on behalf of the
relevant European international clearing system by its U.S. Depositary; however,
such cross-market transactions will require delivery of instructions to the
relevant European international clearing system by the counterparty in such
system in accordance with its rules and procedures and within its established
deadlines (European time). The relevant European, international clearing system
will, if the transaction meets its settlement requirements, deliver instructions
to its U.S. Depositary to take action to effect final settlement on its behalf
by delivering interests in the Notes to or receiving interests in the Notes from
the Depositary, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to the Depositary.
Clearstream Customers and Euroclear Participants may not deliver instructions
directly to their respective U.S. Depositaries.
Because of time-zone differences, credits of interests in the Notes received
in Clearstream or Euroclear as a result of a transaction with a DTC participant
will be made during subsequent securities settlement processing and dated the
business day following the Depositary settlement date. Such credits or any
transactions involving interests in such Notes settled during such processing
will be reported to the relevant Clearstream Customers or Euroclear Participants
on such business day. Cash received in Clearstream or Euroclear as a result of
sales of interests in the Notes by or through a Clearstream Customer or a
Euroclear Participant to a DTC participant will be received with value on the
Depositary settlement date but will be available in the relevant Clearstream or
Euroclear cash account only as of the business day following settlement in the
Depositary.
Although the Depositary, Clearstream and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of interests in the Notes
among participants of the Depositary, Clearstream and Euroclear, they are under
no obligation to perform or continue to perform such procedures and such
procedures may be changed or discontinued at any time.
UNITED STATES TAXATION
GENERAL
This section summarizes the material U.S. federal tax consequences of
ownership and disposition of the Notes. However, the discussion is limited in
the following ways:
- The discussion only covers you if you buy your Notes in the initial
offering at the price set forth on the cover page.
- The discussion only covers you if you hold your Notes as capital assets
(that is, for investment purposes), and if you do not have a special tax
status such as:
- certain financial institutions;
- insurance companies;
- dealers in securities or foreign currencies;
- persons holding notes as part of a hedge;
- U.S. Holders whose functional currency is not the U.S. dollar;
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- partnerships or other entities classified as partnerships for U.S.
federal income tax purposes; or
- persons subject to the alternative minimum tax;
- The discussion does not cover tax consequences that depend upon your
particular tax situation in addition to your ownership of Notes.
- The discussion is based on current law. Changes in the law may change the
tax treatment of the Notes possibly with a retroactive effect.
- The discussion does not cover state, local or foreign law.
- We have not requested a ruling from the IRS on the tax consequences of
owning and disposing of the Notes. As a result, the IRS could disagree
with portions of this discussion.
IF YOU ARE CONSIDERING BUYING NOTES, WE SUGGEST THAT YOU CONSULT YOUR TAX
ADVISOR ABOUT THE TAX CONSEQUENCES OF HOLDING THE NOTES IN YOUR PARTICULAR
SITUATION.
TAX CONSEQUENCES TO U.S. HOLDERS
This section applies to you if you are a "U.S. Holder." A "U.S. Holder" is a
beneficial owner of a Note that is for U.S. federal income tax purposes:
- an individual U.S. citizen or resident alien;
- a corporation--or entity taxable as a corporation for U.S. federal income
tax purposes--that was created under U.S. law (federal or state); or
- an estate or trust whose world-wide income is subject to U.S. federal
income 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 suggest
that you consult your tax advisor.
INTEREST
- If you are a cash method taxpayer (including most individual holders), you
must report interest on the Notes as ordinary income when you receive it.
- If you are an accrual method taxpayer, you must report interest on the
Notes as ordinary income as it accrues.
SALE OR RETIREMENT OF NOTES
On your sale, redemption or retirement of your Note:
- You will have taxable gain or loss equal to the difference between the
amount realized by you and your tax basis in the Note. Your tax basis in
the Note is your cost, subject to certain adjustments.
- Your gain or loss will generally be capital gain or loss, and will be long
term capital gain or loss if you held the Note for more than one year. For
an individual, the maximum tax rate on long term capital gains is 20% (or
18% if the Note is held for more than five years).
- If you sell the Note between interest payment dates, a portion of the
amount you receive reflects interest that has accrued on the Note but has
not yet been paid by the sale date. That amount is treated as ordinary
interest income as described above under "--Interest."
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INFORMATION REPORTING AND BACKUP WITHHOLDING
Under the tax rules concerning information reporting to the IRS:
- Assuming you hold your Notes through a broker or other securities
intermediary, the intermediary must provide information to the IRS and to
you on IRS Form 1099 concerning interest and retirement proceeds on your
Notes as well as on proceeds from sale or other disposition of the Notes,
unless an exemption applies.
- Similarly, unless an exemption applies, you must provide the intermediary
with your Taxpayer Identification Number for its use in reporting
information to the IRS. If you are an individual, this is your social
security number. You are also required to comply with other IRS
requirements concerning information reporting.
- If you are subject to these requirements but do not comply, the
intermediary must withhold at a rate not to exceed 31% of all amounts
payable to you on the Notes (including principal payments and sale
proceeds). This is called "backup withholding". If the intermediary
withholds payments, you may use the withheld amount as a credit against
your federal income tax liability.
- All individuals are subject to these requirements. Some holders, including
all corporations, tax-exempt organizations and individual retirement
accounts, are exempt from these requirements.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
This section applies to you if you are a "Non-U.S. Holder." A "Non-U.S.
Holder" is a beneficial owner of a Note that is for U.S. federal income tax
purposes:
- an individual that is a nonresident alien;
- a corporation--or entity taxable as a corporation for U.S. tax
purposes--created under non-U.S. law; or
- an estate or trust that is not taxable in the U.S. on its worldwide
income.
WITHHOLDING TAXES
Generally, payments of principal and interest on the Notes will not be
subject to U.S. withholding taxes.
However, in the case of interest, for the exemption from withholding taxes
to apply to you, you must meet one of the following requirements:
- You provide a completed Form W-8BEN (or substitute form) to the bank,
broker or other intermediary through which you hold your Notes. The
Form W-8BEN contains your name, address and a statement that you are the
beneficial owner of the Notes and that you are not a U.S. Holder.
- You hold your Notes directly through a "qualified intermediary," and the
qualified intermediary has sufficient information in its files indicating
that you are not a U.S. Holder. A qualified intermediary is a bank, broker
or other intermediary that (1) is either a U.S. or non-U.S. entity,
(2) is acting out of a non-U.S. branch or office and (3) has signed an
agreement with the IRS providing that it will administer all or part of
the U.S. tax withholding rules under specified procedures.
- You are entitled to an exemption from withholding tax on interest under a
tax treaty between the U.S. and your country of residence. To claim this
exemption, you must generally complete Form W-8BEN and claim this
exemption on the form. In some cases, you may instead be
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permitted to provide documentary evidence of your claim to the
intermediary, or a qualified intermediary may already have some or all of
the necessary evidence in its files.
- The interest income on the Notes is effectively connected with the conduct
of your trade or business in the U.S., and is not exempt from U.S. tax
under a tax treaty. To claim this exemption, you must complete
Form W-8ECI.
Even if you meet one of the above requirements, interest paid to you will be
subject to withholding tax under any of the following circumstances:
- The withholding agent or an intermediary knows or has reason to know that
you are not entitled to an exemption from withholding tax. Specific rules
apply for this test.
- The IRS notifies the withholding agent that information that you or an
intermediary provided concerning your status is false.
- An intermediary through which you hold the Notes fails to comply with the
procedures necessary to avoid withholding taxes on the Notes. In
particular, an intermediary is generally required to forward a copy of
your Form W-8BEN (or other documentary information concerning your status)
to the withholding agent for the Notes. However, if you hold your Notes
through a qualified intermediary--or if there is a qualified intermediary
in the chain of title between yourself and the withholding agent for the
Notes--the qualified intermediary will not generally forward this
information to the withholding agent.
- You own 10% or more of the voting stock of IBM, are a "controlled foreign
corporation" related directly or indirectly to IBM through stock
ownership, or are a bank making a loan in the ordinary course of its
business. In these cases, you will be exempt from withholding taxes only
if you are eligible for a treaty exemption or if the interest income is
effectively connected with your conduct of a trade or business in the U.S.
and you provide us with a properly executed form W-8ECI as discussed
above.
Interest payments made to you will generally be reported to the IRS and to
you on Form 1042-S. However, this reporting does not apply to you if one of the
following conditions applies:
- You hold your Notes directly through a qualified intermediary and the
applicable procedures are complied with.
- You file Form W-8ECI.
The rules regarding withholding are complex and vary depending on your
individual situation. They are also subject to change. In addition, special
rules apply to certain types of non-U.S. holders of Notes, including
partnerships, trusts and other entities treated as pass-through entities for
U.S. federal income tax purposes. We suggest that you consult with your tax
advisor regarding the specific methods for satisfying these requirements.
SALE OR RETIREMENT OF NOTES
If you sell a Note or it is redeemed, you will not be subject to U.S.
federal income tax on any gain unless one of the following applies:
- The gain is connected with a trade or business that you conduct in the
U.S.
- You are an individual, you are present in the U.S. for at least 183 days
during the taxable year in which you dispose of the Note, and certain
other conditions are satisfied.
- The gain represents accrued interest, in which case the rules for interest
would apply.
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U.S. TRADE OR BUSINESS
If you hold your Note in connection with a trade or business that you are
conducting in the U.S.:
- Any interest on the Note, and any gain from disposing of the Note,
generally will be subject to income tax as if you were a U.S. Holder.
- If you are a corporation, you may be subject to the "branch profits tax"
on your earnings that are connected with your U.S. trade or business,
including earnings from the Note. This tax rate is 30%, but may be reduced
or eliminated by an applicable income tax treaty.
ESTATE TAXES
If you are an individual, your Notes will not be subject to U.S. estate tax
when you die. However, this rule only applies if, at your death, payments on the
Notes were not connected to a trade or business that you were conducting in the
U.S. or you did not own, actually or constructively, 10% or more of the total
combined voting power of IBM.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. rules concerning information reporting and backup withholding are
described above. These rules apply to Non-U.S. Holders as follows:
- Principal and interest payments you receive will be automatically exempt
from the usual rules if you are a Non-U.S. Holder exempt from withholding
tax on interest, as described above. The exemption does not apply if the
withholding agent or an intermediary knows or has reason to know that you
should be subject to the usual information reporting or backup withholding
rules. In addition, as described above, interest payments made to you may
be reported to the IRS on Form 1042-S.
