<PAGE>
RULE NO. 424(b)(5)
REGISTRATION NO. 333-13195
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 9, 1997)
GENERAL ELECTRIC CAPITAL CORPORATION
500 SHARES--VARIABLE CUMULATIVE PREFERRED STOCK, SERIES AA
500 SHARES--VARIABLE CUMULATIVE PREFERRED STOCK, SERIES BB
500 SHARES--VARIABLE CUMULATIVE PREFERRED STOCK, SERIES CC
500 SHARES--VARIABLE CUMULATIVE PREFERRED STOCK, SERIES DD
(PAR VALUE $100 PER SHARE)
LIQUIDATION PREFERENCE $100,000 PER SHARE
----------------
General Electric Capital Corporation (the "Company") hereby offers for sale
500 shares of its preferred stock to be known as the Variable Cumulative
Preferred Stock Series AA (the "Series AA Preferred Shares"), 500 shares of
its preferred stock to be known as the Variable Cumulative Preferred Stock,
Series BB (the "Series BB Preferred Shares"), 500 shares of its preferred
stock to be known as the Variable Cumulative Preferred Stock, Series CC (the
"Series CC Preferred Shares") and 500 shares of its preferred stock to be
known as the Variable Cumulative Preferred Stock, Series DD (the "Series DD
Preferred Shares" and, collectively with the Series AA Preferred Shares, the
Series BB Preferred Shares and the Series CC Preferred Shares, the "Preferred
Shares").
Dividends on the Preferred Shares of each Series offered hereby are
cumulative and accumulate from the Date of Original Issue (expected to be
December 11, 1997) and will be payable, when and as declared by the Board of
Directors of the Company, on each Dividend Payment Date. The Initial Dividend
Period for the Preferred Shares of each Series will commence on the Date of
Original Issue and will end on February 2, 1998 for the Series AA Preferred
Shares, February 5, 1998 for the Series BB Preferred Shares, February 23, 1998
for the Series CC Preferred Shares and February 24, 1998 for the Series DD
Preferred Shares. The Dividend Rate for the Initial Dividend Period for the
Series AA Preferred Shares will be 4.25%, for the Series BB Preferred Shares
will be 4.25%, for the Series CC Preferred Shares will be 4.20% and for the
Series DD Preferred Shares will be 4.20%.
The duration of the first Subsequent Dividend Period and the Dividend Rate
for such first Subsequent Dividend Period for each series of the Preferred
Shares will be determined pursuant to the Auction Method, at the times and in
the manner described in the accompanying Prospectus.
The Preferred Shares of each Series are redeemable on the last day of any
Dividend Period (including the last day of the Initial Dividend Period for the
Preferred Shares of each Series), as a whole or in part, at the option of the
Company, at a redemption price of $100,000 per share plus accumulated and
unpaid dividends and, in the case of a Subsequent Dividend Period of two years
or more, may be redeemable at the times and redemption prices (but not less
than $100,000 per Share plus accumulated and unpaid dividends) determined by
the Company prior to the commencement of such Subsequent Dividend Period. The
Preferred Shares of each Series are not redeemable on any day prior to the
last day of the Initial Dividend Period for each Series.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share for each Series.................. $100,000 $750 $99,250
- -------------------------------------------------------------------------------
Total...................................... $200,000,000 $1,500,000 $198,500,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company estimated at $165,000.
----------------
The Preferred Shares of each Series are offered by the Underwriters as
specified herein, subject to receipt and acceptance by them and subject to the
right to reject any order in whole or in part. It is expected that delivery of
a single certificate for each Series of the Preferred Shares will be made
through the facilities of The Depository Trust Company on or about December
11, 1997.
----------------
MERRILL LYNCH & CO. LEHMAN BROTHERS
----------------
The date of this Prospectus Supplement is December 9, 1997.
<PAGE>
DESCRIPTION OF THE PREFERRED SHARES
The following information supplements the information set forth in the
accompanying Prospectus, to which information reference is hereby made.
Capitalized terms used and not otherwise defined herein shall have the
meanings set forth in the Prospectus. The Preferred Shares constitute part of
the "Stock" as defined in the Prospectus.
Initial Auction Date. The Initial Auction Date for the Series AA Preferred
Shares, for the Series BB Preferred Shares, for the Series CC Preferred Shares
and for the Series DD Preferred Shares will be January 30, 1998, February 4,
1998, February 20, 1998 and February 23, 1998, respectively.
Trust Company, Tender Agent and Paying Agent. Bankers Trust Company will act
as the Trust Company, the Tender Agent and the Paying Agent and, among other
things, will implement the Auction Procedures for the Preferred Shares. See
"Auction Procedures--Trust Company Agreement" in the accompanying Prospectus.
