Prospectus Supplement
(To Prospectus dated March 27, 2001)
[FIRST DATA LOGO]
First Data Corporation
$450,000,000
4.70% SENIOR NOTES DUE 2006
Issue price: 99.856%
$550,000,000
5.625% SENIOR NOTES DUE 2011
Issue price: 99.692%
INTEREST PAYABLE MAY 1 AND NOVEMBER 1
The 2006 notes will mature on November 1, 2006. The 2011 notes will mature on
November 1, 2011. Interest on the notes will accrue from November 8, 2001. We
may redeem either series of notes in whole or in part at any time at the
redemption prices set forth under "Description of the Notes--Optional
Redemption" on page S-12.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the notes or determined that this
prospectus supplement or the accompanying prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
Price to Underwriting Proceeds
Public Discounts to First Data
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Per 2006 Note 99.856% .500% 99.356%
----------------------------------------------------------------------------------------------
Total $449,352,000 $2,250,000 $447,102,000
----------------------------------------------------------------------------------------------
Per 2011 Note 99.692% .600% 99.092%
----------------------------------------------------------------------------------------------
Total $548,306,000 $3,300,000 $545,006,000
----------------------------------------------------------------------------------------------
We will apply to list the notes on the Luxembourg Stock Exchange. Currently,
there is no public market for the notes.
We expect to deliver the notes to investors through the book-entry delivery
system of The Depository Trust Company for the accounts of its participants,
including Clearstream, Luxembourg and the Euroclear System, on or about
November 8, 2001.
JOINT LEAD MANAGERS AND BOOKRUNNERS
Bear, Stearns & Co. Inc. JPMorgan
JOINT LEAD MANAGERS
Banc One Capital Markets, Inc. Salomon Smith Barney
CO-MANAGERS
Goldman, Sachs & Co.
Lehman Brothers
Merrill Lynch & Co.
Morgan Stanley
SunTrust Robinson Humphrey
Wachovia Securities
November 1, 2001
TABLE OF CONTENTS
Prospectus Supplement
Page
--------
About This Prospectus Supplement............................ S-3
Special Note Regarding Forward-Looking Statements........... S-5
First Data Corporation...................................... S-7
Use of Proceeds............................................. S-7
Ratios of Earnings to Fixed Charges......................... S-8
Capitalization.............................................. S-9
Selected Historical Financial Data.......................... S-10
Directors and Executive Officers............................ S-11
Description of the Notes.................................... S-12
Certain United States Federal Tax Consequences.............. S-18
Underwriting................................................ S-22
Legal Matters............................................... S-24
Experts..................................................... S-24
General Information......................................... S-25
Prospectus
Page
--------
Where You Can Find More Information......................... 2
First Data Corporation...................................... 3
Use of Proceeds............................................. 3
Ratios of Earnings to Fixed Charges......................... 3
Description of Debt Securities.............................. 5
Description of Capital Stock................................ 22
Plan of Distribution........................................ 25
Legal Matters............................................... 26
Experts..................................................... 26
S-2
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement contains the terms of this offering of notes. This
prospectus supplement, or the information incorporated by reference in this
prospectus supplement, may add to, update or change the information in the
accompanying prospectus. If information in this prospectus supplement, or the
information incorporated by reference in this prospectus supplement, is
inconsistent with the accompanying prospectus, this prospectus supplement, or
the information incorporated by reference in this prospectus supplement, will
apply and will supersede that information in the accompanying prospectus.
It is important for you to read and consider all information contained in this
prospectus supplement and the accompanying prospectus in making your investment
decision. You should also read and consider the information in the documents we
have referred you to in "Where You Can Find More Information" in the
accompanying prospectus.
No person is authorized to give any information or to make any representations
other than those contained or incorporated by reference in this prospectus
supplement or the accompanying prospectus and, if given or made, such
information or representations must not be relied upon as having been
authorized. This prospectus supplement and the accompanying prospectus do not
constitute an offer to sell or the solicitation of an offer to buy any
securities other than the securities described in this prospectus supplement or
an offer to sell or the solicitation of an offer to buy such securities in any
circumstances in which such offer or solicitation is unlawful. Neither the
delivery of this prospectus supplement or the accompanying prospectus, nor any
sale made hereunder or thereunder shall under any circumstances, create any
implication that there has been no change in our affairs since the date of this
prospectus supplement or the accompanying prospectus, or that the information
contained or incorporated by reference herein or therein is correct as of any
time subsequent to the date of such information.
The distribution of this prospectus supplement and the accompanying prospectus
and the offering of the notes in certain jurisdictions may be restricted by law.
This prospectus supplement and the accompanying prospectus do not constitute an
offer, or an invitation on our behalf or on behalf of the underwriters or any of
them, to subscribe to or purchase, any of the notes, and may not be used for or
in connection with an offer or solicitation by anyone, in any jurisdiction in
which such an offer or solicitation is not authorized or to any person to whom
it is unlawful to make such an offer or solicitation. See "Underwriting."
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
First Data Corporation. We accept responsibility for the accuracy of the
information contained in this prospectus supplement and the accompanying
prospectus and confirm that, to the best of our 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. The Luxembourg Stock Exchange
takes no responsibility for the contents of this document, makes no
representation as to its accuracy or completeness and expressly disclaims any
liability whatsoever for any loss howsoever arising from or in reliance upon the
whole or any part of the contents of this prospectus supplement and accompanying
prospectus.
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, Chase Manhattan
Bank Luxembourg S.A., 5 Rue Plaetis, L-2338 Luxembourg.
S-3
So long as the notes are listed on the Luxembourg Stock Exchange, copies of the
periodic reports that we file with the Securities and Exchange Commission will
be made available without charge at the offices of Chase Manhattan Bank
Luxembourg S.A., 5 Rue Plaetis, L-2338 Luxembourg.
All references in this prospectus supplement to "U.S. dollars," "dollars," "U.S.
$" or "$" are to the currency of the United States of America.
S-4
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus include and
incorporate by reference certain statements that may be deemed to be
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. This prospectus supplement, the accompanying
prospectus and the documents that we incorporate by reference also include
information relating to First Data that is based on the beliefs of our
management, as well as assumptions made by, and information currently available
to, our management. When used in this prospectus supplement, the accompanying
prospectus or any document incorporated by reference, the words "anticipate,"
"believe," "estimate," "expect," "intend" and similar expressions identify
forward-looking statements. All forward-looking statements are inherently
uncertain as they are based on various expectations and assumptions concerning
future events and are subject to numerous known and unknown risks and
uncertainties which could cause actual events or results to differ materially
from those projected.
Important factors upon which our forward-looking statements are premised
include:
- continued growth at rates approximating recent levels for card-based payment
transactions, consumer money transfer transactions and other product markets;
- successful conversions under service contracts with major clients;
- renewal of material contracts in our business units consistent with past
experience;
- timely, successful and cost-effective implementation of processing systems to
provide new products, improved functionality and increased efficiencies
particularly in the card issuing services segment;
- successful and timely integration of significant businesses and technologies
acquired by us and realization of anticipated synergies;
- continuing development and maintenance of appropriate business continuity
plans for our processing systems based on the needs and risks relative to each
such system;
- absence of consolidation among client financial institutions or other client
groups which has a significant impact on client relationships and no material
loss of business from our significant customers;
- achieving planned revenue growth throughout First Data, including in the
merchant alliance program which involves several joint ventures not under our
sole control and each of which acts independently of the others, and
successful management of pricing pressures through cost efficiencies and other
cost management initiatives;
- successfully managing the credit and fraud risks in our business units and the
merchant alliances, particularly in the context of the developing e-commerce
markets and difficulties in the travel industry due to the events of
September 11, 2001;
- anticipation of and response to technological changes, particularly with
respect to e-commerce;
- attracting and retaining qualified key employees;
- no unanticipated changes in laws, regulations, credit card association rules
or other industry standards affecting our businesses which require significant
product redevelopment efforts, reduce the market for or value of our products
or render products obsolete;
S-5
- continuation of the existing interest rate environment, avoiding increases in
agent fees related to our consumer money transfer products and our short-term
borrowing costs;
- absence of significant changes in foreign exchange spreads on retail money
transfer transactions, particularly between the United States and Mexico,
without a corresponding increase in volume or consumer fees;
- implementation of Western Union agent agreements with governmental entities
according to schedule and no interruption of relations with countries in which
Western Union has or is implementing material agent agreements;
- no unanticipated developments relating to previously disclosed lawsuits
against Western Union alleging, inter alia, violation of consumer protection
laws in connection with advertising the cost of money transfers;
- successful management of any impact from slowing economic conditions or
consumer spending;
- no catastrophic events that could impact our or our major customers' operating
facilities, communication systems and technology or that has a material
negative impact on current economic conditions or levels of consumer spending;
- successfully managing the potential both for patent protection and patent
liability in the context of rapidly developing legal framework for expansive
software patent protection; and
- continued political stability in countries in which Western Union has material
operations.
Variations from these assumptions or failure to achieve these objectives could
cause actual results to differ from those projected in the forward-looking
statements. Due to the uncertainties inherent in forward-looking statements, you
are urged not to place undue reliance on these statements. In addition, we
undertake no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events, or changes
to projections over time.
S-6
FIRST DATA CORPORATION
We operate in four business segments: payment services, merchant services, card
issuing services and emerging payments. Payment services includes Western Union,
Integrated Payment Systems and Orlandi Valuta Companies and is the leading
provider of nonbank domestic and international money transfer and payment
services to consumers and commercial entities, including money transfer,
official check and money order services. Merchant services is primarily
comprised of First Data Merchant Services, TeleCheck, First Data Financial
Services and a majority interest in TASQ Technology, Inc. and NYCE, Inc. This
segment provides merchants with credit and debit card transaction processing
services, including authorization, transaction capture, settlement,
Internet-based transaction processing, check verification and guarantee
services. Card issuing services encompasses domestic and international card
processing services. This segment provides a comprehensive line of processing
and related services to financial institutions issuing credit and debit cards
and to issuers of oil and private label credit cards, including
information-based products for enhanced decision making and marketing. First
Data Solutions is also included in the card issuing services segment, providing
consumer and business solutions in the areas of risk and fraud management and
information verification associated with granting of credit, debit and customer
service collecting. The emerging payments segment, created in the third quarter
of 2000, consists of eONE Global, a leader in identifying, commercializing and
operating emerging payment technologies that support Internet and wireless
payment products. The remainder of our business units are grouped in the "All
Other and Corporate" category, which includes TeleServices, Call Interactive and
Corporate Operations.
Our principal executive offices are located at 6200 South Quebec Street,
Greenwood Village, Colorado 80111, telephone (303) 488-8000.
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the notes, after deducting
underwriting discounts and our estimated expenses of the offering, will be
$991,391,000. We intend to use the net proceeds from the sale to repay
outstanding commercial paper maturing within 30 days and having an average
interest rate of 2.43% at October 30, 2001.
S-7
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratios of earnings to fixed charges for the
periods indicated.
Nine Months
Ended
September 30, Year Ended December 31,
------------------- ----------------------------------------------------
2001(1) 2000(2) 2000(3) 1999(4) 1998(5) 1997(6) 1996(7)
-------- -------- -------- -------- -------- -------- --------
Ratio of earnings to fixed charges--
historical................................. 7.28x 10.72x 9.99x 12.54x 5.70x 5.11x 7.19x
Ratio of earnings to fixed charges--
pro forma(8)............................... 6.93x -- 11.01x -- -- -- --
------------
(1) Includes net restructuring, business divestitures and impairment charges of
$180.2 million ($116.2 million after tax). The ratio of earnings to fixed
charges without these charges would have been 8.69x. The pro forma ratio
without these charges would have been 8.27x.
(2) Includes net restructuring, business divestiture, litigation and impairment
benefit of $100.6 million ($64.2 million after tax). The ratio of earnings
to fixed charges without this benefit would have been 9.71x.
(3) Includes net restructuring, business divestitures, litigation and impairment
benefit of $71.3 million ($46.0 million after tax). The ratio of earnings to
fixed charges without this benefit would have been 9.50x. The pro forma
ratio without this benefit would have been 10.47x.
(4) Includes net restructuring, business divestitures, litigation and impairment
benefit of $715.8 million ($417.6 million after tax). The ratio of earnings
to fixed charges without this benefit would have been 8.01x.
(5) Includes restructuring, net loss on business divestitures, impairment
charges and provision of loss on contract of $319.1 million ($231.5 million
after tax). The ratio of earnings to fixed charges without these charges
would have been 7.80x.
(6) Includes restructuring, net loss on business divestitures and impairment
charges of $369.3 million ($333.9 million after tax). The ratio of earnings
to fixed charges without these charges would have been 7.25x.
(7) Includes merger, integration and impairment charge of $32.5 million and
$46.0 million gain on the MoneyGram disposition together totaling
$13.5 million gain ($8.3 million after tax). The ratio of earnings to fixed
charges without these items would have been 7.10x.
(8) Pro forma ratios give pro forma effect to the sale of the notes and
repayment of outstanding commercial paper and proportionate repayment of
long-term debt with the estimated net proceeds from this offering as of the
beginning of the periods.
The computation of the ratio of earnings to fixed charges is based on applicable
amounts for us and our consolidated subsidiaries. For purposes of computing the
ratio of earnings to fixed charges, fixed charges consist of interest on debt,
amortization of deferred financing costs and a portion of rentals determined to
be representative of interest. Earnings consist of income before income taxes
plus fixed charges.