- Sale proceeds you receive on a sale of your Notes through a broker may be
subject to information reporting and/or backup withholding if you are not
eligible for an exemption. In particular, information reporting and backup
reporting may apply if you use the U.S. office of a broker, and
information reporting (but not backup withholding) may apply if you use
the foreign office of a broker that has certain connections to the U.S. In
general, you may file Form W-8BEN to claim an exemption from information
reporting and backup withholding. We suggest that you consult your tax
advisor concerning information reporting and backup withholding on a sale.
POSSIBLE EUROPEAN UNION REQUIREMENTS
The European Union is considering new procedures that would apply to you if
you are a tax resident of a "member state" and you receive interest on the Notes
from a paying agent located in another member state. Under these procedures, the
paying agent's member state would adopt one of the following rules:
- the paying agent would be required to withhold tax on interest paid to you
on the Notes, unless you follow specified procedures to show that you have
reported the interest to the tax authorities in your state of residence;
or
- the interest paid to you would be reported to the tax authorities in your
state of residence by the paying agent's member state.
No decision has been made whether to adopt these requirements. Even if they
are adopted, it is not clear what their effective date will be. We advise you to
consult your tax advisor about the possible implications of these requirements.
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UNDERWRITERS
Deutsche Bank Securities Inc. is acting as representative of the
underwriters named below.
Subject to terms and conditions stated in the underwriting agreement dated
the date of this prospectus supplement, each underwriter named below has agreed
to purchase, and IBM has agreed to sell to that underwriter, the principal
amount of Notes set forth opposite the underwriter's name.
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
----------- ----------------
Deutsche Bank Securities Inc............................... $ 1,034,000,000
Banc One Capital Markets, Inc.............................. 22,000,000
Banc of America Securities LLC............................. 22,000,000
Salomon Smith Barney Inc................................... 22,000,000
----------------
Total.............................................. $ 1,100,000,000
================
The underwriting agreement provides that the obligation of the several
underwriters to pay for and accept delivery of the Notes is subject to the
approval of certain legal matters by their counsel and to certain other
conditions. The underwriters are obligated to take and pay for all of the Notes
if any are taken.
IBM has been advised by the underwriters that the underwriters propose to
offer some of the Notes directly to the public at the public offering price set
forth on the cover page of this prospectus supplement and some of the Notes to
dealers at the public offering price less a concession not to exceed 0.075% of
the principal amount of the Notes. Any underwriter may allow, and such dealers
may reallow, a concession not in excess of 0.025% of the principal amount per
Note to certain other dealers. After the initial offering of the Notes to the
public, the representatives may change the public offering price and
concessions.
The following table shows the underwriting discounts and commission that IBM
is to pay to the underwriters in connection with this offering (expressed as a
percentage of the principal amount of the notes).
PAID BY IBM
-----------
Per Note.................................................... 0.100%
The Notes are a new issue of securities with no established trading market.
The underwriters have informed IBM that they intend to make a market in the
Notes but are under no obligation to do so and such market making may be
terminated at any time without notice. Application will be made to list the
Notes on the Luxembourg Stock Exchange.
In connection with the offering, Deutsche Bank Securities Inc., on behalf of
the underwriters, may purchase and sell Notes in the open market. These
transactions may include over-allotment, syndicate covering transactions and
stabilizing transactions. Over-allotment involves syndicate sales of Notes in
excess of the principal amount of Notes to be purchased by the underwriters in
the offering, which creates a syndicate short position. 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.
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.
The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Deutsche Bank Securities Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases Notes originally sold by that syndicate
member.
Any of these activities 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 the price that otherwise
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would exist in the open market in the absence of these transactions. The
underwriters may conduct these transactions in the over-the-counter market or
otherwise. If the underwriters commence any of these transactions, they may
discontinue them at any time.
The underwriters and certain of their affiliates and associates may engage
in transactions with, and/or perform services, including investment banking and
general financing and banking services, for, IBM and its subsidiaries in the
ordinary course of business.
IBM has agreed to indemnify the underwriters against certain liabilites,
including civil liabilities under the Securities Act of 1933, or contribute to
payments which the underwriters may be required to make in respect thereof.
Expenses payable by IBM are estimated at $480,000. The underwriters have
agreed to reimburse IBM for certain of these expenses.
OFFERING RESTRICTIONS
The Notes are offered for sale in the United States and in jurisdictions
outside the United States, subject to applicable law.
Each of the underwriters has agreed that it will not offer, sell, or deliver
any of the Notes, directly or indirectly, or distribute this prospectus
supplement or prospectus or any other offering material relating to the Notes,
in or from any jurisdiction except under circumstances that will, to the best of
the underwriters' knowledge and belief, result in compliance with the applicable
laws and regulations and which will not impose any obligations on IBM except as
set forth in the underwriting agreement.
Noteholders may be required to pay stamp taxes and other charges in
accordance with the laws and practices of the country in which the Notes were
purchased. These taxes and charges are in addition to the issue price set forth
on the cover page.
UNITED KINGDOM
Each underwriter has represented and agreed that it and each of its
affiliates:
- has not offered or sold and, prior to the date six months after the date
of issue of the Notes, will not offer or sell any of the 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 or the Financial Services and Markets Act
2000;
- has complied and will comply with all applicable provisions of the
Financial Services and Markets Act 2000 with respect to anything done by
it in relation to the Notes in, from or otherwise involving the United
Kingdom; and
- 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
Financial Services and Markets Act 2000) received by it in connection with
the issue or sale of the Notes in circumstances in which Section 21(1) of
the Financial Services and Markets Act 2000 does not apply to IBM.
S-22
GERMANY
No selling prospectus (VERKAUFSPROSPEKT) has been or will be published in
respect of the Notes and each underwriter will be required to comply with the
German Securities Selling Prospectus Act (WERTPAPIER-VERKAUFSPROSPEKTGESETZ) of
December 13, 1990, as amended.
THE NETHERLANDS
The Notes are being issued under the Euro-securities exemption pursuant to
Article 6 of the Exemption Regulation (VRIJSTELLINSREGELING WET TOEZICHT
EFFECTENVERKEER) of December 21, 1995, as amended, of the Netherlands'
Securities Market Supervision Act 1995 (WET TOEZICHT EFFECTENVERKEER) and
accordingly, each underwriter has represented and agreed that it has not
publicly promoted and will not publicly promote the offer or sale of the Notes
by conducting a generalized advertising or cold-calling campaign within or
outside The Netherlands.
THE REPUBLIC OF FRANCE
The Notes are being issued outside the Republic of France and each
underwriter has represented and agreed that, in connection with their initial
distribution, it has not offered or sold and will not offer or sell, directly or
indirectly, any of the Notes to the public in the Republic of France and that it
has not distributed and will not distribute or cause to be distributed to the
public in the Republic of France this prospectus supplement or any other
offering material relating to the Notes.
JAPAN
The Notes have not been and will not be registered under the Securities and
Exchange Law of Japan (the "SEL") and each of the underwriters and each of its
affiliates has represented and agreed that it has not offered or sold, and it
will not offer or sell, directly or indirectly, any of the Notes in or to
residents of Japan or to any persons for reoffering or resale, directly or
indirectly, in Japan or to any resident of Japan, except pursuant to an
exemption from the registration requirements of the SEL available thereunder and
otherwise in compliance with the SEL and the other relevant laws, regulations
and guidelines of Japan.
HONG KONG
Each of the underwriters and each of its affiliates has represented and
agreed that it has not offered or sold, and it will not offer or sell, the Notes
by means of any document to persons in Hong Kong other than persons whose
ordinary business it is to buy or sell shares or debentures, whether as
principal or agent, or otherwise in circumstances which do not constitute an
offer to the public within the meaning of the Hong Kong Companies Ordinance
(Chapter 32 of the Laws of Hong Kong).
LEGAL OPINIONS
The validity of the Notes offered hereby will be passed upon for the Company
by Stuart S. Moskowitz, Senior Counsel of the Company, and for the underwriters
by Davis Polk & Wardwell, New York, New York. Mr. Moskowitz, together with
members of his family, owns, has options to purchase and has other interests in
shares of common stock of the Company.
LISTING AND GENERAL INFORMATION
1. Application has been made to list the Notes on the Luxembourg Stock
Exchange. In connection with the listing application, the Certificate of
Incorporation, as amended, the By-Laws of International Business Machines
("IBM") Corporation and a legal notice (NOTICE LEGALE) relating to the issuance
of the Notes will have been deposited prior to listing with the Chief Registrar
of the District Court of
S-23
Luxembourg (GREFFIER EN CHEF DU TRIBUNAL D'ARRONDISSEMENT DE ET A LUXEMBOURG),
where these documents may be examined and copies may be obtained on request.
2. Any documents incorporated by reference may be obtained free of charge
from the Paying Agent in Luxembourg during the term of the Notes. These
documents include audited annual consolidated financial statements and unaudited
consolidated quarterly financial statements. Future financial statements will
also be available free of charge from the Paying Agent in Luxembourg when they
are prepared. IBM does not prepare unconsolidated financial statements.
Copies of the Indenture will also be available for inspection at the office
of the Paying Agent in Luxembourg.
3. The independent certified public accountants of IBM are
PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP has audited IBM's annual
consolidated financial statements for the years ended December 31, 2000 and
2001.
4. The resolutions relating to the sale and issuance of the Notes were
adopted by the Board of Directors of IBM on February 29, 2000 and April 30,
2002.
5. Except as disclosed in this prospectus supplement, the prospectus, and
the documents incorporated by reference herein, there has been no material
adverse change in the consolidated financial position of IBM and its
subsidiaries since the date of the last audited financial statements. IBM is not
involved in, and has no knowledge of any threat of, any litigation,
administrative proceedings or arbitration which is or may be material in the
context of the issue of the Notes.
6. The Notes have been accepted for clearance through Euroclear and
Clearstream, Luxembourg. The common code assigned to the Notes is 015461110. The
International Security Identification Number (ISIN) allocated to the Notes is
US459200 AY71. The CUSIP number assigned to the Notes is 459200 AY7.