USE OF PROCEEDS
The net proceeds from the sale of the Preferred Shares will be added to the
general funds of the Company and will be available for financing its business
activities. Initially, such proceeds will be applied to reduce short-term
indebtedness.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
relating to the Preferred Shares, the Company has agreed to sell to each of
the Underwriters listed below (the "Underwriters"), and each of the
Underwriters has severally agreed to purchase, the number of Preferred Shares
set forth below:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
SERIES AA SERIES BB SERIES CC SERIES DD
UNDERWRITERS PREFERRED SHARES PREFERRED SHARES PREFERRED SHARES PREFERRED SHARES
------------ ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Merrill Lynch, Pierce,
Fenner & Smith
Incorporated....... 350 350 350 350
Lehman Brothers Inc. ... 150 150 150 150
--- --- --- ---
Total.............. 500 500 500 500
=== === === ===
</TABLE>
The Underwriters propose to offer the Preferred Shares of each Series to the
public at the public offering price set forth on the cover page of this
Prospectus Supplement and to certain dealers at such price less a concession
of $450 per share. The Underwriters may allow and such dealers may reallow a
concession not in excess of $250 per share. After the initial public offering,
the public offering price and such concession may be changed.
The Company has agreed to indemnify the several Underwriters against certain
liabilities including liabilities under the Securities Act of 1933, as
amended.
Each of the Underwriters may act in Auctions for each Series of the
Preferred Shares as Broker-Dealers and may provide information to be used in
ascertaining the Effective Composite Commercial Paper Rate as set forth in the
Prospectus.
Settlement. Payment by each initial purchaser of each Series of the
Preferred Shares will be made through a purchaser's Agent Member on the date
of delivery of the Preferred Shares to the Underwriter or the Broker-Dealer
from which the purchaser purchased such Preferred Shares in Federal or other
immediately available
S-2
<PAGE>
funds. At the closing, the Underwriters will accept delivery of each Series of
the Preferred Shares and will thereafter deposit them in their account at the
Stock Depository. Immediately thereafter on the closing date, the Stock
Depository will deliver each Series of the Preferred Shares purchased by each
Broker-Dealer and each purchaser from the Underwriters' account to the account
of such Broker-Dealer or such purchaser's Agent Member of the Stock
Depository, as the case may be, against payment to the account of the
Underwriters of an amount equal to the purchase price from the account of such
Broker-Dealer or such purchaser's Agent Member of the Stock Depository, as the
case may be. In the case of an initial purchaser who purchases Preferred
Shares from a Broker-Dealer, the Stock Depository will deliver the Preferred
Shares purchased by such purchaser from such Broker-Dealer's account to the
account of such purchaser's Agent Member of the Stock Depository against
payment to the account of such Broker-Dealer of an amount equal to the
purchase price from the account of such purchaser's Agent Member of the Stock
Depository.
LEGAL OPINIONS
The legality of each Series of the Preferred Shares will be passed upon for
the Company by Nancy E. Barton, Senior Vice President, General Counsel and
Secretary of the Company or Bruce C. Bennett, Associate General Counsel,
Treasury Operation and Assistant Secretary of the Company and for the
Underwriters by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New
York. Ms. Barton and Mr. Bennett, together with members of their families,
own, have options to purchase and have other interests in shares of common
stock of GE Company.
S-3
<PAGE>
5,000 SHARES-LIQUIDATION PREFERENCE $100,000 PER SHARE
GENERAL ELECTRIC CAPITAL CORPORATION
VARIABLE CUMULATIVE PREFERRED STOCK, ISSUABLE IN SERIES
----------------
The up to 5,000 Shares (the "Shares") of Variable Cumulative Preferred Stock
(the "Stock"), of General Electric Capital Corporation (the "Company") offered
hereby are in addition to the 18,000 shares of Variable Cumulative Preferred
Stock previously issued by the Company in Series A through Z (including series
designated Series X-1 and Y-1). The Stock is issuable in series (the "Series")
and dividends thereon are cumulative from the Date of Original issue of each
Share of Stock and are payable, when and as declared by the Company,
commencing on the initial Dividend Payment Date for such Share of Stock, as
set forth in the Prospectus Supplement relating to such Share of Stock, and on
each Dividend Payment Date for such Share of Stock thereafter, subject to
certain exceptions. The specific designation, number of shares and other
specific terms of the Series of Stock in respect of which this Prospectus is
being delivered will be set forth in the Prospectus Supplement relating to
such Series.
The initial Dividend Period for each Share of Stock will be a period (not
exceeding 30 years) determined by the Company, during which each Share of
Stock will have a Dividend Rate specified by the Company, as set forth in the
Prospectus Supplement relating to such Share of Stock. Thereafter, the
determination of the duration of each Subsequent Dividend Period with respect
to each Share of Stock and the Dividend Rate for such Subsequent Dividend
Period will be determined by the Auction Method.
Each Subsequent Dividend Period will have a duration (not less than seven
days nor more than 30 years) specified by the Company in a notice to record
holders sent not less than seven days prior to the Auction Date for such
Subsequent Dividend Period. In the absence of any such notice with respect to
a Subsequent Dividend Period, such period will have a duration of 49 days. At
any point in time, all Shares of Stock of a Series will have a single Dividend
Period and will accumulate dividends at a single Dividend Rate. The Dividend
Rate for each Subsequent Dividend Period for Stock will be the rate per annum
determined on the basis of Orders for such Stock placed in an Auction
conducted on the Business Day preceding the commencement of such Subsequent
Dividend Period on the basis specified in the Auction Procedures.
The rate determined by the Auction Procedures for any Subsequent Dividend
Period will not exceed the Maximum Rate, which is calculated by applying a
percentage ranging from 110% to 225% to the Federal Funds Rate, the Effective
Composite Commercial Paper Rate, the Effective LIBOR Rate, the U.S. Treasury
Note Rate or the U.S. Treasury Bond Rate, depending upon the prevailing rating
of the Shares of Stock at such time and the duration of such Subsequent
Dividend Period.