S-8
CAPITALIZATION
The following table sets forth our capitalization at September 30, 2001 and as
adjusted to give effect to the sale of the notes and repayment of outstanding
commercial paper with the estimated net proceeds of the offering before
deducting expenses (other than underwriting discounts). There has been no
material change in our capitalization since September 30, 2001.
September 30, 2001
----------------------
Actual As Adjusted
-------- -----------
(in millions)
Cash and cash equivalents................................... $ 774.5 $ 774.5
======== ========
Short-term borrowings and current portion of long-term
debt...................................................... 1,187.1 195.0
Long-term debt:
4 7/8% Convertible Notes due 2005......................... 50.0 50.0
2% Senior Convertible Contingent Debt Securities
(CODES(SM)) due 2008.................................... 534.5 534.5
4.70% Senior Notes due 2006............................... -- 447.1
5.625% Senior Notes due 2011.............................. -- 545.0
Other long-term debt...................................... 872.0 872.0
-------- --------
Total long-term debt.................................... 1,456.5 2,448.6
-------- --------
Total debt.................................................. 2,643.6 2,643.6
Total stockholders' equity.................................. 3,412.1 3,412.1
-------- --------
Total capitalization.................................... $6,055.7 $6,055.7
======== ========
As of October 22, 2001, there were 381,503,180 shares of our common stock issued
and outstanding.
S-9
SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial data set forth below have been derived from
our historical consolidated financial statements incorporated by reference in
this prospectus supplement. Results for the nine months ended September 30, 2001
are not necessarily indicative of the results that may be expected for the
entire year.
Nine Months Ended
September 30, Year Ended December 31,
----------------------- -------------------------------------
2001 2000 2000 1999 1998
--------- --------- --------- --------- ---------
(unaudited)
(in millions, except per share amounts)
Income statement data:
Revenues...................... $ 4,652.5 $ 4,197.4 $ 5,705.2 $ 5,479.9(1) $ 5,047.1
Expenses...................... 3,847.6(2) 3,222.0(2) 4,396.9(2) 3,654.5(2) 4,335.2(2)
--------- --------- --------- --------- ---------
Income before cumulative
effect of a change in
accounting principle and
income taxes................ 804.9 975.4 1,308.3 1,825.4 711.9
Income taxes.................. 218.1 285.7 378.7 625.7 246.2
--------- --------- --------- --------- ---------
Cumulative effect of a change
in accounting principle, net
of tax benefit.............. (2.7) -- -- -- --
--------- --------- --------- --------- ---------
Net income.................... $ 584.1 $ 689.7 $ 929.6 $ 1,199.7 $ 465.7
========= ========= ========= ========= =========
Depreciation and
amortization................ $ 475.2 $ 437.4 $ 588.8 $ 617.8 $ 591.1
Per share data:
Earnings per share--basic..... $ 1.49(2) $ 1.68(2) $ 2.28(2) $ 2.81(2) $ 1.05(2)
Earnings per share--diluted... 1.46(2) 1.65(2) 2.25(2) 2.76(2) 1.04(2)
Cash dividends per share...... 0.06 0.06 0.08 0.08 0.08
Balance sheet data (at period-
end):
Total assets.................. $20,574.3 $16,369.0 $17,295.1 $17,004.8 $16,587.0
Settlement assets........... 12,434.6 9,224.7 9,816.6 9,585.6 9,758.0
Total liabilities............. 17,162.2 12,878.0 13,567.4 13,097.1 12,831.1
Settlement obligations...... 12,235.5 9,259.3 9,773.2 9,694.6 9,617.0
Borrowings.................. 2,059.1 1,821.9 1,780.0 1,528.1 1,521.7
Convertible debt............ 584.5 50.0 50.0 50.0 50.0
Total stockholders' equity.... 3,412.1 3,491.0 3,727.7 3,907.7 3,755.9
------------
(1) Includes a $19.8 million gain recognized upon the merger exchange of
Excite@Home stock for iMall stock in which we held an 11% ownership
interest.
(2) Includes restructuring, business divestiture, litigation, provision for loss
on contract and impairment items: a net charge of $180.2 million pre-tax
($116.2 million after tax, or $0.29 loss per share) for the nine months
ended September 30, 2001; a net benefit of $100.6 million pre-tax
($64.2 million after tax, or $0.15 benefit per share) for the nine months
ended September 30, 2000; a net benefit of $71.3 million pre-tax
($46.0 million after tax, or $0.11 benefit per share) for 2000; a net
benefit of $715.8 million pre-tax ($417.6 million after tax, or $0.96
benefit per share, $0.99 benefit per share including the iMall gain
discussed above) for 1999; a net charge of $319.1 million pre-tax,
($231.5 million after tax, or $0.52 loss per share) for 1998 (including a
provision for termination of a card processing agreement).
S-10
DIRECTORS AND EXECUTIVE OFFICERS
The table below lists each of our directors and executive officers. The business
address of each such person is First Data Corporation, 6200 South Quebec Street,
Greenwood Village, Colorado, 80111.
Name Position
---- --------
Directors
Henry C. Duques Chairman of the Board and Chief Executive
Officer of First Data; Chairman of the Board
of eONE Global, LLC, a majority-owned
subsidiary of First Data ("eONE")
Charles T. Fote Director, President and Chief Operating
Officer of First Data
Courtney F. Jones Director
Robert J. Levenson Director
James D. Robinson III Director; Director of eONE
Charles T. Russell Director; Director of eONE
Bernard L. Schwartz Director
Joan E. Spero Director
Garen K. Staglin Director; President and Chief Executive
Officer of eONE
Arthur F. Weinbach Director
Executive Officers
Henry C. Duques Chairman of the Board and Chief Executive
Officer
Eula L. Adams Senior Executive Vice President
Guy A. Battista Executive Vice President
Charles T. Fote President, Chief Operating Officer and
Director
Kimberly S. Patmore Executive Vice President and Chief Financial
Officer
Pamela H. Patsley Senior Executive Vice President
Michael T. Whealy Executive Vice President, Secretary, General
Counsel and Chief Administrative Officer
S-11
DESCRIPTION OF THE NOTES
The following description of the particular terms of the notes supplements the
description of the general terms and provisions of the "debt securities" and
"senior debt securities" set forth in the accompanying prospectus, to which
reference is made. When we refer to "we," "us" or "our" under the heading
"Description of the Notes," we refer only to First Data Corporation and not to
its subsidiaries.
General
The 4.70% Senior Notes due 2006 (the "2006 notes") will mature on November 1,
2006, and the 5.625% Senior Notes due 2011 (the "2011 notes") will mature on
November 1, 2011. The notes will be issued in book-entry form only in minimum
denominations of $1,000 increased in multiples of $1,000. Interest on the notes
will accrue from November 8, 2001 at the respective rates per annum shown on the
cover of this prospectus supplement and will be payable semi-annually on May 1
and November 1, commencing May 1, 2002, to the persons in whose names the notes
are registered at the close of business on the preceding April 15 or
October 15, as the case may be.
The notes will be issued under an indenture dated as of March 26, 1993 (referred
to as the "senior indenture" in the accompanying prospectus), between us and
Wells Fargo Bank Minnesota, National Association, as trustee, as supplemented
from time to time. The notes will be our "senior debt securities" (as that term
is used in the accompanying prospectus), will be our unsecured obligations and
will rank on a parity with our other unsecured and unsubordinated indebtedness
(as indebtedness of First Data Corporation, the notes will be effectively
subordinated to all indebtedness and liabilities of our subsidiaries).
Issuance of Additional Notes
We may, without the consent of the holders, increase the principal amount of
either series of notes by issuing additional notes of such series in the future
on the same terms and conditions, except for any differences in the issue price
and interest accrued prior to the issue date of the additional notes, and with
the same CUSIP number as the notes of such series offered hereby. The notes of
either series offered by this prospectus supplement and any additional notes of
such series would rank equally and ratably and would be treated as a single
series for all purposes under the indenture.
Optional Redemption
The notes will be redeemable, as a whole or in part, at our option, at any time
or from time to time, on at least 30 days, but not more than 60 days, prior
notice to holders of the notes given in accordance with the provisions described
under "--Notices" below, at a redemption price equal to the greater of:
- 100% of the principal amount of the notes to be redeemed; or
- the sum of the present values of the Remaining Scheduled Payments, as defined
below, discounted to the date of redemption, on a semi-annual basis, assuming
a 360-day year consisting of twelve 30-day months, at the Treasury Rate, as
defined below, plus 20 basis points in the case of the 2006 notes and 25 basis
points in the case of the 2011 notes;
plus, in either case, accrued interest to the date of redemption which has not
been paid.
S-12
"Treasury Rate" means, with respect to any redemption date for the notes:
- the yield, under the heading which represents the average for the immediately
preceding week, appearing in the most recently published statistical release
designated "H.15(519)" or any successor publication which is published weekly
by the Board of Governors of the Federal Reserve System and which establishes
yields on actively traded United States Treasury securities adjusted to
constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Comparable Treasury Issue; provided that if no
maturity is within three months before or after the maturity date for the
notes, yields for the two published maturities most closely corresponding to
the Comparable Treasury Issue will be determined and the Treasury Rate will be
interpolated or extrapolated from those yields on a straight line basis
rounding to the nearest month; or
- if that release, or any successor release, is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for that redemption date.
The Treasury Rate will be calculated on the third business day preceding the
redemption date.
"Comparable Treasury Issue" means the United States Treasury security selected
by an Independent Investment Banker as having a maturity comparable to the
remaining term of the notes to be redeemed that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of such notes.
"Independent Investment Banker" means one of the Reference Treasury Dealers, to
be appointed by us.
"Comparable Treasury Price" means, with respect to any redemption date for the
notes:
- the average of four Reference Treasury Dealer Quotations for that redemption
date, after excluding the highest and lowest of such Reference Treasury Dealer
Quotations; or
- if the trustee obtains fewer than four Reference Treasury Dealer Quotations,
the average of all quotations obtained by the trustee.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
trustee, of the bid and asked prices of the Comparable Treasury Issue, expressed
in each case as a percentage of its principal amount, quoted in writing to the
trustee by such Reference Treasury Dealer at 3:30 p.m., New York City time, on
the third business day preceding such redemption date.
"Reference Treasury Dealer" means each of Bear, Stearns & Co. Inc., J.P. Morgan
Securities Inc. and two other treasury dealers selected by us, and their
respective successors; provided, however, that if any of the foregoing shall
cease to be a primary U.S. Government securities dealer, which we refer to as a
"Primary Treasury Dealer," we will substitute therefor another nationally
recognized investment banking firm that is a Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to each note to be redeemed,
the remaining scheduled payments of the principal thereof and interest thereon
that would be due after the related redemption date but for such redemption;
provided, however, that, if such redemption date is not an interest payment date
with respect to such note, the amount of the next succeeding scheduled interest
payment thereon will be deemed to be reduced by the amount of interest accrued
thereon to such redemption date.
S-13
On and after the redemption date, interest will cease to accrue on the notes or
any portion thereof called for redemption, unless we default in the payment of
the redemption price and accrued interest. On or before the redemption date, we
will deposit with a paying agent, or the trustee, money sufficient to pay the
redemption price of and accrued interest on the notes to be redeemed on such
date. If less than all of the notes are to be redeemed, the notes to be redeemed
shall be selected by the trustee by such method as the trustee shall deem fair
and appropriate.
Sinking Fund
The notes will not be entitled to any sinking fund.
Defeasance
The notes are subject to defeasance under the conditions described in the
accompanying prospectus under "Description of Debt Securities--Discharge, Legal
Defeasance and Covenant Defeasance" on page 14 and in the indenture.
Book-Entry; Delivery and Form
The notes will be issued in the form of one or more fully registered global
notes, which we refer to as the "Global Notes," which will be deposited with, or
on behalf of, The Depository Trust Company, New York, New York, which we refer
to as 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, Societe Anonyme, which we refer to as
"Clearstream, Luxembourg," or Euroclear Bank S.A./N.V., as operator of the
Euroclear System, which we refer to as "Euroclear," if they are participants in
such systems, or indirectly through organizations which are participants in such
systems. Clearstream, Luxembourg and Euroclear will hold interests on behalf of
their participants through customers' securities accounts in Clearstream,
Luxembourg'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, Luxembourg and The Chase Manhattan
Bank will act as depositary for Euroclear, which we refer to in such capacities
as the "U.S. Depositaries." Except as set forth 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 us 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 Securities Exchange Act of 1934. 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 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's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
S-14
Clearstream, Luxembourg advises that it is incorporated under the laws of
Luxembourg as a bank. Clearstream, Luxembourg holds securities for its
customers, which we refer to as "Clearstream, Luxembourg Customers," and
facilitates the clearance and settlement of securities transactions between
Clearstream, Luxembourg Customers through electronic book-entry transfers
between their accounts. Clearstream, Luxembourg provides to Clearstream,
Luxembourg Customers, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream, Luxembourg interfaces with
domestic securities markets in over 30 countries through established depository
and custodial relationships. As a bank, Clearstream, Luxembourg is subject to
regulation by the Luxembourg Commission for the Supervision of the Financial
Sector, also known as the Commission de Surveillance du Secteur Financier.
Clearstream, Luxembourg Customers are recognized financial institutions around
the world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. Clearstream,
Luxembourg Customers in the United States are limited to securities brokers and
dealers and banks. Indirect access to Clearstream, Luxembourg 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,
Luxembourg Customer.