Transactions will normally be effected for settlement not earlier than three
days after the date of the transaction.
S-24
ISSUER
INTERNATIONAL BUSINESS MACHINES CORPORATION
New Orchard Road
Armonk, New York 10504
TRUSTEE, REGISTRAR AND PAYING AGENT
JPMORGAN CHASE BANK
450 West 33rd Street
New York, New York 10001
LUXEMBOURG PAYING AND TRANSFER AGENT
J.P. MORGAN BANK
LUXEMBOURG S.A.
5 Rue Plactis, L-2338
Luxembourg Grund
LUXEMBOURG LISTING AGENT
KREDIETBANK S.A. LUXEMBOURGEOISE
43, Boulevard Royal
L-2955 Luxembourg
LEGAL ADVISERS
TO INTERNATIONAL BUSINESS MACHINES CORPORATION
CRAVATH, SWAINE & MOORE
825 Eighth Avenue
New York, New York 10019
TO THE UNDERWRITERS
DAVIS, POLK & WARDWELL
450 Lexington Avenue
New York, New York 10017
AUDITORS TO THE ISSUER
PRICEWATERHOUSECOOPERS LLP
1301 Avenue of the Americas
New York, New York 10019
PROSPECTUS
INTERNATIONAL BUSINESS MACHINES CORPORATION
NEW ORCHARD ROAD
ARMONK, NEW YORK 10504
(914) 499-1900
$12,107,437,190
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
CAPITAL STOCK
WARRANTS
------------------
WE WILL PROVIDE SPECIFIC TERMS OF THESE SECURITIES
IN SUPPLEMENTS TO THIS PROSPECTUS.
YOU SHOULD READ THIS PROSPECTUS AND ANY SUPPLEMENT CAREFULLY
BEFORE YOU INVEST.
------------------------
These securities have not been approved by the Securities and Exchange
Commission or any state securities commission, nor have these organizations
determined that this prospectus is accurate or complete. Any representation to
the contrary is a criminal offense.
The date of this prospectus is June 20, 2000.
TABLE OF CONTENTS
PAGE
--------
Summary..................................................... 3
Ratios of Earnings to Fixed Charges and Earnings to Combined
Fixed Charges and Preferred Stock Dividends................ 4
Where You Can Find More Information......................... 5
Description of the Company.................................. 6
Use of Proceeds............................................. 6
Description of the Debt Securities.......................... 6
Description of the Preferred Stock.......................... 18
Description of the Depositary Shares........................ 19
Description of the Capital Stock............................ 22
Description of the Warrants................................. 22
Plan of Distribution........................................ 24
Legal Opinions.............................................. 24
Experts..................................................... 24
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the terms
of our securities, you should carefully read this document with the attached
prospectus supplement. Together these documents will give the specific terms of
the securities we are offering. You should also read the documents we have
incorporated by reference into this prospectus for information on us and our
financial statements. Certain capitalized terms used in this summary are defined
elsewhere in this prospectus.
THE SECURITIES WE MAY OFFER
This prospectus is part of a registration statement (No. 333-37034) that we
filed with the SEC utilizing a "shelf" registration process. Under this shelf
process, we may offer from time to time up to $12,107,437,190 of any of the
following securities, either separately or in units: DEBT, PREFERRED STOCK,
DEPOSITARY SHARES, CAPITAL STOCK AND WARRANTS. This prospectus provides you with
a general description of the securities we may offer. Each time we offer
securities, we will provide you with a prospectus supplement that will describe
the specific amounts, prices and terms of the securities being offered. The
prospectus supplement may also add, update or change information contained in
this prospectus.
DEBT SECURITIES
We may offer unsecured general obligations of our company, which may be
senior or subordinate. The senior debt securities and the subordinated debt
securities are together referred to in this prospectus as the "debt securities".
The senior debt securities will have the same rank as all of our other
unsecured, unsubordinated debt. The subordinated debt securities will be
entitled to payment only after payment on our senior indebtedness. Senior
indebtedness includes all indebtedness for money borrowed by us, except
indebtedness that is stated to be not superior to, or to have the same rank as,
the subordinated debt securities. In addition, the subordinated debt securities
will be effectively subordinated to creditors and preferred stockholders of our
subsidiaries.
The senior debt securities will be issued under an indenture between us and
The Chase Manhattan Bank, as the trustee. The subordinated debt securities will
be issued under an indenture between us and the trustee we name in the
prospectus supplement. We have summarized general features of the debt
securities from the indentures. We encourage you to read the indentures which
are exhibits to the registration statement and our recent periodic and current
reports that we file with the SEC.
GENERAL INDENTURE PROVISIONS THAT APPLY TO SENIOR AND SUBORDINATED DEBT
SECURITIES
Neither indenture limits the amount of debt that we may issue. In addition,
neither indenture provides holders any protection should there be a
recapitalization or restructuring involving our company.
The indentures allow us to merge or consolidate with another company, or to
sell all or most of our assets to another company. If these events occur, the
other company will be required to assume our responsibilities relating to the
debt securities, and we will be released from all liabilities and obligations.
The indentures provide that holders of a majority of the outstanding
principal amount of any series of debt securities may vote to change our
obligations or your rights concerning that series. However, to change the amount
or timing of principal, interest or other payments under the debt securities,
every holder in the series must consent.
We may discharge our obligations under the indenture relating to the senior
debt securities by depositing with the trustee sufficient funds or government
obligations to pay the senior debt securities when due.
EVENTS OF DEFAULT. Each indenture provides that the following are events of
default:
- If we do not pay interest for 30 days after its due date.
3
- If we do not pay principal or premium when due.
- If we do not make any sinking fund payment for 30 days after its due date.
- If we continue to breach a covenant for 90 days after notice.
- If we enter bankruptcy or become insolvent.
If an event of default occurs under any series of debt securities, the
trustee or holders of 25% of the outstanding principal amount of that series may
declare the principal amount of the series immediately payable. However, holders
of a majority of the principal amount may rescind this action.
GENERAL INDENTURE PROVISIONS THAT APPLY ONLY TO SENIOR DEBT SECURITIES
The indenture relating to the senior debt securities contains covenants
restricting our ability to incur secured indebtedness and enter into sale and
leaseback transactions.
GENERAL INDENTURE PROVISIONS THAT APPLY ONLY TO SUBORDINATED DEBT SECURITIES
The subordinated debt securities will be subordinated to all senior
indebtedness. In addition, claims of our subsidiaries' creditors and preferred
stockholders generally will have priority with respect to the subsidiaries'
assets and earnings over the claims of our creditors, including holders of the
subordinated debt securities. The subordinated debt securities, therefore, will
be effectively subordinated to creditors and preferred stockholders of our
subsidiaries.
The indenture relating to the subordinated debt securities does not provide
holders any protection in the event of a highly leveraged transaction.
PREFERRED STOCK AND DEPOSITARY SHARES
We may issue our preferred stock, par value $0.01 per share, in one or more
series. Our Board of Directors will determine the dividend, voting, conversion
and other rights of the series being offered and the terms and conditions
relating to its offering and sale at the time of the offer and sale. We may also
issue fractional shares of preferred stock that will be represented by
depositary shares and depositary receipts.
CAPITAL STOCK
We may issue our capital stock, par value $0.20 per share. Holders of
capital stock are entitled to receive dividends if and when those dividends are
declared by our Board of Directors, subject to rights of preferred stockholders.
Each holder of capital stock is entitled to one vote per share. The holders of
capital stock have no preemptive rights or cumulative voting rights.
WARRANTS
We may issue warrants for the purchase of debt securities, preferred stock
or capital stock. We may issue warrants independently or together with other
securities.
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The ratio of earnings to fixed charges and the ratio of earnings to combined
fixed charges and preferred stock dividends for each of the periods indicated
are as follows:
THREE
MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
Ratio of earnings to
fixed charges.......... 5.71 5.37 7.0 5.3 5.4 5.3 5.0
Ratio of earnings to
combined fixed charges
and preferred stock
dividends.............. 5.63 5.29 6.9 5.3 5.4 5.3 4.9
We compute the ratio of earnings to fixed charges by dividing earnings,
which includes income before taxes and fixed charges, by fixed charges. This
calculation excludes the effects of accounting changes which have been made over
time. We compute the ratio of earnings to combined fixed charges and preferred
stock dividends by dividing earnings by the sum of fixed charges and dividends
on preferred stock.
4
For purposes of calculating this ratio, the preferred stock dividend
requirements were assumed to be equal to the pre-tax earnings that would be
required to cover such dividend requirements based on our effective income tax
rates for the respective periods. "Fixed charges" consist of interest on debt
and a portion of rentals determined to be representative of interest.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room in Washington, D.C. Please call the SEC at
1-800-SEC-0330 for further information on their public reference room. Our SEC
filings are also available to the public at the SEC's web site at
(http://www.sec.gov).
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with it. This means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus, and later
information that we file with the SEC will automatically update and supersede
this information. We incorporate by reference the documents listed below and any
future filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until our offering is completed:
i. Annual Report on Form 10-K for the year ended December 31, 1999;
ii. Quarterly report on Form 10-Q for the quarter ended March 31, 2000; and
iii. Current Reports on Form 8-K, filed on January 20, 2000, April 13, 2000,
April 19, 2000 and May 5, 2000.
We encourage you to read our periodic and current reports. Not only do we
think these items are interesting reading, we think these reports provide
additional information about our company which prudent investors find important.
You may request a copy of these filings at no cost, by writing to or telephoning
our transfer agent at the following address:
EquiServe, the First Chicago Trust Division
Mail Suite 4688
P.O. Box 2530
Jersey City, New Jersey 07303-2530
(201) 324-0405
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of the
document.
5
DESCRIPTION OF THE COMPANY
We were originally incorporated in the State of New York on June 16, 1911,
as the Computing-Tabulating-Recording Co. (C-T-R). C-T-R was a consolidation of
the Computing Scale Co. of America, the Tabulating Machine Co., and The
International Time Recording Co. of New York. In 1924, C-T-R adopted the name
International Business Machines Corporation, also known more simply as IBM.