Prospective purchasers should carefully review the Auction Procedures
described in this Prospectus (including its Appendices).
The Shares of Stock of each Series are redeemable at the option of the
Company, as a whole or in part, on the last day of any Dividend Period, at a
redemption price of $100,000 per Share, plus accumulated and unpaid dividends,
and, in the case of Shares of Stock with a Dividend Period of two years or
more, at the times and at the redemption prices (but not less than $100,000
per Share plus accumulated and unpaid dividends) determined by the Company
prior to the commencement of such Dividend Period.
This Prospectus may not be used to consummate sales of Stock unless
accompanied by a Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS, ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Prospectus is December 9, 1997.
<PAGE>
No dealer, salesperson, or other individual has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus and the accompanying Prospectus
Supplement in connection with the offer contained in this Prospectus and the
accompanying Prospectus Supplement and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company or by any agent, underwriter or dealer. Neither the delivery of this
Prospectus and the accompanying Prospectus Supplement, nor any sale made
hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the dates as of which
information is given in this Prospectus and in the accompanying Prospectus
Supplement. This Prospectus and the accompanying Prospectus Supplement do not
constitute an offer or solicitation by anyone in any state in which such offer
or solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom it is unlawful
to make such offer or solicitation.
----------------
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 (the ("1934 Act") and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information can be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, as well as the Regional
Offices of the Commission at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York,
New York 10048 and copies can be obtained from the Public Reference Section of
the Commission, at Room 1024 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Reports and other information concerning the Company can
also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005, on which certain of the Company's securities
are listed. The Commission also maintains a Website (located at
http://www.sec.gov) which contains certain reports, proxy statements and other
information regarding registrants such as the Company that file electronically
with the Commission.
----------------
DOCUMENTS INCORPORATED BY REFERENCE
There is hereby incorporated in this Prospectus by reference the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 and the
Company's Quarterly Reports on Form 10-Q for the fiscal quarters ended March
29, 1997, June 28, 1997 and September 27, 1997 heretofore filed with the
Commission pursuant to the 1934 Act, to which reference is hereby made.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act after the date of the initial filing of the Registration
Statement of which this Prospectus is a part and prior to the termination of
the offering of the Stock offered by the accompanying Prospectus Supplement
shall be deemed to be incorporated in this Prospectus by reference and to be a
part hereof from the date of filing of such documents.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, on the written or oral request of such person, a copy of any or all
of the documents referred to above which have been or may be incorporated in
this Prospectus by reference, other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into such documents.
Requests for such copies should be directed to Bruce C. Bennett, Associate
General Counsel, Treasury Operations and Assistant Secretary, General Electric
Capital Corporation, 201 High Ridge Road, Stamford, Connecticut 06927,
Telephone No. (203) 357-4000.
2
<PAGE>
SUMMARY
This Summary is qualified in its entirety by the detailed information
appearing elsewhere in this Prospectus and in the Prospectus Supplement
accompanying the Prospectus, including the Appendices hereto. Capitalized terms
used in this Prospectus are defined in the Glossary of Terms set forth in
Appendix A.
THE OFFERING
The Company is offering up to 5,000 Shares of Stock at a purchase price of
$100,000 per Share. The Company has previously issued 18,000 shares of Variable
Cumulative Preferred Stock in twenty-eight series, constituting Series A
through Z (including series designated Series X-1 and Y-1) and the Shares of
Stock will rank equal to such Series A through Z as to dividend and liquidation
preference. The Shares of Stock may be issued in one or more Series. Dividends
on all Shares of Stock will be determined pursuant to the Auction Method. Each
Share will have a liquidation preference of $100,000.
Except in certain limited circumstances, purchasers of the Shares of Stock
will not be entitled to receive any certificate representing the Shares of
Stock, and such Shares will be maintained in book entry form by the Stock
Depository (The Depository Trust Company or any successor) for such purchaser's
Agent Member, which will in turn maintain records of such purchaser's
beneficial ownership.
DIVIDENDS AND DIVIDEND PERIODS
Dividends on each Share of Stock offered hereby are cumulative from the Date
of the Original Issue of such Share of Stock and are payable, when and as
declared by the Board of Directors of the Company out of funds legally
available therefor, commencing on the initial Dividend Payment Date for such
Share of Stock, as set forth in the Prospectus Supplement relating to such
Share of Stock, and on each Dividend Payment Date for such Share of Stock
thereafter, subject to certain exceptions.
Payment of Dividends. Dividends on the Shares of Stock will be paid through
the Stock Depository on each Dividend Payment Date in accordance with its
normal procedures for distribution of dividends in same-day funds to Agent
Members, who in turn are expected to distribute such dividend payments to the
persons for whom they are acting as agents.
Subject to declaration as described above, dividends will be payable on each
Share of Stock on the last day of each Dividend Period applicable to such Share
of Stock, regardless of the length of such Dividend Period, and, in addition,
in the case of Dividend Periods of more than 99 days, on the following
additional dates: (a) if such Dividend Period is from 100 to 190 days, on the
91st day; (b) if such Dividend Period is from 191 to 281 days, on the 91st and
182nd days; (c) if such Dividend Period is from 282 to 364 days, on the 91st,
182nd and 273rd days; and (d) if such Dividend Period is from two to 30 years,
on January 15, April 15, July 15 and October 15 of each year; provided,
however, that in all such cases, if such date is not a Business Day, the
Dividend Payment Date shall be the Business Day next succeeding such date.