Distributions with respect to the notes held through Clearstream, Luxembourg
will be credited to cash accounts of Clearstream, Luxembourg Customers in
accordance with its rules and procedures, to the extent received by the U.S.
Depositary for Clearstream, Luxembourg.
Euroclear advises that it was created in 1968 to hold securities for its
participants, which we refer to as "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./N.V., which
we refer to as the "Euroclear Operator," under contract with Euroclear Clearance
Systems, S.C., a Belgian cooperative corporation, which we refer to as 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, which
we refer to collectively as, the "Terms and Conditions." The Terms and
Conditions govern transfers of securities and cash within Euroclear, withdrawals
of securities and cash from Euroclear, and receipts of payments with respect to
securities in Euroclear. All securities in Euroclear are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts. 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.
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.
S-15
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 that 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 Euroclear Participants credited with such
interests in securities on the Euroclear Operator's records, all Euroclear
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 interest 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 us
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
Securities Exchange Act of 1934, and a successor clearing system is not
appointed by us within 90 days after receiving such notice from DTC or upon
becoming aware that DTC is no longer so registered, we 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 our paying and transfer agent in
Luxembourg, Chase Manhattan 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, Luxembourg, 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, Luxembourg and
within Euroclear and between Clearstream, Luxembourg and Euroclear in accordance
with procedures established for these purposes by Clearstream, Luxembourg 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, Luxembourg and Euroclear
and DTC may be effected in accordance with procedures established for this
purpose by Clearstream, Luxembourg, Euroclear and DTC.
A further description of the Depositary's procedures with respect to the Global
Notes is set forth in the accompanying prospectus under "Description of Debt
Securities--Book-Entry Debt Securities" beginning on page 17.
S-16
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 rules and will be settled in immediately
available funds using the Depositary's Same-Day Funds Settlement System.
Secondary market trading between Clearstream, Luxembourg Customers and/or
Euroclear Participants will occur in the ordinary way in accordance with the
applicable rules and operating procedures of Clearstream, Luxembourg 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,
Luxembourg 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, in 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, Luxembourg 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, Luxembourg 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, Luxembourg Customers or
Euroclear Participants on such business day. Cash received in Clearstream,
Luxembourg or Euroclear as a result of sales of interests in the notes by or
through a Clearstream, Luxembourg 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, Luxembourg or Euroclear cash
account only as of the business day following settlement in the Depositary.
Although the Depositary, Clearstream, Luxembourg and Euroclear have agreed to
the foregoing procedures in order to facilitate transfers of interests in the
notes among participants of the Depositary, Clearstream, Luxembourg 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.
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, 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 will 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.
S-17
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
The following is a summary of certain United States federal income and estate
tax considerations relating to the purchase, ownership and disposition of the
notes, but does not purport to be a complete analysis of all the potential tax
considerations relating thereto. This summary is based upon the Internal Revenue
Code of 1986 as amended (the "Code") and regulations, rulings and decisions
thereunder now in effect (or, in the case of certain United States Treasury
Regulations, now in proposed form), all of which are subject to change, possibly
on a retroactive basis. This summary deals only with holders that will hold the
notes as "capital assets" (generally, property held for investment) and does not
address tax considerations applicable to investors that may be subject to
special tax rules, including financial institutions, tax-exempt organizations,
insurance companies, dealers in securities or currencies, traders in securities
that elect to use a mark-to-market method of accounting for their securities
holdings, persons that will hold the notes as a position in a hedging
transaction, "straddle" or "conversion transaction" for tax purposes, regulated
investment companies, real estate investment trusts, or persons that have a
"functional currency" other than the U.S. dollar. If a partnership holds the
notes, the tax treatment of a partner will generally depend upon the status of
the partner and the activities of the partnership. If you are a partner of a
partnership holding our notes, you should consult your tax advisor. This summary
discusses the tax considerations applicable only to those purchasers who
purchase the notes in the initial offering at their "issue price" and does not
discuss the tax considerations applicable to other purchasers of the notes.
Moreover, this summary does not discuss alternative minimum tax consequences, if
any, or any state, local or foreign tax consequences to holders of the notes. We
have not sought any ruling from the Internal Revenue Service (the "IRS") with
respect to the statements made and the conclusions reached in the following
summary, and there can be no assurance that the IRS will agree with these
statements and conclusions. INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD
CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED
STATES FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL
AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN
TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
United States Holders
As used in this tax discussion, a "United States Holder" means the beneficial
owner of a note that for United States federal income tax purposes is:
(1) a citizen or resident of the United States,
(2) a corporation or partnership, including an entity treated as a corporation
or partnership for United States federal income tax purposes, created or
organized in or under the laws of the United States or any State thereof or
the District of Columbia, unless in the case of a partnership, Treasury
Regulations are adopted that provide otherwise,
(3) an estate the income of which is subject to United States federal income
taxation regardless of its source, or
(4) a trust (i) if it is subject to the primary supervision of a court within
the United States and one or more United States persons have the authority
to control all substantial decisions of the trust or (ii) that has a valid
election in effect under applicable United States Treasury Regulations to be
treated as a United States person.
S-18
PAYMENT OF INTEREST
Interest on a note generally will be includable in your income as ordinary
income at the time the interest is received or accrued, in accordance with your
method of accounting for United States federal income tax purposes.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange or redemption of a note, you generally will recognize
capital gain or loss equal to the difference between:
(1) the amount of cash proceeds and the fair market value of any property
received on the sale, exchange or redemption (except to the extent this
amount is attributable to accrued interest income, which is taxable as
ordinary income), and
(2) your adjusted tax basis in the note.
Your adjusted tax basis in a note generally will equal the amount you paid for
the note, less any principal payments received by you. The gain or loss will be
long-term capital gain or loss if you held the note for more than one year.
Long-term capital gains of individuals, estates and trusts are generally taxed
at a maximum rate of 20%. The deductibility of capital losses is subject to
certain limitations.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to certain
non-corporate United States Holders with respect to payments of principal and
interest on a note and to the proceeds of the sale of a note, and a backup
withholding tax also may apply to these payments. If you are such a United
States Holder, you generally will be subject to backup withholding unless you
provide to us or our paying agent a correct taxpayer identification number and
certain other information, certified under penalties of perjury, or you
otherwise establish an exemption.
Any amounts withheld from a payment under the backup withholding rules may be
allowed as a credit against your United States federal income tax liability and
may entitle you to a refund, provided that the required information is furnished
to the IRS.
Non-United States Holders
As used in this tax discussion, a "non-United States Holder" means any
beneficial owner of a note that is not a United States Holder. The rules
governing the United States federal income and estate taxation of a non-United
States Holder are complex, and no attempt will be made herein to provide more
than a summary of those rules. Special rules may apply to a non-United States
Holder that is a controlled foreign corporation, passive foreign investment
company or foreign personal holding company and therefore subject to special
treatment under the Code. NON-UNITED STATES HOLDERS SHOULD CONSULT WITH THEIR
OWN TAX ADVISORS TO DETERMINE THE EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN
TAX LAWS WITH REGARD TO AN INVESTMENT IN THE NOTES, INCLUDING ANY REPORTING
REQUIREMENTS.
PAYMENT OF INTEREST
Generally, payments of interest on a note will qualify for the "portfolio
interest" exemption and, therefore, will not be subject to United States federal
income tax or withholding tax,
S-19
provided that this interest income is not effectively connected with a United
States trade or business conducted by you and provided that you:
(1) do not actually or constructively own 10% or more of the combined voting
power of all classes of our stock entitled to vote,
(2) are not, for United States federal income tax purposes, a controlled foreign
corporation related to us through stock ownership,
(3) are not a bank receiving interest on a loan entered into in the ordinary
course of your business within the meaning of Section 881(c)(3)(A) of the
Code, and
(4) you appropriately certify as to your foreign status.
You can generally meet the certification requirement by providing a properly
executed Form W-8BEN or appropriate substitute form to us, or our paying agent.
If you hold the notes through a financial institution or other agent acting on
your behalf, you may be required to provide appropriate certifications to the
agent. Your agent will then generally be required to provide appropriate
certifications to us or our paying agent, either directly or through other
intermediaries. Special rules apply to foreign partnerships, estates and trusts,
and in certain circumstances certifications as to the foreign status of
partners, trust owners or beneficiaries may have to be provided to us or our
paying agent. In addition, special rules apply to qualified intermediaries that
enter into withholding agreements with the IRS, and such intermediaries
generally are not required to forward any certification forms received from
Non-U.S. Holders.
Except to the extent that an applicable treaty otherwise provides, a non-United
States Holder generally will be taxed in the same manner as a United States
Holder with respect to interest if the interest income is effectively connected
with a United States trade or business of the non-United States Holder.
Effectively connected interest received by a corporate non-United States Holder
may also, under certain circumstances, be subject to an additional "branch
profits tax" at a 30% rate (or, if applicable, a lower treaty rate). Even though
this effectively connected interest is subject to income tax, and may be subject
to the branch profits tax, it is not subject to withholding tax (unless derived
through a partnership) if the non-United States Holder delivers IRS Form W-8ECI
(or successor form) annually to us or our agent.
Interest income of a non-United States Holder that is not effectively connected
with a United States trade or business and that does not qualify for the
portfolio interest exemption described above will generally be subject to a
withholding tax at a 30% rate (or, if applicable, a lower treaty rate).
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
You will generally not be subject to United States federal income tax or
withholding tax on any gain realized on the sale, exchange, redemption or other
disposition of a note unless:
(1) the gain is effectively connected with your conduct of a United States trade
or business,
(2) you are an individual who has been present in the United States for a period
or periods aggregating 183 days or more during the taxable year of the
disposition, and certain other requirements are met, or
(3) you are subject to tax pursuant to the provisions of the Code applicable to
certain United States expatriates.
S-20
CERTAIN U.S. FEDERAL ESTATE TAX CONSIDERATIONS FOR NON-UNITED STATES HOLDERS
A note beneficially owned by an individual who is not a citizen or resident of
the United States at the time of death will generally not be includable in the
decedent's gross estate for United States federal estate tax purposes, provided
that the beneficial owner did not at the time of death actually or
constructively own 10% or more of the combined voting power of all classes of
our stock entitled to vote, and provided that, at the time of the holder's
death, payments with respect to that note would not have been effectively
connected with the holder's conduct of a trade or business within the United
States.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
United States information reporting requirements and backup withholding tax
generally will not apply to payments of interest and principal on a note to a
non-United States Holder if the statement described in "Non-United States
Holders--Payment of Interest" is duly provided by the holder or the holder
otherwise establishes an exemption, provided that we do not have actual
knowledge that the holder is a United States person.
Information reporting requirements and backup withholding tax generally will not
apply to any payment of the proceeds of the sale of a note effected outside the
United States by a foreign office of a "broker" (as defined in applicable United
States Treasury Regulations). However, if the broker:
(1) is a United States person,
(2) derives 50% or more of its gross income from all sources for certain periods
from the conduct of a United States trade or business,
(3) is a controlled foreign corporation as to the United States, or
(4) is a foreign partnership in which one or more United States persons, in the
aggregate, own more than 50% of the income or capital interests in the
partnership or is a foreign partnership that is engaged in a trade or
business in the United States,
payment of the proceeds will be subject to information reporting requirements
unless the broker has documentary evidence in its records that the beneficial
owner is a non-United States Holder and certain other conditions are met, or the
beneficial owner otherwise establishes an exemption.
Payment of the proceeds of any sale of a note to or through the United States
office of a foreign or U.S. broker is subject to information reporting and
backup withholding requirements, unless the beneficial owner of the note
provides the statement described in "Non-United States Holders--Payment of
Interest" or otherwise establishes an exemption and the broker does not have
actual knowledge that the payee is a United States person or that the exemption
conditions are not satisfied.
Any amounts withheld from a payment to a non-United States Holder under the
backup withholding rules generally will be allowed as a credit against the
non-United States Holder's United States federal income tax liability and may
entitle the non-United States Holder to a refund, provided that the required
information is provided to the IRS.
THE FEDERAL TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION
ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION.
HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES
TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE
TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
S-21
UNDERWRITING
Under the terms and conditions set forth in the terms agreement applicable to
each series of notes, which is dated the date of this prospectus supplement and
which incorporates by reference the underwriting agreement basic provisions
dated the date of this prospectus supplement (collectively, the "underwriting
agreement"), we have agreed to sell to each of the underwriters named below,
severally, and each of the underwriters has severally agreed to purchase, the
principal amount of each series of notes set forth opposite its name below:
Principal Principal
Amount of Amount of
Underwriter 2006 Notes 2011 Notes
----------- ------------- -------------
Bear, Stearns & Co. Inc..................................... $130,500,000 $159,500,000
J.P. Morgan Securities Inc.................................. 130,500,000 159,500,000
Banc One Capital Markets, Inc............................... 81,000,000 99,000,000
Salomon Smith Barney Inc.................................... 81,000,000 99,000,000
Goldman, Sachs & Co......................................... 4,500,000 5,500,000
Lehman Brothers Inc......................................... 4,500,000 5,500,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................... 4,500,000 5,500,000
Morgan Stanley & Co. Incorporated........................... 4,500,000 5,500,000
SunTrust Capital Markets, Inc............................... 4,500,000 5,500,000
First Union Securities, Inc................................. 4,500,000 5,500,000
------------ ------------
Total............................................... $450,000,000 $550,000,000
============ ============
Under the terms and conditions of the underwriting agreement, if the
underwriters take any of the notes of a series, then the underwriters are
obligated to take and pay for all of the notes of that series.