We use advanced information technology to provide customer solutions. We
operate primarily in a single industry using several segments that create value
by offering a variety of solutions that include, either singularly or in some
combination, technologies, systems, products, services, software and financing.
Organizationally, our major operations comprise three hardware products
segments--Technology, Personal Systems and Enterprise Systems; a Global Services
segment; a Software segment; a Global Financing segment and an Enterprise
Investment segment. The segments are determined based on several factors,
including customer base, homogeneity of products, technology and delivery
channels.
We offer our products through our global sales and distribution
organization. The sales and distribution organization has both a geographic
focus (in the Americas, Europe/Middle East/ Africa, and Asia Pacific) and a
specialized and global industry focus. In addition, this organization includes a
global sales and distribution effort devoted exclusively to small and medium
businesses. We also offer our products through a variety of third party
distributors and resellers, as well as through our on-line channels.
USE OF PROCEEDS
Unless we otherwise specify in the applicable prospectus supplement, the net
proceeds we receive from the sale of the securities offered by this prospectus
and the accompanying prospectus supplement will be used for general corporate
purposes. General corporate purposes may include the repayment of debt,
investments in or extensions of credit to our subsidiaries, redemption of
preferred stock, or the financing of possible acquisitions or business
expansion. The net proceeds may be invested temporarily or applied to repay
short-term debt until they are used for their stated purpose.
DESCRIPTION OF THE DEBT SECURITIES
The following description of the terms of the debt securities sets forth
general terms that may apply to the debt securities. The particular terms of any
debt securities will be described in the prospectus supplement relating to those
debt securities.
The debt securities will be either our senior debt securities or our
subordinated debt securities. The senior debt securities will be issued under an
indenture dated as of October 1, 1993, as supplemented on December 15, 1995,
between us and The Chase Manhattan Bank, as trustee. This indenture is referred
to as the "senior indenture". The subordinated debt securities will be issued
under an indenture to be entered into between us and the trustee named in a
prospectus supplement. This indenture is referred to as the "subordinated
indenture". The senior indenture and the subordinated indenture are together
called the "indentures".
The following is a summary of the most important provisions of the
indentures. Copies of the entire indentures are exhibits to the registration
statement of which this prospectus is a part. Section references below are to
the section in the applicable indenture. The referenced sections of the
indentures are incorporated by reference. We encourage you to read our
indentures.
GENERAL
Neither indenture limits the amount of debt securities that we may issue.
Each indenture provides that debt securities may be issued up to the principal
amount authorized by us from time to time. The senior debt securities will be
unsecured and will have the same rank as all of our other unsecured and
unsubordinated debt. The subordinated debt securities will be unsecured and will
be subordinated and junior to all senior indebtedness.
6
The debt securities may be issued in one or more separate series of senior
debt securities and/or subordinated debt securities. The prospectus supplement
relating to the particular series of debt securities being offered will specify
the particular amounts, prices and terms of those debt securities. These terms
may include:
- the title of the debt securities;
- any limit upon the aggregate principal amount of the debt securities;
- the maturity date or dates, or the method of determining the maturity
dates;
- the interest rate or rates, or the method of determining those rates;
- the interest payment dates and, for debt securities in registered form,
the regular record dates;
- the places where payments may be made;
- any mandatory or optional redemption provisions;
- any sinking fund or analogous provisions;
- any conversion or exchange provisions;
- any terms for the attachment to the debt securities of warrants, options
or other rights to purchase or sell our securities;
- the portion of principal amount of the debt security payable upon
acceleration of maturity if other than the full principal amount;
- any deletions of, or changes or additions to, the events of default or
covenants;
- if other than U.S. dollars, the currency or currencies, including the euro
and other composite currencies, in which payments on the debt securities
will be payable and whether the holder may elect payment to be made in a
different currency;
- the method of determining the amount of any payments on the debt
securities which are linked to an index;
- whether the debt securities will be issued in fully registered form
without coupons or in bearer form, with or without coupons, or any
combination of these, and whether they will be issued in the form of one
or more global securities in temporary or definitive form;
- any terms relating to the delivery of the debt securities if they are to
be issued upon the exercise of warrants;
- whether and on what terms we will pay additional amounts to holders of the
debt securities that are not U.S. persons for any tax, assessment or
governmental charge withheld or deducted and, if so, whether and on what
terms we will have the option to redeem the debt securities rather than
pay the additional amounts; and
- any other specific terms of the debt securities.
(Sections 202 and 301)
Unless we otherwise specify in the prospectus supplement:
- the debt securities will be registered debt securities;
- registered debt securities denominated in U.S. dollars will be issued in
denominations of $1,000 or an integral multiple of $1,000; and
- bearer debt securities denominated in U.S. dollars will be issued in
denominations of $5,000.
Debt securities may bear legends required by United States Federal tax law
and regulations. (Section 401)
If any of the debt securities are sold for any foreign currency or currency
unit, or if any payments on the debt securities are payable in any foreign
currency or currency unit, the prospectus supplement will contain any
restrictions, elections, tax consequences, specific terms and other information
relating to the debt securities and the foreign currency or currency unit.
Some of the debt securities may be issued as original issue discount debt
securities. Original issue discount securities bear no interest
7
or bear interest at below-market rates. These are sold at a discount below their
stated principal amount. If we issue these securities, the prospectus supplement
will describe any special tax, accounting or other information which we think is
important.
EXCHANGE, REGISTRATION AND TRANSFER
Debt securities may be transferred or exchanged at the corporate trust
office of the security registrar or at any other office or agency which is
maintained for these purposes. No service charge will be payable upon the
transfer or exchange, except for any applicable tax or governmental charge.
The designated security registrar in the United States for the senior debt
securities is The Chase Manhattan Bank, located at 450 West 33rd Street, New
York, New York 10001. The security registrar for the subordinated debt
securities will be designated in a prospectus supplement.
If debt securities are issuable in both registered and bearer form, the
bearer securities will be exchangeable for registered securities. If a bearer
security with related coupons is surrendered in exchange for a registered
security between a record date and the date set for the payment of interest, the
bearer security will be surrendered without the coupon relating to that interest
payment. That interest payment will be made only to the holder of the coupon
when due.
In the event of any redemption in part of any series of debt securities, we
will not be required to:
- issue, register the transfer of, or exchange, debt securities of any
series between the opening of business 15 business days before any
selection of debt securities of that series to be redeemed and the close
of business on:
- the day of mailing of the relevant notice of redemption (if debt
securities of the series are issuable only in registered form), and
- the day of the first publication of the relevant notice of redemption
(if the debt securities of the series are issuable in bearer form) or,
- the day of mailing of the relevant notice of redemption (if the debt
securities of the series are issuable in bearer and registered form)
and there is no publication;
- register the transfer of, or exchange, any registered security selected
for redemption, in whole or in part, except the unredeemed portion of any
registered security being redeemed in part; or
- exchange any bearer security selected for redemption, except to exchange
it for a registered security which is simultaneously surrendered for
redemption.
(Section 404)
PAYMENT AND PAYING AGENT
We will pay principal, interest and any premium on fully registered
securities in the designated currency or currency unit at the office of the
paying agent. Payment of interest on fully registered securities may be made by
check mailed to the persons in whose names the debt securities are registered on
days specified in the indentures or any prospectus supplement. (Sections 406 and
410)
We will pay principal, interest and any premium on bearer securities in the
designated currency or currency unit at the office of the paying agent or agents
outside of the United States. Payments will be made at the offices of the paying
agent in the United States only if the designated currency is U.S. dollars and
payment outside of the United States is illegal or effectively precluded.
(Sections 410 and 1102)
If any amount payable on any debt security or coupon remains unclaimed at
the end of two years after the amount became due and payable, the paying agent
will release any unclaimed amounts to us. (Section 1103)
Our paying agent in the United States for the senior debt securities is The
Chase Manhattan Bank, located at 450 West 33rd
8
Street, New York, New York 10001. If and when we issue subordinated debt
securities, we'll designate the paying agent for those subordinated debt
securities in the applicable prospectus supplement.
GLOBAL SECURITIES
The debt securities of a series may be issued in whole or in part in the
form of one or more global certificates. Those certificates will be deposited
with a depositary that we will identify in a prospectus supplement. Global debt
securities may be issued in either registered or bearer form and can be in
either temporary or definitive form. All global securities in bearer form will
be deposited with a depositary outside of the United States. We will describe
the specific terms of the depositary arrangement relating to a series of debt
securities in the prospectus supplement.
Other than for payments, we can treat a person having a beneficial interest
in a definitive global security as the holder of the principal amount of
outstanding debt securities represented by the global security. For these
purposes, we can rely upon a written statement delivered to the trustee by the
holder of the definitive global security, or, in the case of a definitive global
security in bearer form, by Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System, and Clearstream Banking, societe
anonyme (Clearstream, Luxembourg). (Section 411)
Neither we, the trustee nor any of our respective agents will be responsible
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in a global security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests. (Section 411)
Unless we otherwise specify in a prospectus supplement, we anticipate that
the following provisions will apply to our depositary arrangements:
TEMPORARY GLOBAL SECURITIES
All or any portion of the debt securities of a series that are issuable in
bearer form initially may be represented by one or more temporary global
securities, without interest coupons. The temporary global securities will be
deposited with a depositary in London for Euroclear and Clearstream for credit
to the accounts of the beneficial owners of the debt securities or to such other
accounts as they may direct.
On and after an exchange date provided in the applicable prospectus
supplement, each temporary global security will be exchangeable for definitive
debt securities in bearer form, registered form, definitive global bearer form
or a combination of these, as will be specified in the prospectus supplement.
No bearer security delivered in exchange for a portion of a temporary global
security will be mailed or delivered to any location in the United States.
(Sections 402 and 403)
Interest on a temporary global security will be paid to Euroclear and/or
Clearstream for the portion held for its account only after a certificate is
delivered to the trustee stating that the portion:
- is not beneficially owned by a United States person;
- has not been acquired by or on behalf of a United States person or for
offer to resell or for resale to a United States person or any person
inside the United States; or
- if a beneficial interest has been acquired by a United States person,
that:
- such person is a financial institution (as defined in the Internal
Revenue Code), purchasing for its own account or has acquired the debt
security through a financial institution; and
- that the debt securities are held by a financial institution that has
agreed in writing to comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the Internal Revenue
9
Code and the regulations thereunder, and that it did not purchase for
resale inside the United States.