Dividend Determination Method. Each Dividend Period will be measured in
either days (not more than 364) or in full years (but not less than two nor
more than 30); provided, however, that the minimum Dividend Period for Stock is
seven calendar days. Each Dividend Period will end on a Dividend Payment Date.
The initial Dividend Period for each Share of Stock will be a period specified
by the Company during which such Share of Stock will have a Dividend Rate
specified by the Company, as set forth in the Prospectus Supplement relating to
such Share of Stock. Thereafter, the determination of the duration of each
Subsequent Dividend Period with respect to such Share of Stock and the Dividend
Rate for such Subsequent Dividend Period will be determined by the Auction
Method.
3
<PAGE>
Auction Method. Each Subsequent Dividend Period will have a duration
specified by the Company in a notice to record holders sent not less than seven
days prior to the Auction Date for such Subsequent Dividend Period. In the
absence of any such notice with respect to a Subsequent Dividend Period, such
period will have a duration of 49 days. In addition, in the event the Company
has elected a duration of more than 49 days for a Subsequent Dividend Period,
it may withdraw such election by giving notice to record holders by no later
than 3:00 p.m., New York City time, on the Business Day immediately preceding
the relevant Auction Date, and in such event such Subsequent Dividend Period
will have a duration of 49 days. Unless a Payment Failure has occurred and is
continuing, the Dividend Rate for the Stock of each Series for each Subsequent
Dividend Period will be the rate per annum that the Trust Company (Bankers
Trust Company or any successor) advises the Company results from an Auction for
such Series. At any point in time, all Shares of Stock of a Series will have a
single Dividend Period and will accumulate dividends at a single Dividend Rate.
Maximum Rate; Payment Failure. Notwithstanding the foregoing, the Dividend
Rate that results from the application of the Auction Procedures for any
Subsequent Dividend Period for any Share of Stock will not be greater than the
Maximum Rate, which is a percentage (determined as set forth below based on the
prevailing rating of such Share of Stock in effect at the close of business on
the Business Day immediately preceding the date of determination and on the
duration of the relevant Dividend Period) of the Applicable Determining Rate
for such Share on the date of determination; provided, however, that during the
continuance of a Payment Failure the applicable percentage will be 200:
<TABLE>
<CAPTION>
PERCENTAGE
------------------------------------------
FOR DIVIDEND PERIODS FOR DIVIDEND PERIODS
PREVAILING RATING OF LESS THAN ONE YEAR OF TWO YEARS OR MORE
----------------- --------------------- --------------------
<S> <C> <C>
AA/Aa or above................. 110% 125%
A/A............................ 125% 140%
BBB/Baa........................ 150% 175%
Below BBB/Baa.................. 200% 225%
</TABLE>
The Applicable Determining Rate, with respect to a Dividend Period of seven
days to 89 days, is the Effective Composite Commercial Paper Rate; with respect
to a Dividend Period of 90 days to 364 days, is the Effective LIBOR Rate; with
respect to a Dividend Period of two years to ten years, is the U.S. Treasury
Note Rate; and, with respect to a Dividend Period in excess of ten years, is
the U.S. Treasury Bond Rate.
Notwithstanding the foregoing, in the event that the Company fails to pay (i)
all dividends in respect of any Share of Stock which have accumulated during
any Dividend Period applicable to such Share of Stock by no later than the
third Business Day following the last day of such Dividend Period or (ii) the
redemption price in respect of Shares of Stock called for redemption on the
date when due and, in each such case, if failure continues unremedied, then the
application of the Auction Procedures will be suspended and dividends will
accumulate on the Shares of Stock of all Series for Dividend Periods commencing
on and after the date such Payment Failure first occurs at 200% of the
Applicable Determining Rate for Dividend Periods of 49 days. In no event will
the Dividend Rate for any Share of Stock be adjusted prior to the end of a
Dividend Period for such Share. If no Payment Failure continues to exist at the
end of a Dividend Period, the application of the Auction Procedures will be
resumed.
AUCTION PROCEDURES
On each Auction Date (the Business Day prior to the beginning of each
Subsequent Dividend Period) for the Stock of a Series, each Existing Holder may
submit Orders in respect of such Subject Stock through a Broker-Dealer to the
Trust Company as follows:
. Hold Order--indicating its desire to hold without regard to the
Dividend Rate for the next Dividend Period.
4
<PAGE>
. Bid--indicating its desire to hold if the Dividend Rate for the next
Dividend Period is not less than the rate specified in such Bid.
. Sell Order--indicating its desire to sell without regard to the
Dividend Rate for the next Dividend Period.