Each series of notes is a new issue of securities with no established trading
market. The underwriters have advised us that they intend to make a market for
each series of notes, but they have no obligation to do so and may discontinue
market making at any time without providing any notice. No assurance can be
given as to the liquidity of any trading market for the notes.
The underwriters initially propose to offer part of each series of notes
directly to the public at the offering price for that series described on the
cover page of this prospectus supplement and part to certain dealers at a price
that represents a concession not in excess of .275% of the principal amount of
the 2006 notes and .350% of the principal amount of the 2011 notes. Any
underwriter may allow, and any such dealer may reallow, a concession not in
excess of .250% of the principal amount of the 2006 notes and .250% of the
principal amount of the 2011 notes to certain other dealers. After the initial
offering of the notes, the underwriters may from time to time vary the offering
prices and other selling terms.
We have agreed to indemnify the underwriters against certain civil liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribute to payments which the underwriters may be required to make in respect
of any such liabilities.
In connection with the offering of each series of notes, the underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
that series of notes. Specifically, the underwriters may overallot in connection
with the offering of each series of notes, creating a syndicate short position.
In addition, the underwriters may bid for, and purchase, notes in the open
market to cover syndicate short positions or to stabilize the price of each
series of notes. Finally, the underwriting syndicate may reclaim selling
concessions
S-22
allowed for distributing the notes in the offerings of the notes, if the
syndicate repurchases previously distributed notes in syndicate covering
transactions, stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market prices of the notes above independent
market levels. The underwriters are not required to engage in any of these
activities, and may end any of them at any time.
The notes are offered for sale in those jurisdictions in the United States,
Europe and Asia where it is legal to make such offers.
The underwriters have represented and agreed that (1) they have not taken any
action in any jurisdiction that would permit a public offering of the notes, and
will not possess or distribute this prospectus supplement and the accompanying
prospectus or any other offering material in any other jurisdiction where action
for that purpose is required and (2) they will comply with all relevant laws and
regulations in each jurisdiction in which they (A) purchase, offer, sell or
deliver notes or (B) have in their possession or distribute the prospectus
supplement and prospectus or any other offering material.
The underwriters have agreed that they have not offered or sold, and 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 unless an exemption from the registration
requirements of the Securities and Exchange Law is available and they are in
compliance with the other relevant laws of Japan.
The underwriters have represented and agreed that (1) they have not offered or
sold and before the date six months after the date of issue of the notes will
not offer or sell any 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 purpose 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; (2) they have complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by them in relation to the notes in, from or otherwise
involving the United Kingdom; and (3) they have only issued or passed on and
will only issue or pass on in the United Kingdom any document received by them
in connection with the issue of the notes to a person who is of a kind described
in Article 11 (3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.
Although application will be made to list the notes on the Luxembourg Stock
Exchange, a listing may not be obtained.
Purchasers of the notes may be required to pay stamp taxes and other charges in
accordance with the laws and practices of the country of purchase in addition to
the issue price set forth on the cover page hereof.
It is expected that delivery of the notes will be made against payment therefor
on or about November 8, 2001, which is the fifth business day following the date
of this prospectus supplement (such settlement cycle being referred to as
"T+5"). Purchasers should note that the ability to settle secondary market
trades of the notes effected on the date of pricing and the succeeding business
days may be affected by the T+5 settlement.
Expenses associated with this offering, to be paid by us, are estimated to be
$717,000.
In the ordinary course of their respective business, certain of the underwriters
and their affiliates have engaged, and may in the future engage, in commercial
banking, investment banking, financial advisory and/or other transactions with
us and our affiliates. Chase
S-23
Manhattan Bank Luxembourg S.A., which will serve as Luxembourg Listing Agent,
Paying Agent and Transfer Agent for the notes, is an affiliate of J.P. Morgan
Securities Inc., one of the underwriters.
First Union Securities, Inc. is an indirect, wholly-owned subsidiary of Wachovia
Corporation. Wachovia Corporation conducts its investment banking, institutional
and capital markets businesses through its various bank, broker-dealer and
nonbank subsidiaries (including First Union Securities, Inc.) under the trade
name of Wachovia Securities. Any references to Wachovia Securities in this
prospectus supplement, however, do not include Wachovia Corporation and its
sister affiliate of First Union Securities, Inc. which may or may not be
participating as a selling dealer in the distribution of the notes.
LEGAL MATTERS
The validity of the notes will be passed upon for us by Stanley J. Andersen,
Esq., our Counsel, and Sidley Austin Brown & Wood, Chicago, Illinois, and for
the underwriters by Simpson Thacher & Bartlett, New York, New York.
Mr. Andersen is an officer and full-time employee of First Data Corporation and
the beneficial owner of our common stock.
EXPERTS
Our consolidated financial statements and schedule included in our Annual Report
on Form 10-K for the year ended December 31, 2000 have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon the report of Ernst &
Young LLP pertaining to such financial statements given on the authority of such
firm as experts in accounting and auditing.
With respect to our unaudited condensed consolidated interim financial
information for the three-month periods ended March 31, 2001 and 2000, the three
and six-month periods ended June 30, 2001 and 2000, and the three and nine-month
periods ended September 30, 2001 and 2000, incorporated by reference in this
prospectus supplement, Ernst & Young LLP have reported that they have applied
limited procedures in accordance with professional standards for a review of
such information. However, their separate reports, included in our Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2001, June 30, 2001 and
September 30, 2001, and incorporated herein by reference, state that they did
not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their reports on such
information should be restricted considering the limited nature of the review
procedures applied. The independent auditors are not subject to the liability
provisions of Section 11 of the Securities Act of 1933, as amended (the "Act"),
for their reports on the unaudited interim financial information because those
reports are not "reports" or "parts" of the Registration Statement prepared or
certified by the auditors within the meaning of Sections 7 and 11 of the Act.
S-24
GENERAL INFORMATION
Listing
We intend to apply to list the notes on the Luxembourg Stock Exchange. In
connection with the listing application, our certificate of incorporation and
bylaws and a legal notice relating to the issuance of the notes will be
deposited with the Chief Registrar of the District Court of Luxembourg, where
copies thereof may be obtained upon request. Copies of the above documents,
together with this prospectus supplement, the accompanying prospectus and the
indenture and our current Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q, as well as all such future reports, so long as any of the notes are
outstanding, will be made available for inspection at the main office of Chase
Manhattan Bank Luxembourg S.A. in Luxembourg. Chase Manhattan Bank Luxembourg
S.A. will act as intermediary for us and the holders of the notes. In addition,
copies of the above reports may be obtained free of charge at such office. The
underwriting agreements will be available for inspection at the offices of Chase
Manhattan Bank Luxembourg S.A.
Material Change
Other than as disclosed or contemplated herein or in the documents incorporated
herein by reference, there has been no material adverse change in our financial
position since September 30, 2001.
Litigation
Other than as disclosed or contemplated herein or in the documents incorporated
herein by reference, neither we nor any of our subsidiaries is involved in
litigation, arbitration or administrative proceedings relating to claims or
amounts that are material in the context of the issue of the notes, and we are
not aware of any such litigation, arbitration or administrative proceedings,
pending or threatened.
Authorization
Resolutions relating to the issue and sale of the notes were adopted by a duly
authorized committee of our Board of Directors on February 20, 2001 and by a
duly authorized officer on November 1, 2001.
Governing Law
The notes and the indenture are governed by, and shall be construed in
accordance with, the laws of the State of New York, United States of America,
applicable to agreements made and to be performed wholly within such
jurisdiction.
Identification Numbers
The notes have been accepted for clearing through DTC, Euroclear and
Clearstream, Luxembourg. The 2006 notes have been assigned Common
Code 013856885, International Security Identification Number (ISIN)
No. US 319963 AE 45 and CUSIP No. 319963 AE 4. The 2011 notes have been assigned
Common Code 013858047, International Security Identification Number (ISIN)
No. US 319963 AF 10 and CUSIP No. 319963 AF 1.
S-25
Prospectus
$1,500,000,000
First Data Corporation
SECURITIES
---------
First Data Corporation may offer from time to time, at prices and on terms to be
determined at or prior to the time of sale, the following securities with an
aggregate initial public offering price not to exceed $1,500,000,000 (or the
equivalent thereof if any securities are denominated in one or more foreign
currencies or foreign currency units):
- unsecured debt securities, consisting of debentures, notes and/or other
unsecured evidences of indebtedness, in one or more series;
- shares of our preferred stock, in one or more series; or
- shares of our common stock.
We will describe the specific terms of these securities, together with the terms
of the offering, the initial public offering price and our net proceeds from the
sale thereof, in supplements to this Prospectus. You should read both this
Prospectus and the applicable Prospectus Supplement before you invest.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
----------------
We may sell these securities directly to purchasers, through agents we may
designate from time to time or to or through underwriters. If any agents or
underwriters are involved in the sale of securities, we will specify the names
of those agents or underwriters and any applicable commission or discount in the
applicable Prospectus Supplement. Our net proceeds from the sale of securities
will be the initial public offering price of those securities less the
applicable discount, in the case of an offering through an underwriter, or the
purchase price of those securities less the applicable commission, in the case
of an offering through an agent, and, in each case, less other expenses payable
by us in connection with the issuance and distribution of those securities.
The date of this Prospectus is March 27, 2001.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission, or SEC. You may read
and copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the regional offices of
the SEC located at 7 World Trade Center, 13th Floor, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, or you may obtain copies of any document we file at prescribed rates by
writing to the Public Reference Section of the SEC in Washington, D.C. Please
call the SEC at 1-800-SEC-0330 for further information on the operation of the
public reference room. Our SEC filings are also available to the public over the
Internet on the SEC's web site at http://www.sec.gov. In addition, our common
stock is listed on the New York Stock Exchange, and you may inspect copies of
any documents we file with the SEC at the offices of The New York Stock
Exchange, Inc., 20 Broad Street, New York, NY 10005.
The SEC allows us to "incorporate by reference" the information we file with
it, which means that we can disclose important information to you by referring
you to previously filed documents. The information incorporated by reference is
considered to be part of this Prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the following documents we filed with the SEC (file
number 001-11073) and any future filings that we make with the SEC under
Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until
we or any agents or underwriters sell all of the securities:
- Our Annual Report on Form 10-K for the year ended December 31, 2000;
- Our Current Reports on Form 8-K dated November 3, 2000, January 18, 2001,
February 21, 2001 and February 22, 2001; and
- The description of our common stock contained in our Registration
Statement on Form 8-A dated March 24, 1992, together with any and all
amendments and reports filed for the purpose of updating that description.
Any statement contained in this Prospectus or in a document incorporated by
reference in this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained in this
Prospectus, the accompanying Prospectus Supplement or any subsequently filed
document which is incorporated by reference in this Prospectus modifies or
supersedes that statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
This Prospectus is part of, and does not contain all information set forth
in, a Registration Statement on Form S-3 that we have filed with the SEC under
the Securities Act of 1933, as amended, with respect to the securities we are
offering. We refer you to the Registration Statement, including the exhibits
thereto, for further information regarding our company and the securities
offered by this Prospectus.
You may request a copy of any of the documents listed above (other than
exhibits to those documents that are not specifically incorporated by reference
therein), at no cost, by writing or telephoning us at:
First Data Corporation
5660 New Northside Drive
Atlanta, Georgia 30328
Attention: Investor Relations
(770) 857-7118
2
FIRST DATA CORPORATION
We operate in four business segments: payment instruments, merchant
services, card issuer services and emerging payments. Payment instruments
includes Western Union, Integrated Payment Systems and Orlandi Valuta Companies
and is the leading provider of nonbank domestic and international money transfer
and payment services to consumers and commercial entities, including money
transfer, official check and money order services. Merchant services is
primarily comprised of First Data Merchant Services, TeleCheck and First Data
Financial Services. This segment provides merchants with credit and debit card
transaction processing services, including authorization, transaction capture,
settlement, Internet-based transaction processing, check verification and
guarantee services. Card issuer services encompasses domestic and international
card processing services. This segment provides a comprehensive line of
processing and related services to financial institutions issuing credit and
debit cards and to issuers of oil and private label credit cards, including
information-based products for enhanced decision making and marketing. First
Data Solutions is also included in the card issuer services segment, providing
consumer and business solutions in the areas of risk and fraud management and
information verification associated with granting of credit, debit and customer
service collecting. The emerging payments segment, created in the third quarter
of 2000, consists of eOne Global, a leader in identifying, commercializing and
operating emerging payment technologies that support Internet and wireless
payment products. The remainder of our business units are grouped in the "All
Other and Corporate" category, which includes TeleServices, Call Interactive,
International Banking Technologies and Corporate operations.
Our principal executive offices are located at 5660 New Northside Drive,
Suite 1400, Atlanta, Georgia 30328-5800, telephone (770) 857-0001.
USE OF PROCEEDS
Unless we indicate otherwise in the applicable Prospectus Supplement, we
expect to use our net proceeds from the sale of the securities for general
corporate purposes. We will describe in the applicable Prospectus Supplement any
specific allocation of the proceeds to a particular purpose that we have made at
the date of that Prospectus Supplement.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratios of earnings to fixed charges for
the periods indicated. We have not issued any preferred stock to date;
therefore, the ratios of earnings to combined fixed charges and preferred stock
dividends are the same as the ratios of earnings to fixed charges set forth
below.