The certificate must be based on statements provided by the beneficial
owners of interests in the temporary global security. Each of Euroclear and
Clearstream will credit the interest received by it to the accounts of the
beneficial owners of the debt security, or to other accounts as they may direct.
(Section 403)
DEFINITIVE GLOBAL SECURITIES
BEARER SECURITIES. The applicable prospectus supplement will describe the
exchange provisions, if any, of debt securities issuable in definitive global
bearer form. We will not deliver any bearer securities in exchange for a portion
of a definitive global security to any location in the United States. (Section
404)
U.S. BOOK-ENTRY SECURITIES. Debt securities of a series represented by a
definitive global registered security and deposited with or on behalf of a
depositary in the United States will be registered in the name of the depositary
or its nominee. These securities are referred to as "book-entry securities".
When a global security is issued and deposited with the depositary, the
depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts represented by that global security to the accounts
of institutions that have accounts with the depositary or its nominee.
Institutions that have accounts with the depositary or its nominee are referred
to as "participants".
The accounts to be credited shall be designated by the underwriters or
agents for the sale of such book-entry securities or by us, if we offer and sell
those securities directly.
Ownership of book-entry securities are limited to participants or persons
that may hold interests through participants. In addition, ownership of these
securities will be evidenced only by, and the transfer of that ownership will be
effected only through, records maintained by the depositary or its nominee or by
participants or persons that hold through other participants.
So long as the depositary, or its nominee, is the registered owner of a
global security, that depositary or nominee will be considered the sole owner or
holder of the book-entry securities represented by the global security for all
purposes under the indenture. Payments of principal, interest and premium on
those securities will be made to the depositary or its nominee as the registered
owner or the holder of the global security.
Owners of book-entry securities:
- will not be entitled to have the debt securities registered in their
names;
- will not be entitled to receive physical delivery of the debt securities
in definitive form; and
- will not be considered the owners or holders of those debt securities
under the indenture.
The laws of some jurisdictions require that purchasers of securities take
physical delivery of the securities in definitive form. These laws impair the
ability to purchase or transfer book-entry securities. We must comply with the
law.
We expect that the depositary for book-entry securities of a series will
immediately credit participants' accounts with payments received by the
depositary or nominee in amounts proportionate to the participants' beneficial
interests as shown on the records of such depositary.
We also expect that payments by participants to owners of beneficial
interests in a global security held through the participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name". The payments by participants to the owners of beneficial
interests will be the responsibility of those participants.
PRACTICAL IMPLICATIONS OF HOLDING DEBT SECURITIES IN STREET NAME
Investors who hold debt securities in accounts at banks or brokers will not
generally be recognized by us as the legal holders of debt
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securities. Since we recognize as the holder the bank or broker, or the
financial institution the bank or broker uses to hold its debt securities, it is
the responsibility of these intermediary banks, brokers and other financial
institutions to pass along principal, interest and other payments on the debt
securities, either because they agree to do so in their agreements with their
customers, or because they are legally required to do so. If you hold debt
securities in street name, you really ought to check with your own institution
to find out:
- How it handles securities payments and notices;
- Whether it imposes additional fees or charges;
- How it would handle voting and related issues if ever required;
- How it would pursue or enforce rights under the debt securities if there
were a default or other event triggering the need for direct holders to
act to protect their interests; and
- Whether and how it would react on other matters which are important to
persons who hold debt securities in "street name".
SATISFACTION AND DISCHARGE; DEFEASANCE
We may be discharged from our obligations on the debt securities of any
series that have matured or will mature or be redeemed within one year if we
deposit with the trustee enough cash to pay all the principal, interest and any
premium due to the stated maturity date or redemption date of the debt
securities. (Section 501)
Each indenture contains a provision that permits us to elect:
1. to be discharged after 90 days from all of our obligations (subject to
limited exceptions) with respect to any series of debt securities then
outstanding; and/or
2. to be released from our obligations under the following covenants and
from the consequences of an event of default or cross-default resulting
from a breach of these covenants:
a. the limitations on mergers, consolidations and sale of assets,
b. the limitations on sale and leaseback transactions under the senior
indenture, and
c. the limitations on secured indebtedness under the senior indenture.
To make either of the above elections, we must deposit in trust with the
trustee enough money to pay in full the principal, interest and premium on the
debt securities. This amount may be made in cash and/or U.S. government
obligations, if the debt securities are denominated in U.S. dollars. This amount
may be made in cash, and/or foreign government securities if the debt securities
are denominated in a foreign currency. As a condition to either of the above
elections, we must deliver to the trustee an opinion of counsel that the holders
of the debt securities will not recognize income, gain or loss for Federal
income tax purposes as a result of the action. (Section 503)
If either of the above events occur, the holders of the debt securities of
the series will not be entitled to the benefits of the indenture, except for
registration of transfer and exchange of debt securities and replacement of
lost, stolen or mutilated debt securities. (Sections 501 and 503)
EVENTS OF DEFAULT, NOTICE AND WAIVER
If an event of default for any series of debt securities occurs and
continues, the trustee or the holders of at least 25% in principal amount of the
debt securities of the series may declare the entire principal amount of all the
debt securities of that series to be due and payable immediately.
The declaration may be annulled and past defaults may be waived by the
holders of a majority of the principal amount of the debt securities of that
series. However, payment defaults that are not cured may only be waived
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by all holders of the debt securities. (Sections 602 and 613)
Each indenture defines an event of default in connection with any series of
debt securities as one or more of the following events:
- we fail to pay interest on any debt security of the series for 30 days
when due;
- we fail to pay the principal or any premium on any debt securities of the
series when due;
- we fail to make any sinking fund payment for 30 days when due;
- we fail to perform any other covenant in the debt securities of the series
or in the applicable indenture relating to debt securities of that series
for 90 days after being given notice; and
- we enter into bankruptcy or become insolvent.
An event of default for one series of debt securities is not necessarily an
event of default for any other series of debt securities. (Section 601)
Each indenture requires the trustee to give the holders of a series of debt
securities notice of a default for that series within 90 days unless the default
is cured or waived. However, the trustee may withhold this notice if it
determines in good faith that it is in the interest of those holders. The
trustee may not, however, withhold this notice in the case of a payment default.
(Section 702)
Other than the duty to act with the required standard of care during an
event of default, a trustee is not obligated to exercise any of its rights or
powers under the indenture at the request or direction of any of the holders of
debt securities, unless the holders have offered to the trustee reasonable
indemnification. (Section 703)
Generally, the holders of a majority in principal amount of outstanding debt
securities of any series may direct the time, method and place of conducting any
proceeding for any remedy available to the trustee, or exercising any trust or
other power conferred on the trustee. (Section 612)
Each indenture includes a covenant that we will file annually with the
trustee a certificate of no default, or specifying any default that exists.
(Section 1106)
Street name and other indirect holders should consult their banks and
brokers for information on their requirements for giving notice or taking other
actions upon a default.
MODIFICATION OF THE INDENTURES
Together with the trustee, we may modify the indentures without the consent
of the holders for limited purposes, including adding to our covenants or events
of default, establishing forms or terms of debt securities, curing ambiguities
and other purposes which do not adversely affect the holders in any material
respect. (Section 1001)
Together with the trustee, we may also make modifications and amendments to
each indenture with the consent of the holders of a majority in principal amount
of the outstanding debt securities of all affected series. However, without the
consent of each affected holder, no modification may:
- change the stated maturity of any debt security;
- reduce the principal, premium (if any) or rate of interest on any debt
security;
- change any place of payment or the currency in which any debt security is
payable;
- impair the right to enforce any payment after the stated maturity or
redemption date;
- adversely affect the terms of any conversion right;
- reduce the percentage of holders of outstanding debt securities of any
series required to consent to any modification, amendment or waiver under
the indenture;
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- change any of our obligations for any outstanding series of debt
securities to maintain an office or agency in the places and for the
purposes specified in the indenture for that series; or
- change the provisions in the indenture that relate to its modification or
amendment.
(Section 1002)
MEETINGS
The indentures contain provisions for convening meetings of the holders of
debt securities of a series. (Section 1401)
A meeting may be called at any time by the trustee, upon request by us or
upon request by the holders of at least 10% in principal amount of the
outstanding debt securities of the series. In each case, notice will be given to
the holders of debt securities of the series. (Section 1402)
Persons holding a majority in principal amount of the outstanding debt
securities of a series will constitute a quorum at a meeting. A meeting called
by us or the trustee that did not have a quorum may be adjourned for not less
than 10 days, and if there is not a quorum at the adjourned meeting, the meeting
may be further adjourned for not less than 10 days.
Generally, any resolution presented at a meeting at which a quorum is
present may be adopted by the affirmative vote of the holders of a majority in
principal amount of the outstanding debt securities of that series. However, to
change the amount or timing of payments under the debt securities, every holder
in the series must consent.
In addition, if the indenture provides that an action may be taken by the
holders of a specified percentage in principal amount of outstanding debt
securities of a series, that action may be taken at a meeting at which a quorum
is present by the affirmative vote of the holders of such specified percentage
in principal amount of the outstanding debt securities of that series. Any
resolution passed or decision taken at any meeting of holders of debt securities
of any series duly held in accordance with an indenture will be binding on all
holders of debt securities of that series and the related coupons. (Section
1404)
NOTICES TO HOLDERS
In most instances, notices to holders of bearer securities will be given by
publication at least once in a daily newspaper in The City of New York and in
London. Notices may also be published in another city or cities as may be
specified in the securities. In addition, notices to holders of bearer
securities will be mailed to those persons whose names and addresses were
previously filed with the applicable trustee. Notice to holders of registered
securities will be given by mail to the addresses of the holders as they appear
in the security register. (Section 106)
TITLE
Title to any bearer securities and any related coupons will pass by
delivery. We, the trustee and any agent of ours or the trustee may treat the
holder of any bearer security or related coupon as the absolute owner of that
security for all purposes. We may also treat the registered owner of any
registered security as the absolute owner of that security for all purposes.