An Existing Holder may submit different types of Orders in an Auction with
respect to different Shares of Subject Stock then held by such Existing Holder;
provided, however, that the total number of Shares of Subject Stock covered by
Hold or Sell Orders does not exceed the number of Shares of Subject Stock held
by such Existing Holder. An Existing Holder that offers to purchase additional
Shares of Subject Stock is, for purposes of such offer, treated as a Potential
Holder as described below. Bids by Existing Holders with rates higher than the
Maximum Rate on the Auction Date will be treated as Sell Orders. A Hold Order
shall be deemed to have been submitted on behalf of an Existing Holder if an
Order is not submitted on behalf of such Existing Holder for any reason,
including the failure of a Broker-Dealer to submit such Order to the Trust
Company, except that a Sell Order will be deemed to have been submitted on
behalf of an Existing Holder if an Order is not submitted on behalf of such
Existing Holder in the case of an Auction for a Dividend Period which differs
in duration by more than seven days from the preceding Dividend Period or an
Auction for a Dividend Period of two years or more.
Potential Holders of Shares of Subject Stock may submit Bids in which they
will offer to purchase Shares of Subject Stock if the Dividend Rate for the
next Dividend Period is not less than the rate specified in such Bid. A Bid by
a Potential Holder specifying a rate higher than the Maximum Rate on the
Auction Date will not be accepted.
If Sufficient Clearing Bids exist (that is, the number of Shares of Subject
Stock subject to Bids by Potential Holders is at least equal to the number of
Shares of Subject Stock subject to Sell Orders by Existing Holders), the
Dividend Rate will be the lowest rate specified in the Submitted Bids, which,
taking into account such rate and all lower rates bid by Existing Holders and
Potential Holders, would result in Existing Holders and Potential Holders
owning all of the Shares of Subject Stock available for purchase in the
Auction. If Sufficient Clearing Bids do not exist, the Dividend Rate will be
the Maximum Rate on the Auction Date for a Dividend Period equal to the lesser
of (i) the length of the Dividend Period selected by the Company and (ii) 49
days, and, in such event, Existing Holders that have submitted Sell Orders will
not be able to sell in such auction all Shares of Subject Stock subject to such
Sell Orders. If all Existing Holders submit or are deemed to have submitted
Hold Orders, the Dividend Rate will be 58% of the Applicable Determining Rate.
The Auction Procedures include a pro rata allocation of Shares of Subject
Stock for purchase and sale, which may result in an Existing Holder selling, or
a Potential Holder purchasing, a number of Shares of Subject Stock that is
fewer than the number of Shares of Subject Stock specified in its Order.
A Sell Order placed by an Existing Holder shall constitute an irrevocable
offer to sell, and, if the rate specified in a Bid is greater than the rate
determined in the Auction, a Bid placed by an Existing Holder will constitute
an irrevocable offer to sell the Shares of Subject Stock subject thereto, in
each case at a price per Share equal to $100,000. A Bid placed by a Potential
Holder shall constitute an irrevocable offer to purchase the Shares of Subject
Stock subject thereto at a price per Share equal to $100,000. Settlement of
purchases and sales will be made on the next Business Day (also a Dividend
Payment Date) after the Auction Date through the Stock Depository. Purchasers
will make payment through their Agent Members in same-day funds to the Stock
Depository against delivery to their respective Agent Members. The Stock
Depository will make payment to the sellers' Agent Members in accordance with
the Stock Depository's normal procedures for payment in same-day funds.
If on any Auction Date, Stock of two or more Series with Dividend Periods of
the same length will be auctioned, then a single Auction will be held with
respect to all of such Series, and all references to "Subject
5
<PAGE>
Stock" in the Auction Procedures with respect to such Auction will be deemed to
be references to all of such Series, collectively.
Each prospective purchaser of Shares of Stock will be required to sign and
deliver a Master Purchaser's Letter in the form of Appendix D hereto, to a
Broker-Dealer (who will deliver copies thereof to the Trust Company) pursuant
to which each prospective purchaser will agree, among other things, that so
long as no Payment Failure has occurred (i) Shares of Stock may be transferred
only pursuant to a Bid or Sell Order placed in an Auction, or to or through a
Broker-Dealer or to a person that has delivered, or caused to be delivered on
its behalf, a signed copy of a Master Purchaser's Letter to the Trust Company;
provided, however, that in the case of all transfers other than those pursuant
to Auctions, the Existing Holder of the Shares so transferred, its Agent Member
or its Broker-Dealer advises the Trust Company of such transfer and (ii)
ownership of Shares of Stock will be maintained in book entry form by the Stock
Depository for the account of such prospective purchaser's Agent Member, which
in turn will maintain records of such prospective purchaser's beneficial
ownership. An execution copy of the Master Purchaser's Letter is included
inside the back cover of this Prospectus.
EXECUTION OF A MASTER PURCHASER'S LETTER IS NOT A COMMITMENT TO PURCHASE
SHARES IN THE OFFERING MADE BY THE PROSPECTUS SUPPLEMENT ACCOMPANYING THIS
PROSPECTUS OR IN ANY AUCTION, BUT IS A CONDITION PRECEDENT TO PURCHASING SHARES
OF STOCK.
REDEMPTION
The Shares of Stock of each Series are redeemable at the option of the
Company as a whole or in part, on the last day of any Dividend Period at a
redemption price of $100,000 per Share plus accumulated and unpaid dividends
and, in the case of Shares of Stock with a Dividend Period of two years or
more, at the times and at the redemption prices (but not less than $100,000 per
Share plus accumulated and unpaid dividends) determined by the Company prior to
the commencement of such Dividend Period.