Year Ended December 31,
----------------------------------------------------
1996(1) 1997(2) 1998(3) 1999(4) 2000(5)
-------- -------- -------- -------- --------
Ratio of earnings to fixed charges.................. 7.19x 5.11x 5.70x 12.54x 9.99x
------------
(1) Includes merger, integration and impairment charge of $32.5 million and
$46.0 million gain on the MoneyGram disposition together totalling
$13.5 million gain ($8.3 million after tax). The ratio of earnings to fixed
charges without these items would have been 7.10x.
(2) Includes restructuring, net loss on business divestitures and impairment
charges of $369.3 million ($333.9 million after tax). The ratio of earnings
to fixed charges without these charges would have been 7.25x.
3
(3) Includes restructuring, net loss on business divestitures and impairment
charges of $319.1 million ($231.5 million after tax). The ratio of earnings
to fixed charges without these charges would have been 7.80x.
(4) Includes net restructuring, business divestitures, litigation and impairment
benefit of $715.8 million ($417.6 million after tax). The ratio of earnings
to fixed charges without these benefits would have been 8.01x.
(5) Includes net restructuring, business divestitures, litigation and impairment
benefit of $71.3 million ($46.0 million after tax). The ratio of earnings to
fixed charges without these benefits would have been 9.50x.
The computation of the ratio of earnings to fixed charges is based on
applicable amounts for us and our consolidated subsidiaries. "Earnings" consist
of income before income taxes plus fixed charges. "Fixed charges" consist of
interest on debt, amortization of deferred financing costs and a portion of
rentals that we determine to be representative of interest.
4
DESCRIPTION OF DEBT SECURITIES
We will issue the debt securities, which may be senior debt securities
and/or subordinated debt securities, in one or more series. Senior debt
securities will be issued under an indenture dated as of March 26, 1993, as
supplemented from time to time, between us and Wells Fargo Bank Minnesota,
National Association, as trustee, which we will refer to as the senior
indenture, and subordinated debt securities will be issued under an indenture
dated as of April 1, 1996, as supplemented from time to time, between us and The
Bank of New York, as trustee, which we will refer to as the subordinated
indenture. Whenever it is used in this Prospectus, the term "trustee" shall mean
either Wells Fargo Bank Minnesota, National Association or The Bank of New York,
as appropriate, for senior debt securities or subordinated debt securities. In
addition, we will refer to the senior indenture and the subordinated indenture
individually as an "indenture" and collectively as the "indentures."
We have summarized selected provisions of the indentures below. However,
because these summaries are not complete, they are subject to and are qualified
in their entirety by reference to the indentures, copies of which we have
incorporated by reference as exhibits to the Registration Statement of which
this Prospectus is a part. Capitalized terms used below have the meanings
specified in the applicable indenture. Unless otherwise noted, section
references below are to both indentures.
General
The debt securities will be our unsecured obligations. The indebtedness
represented by the senior debt securities will rank on a parity with our other
unsecured and unsubordinated indebtedness. The indebtedness represented by the
subordinated debt securities will be subordinated in right of payment to the
prior payment in full of our senior indebtedness as described under
"Subordination" below. We may issue the debt securities in one or more series.
We will describe in a supplement to this Prospectus the particular terms of any
debt securities being offered, any modifications of or additions to the general
terms of the debt securities and any applicable Federal income tax
considerations that may be applicable in the case of offered debt securities.
Accordingly, you should read both the Prospectus Supplement relating to the
particular debt securities being offered and the general description of debt
securities set forth in this Prospectus before investing.
We primarily conduct our operations through our subsidiaries. Our rights and
the rights of our creditors, including the holders of the debt securities, to
participate in the distribution of assets of any of our subsidiaries upon the
liquidation or reorganization of that subsidiary or otherwise will be subject to
the prior claims of the subsidiary's creditors, except to the extent that we may
be a creditor with recognized claims against the subsidiary. As a result, the
debt securities will be effectively subordinated to existing and future
liabilities of our subsidiaries.
The applicable Prospectus Supplement will describe specific terms relating
to the series of debt securities being offered. These terms will include some or
all of the following:
- the title and ranking of the series of debt securities;
- the aggregate principal amount and authorized denominations (if other than
$1,000 and integral multiples of $1,000);
- the initial public offering price;
- the original issue and stated maturity date or dates;
- the interest rate or rates (which may be fixed or floating), if any, the
method by which the rate or rates will be determined and the interest
payment and regular record dates;
5
- the manner and place of payment of principal and interest, if any;
- if other than U.S. dollars, the currency or currencies in which payment of
the initial public offering price and/or principal and interest, if any,
may be made;
- whether (and if so, when and at what price) we may be obligated to
repurchase the debt securities;
- whether (and if so, when and at what price) the debt securities can be
redeemed by us or the holder;
- under what circumstances, if any, we will pay additional amounts on the
debt securities to non-U.S. holders in respect of taxes;
- whether the debt securities will be issued in registered or bearer form
(with or without coupons) and, if issued in the form of one or more global
securities, the depositary for such securities;
- where the debt securities can be exchanged or transferred;
- whether the debt securities may be issued as original issue discount
securities, and if so, the amount of discount and the portion of the
principal amount payable upon declaration of acceleration of the maturity
thereof;
- whether (and if so, when and at what rate) the debt securities will be
convertible into shares of our common stock;
- whether there will be a sinking fund;
- provisions, if any, for the defeasance of the debt securities;
- any addition to, or modification or deletion of, any events of default or
covenants contained in the indenture relating to the debt securities; and
- any other terms of the series. (Section 3.01)
We may issue the debt securities in one or more series, as authorized from
time to time by our Board of Directors, any committee of our Board or any duly
authorized officer. The indentures do not limit the aggregate principal amount
of debt securities that we may issue thereunder. (Section 3.01)
If we issue original issue discount securities, we will also describe in the
applicable Prospectus Supplement the Federal income tax consequences and other
special considerations applicable to those securities.
The indentures do not limit our ability to incur additional indebtedness,
nor do they afford holders of debt securities protection in the event of a
highly leveraged or similar transaction involving our company. However, the
senior indenture provides that neither we nor any of our subsidiaries may
subject certain of our property or assets to any mortgage or other encumbrance
unless the senior debt securities are secured equally and ratably with or prior
to that other secured indebtedness. See "Certain Covenants of Senior Debt
Securities" below. Reference is made to the applicable Prospectus Supplement for
information with respect to any additions to, or modifications or deletions of,
the events of default or covenants described below.
We are not required to issue all of the debt securities of a series at the
same time, and debt securities of the same series may vary as to interest rate,
maturity and other provisions. Unless otherwise provided, a series may be
reopened for issuance of additional debt securities of that series.
(Section 3.01)
6
Denominations, Exchange, Registration and Transfer
Unless otherwise specified in the applicable Prospectus Supplement, the debt
securities of any series will be issued only as registered securities, in global
or certificated form and in denominations of $1,000 and any integral multiple
thereof, and will be payable only in U.S. dollars. (Section 3.02) For more
information regarding debt securities issued in global form, see "Book-Entry
Debt Securities" below. Unless otherwise indicated in the applicable Prospectus
Supplement, any debt securities we issue in bearer form will have coupons
attached. (Section 2.01)
Registered debt securities of any series will be exchangeable for other
registered debt securities of the same series in the same aggregate principal
amount and having the same stated maturity date and other terms and conditions.
If so provided in the applicable Prospectus Supplement, to the extent permitted
by law, debt securities of any series issued in bearer form which by their terms
are registrable as to principal and interest may be exchanged, at the option of
the holders, for registered debt securities of the same series in the same
aggregate principal amount and having the same stated maturity date and other
terms and conditions, upon surrender of those securities at the corporate trust
office of the applicable trustee or at any other office or agency designated by
us for the purpose of making any such exchanges. Except in certain limited
circumstances, debt securities issued in bearer form with coupons surrendered
for exchange must be surrendered with all unmatured coupons and any matured
coupons in default attached thereto. (Section 3.05)
The exchange of debt securities issued in bearer form for registered debt
securities will be subject to the provisions of U.S. income tax laws and
regulations applicable to the debt securities in effect at the time of the
exchange. (Section 3.05)
Unless otherwise specified in the applicable Prospectus Supplement, in no
event may registered debt securities, including registered debt securities
received upon exchange of debt securities issued in bearer form, be exchanged
for debt securities issued in bearer form. (Section 3.05)
Upon surrender for registration of transfer of any registered debt security
of any series at the office or agency maintained for that purpose, we will
execute, and the applicable trustee will authenticate and deliver, in the name
of the designated transferee, one or more new registered debt securities of the
same series in the same aggregate principal amount of authorized denominations
and having the same stated maturity date and other terms and conditions. We may
not impose any service charge, other than any required tax or other governmental
charge, on the transfer or exchange of debt securities. (Section 3.05)
We are not required (1) to register, transfer or exchange debt securities of
any series during the period from the opening of business 15 days before the day
a notice of redemption relating to debt securities of that series selected for
redemption is sent to the close of business on the day that notice is sent, or
(2) to register, transfer or exchange any debt security so selected for
redemption, except for the unredeemed portion of any debt security being
redeemed in part. (Section 3.05)
Certain Covenants of Senior Debt Securities
The following covenants apply to the senior debt securities:
LIMITATION ON MORTGAGES AND LIENS. Neither we nor any of our subsidiaries
may create or assume, except in favor of us or one of our wholly owned
subsidiaries, any mortgage, pledge, lien or encumbrance upon any Principal
Facility (as defined below under "Certain Definitions"), any stock of any
subsidiary or indebtedness of any subsidiary to us or to any other subsidiary
7
without equally and ratably securing any senior debt securities then
outstanding. However, this limitation does not apply to certain permitted
encumbrances as described in the senior indenture, including:
- purchase money mortgages entered into within specified time limits, and
liens extending, renewing or refunding those purchase money mortgages;
- liens existing on acquired property;
- certain tax, materialmen's, mechanics' and judgment liens, liens arising
by operation of law and other similar liens;
- liens in connection with certain government contracts;
- certain mortgages, pledges, liens or encumbrances in favor of any state or
local government or governmental agency in connection with certain
tax-exempt financings;
- liens to secure the cost of construction or improvement of any property
entered into within specified time limits; and
- mortgages, pledges, liens and encumbrances not otherwise permitted if the
sum of the indebtedness secured by those mortgages, pledges, liens and
encumbrances, plus the aggregate sales price of property involved in sale
and lease back transactions referred to in the first bullet point under
"-- Limitation Upon Sale and Leaseback Transactions" below, does not
exceed the greater of $50 million or 10% of our Consolidated Stockholders'
Equity (as defined below under "Certain Definitions"). (Section 12.07 of
the senior indenture)
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. Neither we nor any of our
subsidiaries may sell any Principal Facility owned on the date of the senior
indenture with the intention of taking back a lease of that facility for a
period of more than 36 months, unless
- the aggregate sales price of property involved in sale and leaseback
transactions not otherwise permitted, plus all indebtedness secured by
mortgages, pledges, liens and encumbrances referred to in the last bullet
point above under "-- Limitation Upon Mortgages and Liens" does not exceed
the greater of $50 million or 10% of our Consolidated Stockholders'
Equity; or
- the net proceeds of the sale or the fair market value of the Principal
Facility, whichever is greater (which may be conclusively determined by
our Board of Directors), are applied within 120 days to the optional
retirement of senior debt securities then outstanding or to the optional
retirement of our other Funded Debt (as defined below under "Certain
Definitions") ranking on a parity with the senior debt securities.
(Section 12.08 of the senior indenture)
In addition, unless otherwise specified in the applicable Prospectus
Supplement, the senior debt securities of each series will contain the following
covenant:
LIMITATION ON INDEBTEDNESS OF RESTRICTED SUBSIDIARIES. Our Restricted
Subsidiaries (as defined below under "Certain Definitions") may not create,
incur, assume or guarantee any Indebtedness (as defined below under "Certain
Definitions") unless immediately thereafter the aggregate amount of all
Indebtedness of Restricted Subsidiaries (excluding Indebtedness owed to us or
another Restricted Subsidiary, including any renewal or replacement of that
Indebtedness), plus the discounted present value of all net rentals payable
under leases referred to above under "-- Limitation Upon Sale and Leaseback
Transactions" would not exceed 15% of Consolidated Stockholders' Equity. For
purposes of this covenant, (1) Indebtedness does not include indebtedness
incurred in connection with overdraft or similar
8
facilities related to settlement, clearing and related activities by a
Restricted Subsidiary in the ordinary course of business consistent with past
practice if the indebtedness does not remain outstanding for more than 72 hours
and (2) indebtedness of a person existing at the time the person became a
Restricted Subsidiary or was merged with or into our company, a Restricted
Subsidiary or other entity, or assumed by us or our subsidiary in connection
with the acquisition of all or a portion of the business of that person, will
not be deemed to be Indebtedness of a Restricted Subsidiary or Indebtedness
created, incurred, assumed or guaranteed by a Restricted Subsidiary.