(Section 407)
REPLACEMENT OF SECURITIES AND COUPONS
We think it's very important for you to keep your securities safe. If you
don't, you'll have to follow these procedures. We'll replace debt securities or
coupons that have been mutilated, but you'll have to pay for the replacement,
and you'll have to surrender the mutilated debt security or coupon to the
security registrar first. Debt securities or coupons that become destroyed,
stolen or lost will only be replaced by us, again at your expense, upon your
providing evidence of destruction, loss or theft which we and the security
registrar think is good. In the case of a destroyed, lost or stolen debt
security or coupon, we may also require you, as the holder of the debt security
or coupon, to indemnify the security registrar and us before we'll go about
issuing any replacement debt security or coupon. (Section 405)
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GOVERNING LAW
The indentures, the debt securities and the coupons will be governed by, and
construed under, the laws of the State of New York.
OUR RELATIONSHIP WITH THE TRUSTEE
We may from time to time maintain lines of credit, and have other customary
banking relationships, with the trustee under the senior indenture or the
trustee under the subordinated indenture.
SENIOR DEBT SECURITIES
The senior debt securities will be unsecured and will rank equally with all
of our other unsecured and non-subordinated debt.
COVENANTS IN THE SENIOR INDENTURE
COVENANTS ARE PROMISES. We must keep our promises or we could be placed in
default.
LIMITATION ON MERGER, CONSOLIDATION AND CERTAIN SALES OF ASSETS. We may,
without the consent of the holders of the debt securities, merge into or
consolidate with any other corporation, or convey or transfer all or
substantially all of our properties and assets to another person provided that:
- the successor is a U.S. corporation;
- the successor assumes on the same terms and conditions all the obligations
under the debt securities and the indentures; and
- immediately after giving effect to the transaction, there is no default
under the applicable indenture. (Section 901)
The remaining or acquiring corporation will take over all of our rights and
obligations under the indentures. (Section 902)
LIMITATION ON SECURED INDEBTEDNESS. Neither we nor any Restricted Subsidiary
will create, assume, incur or guarantee any Secured Indebtedness without
securing the senior debt securities equally and ratably with, or prior to, that
Secured Indebtedness, unless the sum of the following amounts would not exceed
10% of Consolidated Net Tangible Assets:
- the total amount of all Secured Indebtedness that the senior debt
securities are not secured equally and ratably with, and
- the discounted present value of all net rentals payable under leases
entered into in connection with sale and leaseback transactions entered
into after July 15, 1985.
You should note that we don't include in this calculation any leases entered
into by a Restricted Subsidiary before the time it became a Restricted
Subsidiary. (Section 1104)
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. Neither we nor any
Restricted Subsidiary will enter into any lease longer than three years covering
any of our Principal Property or any Restricted Subsidiary that is sold to any
other person in connection with that lease unless either:
1. the sum of the following amounts does not exceed 10% of Consolidated Net
Tangible Assets:
- the discounted present value of all net rentals payable under all
these leases entered into after July 15, 1985; and
- the total amount of all Secured Indebtedness that the senior debt
securities are not secured equally and ratably with.
We don't include in this calculation any leases entered into by a Restricted
Subsidiary before the time it became a Restricted Subsidiary.
or
2. an amount equal to the greater of the following amounts is applied
within 180 days to the retirement of our long-term
14
debt or the debt of a Restricted Subsidiary:
- the net proceeds to us or a Restricted Subsidiary from the sale; and
- the discounted present value of all net rentals payable under the
lease.
Amounts applied to debt which is subordinated to the senior debt securities
or which is owing to us or a Restricted Subsidiary will not be included in
this calculation. (Section 1105)
We think it's important for you to be aware that this limitation on sale and
leaseback transactions won't apply to any leases that we may enter into relating
to newly acquired, improved or constructed property.
We think it's also important for you to note that the holders of a majority
in principal amount of all affected series of outstanding debt securities may
waive compliance with each of the above covenants. (Section 1107)
DEFINITIONS
"Secured Indebtedness" means our indebtedness or indebtedness of a
Restricted Subsidiary for borrowed money secured by any lien on, or any
conditional sale or other title retention agreement covering, any Principal
Property or any stock or indebtedness of a Restricted Subsidiary. Excluded from
this definition is all indebtedness:
- outstanding on July 15, 1985, secured by liens, or arising from
conditional sale or other title retention agreements, existing on that
date;
- incurred after July 15, 1985 to finance the acquisition, improvement or
construction of property, and either secured by purchase money mortgages
or liens placed on the property within 180 days of acquisition,
improvement or construction or arising from conditional sale or other
title retention agreements;
- secured by liens on Principal Property or on the stock or indebtedness of
Restricted Subsidiaries, and, in either case, existing at the time of its
acquisition;
- owing to us or any Restricted Subsidiary;
- secured by liens, or conditional sale or other title retention devices,
existing at the time a corporation became or becomes a Restricted
Subsidiary after July 15, 1985;
- arising from any sale and leaseback transaction;
- incurred to finance the acquisition or construction of property secured by
liens in favor of any country or any political subdivision; and
- constituting any replacement, extension or renewal of any indebtedness to
the extent the amount of indebtedness is not increased.
"Principal Property" means land, land improvements, buildings and associated
factory, laboratory and office equipment constituting a manufacturing,
development, warehouse, service or office facility owned by or leased to us or a
Restricted Subsidiary which is located within the United States and which has an
acquisition cost plus capitalized improvements in excess of 0.15% of
Consolidated Net Tangible Assets as of the date of such determination. Principal
Property does not include:
- products marketed by us or our subsidiaries;
- any property financed through the issuance of tax-exempt governmental
obligations;
- any property which our Board of Directors determines is not of material
importance to us and our Restricted Subsidiaries taken as a whole; or
- any property in which the interest of us and all of our subsidiaries does
not exceed 50%.
"Consolidated Net Tangible Assets" means the total assets of us and our
subsidiaries, less current liabilities and intangible assets. We
15
include in intangible assets the balance sheet value of:
- all trade names, trademarks, licenses, patents, copyrights and goodwill;
- organizational and development costs;
- deferred charges other than prepaid items such as insurance, taxes,
interest, commissions, rents and similar items and tangible items we are
amortizing; and
- unamortized debt discount and expense minus unamortized premium.
We don't include in intangible assets any program products.
"Restricted Subsidiary" means:
1. any of our subsidiaries:
a. which has substantially all its property in the United States;
b. which owns or is a lessee of any Principal Property; and,
c. in which our investment and the investment of our subsidiaries
exceeds 0.15% of Consolidated Net Tangible Assets as of the date of
such determination; and
2. any other subsidiary the Board of Directors may designate as a
Restricted Subsidiary.
"Restricted Subsidiary" doesn't include financing subsidiaries and
subsidiaries formed or acquired after July 15, 1985 for the purpose of acquiring
the stock, business or assets of another person and that have not and do not
acquire all or any substantial part of our business or assets or the business or
assets of any Restricted Subsidiary. (Section 101 of Senior Indenture)
SUBORDINATED DEBT SECURITIES
The subordinated debt securities will be unsecured. The subordinated debt
securities will be subordinate in right of payment to all senior indebtedness.
(Section 1501 of Subordinated Indenture)
In addition, claims of our subsidiaries' creditors and preferred
stockholders generally will have priority with respect to the assets and
earnings of the subsidiaries over the claims of our creditors, including holders
of the subordinated debt securities, even though those obligations may not
constitute senior indebtedness. The subordinated debt securities, therefore,
will be effectively subordinated to creditors, including trade creditors, and
preferred stockholders of our subsidiaries.
The subordinated indenture defines "senior indebtedness" to mean the
principal of, premium, if any, and interest on:
- all indebtedness for money borrowed or guaranteed by us other than the
subordinated debt securities, unless the indebtedness expressly states to
have the same rank as, or to rank junior to, the subordinated debt
securities; and
- any deferrals, renewals or extensions of any senior indebtedness.
However, the term "senior indebtedness" will not include:
- any of our obligations to our subsidiaries;
- any liability for Federal, state, local or other taxes owed or owing by
us;
- any accounts payable or other liability to trade creditors arising in the
ordinary course of business, including guarantees of instruments
evidencing those liabilities;
- any indebtedness, guarantee or obligation of ours which is expressly
subordinate or junior in right of payment in any respect to any other
indebtedness, guarantee or obligation of ours, including any senior
subordinated indebtedness and any subordinated obligations;
- any obligations with respect to any capital stock; or
- any indebtedness incurred in violation of the Subordinated Indenture.
There is no limitation on our ability to issue additional senior
indebtedness. The senior debt securities constitute senior indebtedness under
the subordinated indenture. The subordinated debt securities will rank equally
with our other subordinated indebtedness.
16
Under the subordinated indenture, no payment may be made on the subordinated
debt securities and no purchase, redemption or retirement of any subordinated
debt securities may be made in the event:
- any senior indebtedness is not paid when due, or
- the maturity of any senior indebtedness is accelerated as a result of a
default, unless the default has been cured or waived and the acceleration
has been rescinded or that senior indebtedness has been paid in full.
We may, however, pay the subordinated debt securities without regard to the
above restriction if the representatives of the holders of the applicable senior
indebtedness approve the payment in writing to us and the trustee.
The representatives of the holders of senior indebtedness may notify us and
the trustee in writing of a default which can result in the acceleration of that
senior indebtedness' maturity without further notice or the expiration of any
grace periods. In this event, we may not pay the subordinated debt securities
for 179 days after receipt of that notice. If the holders of senior indebtedness
or their representatives have not accelerated the maturity of the senior
indebtedness at the end of the 179 day period, we may resume payments on the
subordinated debt securities. Not more than one such notice may be given in any
consecutive 360-day period, irrespective of the number of defaults with respect
to senior indebtedness during that period. (Section 1503 of Subordinated
Indenture)
In the event we pay or distribute our assets to creditors upon a total or
partial liquidation, dissolution or reorganization of us or our property, the
holders of senior indebtedness will be entitled to receive payment in full of
the senior indebtedness before the holders of subordinated debt securities are
entitled to receive any payment. Until the senior indebtedness is paid in full,
any payment or distribution to which holders of subordinated debt securities
would be entitled but for the subordination provisions of the subordinated
indenture will be made to holders of the senior indebtedness. (Section 1502 of
Subordinated Indenture)
If a distribution is made to holders of subordinated debt securities that,
due to the subordination provisions, should not have been made to them, those
holders of subordinated debt securities are required to hold it in trust for the
holders of senior indebtedness, and pay it over to them as their interests may
appear. (Section 1505 of Subordinated Indenture)
If payment of the subordinated debt securities is accelerated because of an
event of default, either we or the trustee will promptly notify the holders of
senior indebtedness or their representatives of the acceleration. We may not pay
the subordinated debt securities until five business days after the holders of
senior indebtedness or their representatives receive notice of the acceleration.