LIQUIDATION PREFERENCE
The liquidation preference of the Shares of Stock shall be $100,000 per Share
plus accumulated and unpaid dividends.
VOTING RIGHTS
Except in certain limited circumstances as required by law, the holders of
the Outstanding Shares of Stock will not be entitled to any voting rights.
TAX CONSIDERATIONS
As explained more fully under "Tax Considerations," the Company has received
an opinion of counsel that Shares of Stock will constitute stock of the Company
for Federal income tax purposes, distributions made by the Company with respect
to such Shares will constitute dividends to the extent made from the current or
accumulated earnings and profits of the Company (as calculated for Federal
income tax purposes), and corporate holders of Shares of Stock otherwise
entitled to the Dividends-Received Deduction will be entitled to such deduction
with respect to dividends on Shares of Stock, provided that the minimum holding
period and other applicable requirements are satisfied.
6
<PAGE>
THE COMPANY
General Electric Capital Corporation (herein together with its consolidated
affiliates called the "Company" or "GE Capital" unless the context otherwise
requires) was incorporated in 1943 in the State of New York, under the
provisions of the New York Banking Law relating to investment companies, as
successor to General Electric Contracts Corporation, which was formed in 1932.
Until November 1987, the name of the Company was General Electric Credit
Corporation. All outstanding common stock of the Company is owned by General
Electric Capital Services, Inc. ("GE Capital Services"), formerly General
Electric Financial Services, Inc., the common stock of which is in turn wholly
owned by General Electric Company ("GE Company"). The business of the Company
originally related principally to financing the distribution and sale of
consumer and other products of GE Company. Currently, however, the type and
brand of products financed and the financial services offered are
significantly more diversified. Very little of the financing provided by GE
Capital involves products that are manufactured by GE Company.
The Company operates in four financing industry segments and in a specialty
insurance industry segment. GE Capital's financing activities include a full
range of leasing, lending, equipment management sales and services and
consumer savings and insurance services. The Company's specialty insurance
activities include providing financial guaranty insurance, principally on
municipal bonds and structured finance issues, private mortgage insurance and
creditor insurance covering international customer loan repayments. The
Company is an equity investor in Montgomery Ward Holding Corp., a retail
organization, and certain other service and financial services organizations.
GE Capital's operations are subject to a variety of regulations in their
respective jurisdictions.
Services of the Company are offered primarily in the United States, Canada,
Europe and the Pacific Basin. The Company's principal executive offices are
located at 260 Long Ridge Road, Stamford, Connecticut 06927 (Telephone number
(203) 357-4000). At December 31, 1996 the Company employed approximately
49,400 persons.
CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------ NINE MONTHS
1992 1993 1994 1995 1996 ENDED SEPTEMBER 27, 1997
---- ---- ---- ---- ---- ------------------------
<S> <C> <C> <C> <C> <C>
1.43 1.60 1.62 1.49 1.51 1.47
</TABLE>
For purposes of computing the consolidated ratio of earnings to combined
fixed charges and preferred stock dividends, earnings consist of net earnings
adjusted for the provision for income taxes, minority interest and fixed
charges. Fixed charges consist of interest and discount on all indebtedness
and one-third of rentals, which the Company believes is a reasonable
approximation of the interest factor of such rentals.
Assuming that all 5,000 Shares of Stock covered by this Prospectus were
outstanding at the date hereof, all such Shares had Dividend Periods at the
date hereof of less than 90 days, and the Dividend Rate for all such Shares of
Stock was 4.23% per annum, and assuming that the 18,000 shares of Variable
Cumulative Preferred Stock previously offered and sold were outstanding and
the respective Dividend Rates for each series of such stock were those in
effect on December 9, 1997 (a weighted average of 4.069% for the Shares of
Stock with Dividend Periods at the date hereof of 90 days or less and a
weighted average of 4.792% for the Shares of Stock
with Dividend Periods at the date hereof of more than 90 days), the
consolidated ratio of earnings to combined fixed charges and preferred stock
dividends for the nine months ended September 27, 1997 would not be materially
affected.
USE OF PROCEEDS
Except as may be otherwise set forth in any Prospectus Supplement
accompanying this Prospectus, the net proceeds from the sale of 5,000 Shares
will be added to the general funds of the Company and will be available for
financing its operations. Additional equity financing, as well as short-term
and long-term debt financing, as required, will be undertaken at such times,
and through such means, as the Company deems appropriate.
7
<PAGE>
DESCRIPTION OF THE STOCK
GENERAL
The Board of Directors of the Company has authorized the issuance of the
Shares of Stock, in Series. The Shares of Stock, when issued and sold, will be
fully paid and non-assessable.
As of the date of this Prospectus, the capital stock of the Company as
authorized by its sole common stockholder consists of 3,866,000 shares of
Common Stock of the par value of $200 per share (the "Common Stock") and
23,000 Shares of Variable Cumulative Preferred Stock, par value $100 per
Share, issuable from time to time in Series. There are presently outstanding
3,837,825 shares of Common Stock and 18,000 shares of Variable Cumulative
Preferred Stock. Each series of Variable Cumulative Preferred Stock ranks
equal with each other series of Variable Cumulative Preferred Stock, as to
dividend and liquidation preference.