Events of Default
"Event of Default" means, with respect to any series of debt securities, any
of the following events:
- failure to pay interest on the debt securities of that series, which
failure continues for a period of 30 days after payment is due;
- failure to make any principal or premium payment on the debt securities of
that series when due;
- failure to make any sinking fund payment when and as due by the terms of
the debt security of that series;
- failure to perform or comply with any other covenant or warranty in the
applicable indenture with respect to the debt securities of that series
for a period of 60 days after notice to us of such failure by (1) the
applicable trustee or (2) the holders of at least 25% in principal amount
of the outstanding debt securities of that series;
- in the case of the senior indenture, default under any of Indebtedness
pursuant to which we or our subsidiaries have borrowed or guaranteed an
aggregate principal amount of $10 million or more and which default
(1) constitutes a failure to make any principal or interest payment when
due after giving effect to any applicable grace period or (2) accelerates
the payment of such debt and such acceleration is not rescinded or
annulled, or such debt is not discharged, within 15 days after notice to
us of such default by (1) the applicable trustee or (2) the holders of at
least 25% in principal amount of the outstanding senior debt securities of
that series;
- in the case of the subordinated indenture, default under any of
Indebtedness pursuant to which we or our subsidiaries have borrowed or
guaranteed an aggregate principal amount of $10 million or more and which
default (1) constitutes a failure to make any principal or interest
payment when due after giving effect to any applicable grace period or
(2) accelerates the payment of such debt and such acceleration is not
rescinded or annulled, or such debt is not discharged, within 15 days
after notice to us of such default by (1) the applicable trustee or
(2) the holders of at least 25% in principal amount of the outstanding
subordinated debt securities of that series;
- in the case of the senior indenture, the entry against us or our
subsidiaries of one or more final judgments, decrees or orders by a court
for the payment of money aggregating in excess of $10 million, which
judgment, decree or order is not paid, discharged or stayed for any period
of 45 consecutive days after the amount thereof is due;
- certain events of bankruptcy, insolvency or reorganization of our company;
and
- any other event of default provided with respect to debt securities of
that series pursuant to the applicable indenture. (Section 5.01)
9
In general, the applicable trustee is required to give notice of a default
with respect to a series of debt securities to the holders of that series.
However, the applicable trustee may withhold notice of any default (except a
default in payment of principal or interest on the debt securities) if the
trustee determines it is in the interest of the holders of that series of debt
securities to do so. (Section 6.02)
An event of default for a particular series of debt securities does not
necessarily constitute an event of default for other series of debt securities.
If there is a continuing event of default, then the applicable trustee or
the holders of at least 25% in principal amount of the series of debt securities
affected by the event of default may require us to repay the principal amount
(or, if the debt securities of that series are original issue discount
securities, the portion of the principal amount as may be specified in the terms
of those debt securities) on the affected series immediately. Upon payment of
the principal or other specified amount in the currency in which the debt
securities of that series are denominated (except as otherwise provided in the
applicable indenture or Prospectus Supplement), our obligations in respect of
the payment of principal of the debt securities of that series will terminate.
(Section 5.02)
Subject to the provisions of each indenture relating to the duties of the
applicable trustee, in the case of a continuing event of default, the applicable
trustee may refuse to exercise any of its rights or powers under such indenture
at the request, order or direction of any of the holders of debt securities of
the affected series unless it first receives reasonable indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance with
such request. (Section 6.03) Subject to this limitation, the holders of a
majority in principal amount of the outstanding debt securities of the affected
series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the applicable trustee under the
applicable indenture or exercising any trust or power conferred on the
applicable trustee with respect to the debt securities of that series.
(Section 5.12)
At any time before a judgment or decree for payment of money due has been
obtained by the applicable trustee as provided in the applicable indenture
following a declaration of acceleration with respect to debt securities of any
series, the holders of a majority in principal amount of the outstanding debt
securities of that series may rescind and annul such declaration and its
consequences if:
- we have paid or deposited with the applicable trustee a sum in the
currency in which debt securities of that series are denominated (except
as otherwise provided in the applicable indenture or Prospectus
Supplement) sufficient to pay (1) all overdue installments of interest or
other payments with respect to coupons on all debt securities of that
series, (2) the principal of, premium, if any, and interest on any debt
securities of that series which have become due otherwise than by such
declaration of acceleration, (3) to the extent that such payment is
lawful, interest on overdue installments of interest or other payments
with respect to coupons on each debt security of that series at a rate
established for such series, and (4) all sums paid or advanced by the
applicable trustee and the reasonable compensation, expenses,
disbursements and advances of the applicable trustee, its agents and
counsel; and
- all events of default with respect to debt securities of that series,
other than the nonpayment of principal which has become due solely by such
declaration of acceleration, have been cured or waived as provided in the
applicable indenture.
No such rescission and waiver will affect any subsequent default or impair
any right consequent thereon. (Section 5.02)
10
We are required to provide the applicable trustee with an officers'
certificate each fiscal year stating whether or not we have complied with all
conditions and covenants under the applicable indenture. (Section 12.02)
Merger or Consolidation
We may not consolidate with or merge into any other corporation or convey,
transfer or lease our properties and assets substantially as an entirety to any
person, unless:
- the surviving or successor corporation is a domestic corporation and
expressly assumes, by supplemental indenture, all of our obligations under
the indentures;
- immediately after completion of the transaction, no event of default, and
no event which, after notice or lapse of time, or both, would become an
event of default, has occurred and is continuing;
- in the case of the senior indenture, if, as a result of the transaction,
our properties or assets would become subject to a mortgage, pledge, lien,
security interest or other encumbrance covered by the provisions described
above under "Certain Covenants of Senior Debt Securities -- Limitation on
Mortgages and Liens," we or the surviving or successor corporation takes
such steps as are necessary to effectively secure all senior debt
securities equally and ratably with (or prior to) all indebtedness secured
by such mortgage, pledge, lien, security interest or other encumbrance;
and
- we deliver to the applicable trustee an officers' certificate and an
opinion of counsel each stating that the transaction and the supplemental
indenture comply with the applicable indenture provisions and that all
conditions precedent in the applicable indenture relating to such
transaction have been complied with. (Section 10.01)
Modification or Waiver
We and the applicable trustee may, at any time and from time to time, amend
the applicable indenture without the consent of the holders of outstanding debt
securities for any of the following purposes:
- to effect the assumption of our obligations under the applicable indenture
by a successor corporation;
- to impose additional covenants and events of default for the benefit of
the holders of all or any series of debt securities (and if such covenants
or events of default are to be for the benefit of less than all series,
stating that such covenants and events of default are expressly being
included solely for the benefit of such series);
- to add or change any of the provisions of the applicable indenture
relating to the issuance or exchange of debt securities in registered or
bearer form, but only if such action does not adversely affect the
interests of the holders of outstanding debt securities of any series or
related coupons in any material respect;
- to change or eliminate any of the provisions of the applicable indenture,
but only if the change or elimination becomes effective when there is no
outstanding debt security of any series or related coupon which is
entitled to the benefit of such provision and as to which such
modification would apply;
- to secure the debt securities;
- to supplement any of the provisions of the applicable indenture to permit
or facilitate the defeasance and discharge of any series of debt
securities, but only if such action does
11
not adversely affect the interests of the holders of outstanding debt
securities of any series or related coupons in any material respect;
- to establish the form or terms of debt securities and coupons, if any, of
any series as permitted by the applicable indenture;
- to evidence and provide for the acceptance of appointment by a successor
trustee and to add to or change any of the provisions of the applicable
indenture to facilitate the administration of the trusts by more than one
trustee; and
- to correct any mistakes or defects in the applicable indenture, but only
if such action does not adversely affect the interests of the holders of
outstanding debt securities of any series or related coupons in any
material respect. (Section 11.01)
In addition, we and the applicable trustee may modify the applicable
indenture with the consent of the holders of not less than a majority in
principal amount of each series of outstanding debt securities affected by such
modification (voting as separate classes) to add, change or eliminate any
provision of, or to modify the rights of holders of debt securities under, the
applicable indenture. But we may not take any of the following actions without
the consent of each holder of outstanding debt securities affected thereby:
- change the stated maturity of the principal of, or any installment of
interest on, any debt security or related coupon, reduce the principal
amount thereof, the interest thereon or any premium payable upon
redemption thereof, change the currency or currencies in which the
principal, premium or interest is denominated or payable, reduce the
amount of principal payable upon acceleration of maturity of an original
issue discount security or reduce the amount of, or postpone the date
fixed for, any sinking fund payment;
- adversely affect the right of a holder to require us to repay or
repurchase any debt security or to convert any debt security into shares
of our common stock, reduce the amount of, or impair the right to
institute suit for the enforcement of, any payment on any debt security
following maturity thereof, or limit our obligation to maintain a paying
agency outside the United States for payments on debt securities issued in
bearer form;
- reduce the percentage in principal amount of outstanding debt securities
of any series required for consent to any supplemental indenture or to any
waiver of defaults or compliance with certain provisions of the applicable
indenture;
- modify any provision of the applicable indenture relating to modifications
and waivers of defaults and covenants, except to increase any such
percentage or to provide that certain other provisions cannot be modified
or waived without the consent of each holder of outstanding debt
securities affected thereby; or
- in the case of the subordinated indenture, modify any of the provisions
relating to the subordination of the subordinated debt securities in a
manner adverse to the holders thereof. (Section 11.02)
In addition, we may not make any modifications under the subordination
provisions of the subordinated indenture that would adversely affect the rights
of any holder of Senior Indebtedness (as defined below under "Certain
Definitions") without the consent of that holder. (Section 11.08 of the
subordinated indenture)
12
A modification with respect to one or more particular series of debt
securities and related coupons, if any, will not affect the rights under the
applicable indenture of the holders of debt securities of any other series and
related coupons, if any. (Section 11.02)
The holders of a majority in principal amount of the outstanding debt
securities of any series may, on behalf of the holders of all debt securities of
that series, waive any past default under the applicable indenture with respect
to that series, except a default (1) in the payment of principal of, premium, if
any, or interest on, or any sinking fund installment or similar obligation with
respect to, any debt security or (2) in respect of a covenant or provision
which, as described above, cannot be modified or amended without the consent of
each holder of outstanding debt securities of the affected series. Upon any such
waiver, the default will cease to exist and any event of default arising
therefrom will be deemed to have been cured for every purpose of the debt
securities of that series under the applicable indenture, but the waiver will
not extend to any subsequent or other default or impair any right consequent
thereon. (Section 5.13)
We may omit in any particular instance to comply with certain covenants set
forth in the indentures or the debt securities of any series (except as
otherwise provided in the applicable Prospectus Supplement and, in the case of
the senior indenture, the covenants described above under "Certain Covenants of
the Senior Debt Securities") if, before the time for such compliance, the
holders of at least a majority in principal amount of the outstanding debt
securities of that series either waive compliance in that instance or generally
waive compliance with those provisions, but the waiver may not extend to or
affect any term, provision or condition except to the extent expressly so
waived, and, until the waiver becomes effective, our obligations and the duties
of the applicable trustee in respect of any such provision will remain in full
force and effect. (Section 12.09)
Subordination
The subordinated debt securities will be subordinated in right of payment to
all of our Senior Indebtedness to the extent provided in the subordinated
indenture. This means that in the event of dissolution, winding up, liquidation
or reorganization of our company, we must first pay in full all of our
outstanding Senior Indebtedness, including senior debt securities, before we
make any payment in respect of principal of, premium, if any, and interest on
the subordinated debt securities, but our obligation to make such payment on the
subordinated debt securities will not otherwise be affected. (Sections 16.01 and
16.02 of the subordinated indenture) In addition, at any time when there is a
default in the payment of any principal, premium, if any, sinking fund or
interest on any Senior Indebtedness when due, we may not make any payment on
account of principal, premium, if any, sinking fund or interest on the
subordinated debt securities. (Section 16.03 of the subordinated indenture) If,
notwithstanding this restriction, the applicable trustee under the subordinated
indenture or the holders of any subordinated debt securities receive from us any
payment described in the preceding sentence before all of our Senior
Indebtedness is paid in full, that payment or distribution must be paid over to
the holders of Senior Indebtedness, or on their behalf for application to the
payment of Senior Indebtedness, remaining unpaid until all such Senior
Indebtedness is paid in full, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness. Subject to payment in
full of Senior Indebtedness, holders of the subordinated debt securities will be
subrogated to the rights of the holders of the Senior Indebtedness to the extent
of payments made to the holders of such Senior Indebtedness out of the
distributive share of the subordinated debt securities. (Section 16.02 of the
subordinated indenture)
By reason of such subordination, in the event of a distribution of assets
upon insolvency, certain of our general creditors may recover more, ratably,
than holders of the subordinated
13
debt securities. The subordinated indenture provides that the subordination
provisions do not apply to money and securities held in trusts pursuant to the
satisfaction and discharge and the legal defeasance provisions of the
subordinated indenture. (Sections 4.02 and 15.02 of the subordinated indenture)
If this Prospectus is being delivered in connection with the offering of a
series of subordinated debt securities, we will set forth in the applicable
Prospectus Supplement the approximate amount of our Senior Indebtedness
outstanding as of a recent date.