Thereafter, we may pay the subordinated debt securities only if the
subordination provisions of the subordinated indenture otherwise permit payment
at that time. (Section 1505 of Subordinated Indenture)
As a result of the subordination provisions contained in the subordinated
indenture, in the event of insolvency, our creditors who are holders of senior
indebtedness may recover more, ratably, than the holders of subordinated debt
securities. In addition, our creditors who are not holders of senior
indebtedness may recover less, ratably, than holders of senior indebtedness and
may recover more, ratably, than the holders of subordinated indebtedness. It's
important to keep this in mind if you decide to hold our subordinated debt
securities.
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DESCRIPTION OF THE PREFERRED STOCK
The following is a description of general terms and provisions of the
preferred stock. The particular terms of any series of preferred stock will be
described in the applicable prospectus supplement.
All of the terms of the preferred stock are, or will be, contained in our
Certificate of Incorporation and the certificate of amendment relating to each
series of the preferred stock, which will be filed with the Securities and
Exchange Commission at or before the time we issue a series of the preferred
stock.
We are authorized to issue up to 150,000,000 shares of preferred stock, par
value $.01 per share. As of March 31, 2000, 2,546,011 shares of Series A 7 1/2%
Preferred Stock, liquidation preference $100 per share, were outstanding.
Subject to limitations prescribed by law, the Board of Directors is authorized
at any time to:
- issue one or more series of preferred stock;
- determine the designation for any series by number, letter or title that
shall distinguish the series from any other series of preferred stock; and
- determine the number of shares in any series.
The Board of Directors is authorized to determine, for each series of
preferred stock, and the prospectus supplement will set forth with respect to
the series the following information:
- whether dividends on that series of preferred stock will be cumulative,
noncumulative or partially cumulative;
- the dividend rate (or method for determining the rate);
- the liquidation preference per share of that series of preferred stock, if
any;
- any conversion provisions applicable to that series of preferred stock;
- any redemption or sinking fund provisions applicable to that series of
preferred stock;
- the voting rights of that series of preferred stock, if any; and
- the terms of any other preferences or rights, if any, applicable to that
series of preferred stock.
The preferred stock, when issued, will be fully paid and nonassessable.
DIVIDENDS
Holders of preferred stock will be entitled to receive, when, as and if
declared by our Board of Directors, cash dividends at the rates and on the dates
as set forth in the prospectus supplement. Generally, no dividends will be
declared or paid on any series of preferred stock unless full dividends for all
series of preferred stock, including any cumulative dividends still owing, have
been or contemporaneously are declared and paid. When those dividends are not
paid in full, dividends will be declared pro-rata so that the amount of
dividends declared per share on each series of preferred stock will bear to each
other series the same ratio that accrued dividends per share for each respective
series of preferred stock bear to aggregate accrued dividends for all
outstanding shares of preferred stock. In addition, generally, unless all
dividends on the preferred stock have been paid, no dividends will be declared
or paid on the capital stock and we may not redeem or purchase any capital
stock.
Payment of dividends on any series of preferred stock may be restricted by
loan agreements, indentures and other transactions we may enter into.
CONVERTIBILITY
No series of preferred stock will be convertible into, or exchangeable for,
other securities or property except as set forth in the applicable prospectus
supplement.
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REDEMPTION AND SINKING FUND
No series of preferred stock will be redeemable or receive the benefit of a
sinking fund except as set forth in the applicable prospectus supplement.
Shares of preferred stock that we redeem or otherwise reacquire will resume
the status of authorized and unissued shares of preferred stock undesignated as
to series, and will be available for subsequent issuance. There are no
restrictions on repurchase or redemption of the preferred stock while there is
any arrearage on sinking fund installments except as may be set forth in a
prospectus supplement.
LIQUIDATION
In the event we voluntarily or involuntarily liquidate, dissolve or wind up
our affairs, the holders of each series of preferred stock will be entitled to
receive the liquidation preference per share specified in the prospectus
supplement, plus any accrued and unpaid dividends. Holders of preferred stock
will be entitled to receive these amounts before any distribution is made to the
holders of capital stock.
If the amounts payable to preferred stockholders are not paid in full, the
holders of preferred stock will share ratably in any distribution of assets
based upon the aggregate liquidation preference for all outstanding shares for
each series. After the holders of shares of preferred stock are paid in full,
they will have no right or claim to any of our remaining assets.
Neither the par value nor the liquidation preference is indicative of the
price at which the preferred stock will actually trade on or after the date of
issuance.
VOTING
Generally, the holders of preferred stock will not be entitled to vote.
However, if the equivalent of six quarterly dividends payable on any series of
preferred stock is in default, the number of directors constituting our Board of
Directors will be increased by two and the holders of such series of preferred
stock, voting together as a class with all other series of preferred stock
entitled to vote on such election of directors, will be entitled to elect those
additional directors. In the event of this type of default, the Board of
Directors will call a special meeting for the holders of all affected series
within 10 business days of the default for the purpose of electing the
additional directors. Alternatively, the holders of record of a majority of the
outstanding shares of all affected series who are entitled to participate in the
election of directors may elect those additional directors by written consent.
If all accumulated dividends on any series of preferred stock have been paid in
full, the holders of shares of that series will no longer have the right to vote
on directors, the term of office of each director so elected will terminate, and
the number of our directors will, without further action, be reduced by two.
Unless we otherwise specify in a prospectus supplement, the vote of the
holders of a majority of the outstanding shares of each series of preferred
stock voting together as a class, is required to authorize any amendment,
alteration or repeal of our Certificate of Incorporation or any certificate of
amendment which would adversely affect the powers, preferences, or special
rights of the preferred stock including authorizing any class of stock with
superior dividend and liquidation preferences.
NO OTHER RIGHTS
The shares of a series of preferred stock will not have any preemptive
rights, preferences, voting powers or relative, participating, optional or other
special rights except as set forth above or in the prospectus supplement, the
Certificate of Incorporation or certificate of amendment or as otherwise
required by law.
TRANSFER AGENT AND REGISTRAR
We'll designate the transfer agent for each series of preferred stock in the
prospectus supplement.
DESCRIPTION OF THE DEPOSITARY SHARES
We may, at our option, elect to offer fractional shares of preferred stock,
rather than full shares of preferred stock. If we do, we will issue to the
public receipts for depositary shares,
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and each of these depositary shares will represent a fraction of a share of a
particular series of preferred stock. Each owner of a depositary share will be
entitled, in proportion to the applicable fractional interest in shares of
preferred stock underlying that depositary share, to all rights and preferences
of the preferred stock underlying that depositary share. Those rights include
dividend, voting, redemption and liquidation rights.
The shares of preferred stock underlying the depositary shares will be
deposited with a depositary under a deposit agreement between us, the depositary
and the holders of the depositary receipts evidencing the depositary shares. The
depositary will be a bank or trust company selected by us. The depositary will
also act as the transfer agent, registrar and dividend disbursing agent for the
depositary shares.
Holders of depositary receipts agree to be bound by the deposit agreement,
which requires holders to take certain actions such as filing proof of residence
and paying certain charges.
The following is a summary of the most important terms of the depositary
shares. The deposit agreement, our Certificate of Incorporation and the
certificate of amendment for the applicable series of preferred stock that are,
or will be, filed with the SEC will set forth all of the terms relating to the
depositary shares.
DIVIDENDS
The depositary will distribute all cash dividends or other cash
distributions received relating to the series of preferred stock underlying the
depositary shares, to the record holders of depositary receipts in proportion to
the number of depositary shares owned by those holders on the relevant record
date. The record date for the depositary shares will be the same date as the
record date for the preferred stock.
In the event of a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary receipts
that are entitled to receive the distribution. However, if the depositary
determines that it is not feasible to make the distribution, the depositary may,
with our approval, adopt another method for the distribution. The method may
include selling the property and distributing the net proceeds to the holders.
LIQUIDATION PREFERENCE
In the event of our voluntary or involuntary liquidation, dissolution or
winding up, the holders of each depositary share will be entitled to receive the
fraction of the liquidation preference accorded each share of the applicable
series of preferred stock, as set forth in the applicable prospectus supplement.
REDEMPTION
If a series of preferred stock underlying the depositary shares is subject
to redemption, the depositary shares will be redeemed from the proceeds received
by the depositary resulting from the redemption, in whole or in part, of
preferred stock held by the depositary. Whenever we redeem any preferred stock
held by the depositary, the depositary will redeem, as of the same redemption
date, the number of depositary shares representing the preferred stock so
redeemed. The depositary will mail the notice of redemption to the record
holders of the depositary receipts promptly upon receiving the notice from us
and not less than 35 nor more than 60 days prior to the date fixed for
redemption of the preferred stock and the depositary shares.
VOTING
Upon receipt of notice of any meeting at which the holders of preferred
stock are entitled to vote, the depositary will mail the information contained
in the notice of meeting to the record holders of the depositary receipts
underlying the preferred stock. Each record holder of those depositary receipts
on the record date will be entitled to instruct the depositary as to the
exercise of the voting rights pertaining to the amount of preferred stock
underlying that holder's depositary shares. The record date for the depositary
shares will be the same date as the record date for the preferred stock. The
depositary will try, as far as practicable, to vote the preferred stock
underlying the depositary
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shares in a manner consistent with the instructions of the holders of the
depositary receipts. We will agree to take all action which may be deemed
necessary by the depositary in order to enable the depositary to do so. The
depositary will not vote the preferred stock to the extent that it does not
receive specific instructions from the holders of depositary receipts.