The following is a brief summary of certain provisions contained in the
Company' Organization Certificate. Such summary does not purport to be
complete and is qualified in its entirety by reference to such document, a
copy of which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part.
DIVIDEND RIGHTS
General. Dividends on the Shares of Stock will accumulate from the Date of
Original Issue thereof and will be payable when and as declared by the Board
of Directors, out of funds legally available therefor, on the last day of each
Dividend Period, applicable thereto, regardless of its length, and, in
addition, in the case of Dividend Periods of more than 99 days, on the
following additional dates: (a) if such Dividend Period is from 100 to 190
days, on the 91st day; (b) is such Dividend Period is from 191 to 281 days, on
the 91st and 182nd days; (c) if such Dividend Period is from 282 to 364 days,
on the 91st, 182nd and 273rd days; and (d) if such Dividend Period is from two
to 30 years, on January 15, April 15, July 15 and October 15 of each year;
provided, however, that in all such cases, if such date is not a Business Day,
the Dividend Payment Date shall be the Business Day next succeeding such date.
Each day on which dividends are payable on Shares of Stock is referred to
herein as a "Dividend Payment Date."
Each dividend will be payable to holders of record as they appear on the
record of stockholders of the Company on the Business Day next preceding the
Dividend Payment therefor; provided, however, that if the Dividend Rate with
respect to Shares of Stock is 200% of the Applicable Determining Rate as a
result of the occurrence of a Payment Failure, then that dividend will be paid
to such holders as their names appear on the record of stockholders of the
Company on a date not exceeding 15 days preceding the payment date thereof as
may be fixed by the Board of Directors of the Company or a committee thereof.
Dividends in arrears for any past Dividend Period may be declared and paid at
any time, without reference to any regular Dividend Payment Date.
The Company will pay to the Paying Agent not later than 12:00 noon, New York
City time, on the Dividend Payment Date for Shares of Stock, an aggregate
amount of funds available on such Business Day in the City of New York, New
York, equal to the dividends to be paid to all holders of such Shares of Stock
on such Dividend Payment Date. All such moneys will be held in trust for the
payment of such dividends by the Paying Agent for the benefit of the holders.
The amount of dividends accumulated on each Share of Stock for each Dividend
Period of less than one year will be computed by multiplying the Dividend Rate
for such Dividend Period by a fraction the numerator of which is the number of
days in such Dividend Period (calculated by counting the first day thereof but
excluding the last day thereof) and the denominator of which will be 360 and
multiplying $100,000 by the rate obtained. During any Dividend Period of one
year or longer, the amount of dividends accumulated on each Share of Stock
will be computed by multiplying the Dividend Rate for each year in such
Dividend Period by a fraction the numerator of which is the actual number of
days in such year (provided that if such year is the last year of such
Dividend Period, the last day of such year shall be excluded) and the
denominator of which is 360 and multiplying $100,000 by the rate obtained.
No dividend will be declared or paid on any Shares of Stock of any Series
for any current dividend period if dividends on any other Shares of Stock are
accumulated and unpaid for any prior dividend period or, in case
8
<PAGE>
of payment of dividend arrearages on Stock, unless at the same time the
Company also declares or pays or sets apart for payment, as the case may be,
such amounts with respect to all such dividend arrearages on all Shares of
Stock, so that all such shares share ratably in such payment in accordance
with the sums which would be payable on all such shares if all dividends
(including all accumulations, if any) were declared and paid in full. For
purposes hereof, dividend accumulations and arrearages do not include any
dividends which have not yet become payable or for which there has not
occurred a Dividend Payment date, as the case may be.
Each Dividend Period for Shares of Stock shall be measured in either days
(not more than 364) or in full years (but not less than two nor more than 30);
provided, however, that the minimum Dividend Period is seven days. Each
Dividend Period shall end on a Dividend Payment Date. The duration of the
Initial Dividend Period for each Share of Stock will be a period specified by
the Company, during which such Share of Stock will have a Dividend Rate
specified by the Company, as set forth in the Prospectus Supplement relating
to such Series. Thereafter, the determination of the duration of each
Subsequent Dividend Period with respect to such Share of Stock and the
Dividend Rate for such Subsequent Dividend Period will be determined by the
Auction Method.
Dividend Periods and Dividend Rates. Each Subsequent Dividend Period will
begin on a Dividend Payment Date and will end 49 days thereafter; provided,
however, that, subject to the limitations set forth above, the Company may
establish the duration of any Subsequent Dividend Period for Shares of Stock
of a Series by a notice sent by the Company to all record holders of Shares of
Stock of such Series, by first-class mail, postage prepaid, to the address of
each such holder appearing in the record of stockholders of the Company, not
less than seven days nor more than 60 days prior to any Auction Date, which
notice will specify the Company's determination of (i) the length of the next
succeeding Dividend Period, (ii) in the case of any Dividend Period in excess
of 99 days in duration, any Dividend Payment Date or Dates other than the last
day of such Dividend Period and (iii) in the case of any Dividend Period equal
to or in excess of two years in duration, any dates on which Shares of Stock
may be redeemed and the corresponding redemption prices. In the absence of any
such notice with respect to a Subsequent Dividend Period such period will have
a duration of 49 days. In addition, in the event the Company has elected a
duration of more than 49 days for a Subsequent Dividend Period, it may
withdraw such election by giving notice to record holders by no later than
3:00 p.m., New York City time, on the Business Day immediately preceding the
relevant Auction Date, and in such event such Subsequent Dividend Period will
have a duration of 49 days. Copies of such notices shall be delivered
physically, by telecopier or other written electronic communication, to the
Trust Company by the Company at the same time they are transmitted to the
record holders of Shares of Stock. The Trust Company will thereupon use its
reasonable best efforts to provide copies of such notices to each Broker-
Dealer as soon as practicable after receiving such notice. No defect in the
notice or in the mailing thereof shall affect the validity of the change in
the Dividend Period.