Discharge, Legal Defeasance and Covenant Defeasance
We may be discharged from all of our obligations with respect to the
outstanding debt securities of any series (except as otherwise provided in the
applicable indenture) when:
- either (1) all debt securities of that series and related coupons, if any,
have been delivered to the applicable trustee for cancellation, or
(2) all debt securities of that series and related coupons, if any, not
delivered to the applicable trustee for cancellation
- have become due and payable,
- will become due and payable at their stated maturity within one year,
or
- are to be called for redemption within one year under arrangements
satisfactory to the applicable trustee for the giving of notice by the
applicable trustee,
and we, in the case of clause (2), have irrevocably deposited or caused
to be deposited with the applicable trustee, in trust, an amount in the
currency in which the debt securities are denominated sufficient for
payment of all principal of, premium, if any, and interest on those debt
securities when due or to the date of deposit, as the case may be;
provided, however, in the event a petition for relief under any
applicable Federal or state bankruptcy, insolvency or other similar law
is filed with respect to our company within 91 days after the deposit and
the applicable trustee is required to return the deposited money to us,
our obligations under the applicable indenture with respect to those debt
securities will not be deemed terminated or discharged;
- we have paid or caused to be paid all other sums payable by us under the
applicable indenture;
- we have delivered to the applicable trustee an officers' certificate and
an opinion of counsel each stating that all conditions precedent relating
to the satisfaction and discharge of the applicable indenture with respect
to that series of debt securities have been complied with; and
- we have delivered to the applicable trustee an opinion of counsel or a
ruling of the Internal Revenue Service to the effect that holders of debt
securities of that series will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and discharge.
(Section 4.01)
If so provided, and except as otherwise specified in the applicable
Prospectus Supplement, the provisions of each indenture relating to defeasance
will apply to registered debt securities of any series which are denominated and
payable only in U.S. dollars. Defeasance provisions, if any, for debt securities
denominated in a foreign currency or currencies or issued in bearer form may be
specified in the applicable Prospectus Supplement. (Section 15.01)
We may elect (1) to be discharged from our obligations with respect to the
outstanding debt securities of any series (except as otherwise specified in the
applicable indenture) or (2) to be released from our obligation to comply with
the provisions of the indentures described
14
above under "Merger or Consolidation" and, in the case of the senior indenture,
the provisions described above under "Certain Covenants of Senior Debt
Securities" with respect to the outstanding debt securities of any series (and,
if so specified, any other obligation or restrictive covenant added for the
benefit of that series), in either case, if we satisfy each of the following
conditions:
- we deposit or cause to be deposited irrevocably with the applicable
trustee, in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the holders of debt securities of that series
money or the equivalent in securities of the government which issued the
currency in which the debt securities are denominated, or any combination
thereof, sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
delivered to the applicable trustee, for payment of all principal of,
premium, if any, and interest on the outstanding debt securities of that
series when due;
- such deposit does not cause the applicable trustee with respect to the
debt securities of that series to have a conflicting interest with respect
to the debt securities of any other series;
- such deposit will not result in a breach or violation of, or constitute a
default under, the applicable indenture or any other agreement or
instrument to which we are a party or by which we are bound;
- if the debt securities of that series are then listed on any national
securities exchange, we deliver to the applicable trustee an opinion of
counsel or a letter or other document from such exchange to the effect
that our exercise of either of the defeasance options described above, as
the case may be, would not cause those debt securities to be delisted;
- on the date of such deposit, there is no continuing event of default or
event (including such deposit) which, with notice or lapse of time or
both, would become an event of default with respect to the debt securities
of that series and, with respect to the option under clause (1) above
only, no event of default under the provisions of the indentures relating
to certain events of bankruptcy or insolvency or event which, with notice
or lapse of time or both, would become an event of default under such
bankruptcy or insolvency provisions shall have occurred and be continuing
on the 91st day after such date; and
- we deliver to the applicable trustee an opinion of counsel or a ruling of
the Internal Revenue Service to the effect that the holders of debt
securities of that series will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit, defeasance or
discharge.
Notwithstanding the foregoing, if we exercise our option under clause (2)
above and an event of default under the provisions of the indentures relating to
certain events of bankruptcy or insolvency or event which, with notice or lapse
of time or both, would become an event of default under such bankruptcy or
insolvency provisions shall have occurred and be continuing on the 91st day
after the date of such deposit, our obligation to comply with the provisions of
the indentures described above under "Merger or Consolidation" and, in the case
of the senior indenture, the provisions described above under "Certain Covenants
of Senior Debt Securities" with respect to those debt securities will be
reinstated. (Section 15.02)
15
Payment and Paying Agents
If we issue a series of debt securities only in registered form, we will
maintain in each place of payment for those debt securities an office or agency
where the debt securities may be presented or surrendered for payment or for
registration of transfer or exchange and where holders may serve us with notices
and demands in respect of the debt securities and the applicable indenture. If
debt securities of a series may be issued in bearer form, we will maintain the
following offices or agencies:
- in the Borough of Manhattan, the City and State of New York (or, in the
case of the senior indenture, in Minneapolis, Minnesota), where any
registered debt securities of that series may be presented or surrendered
for payment or for registration of transfer or exchange, where holders may
serve us with notices and demands in respect of the debt securities and
the applicable indenture and where debt securities of that series issued
in bearer form and related coupons may be presented or surrendered for
payment in the circumstances described in the next paragraph (and not
otherwise);
- subject to any applicable laws or regulations, in a place of payment for
that series of debt securities which is located outside the United States,
where the debt securities and related coupons may be presented and
surrendered for payment (including payment of any additional amounts on
the debt securities, if so provided); PROVIDED, HOWEVER, that if the debt
securities are listed on The Stock Exchange of the United Kingdom and the
Republic of Ireland, the Luxembourg Stock Exchange or any other stock
exchange located outside the United States and such stock exchange so
requires, we will maintain a paying agent for the debt securities in
London, Luxembourg or any other required city located outside the United
States, as the case may be, so long as the debt securities are listed on
such exchange, and
- subject to any laws or regulations applicable thereto, in a place of
payment for that series of debt securities located outside the United
States, where any registered debt securities of that series may be
surrendered for registration of transfer or exchange and where holders may
serve us with notices and demands in respect of the debt securities and
the applicable indenture.
We will give prompt written notice to the applicable trustee of the location,
and any change in the location, of such office or agency. If we fail to maintain
any required office or agency or fail to furnish the applicable trustee with the
address of such office or agency, presentations, surrenders, notices and demands
may be made or served at the corporate trust office of the applicable trustee
(in the case of registered debt securities) and at the principal London office
of the applicable trustee (in the case of debt securities in bearer form). We
have appointed the applicable trustee as our agent to receive all presentations,
surrenders, notices and demands. (Section 12.03)
We may not make any payment of principal of or premium or interest on debt
securities issued in bearer form at any office or agency in the United States,
by check mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States. However, if so provided in
the applicable Prospectus Supplement, we may make payment of principal of and
any premium and interest on debt securities of a series which are denominated
and payable in U.S. dollars at the office of our paying agent in the Borough of
Manhattan, the City and State of New York, or, in the case of the senior
indenture, in Minneapolis, Minnesota, but only if payment in U.S. dollars of the
full amount of such principal, premium, interest or additional amounts, as the
case may be, at all offices or agencies outside the United States maintained by
us in accordance with the applicable
16
indenture is illegal or effectively precluded by exchange controls or other
similar restrictions. (Section 12.03)
Book-Entry Debt Securities
We may issue the debt securities of a series in whole or in part in global
form that we will deposit with, or on behalf of, a depositary identified in the
applicable Prospectus Supplement. Global securities may be issued in either
registered or bearer form and in either temporary or permanent form. We will
make payments of principal of, and premium, if any, and interest on debt
securities represented by a global security to the applicable trustee and then
by the trustee to the depositary.
We anticipate that any global securities will be deposited with, or on
behalf of, The Depository Trust Company, New York, New York and will be
registered in the name of DTC's nominee, and that the following provisions will
apply to the depositary arrangements with respect to any global securities. We
will describe additional or differing terms of the depositary arrangements in
the Prospectus Supplement relating to a particular series of debt securities
issued in the form of global securities.
So long as DTC or its nominee is the registered owner of a global security,
DTC or its nominee, as the case may be, will be considered the sole holder of
the debt securities represented by the global security for all purposes under
the applicable indenture. Except as provided below, owners of beneficial
interests in a global security will not be entitled to have debt securities
represented by a global security registered in their names, will not receive or
be entitled to receive physical delivery of debt securities in certificated form
and will not be considered the owners or holders thereof under the applicable
indenture. The laws of some states require that certain purchasers of securities
take physical delivery of those securities in certificated form; accordingly,
these laws may limit the transferability of beneficial interests in a global
security.
If DTC is at any time unwilling or unable to continue as depositary, or
ceases to be a clearing agency registered under the Exchange Act, and we do not
appoint a successor depositary within 90 days, we will issue individual debt
securities in certificated form in exchange for the global securities. In
addition, we may at any time, in our sole discretion, determine not to have any
debt securities represented by one or more global securities. If we so
determine, we will issue individual debt securities in certificated form in
exchange for the relevant global securities. If registered debt securities of
any series are issued in the form of one or more global securities and if an
event of default with respect to that series of debt securities occurs and is
continuing, we will issue individual debt securities in certificated form in
exchange for the relevant global securities.
The following is based on information furnished by DTC:
DTC will act as securities depositary for debt securities represented by one
or more global securities. The debt securities will be issued as
fully-registered debt securities registered in the name of Cede & Co. (DTC's
partnership nominee) or another name as may be requested by an authorized
representative of DTC. One fully-registered global security will be issued for
each issue of debt securities, in the aggregate principal amount of the issue,
and will be deposited with DTC. If, however, the aggregate principal amount of
any issue exceeds the maximum principal amount permitted by DTC, one global
security will be issued with respect to the maximum principal amount and an
additional global security will be issued with respect to any remaining
principal amount of that issue.
17
DTC is a limited-purpose trust company organized under the New York Banking
Law; a "banking organization" within the meaning of the New York Banking Law; a
member of the Federal Reserve System; a "clearing corporation" within the
meaning of the New York Uniform Commercial Code; and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act.
DTC holds securities that its participants deposit with DTC. DTC also
facilitates the settlement among participants of securities transactions, such
as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations.
DTC is owned by a number of its direct participants and by the New York
Stock Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. Access to DTC's system is also available
to others such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a direct participant,
either directly or indirectly. The rules applicable to DTC and its participants
are on file with the SEC.
Purchases of debt securities represented by one or more global securities
under DTC's system must be made by or through direct participants, which will
receive a credit for the global securities on DTC's records. The ownership
interest of each beneficial owner of each global security is in turn recorded on
the direct and indirect participants' records. A beneficial owner will not
receive written confirmation from DTC of its purchase, but is expected to
receive a written confirmation providing details of such transaction, as well as
periodic statements of its holdings, from the direct or indirect participant
through which the beneficial owner entered into the transaction. Transfers of
ownership interests in global securities will be accomplished by entries made on
the books of participants acting on behalf of the beneficial owners. Beneficial
owners will not receive certificates representing their ownership interests in
global securities, except in the event that use of the book-entry system for one
or more global securities is discontinued.
To facilitate subsequent transfers, all global securities deposited by
participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. or another name as may be requested by an authorized representative
of DTC. The deposit of global securities with DTC and their registration in the
name of Cede & Co. (or such other name) effect no change in beneficial
ownership. DTC has no knowledge of the actual beneficial owners of the debt
securities; DTC records reflect only the identity of the direct participants to
whose accounts global securities are credited, which may or may not be the
beneficial owners. The participants remain responsible for keeping account of
their holdings on behalf of their customers.
Delivery of notices and other communications by DTC to direct participants,
by direct participants to indirect participants, and by direct participants and
indirect participants to beneficial owners are governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the global
securities. Under its usual procedures, DTC will mail an Omnibus Proxy to the
issuer as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those direct participants to whose
accounts the debt securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
18
Principal, premium, if any, and interest payments on the global securities
will be made to Cede & Co., or another nominee as may be requested by an
authorized representative of DTC. DTC's practice is to credit direct
participants' accounts, upon DTC's receipt of funds and corresponding detail
information from us or the paying agent, on the relevant payment date in
accordance with the direct participants' respective holdings shown on DTC's
records.
Payments by participants to beneficial owners are governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of the participant and not of DTC, the paying agent
or us, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of principal, premium, if any, and interest to
Cede & Co., or another nominee as may be requested by an authorized
representative of DTC, is our responsibility or the responsibility of the paying
agent, disbursement of those payments to direct participants is the
responsibility of DTC, and disbursement of those payments to the beneficial
owners is the responsibility of direct and indirect participants.
A beneficial owner must give notice to elect to have its global securities
purchased or tendered, through its participant, to the paying agent, and must
effect delivery of the global securities by causing the direct participant to
transfer the participant's interest in the global securities, on DTC's records,
to the paying agent. The requirement for physical delivery of global securities
in connection with a demand for purchase or a mandatory purchase will be deemed
satisfied when the ownership rights in the global securities are transferred by
direct participants on DTC's records.
DTC may discontinue providing its services as securities depositary with
respect to the debt securities at any time by giving reasonable notice to us or
the agents. If we do not appoint a successor securities depositary within
90 days, certificates representing debt securities will be printed and delivered
in exchange for the debt securities represented by the global securities held by
DTC.
In addition, if we decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary), certificates
representing debt securities will be printed and delivered in exchange for the
debt securities represented by the global securities held by DTC.
We have obtained the information in this section concerning DTC and DTC's
book-entry system from sources that we believe to be reliable, but we take no
responsibility for the accuracy thereof.