WITHDRAWAL OF PREFERRED STOCK
Owners of depositary shares are entitled, upon surrender of depositary
receipts at the principal office of the depositary and payment of any unpaid
amount due the depositary, to receive the number of whole shares of preferred
stock underlying the depositary shares. Partial shares of preferred stock will
not be issued. These holders of preferred stock will not be entitled to deposit
the shares under the deposit agreement or to receive depositary receipts
evidencing depositary shares for the preferred stock.
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may be amended at any time and from time to
time by agreement between us and the depositary. However, any amendment which
materially and adversely alters the rights of the holders of depositary shares,
other than any change in fees, will not be effective unless the amendment has
been approved by at least a majority of the depositary shares then outstanding.
The deposit agreement may be terminated by us or the depositary only if:
- all outstanding depositary shares have been redeemed; or
- there has been a final distribution relating to the preferred stock in
connection with our dissolution, and that distribution has been made to
all the holders of depositary shares.
CHARGES OF DEPOSITARY
We'll pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. We'll also pay charges
of the depositary in connection with the initial deposit of the preferred stock
and the initial issuance of the depositary shares, any redemption of the
preferred stock and all withdrawals of preferred stock by owners of depositary
shares. Holders of depositary receipts will pay transfer, income and other taxes
and governmental charges and certain other charges as provided in the deposit
agreement. In certain circumstances, the depositary may refuse to transfer
depositary shares, withhold dividends and distributions, and sell the depositary
shares evidenced by the depositary receipt, if the charges are not paid.
REPORTS TO HOLDERS
The depositary will forward to the holders of depositary receipts all
reports and communications we deliver to the depositary that we are required to
furnish to the holders of the preferred stock. In addition, the depositary will
make available for inspection by holders of depositary receipts at the principal
office of the depositary--and at other places as it thinks is advisable--any
reports and communications we deliver to the depositary as the holder of
preferred stock.
LIABILITY AND LEGAL PROCEEDINGS
Neither we nor the depositary will be liable if either of us are prevented
or delayed by law or any circumstance beyond our control in performing our
obligations under the deposit agreement. Our obligations and those of the
depositary will be limited to performance in good faith of our duties under the
deposit agreement. Neither we nor the depositary will be obligated to prosecute
or defend any legal proceeding in respect of any depositary shares or preferred
stock unless satisfactory indemnity is furnished. We and the depositary may rely
on written advice of counsel or accountants, on information provided by holders
of depositary receipts or other persons believed in good faith to be competent
to give such information and on
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documents believed to be genuine and to have been signed or presented by the
proper persons.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering a notice to us of its
election to do so. We may also remove the depositary at any time. Any such
resignation or removal will take effect upon the appointment of a successor
depositary and its acceptance of such appointment. The successor depositary must
be appointed within 60 days after delivery of the notice for resignation or
removal. In addition, the successor depositary must be a bank or trust company
having its principal office in the United States of America and must have a
combined capital and surplus of at least $150,000,000.
FEDERAL INCOME TAX CONSEQUENCES
Owners of the depositary shares will be treated for Federal income tax
purposes as if they were owners of the preferred stock underlying the depositary
shares. Accordingly, the owners will be entitled to take into account for
Federal income tax purposes income and deductions to which they would be
entitled if they were holders of the preferred stock. In addition:
- no gain or loss will be recognized for Federal income tax purposes upon
the withdrawal of preferred stock in exchange for depositary shares;
- the tax basis of each share of preferred stock to an exchanging owner of
depositary shares will, upon the exchange, be the same as the aggregate
tax basis of the depositary shares exchanged; and
- the holding period for preferred stock in the hands of an exchanging owner
of depositary shares will include the period during which the person owned
the depositary shares.
DESCRIPTION OF THE CAPITAL STOCK
As of the date of this prospectus, we are authorized to issue up to
4,687,500,000 shares of capital stock, $0.20 par value per share. As of
March 31, 2000, 1,772,836,653 shares of capital stock were outstanding.
DIVIDENDS. Holders of capital stock are entitled to receive dividends, in
cash, securities, or property, as may from time to time be declared by our Board
of Directors, subject to the rights of the holders of the preferred stock.
VOTING. Each holder of capital stock is entitled to one vote per share on
all matters requiring a vote of the stockholders.
RIGHTS UPON LIQUIDATION. In the event of our voluntary or involuntary
liquidation, dissolution, or winding up, the holders of capital stock will be
entitled to share equally in our assets available for distribution after payment
in full of all debts and after the holders of preferred stock have received
their liquidation preferences in full.
MISCELLANEOUS. Shares of capital stock are not redeemable and have no
subscription, conversion or preemptive rights.
DESCRIPTION OF THE WARRANTS
We may issue warrants for the purchase of debt securities, preferred stock
or capital stock. Warrants may be issued independently or together with our debt
securities, preferred stock or capital stock and may be attached to or separate
from any offered securities. Each series of warrants will be issued under a
separate warrant agreement to be entered into between us and a bank or trust
company, as warrant agent. The warrant agent will act solely as our agent in
connection with the warrants and will not have any obligation or relationship of
agency or trust for or with any holders or beneficial owners of warrants. A copy
of the warrant agreement will be filed with the SEC in connection with the
offering of warrants.
DEBT WARRANTS
The prospectus supplement relating to a particular issue of warrants to
issue debt securities will describe the terms of those warrants, including the
following:
- the title of the warrants;
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- the offering price for the warrants, if any;
- the aggregate number of the warrants;
- the designation and terms of the debt securities purchasable upon exercise
of the warrants;
- if applicable, the designation and terms of the debt securities that the
warrants are issued with and the number of warrants issued with each debt
security;
- if applicable, the date from and after which the warrants and any debt
securities issued with them will be separately transferable;
- the principal amount of debt securities that may be purchased upon
exercise of a warrant and the price at which the debt securities may be
purchased upon exercise;
- the dates on which the right to exercise the warrants will commence and
expire;
- if applicable, the minimum or maximum amount of the warrants that may be
exercised at any one time;
- whether the warrants represented by the warrant certificates or debt
securities that may be issued upon exercise of the warrants will be issued
in registered or bearer form;
- information relating to book-entry procedures, if any;
- the currency or currency units in which the offering price, if any, and
the exercise price are payable;
- if applicable, a discussion of material United States federal income tax
considerations;
- anti-dilution provisions of the warrants, if any;
- redemption or call provisions, if any, applicable to the warrants; and
- any additional terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
STOCK WARRANTS
The prospectus supplement relating to a particular issue of warrants to
issue capital stock or preferred stock will describe the terms of the warrants,
including the following:
- the title of the warrants;
- the offering price for the warrants, if any;
- the aggregate number of the warrants;
- the designation and terms of the capital stock or preferred stock that may
be purchased upon exercise of the warrants;
- if applicable, the designation and terms of the securities that the
warrants are issued with and the number of warrants issued with each
security;
- if applicable, the date from and after which the warrants and any
securities issued with the warrants will be separately transferable;
- the number of shares of capital stock or preferred stock that may be
purchased upon exercise of a warrant and the price at which the shares may
be purchased upon exercise;
- the dates on which the right to exercise the warrants commence and expire;
- if applicable, the minimum or maximum amount of the warrants that may be
exercised at any one time;
- the currency or currency units in which the offering price, if any, and
the exercise price are payable;
- if applicable, a discussion of material United States federal income tax
considerations;
- antidilution provisions of the warrants, if any;
- redemption or call provisions, if any, applicable to the warrants;
- any additional terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants; and
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- any other information we think is important about the warrants.
PLAN OF DISTRIBUTION
We may sell the securities:
- through underwriters;
- through agents; or
- directly to purchasers.
We'll describe in a prospectus supplement, the particular terms of the
offering of the securities, including the following:
- the names of any underwriters;
- the purchase price and the proceeds we will receive from the sale;
- any underwriting discounts and other items constituting underwriters'
compensation;
- any initial public offering price and any discounts or concessions allowed
or reallowed or paid to dealers;
- any securities exchanges on which the securities of the series may be
listed; and
- any other information we think is important.
If we use underwriters in the sale, the securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, either at a fixed public
offering price, or at varying prices determined at the time of sale.
The securities may be either offered to the public through underwriting
syndicates represented by managing underwriters or by underwriters without a
syndicate. The obligations of the underwriters to purchase securities will be
subject to conditions precedent, and the underwriters will be obligated to
purchase all the securities of a series if any are purchased. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
Securities may be sold directly by us or through agents designated by us
from time to time. Any agent involved in the offer or sale of the securities for
which this prospectus is delivered will be named, and any commissions payable by
us to that agent will be set forth, in the prospectus supplement. Unless
otherwise indicated in the prospectus supplement, any agent will be acting on a
best efforts basis for the period of its appointment.
We may authorize agents or underwriters to solicit offers by certain types
of institutions to purchase securities from us at the public offering price set
forth in the prospectus supplement pursuant to delayed delivery contracts. These
contracts will provide for payment and delivery on a specified date in the
future. The conditions to these contracts and the commissions payable for
solicitation of such contracts will be set forth in the applicable prospectus
supplement.
Agents and underwriters may be entitled to indemnification by us against
civil liabilities arising out of this prospectus, including liabilities under
the Securities Act of 1933, or to contribution for payments which the agents or
underwriters may be required to make relating to those liabilities. Agents and
underwriters may be customers of, engage in transactions with, or perform
services for, us in the ordinary course of business.
Each series of securities will be a new issue of securities with no
established trading market. Any underwriter may make a market in the securities,
but won't be obligated to do so, and may discontinue any market making at any
time without notice. We can't and won't give any assurances as to the liquidity
of the trading market for any of our securities.
LEGAL OPINIONS
The legality of the securities will be passed upon by Mr. David S.
Hershberg, our Vice President and Assistant General Counsel. Mr. Hershberg,
together with members of his family, owns, has options to purchase and has other
interests in shares of our common stock.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31, 1999
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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$1,100,000,000
INTERNATIONAL BUSINESS
MACHINES CORPORATION
FLOATING RATE NOTES DUE 2004
[LOGO]
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P R O S P E C T U S S U P P L E M E N T
SEPTEMBER 5, 2002
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DEUTSCHE BANK SECURITIES
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
SALOMON SMITH BARNEY
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