Neither we nor any underwriter or agent, applicable trustee, paying agent or
registrar of any debt securities will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in a global security, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Conversion Rights
We will describe in the applicable Prospectus Supplement the particular
terms and conditions, if any, on which debt securities may be convertible into
shares of our common stock. These terms will include the conversion price, the
conversion period, provisions as to whether conversion will be at our option or
the option of the holder, events requiring an adjustment of the conversion price
and provisions affecting conversion in the event of the redemption of the debt
securities.
19
The Trustees Under the Indentures
We maintain ordinary banking relationships and, from time to time, obtain
credit facilities and lines of credit with a number of banks, including the
trustees, Wells Fargo Bank Minnesota, National Association and The Bank of New
York.
Certain Definitions
We have summarized below certain defined terms as used in the applicable
indenture. We refer you to the applicable indenture for the full definition of
these terms.
"Consolidated Stockholders' Equity," at any time, means the total
stockholders' equity of our company and our consolidated subsidiaries,
determined on a consolidated basis in accordance with generally accepted
accounting principles, as of the end of our most recently completed fiscal
quarter for which financial information is then available. (Section 1.01 of the
senior indenture)
"Funded Debt" means any indebtedness for money borrowed, created, issued,
incurred, assumed or guaranteed which would, in accordance with generally
accepted accounting practice, be classified as long-term debt, but in any event
including all indebtedness for money borrowed, whether secured or unsecured,
maturing more than one year or extendible at the option of the obligor to a date
more than one year, after the date of determination thereof (excluding any
amount thereof included in current liabilities). (Section 1.01 of the senior
indenture)
"Indebtedness" means:
- any liability of any person (1) for borrowed money, (2) evidenced by a
bond, note, debenture or similar instrument (including purchase money
obligations, but excluding trade payables), (3) for the payment of money
relating to a lease that is required to be classified as a capitalized
lease obligation in accordance with generally accepted accounting
principles, or [(4) preferred or preference stock of our subsidiary held
by persons other than us or any of our other subsidiaries];
- any liability of others described in the preceding bullet point that the
person has guaranteed, that is recourse to such person or that is
otherwise its legal liability; and
- any amendment, supplement, modification, deferral, renewal, extension or
refunding of any liability of the types referred to the first two bullet
points above, except that "Indebtedness" does not include any liabilities
of the kind included opposite the caption "Liabilities relating to TRS
financial instruments sold" on our audited consolidated balance sheet.
(Section 1.01) [These liabilities are currently included opposite the
caption "Settlement Obligations" on our consolidated balance sheet.]
"Principal Facility" means the real property, fixtures, machinery and
equipment relating to any facility owned by us or any of our subsidiaries,
except any facility that, in the opinion of our board of directors, is not of
material importance to the our business. (Section 1.01 of the senior indenture)
"Restricted Subsidiary," at any time, means any of our subsidiaries which
has revenues, determined on a consolidated basis (with its subsidiaries) in
accordance with generally accepted accounting principles, equal to or exceeding
10% of our consolidated revenues for our most recently completed fiscal year for
which financial information is then available.
"Senior Indebtedness" means the principal of and premium, if any, and unpaid
interest on our Indebtedness for money borrowed (other than the subordinated
debt securities), whether
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outstanding on the date of the subordinated indenture or thereafter created,
incurred, assumed or guaranteed, unless the instrument creating or evidencing
the Indebtedness provides that such Indebtedness is not senior or prior in right
of payment to the subordinated debt securities or is PARI PASSU or subordinate
by its terms in right of payment to the subordinated debt securities, and
renewals, extensions and modifications of any such Indebtedness.
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DESCRIPTION OF CAPITAL STOCK
As of the date of this Prospectus, our authorized capital stock consists of
600,000,000 shares of common stock and 10,000,000 shares of preferred stock. As
of January 31, 2001, approximately 395,423,200 shares of common stock were
issued and outstanding. No shares of preferred stock are currently outstanding.
The following summary description of our capital stock does not purport to be
complete and is qualified in its entirety by reference to our Amended and
Restated Certificate of Incorporation, including the certificate of designation
relating to the particular class or series of preferred stock being offered, and
to Delaware corporate law. See "Where You Can Find More Information."
Common Stock
Each holder of common stock is entitled to one vote for each share held on
all matters submitted to a vote of the stockholders. Holders of common stock do
not have cumulative voting rights. Accordingly, holders of a majority of the
shares of common stock entitled to vote in any election of directors may elect
all of the directors standing for election. Holders of common stock are entitled
to receive ratably dividends, if any, as may be declared by our board of
directors out of funds legally available therefor, subject to any preferential
dividend rights of outstanding preferred stock and certain dividend limitations
contained in our outstanding senior promissory notes. Upon the liquidation,
dissolution or winding up of our company, holders of common stock are entitled
to receive ratably our net assets remaining after payment of all debts and other
liabilities, subject to the prior rights of any outstanding preferred stock.
Holders of common stock have no preemptive, subscription, redemption or
conversion rights. All outstanding shares of common stock are duly authorized,
validly issued, fully paid and nonassessable. The rights, preferences and
privileges of holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of preferred
stock which we may designate and issue in the future.
Preferred Stock
Under our Amended and Restated Certificate of Incorporation, we may issue,
in one or more classes or series, up to 10,000,000 shares of preferred stock.
The powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions of any such class or
series of preferred stock will be designated in resolutions adopted by our board
of directors or one of its committees. Holders of preferred stock will have no
preemptive rights. All shares of preferred stock, when issued, will be fully
paid and nonassessable.
We will describe in a supplement to this Prospectus the particular terms of
each class or series of preferred stock being offered, including:
- the designation of the preferred stock;
- the number of shares being offered and the initial offering price;
- the per share liquidation preference;
- the dividend rate or rates (or method of calculation thereof) and the
dividend periods and/or payment dates;
- the date from which dividends will accumulate, if applicable;
- the procedures for any auction and remarketing of the preferred stock;
- the provision of a sinking fund, if any;
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- whether the preferred stock will be redeemable (and if so, when and at
what price), at our option or the option of the holder;
- the securities exchange, if any, on which the preferred stock will be
listed;
- whether the preferred stock will be convertible into or exchangeable for
common stock (and if so, when and at what price) at our option or at the
option of the holder;
- whether the preferred stock will rank senior or junior to or on a parity
with any other class or series of preferred stock;
- the voting rights, if any, and any other specific terms, preferences,
rights, limitations or restrictions of the preferred stock; and
- a discussion of U.S. federal income tax considerations applicable to the
preferred stock.
Subject to our Amended and Restated Certificate of Incorporation and to any
limitations contained in any then outstanding class or series of preferred
stock, we may issue additional classes or series of preferred stock, at various
times, with powers, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions thereof, as our
board of directors or one of its committees determines, all without further
action of the stockholders, including holders of then outstanding preferred
stock.
Certain Provisions of our Amended and Restated Certificate of Incorporation and
By-laws
Certain provisions of our Amended and Restated Certificate of Incorporation
and By-laws summarized below may be deemed to have an anti-takeover effect and
may delay, defer or prevent a tender offer or takeover attempt that a
stockholder might consider in its best interest, including those attempts that
might result in a premium over the market price for the shares held by
stockholders.
Our Amended and Restated Certificate of Incorporation or By-laws provide
that:
- we will have three classes of directors serving staggered terms;
- directors can be removed from office only for cause and only by the
affirmative vote of the holders of a majority of the then outstanding
shares of common stock entitled to vote generally in an election of
directors;
- vacancies on our board of directors may be filled only by the remaining
directors and not by the stockholders; and
- our board of directors may adopt, amend or repeal our By-laws.
In addition, our By-laws specify an advance notice procedure for the
nomination by stockholders of candidates for election as directors and other
stockholder proposals to be considered at annual meetings of stockholders. In
general, we must receive notice from a stockholder of his or her intent to
nominate a director or raise business at an annual meeting not less than 60 nor
more than 90 days prior to the anniversary of the previous year's annual
meeting. The notice must contain certain information concerning the person to be
nominated or the matters to be brought before the meeting and the stockholder
submitting the proposal.
Our Amended and Restated Certificate of Incorporation also provides that any
action required or permitted to be taken by stockholders may be effected only at
an annual or special meeting of stockholders. Stockholder action by written
consent in lieu of a meeting is prohibited. The affirmative vote of the holders
of more than 80% of the voting power of our capital stock entitled to vote is
required to alter, amend or repeal, or adopt any provision inconsistent with,
this provision. In addition, special meetings of stockholders may be called
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only by the chairman of the board, chairman of the executive committee, our
president or secretary or any officer at the request in writing of our board of
directors.
Statutory Provisions
We have elected, pursuant to a provision of our Amended and Restated
Certificate of Incorporation, not to be governed by Section 203 of the Delaware
General Corporation Law. Section 203 prohibits certain transactions between a
Delaware corporation and an "interested stockholder," which is defined as a
person who, together with that person's affiliates and/or associates,
beneficially owns, directly or indirectly, 15% or more of the outstanding voting
shares of a Delaware corporation. This provision prohibits certain business
combinations (including mergers, consolidations, sales or other dispositions of
assets having an aggregate value in excess of 10% of the consolidated assets of
the corporation and certain transactions that would increase the interested
stockholder's proportionate share ownership in the corporation) between an
interested stockholder and a corporation for a period of three years after the
date the interested stockholder acquired its stock, unless:
- the business combination is approved by the corporation's board of
directors prior to the date the interested stockholder acquired its stock;
- the interested stockholder acquired at least 85% of the voting stock of
the corporation in the transaction in which it became an interested
stockholder; or
- the business combination is approved by a majority of the board of
directors and by the affirmative vote of two-thirds of the votes entitled
to be cast by disinterested stockholders at an annual or special meeting.
Transfer Agent and Registrar
Wells Fargo Bank Minnesota, National Association serves as the transfer
agent and registrar for our common stock.
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PLAN OF DISTRIBUTION
We may sell securities offered by this Prospectus in and/or outside the
United States:
- through underwriters or dealers;
- directly to a limited number of purchasers or to a single purchaser; or
- through agents.
We will describe in the applicable Prospectus Supplement the particular
terms of any offering of securities, including:
- the name or names of any underwriters or agents;
- the purchase price of the securities;
- our net proceeds from the sale;
- any underwriting discounts and other items constituting underwriters'
compensation;
- the initial public offering price; and
- any discounts or concessions allowed or reallowed or paid to dealers
We may change the initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers from time to time.
If we offer the securities through underwriters, the underwriters will
acquire the securities for their own account and may resell the securities from
time to time in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices determined at the time of
sale. We may offer the securities to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more underwriters. We will specify on the cover of the applicable Prospectus
Supplement the underwriter or underwriters with respect to a particular
underwritten offering of securities, or, if an underwriting syndicate is used,
the managing underwriter or underwriters. Unless we state otherwise, the
obligations of the underwriters to purchase the securities will be subject to
certain conditions, and the underwriters will be obligated to purchase all of
the securities if any are purchased.
If we offer the securities through dealers, and if so specified in the
applicable Prospectus Supplement, we will sell the securities to the dealers as
principals. The dealers may then resell the securities to the public at varying
prices determined by the dealers at the time of resale. We will list the names
of the dealers and describe the terms of the transaction in the applicable
Prospectus Supplement.
We may also sell the securities directly or through agents we designate from
time to time. We will name in the applicable Prospectus Supplement any agent
involved in the offer or sale of the securities in respect to which this
prospectus is delivered, and describe any commissions we will pay to the agent.
We may agree to indemnify any underwriters, dealers and agents against
certain civil liabilities, including liabilities under the Securities Act, or to
contribute with respect to payments which the underwriters, dealers or agents
may be required to make in respect thereof. Underwriters, dealers and agents may
be customers of, may engage in transactions with or perform services for, us in
the ordinary course of business.
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LEGAL MATTERS
Thomas A. Rossi, Esq., our Associate General Counsel, will issue an opinion
about the legality of securities offered pursuant to this Prospectus. Mr. Rossi
is a beneficial owner of our common stock.
EXPERTS
Our consolidated financial statements and schedule included in our Annual
Report on Form 10-K for the year ended December 31, 2000, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such financial statements
are, and audited financial statements to be included in subsequently filed
documents will be, incorporated herein in reliance upon the reports of Ernst &
Young LLP pertaining to such financial statements (to the extent covered by
consents filed with the Securities and Exchange Commission) given on the
authority of such firm as experts in accounting and auditing.
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PRINCIPAL OFFICE OF FIRST DATA CORPORATION
First Data Corporation
6200 South Quebec Street
Greenwood Village, Colorado 80111
TRUSTEE AND PRINCIPAL PAYING AGENT
Wells Fargo Bank Minnesota, National Association
Corporate Trust Services
Mail Code MAC N9303-110
Sixth and Marquette
Minneapolis, Minnesota 55479
LUXEMBOURG PAYING AGENT & TRANSFER AGENT
Chase Manhattan Bank Luxembourg S.A.
5 Rue Plaetis
L-2338 Luxembourg
LEGAL ADVISORS
TO FIRST DATA CORPORATION TO THE UNDERWRITERS
Sidley Austin Brown & Wood Simpson Thacher & Bartlett
Bank One Plaza 425 Lexington Avenue
10 S. Dearborn New York, New York 10017
Chicago, Illinois 60603
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
Suite 3300
370 17th Street
Denver, Colorado 80202-9971
LISTING AGENT
Chase Manhattan Bank Luxembourg S.A.
5 Rue Plaetis
L-2338 Luxembourg
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