In the event that Sufficient Clearing Bids have not been made, so the
Dividend Rate for the next Dividend Period is equal to the Maximum Rate, then
the length of the Subsequent Dividend Period will be the lesser of (i) the
length of such Dividend Period as specified by the Company in a notice sent as
described above, or (ii) 49 days, and the Maximum Rate shall be determined
based upon the length of the Dividend Period determined pursuant to the
foregoing clause (i) or (ii).
Except as provided below, the Dividend Rate on the Shares of Stock of a
Series for each Subsequent Dividend Period will be at the rate per annum that
results from an Auction for such Series of Stock.
9
<PAGE>
Maximum Rate. Notwithstanding the foregoing, the Dividend Rate that results
from the application of the Auction Procedures for any Subsequent Dividend
Period for any Share of Stock will not be greater than the Maximum Rate which
is a percentage (determined as set forth below based on the prevailing rating
of such Share of Stock in effect at the close of business on the Business Day
immediately preceding the date of determination and on the duration of the
relevant Dividend period) of the Applicable Determining Rate for such Share on
the date of determination; provided, however, that during the continuance of a
Payment Failure the applicable percentage will be 200%:
<TABLE>
<CAPTION>
PERCENTAGE
------------------------------------------
FOR DIVIDEND PERIODS FOR DIVIDEND PERIODS
PREVAILING RATING OF LESS THAN ONE YEAR OF TWO YEARS OR MORE
----------------- --------------------- --------------------
<S> <C> <C>
AA/Aa or above................. 110% 125%
A/A............................ 125% 140%
BBB/Baa........................ 150% 175%
Below BBB/Baa.................. 200% 225%
</TABLE>
The Applicable Determining Rate, with respect to a Dividend Period of seven
days to 89 days, is the Effective Composite Commercial Paper Rate; with
respect to a Dividend Period of 90 days to 364 days, is the Effective LIBOR
Rate; with respect to a Dividend Period of two years to ten years, is the U.S.
Treasury Note Rate; and with respect to a Dividend Period in excess of ten
years, is the U.S. Treasury Bond Rate.
Payment Failure. Notwithstanding the foregoing, in the event that the
Company fails to pay (i) all dividends in respect of any Share of Stock which
have accumulated during any Dividend Period applicable to such Share of Stock
by no later than the third Business Day following the last day of such
Dividend Period or (ii) the redemption price in respect of Shares of Stock
called for redemption on the date when due and, in each such case, if such
failure continues unremedied (either of such events a "Payment Failure"), then
the application of the Auction Procedures will be suspended and dividends will
accumulate on the Shares of Stock of all Series for Dividend Periods
commencing on and after the date such Payment Failure first occurs at 200% of
the Applicable Determining Rate for Dividend Periods of 49 days. In no event
will the Dividend Rate for any Share of Stock be adjusted prior to the end of
a Dividend Period for such Share. If no Payment Failure continues to exist at
the end of a Dividend Period, the application of the Auction Procedures will
be resumed.
REDEMPTION
At the option of the Company, the Shares of any Series may be redeemed out
of legally available funds therefore, as a whole or from time to time in part,
(i) on the last day of any Dividend Period at a redemption price of $100,000
per Share, plus accumulated and unpaid dividends to the date fixed for
redemption and (ii) in the case of Shares of Stock with a Dividend Period
equal to or more than two years, on any Dividend Payment Date for such Shares
at redemption prices (but not less than $100,000 per Share) determined by the
Company prior to the commencement of such Dividend Period plus accumulated and
unpaid dividends to the date set forth for redemption.
If fewer than all of the Outstanding Shares of a Series are to be redeemed
as set forth above, the number of Shares to be redeemed shall be determined by
the Board of Directors of the Company or a duly authorized committee thereof,
and such Shares shall be redeemed pro rata from the holders of record of such
Shares in proportion to the number of such Shares held by such holders.
Notice of redemption will be provided by mailing a notice to each record
holder of the Shares of Stock to be redeemed not less than 30 but not more
than 60 days prior to the date fixed for redemption to the respective address
of each holder as that address appears on the record of stockholders of the
Company.
If dividends are in arrears on any Share of Stock, the Company may not
redeem any Shares of Stock unless all of such Shares are simultaneously
redeemed, and the Company may not purchase or otherwise acquire any Shares of
Stock except pursuant to an offer on the same terms to holders of all Shares
of Stock.
10
<PAGE>
If notice of redemption has been given, from and after the redemption date
for the Shares of a Series of Stock called for redemption (unless the Company
defaults in providing money for the payment of the redemption price of the
Shares so called for redemption), dividends on the Shares so called for
redemption will cease to accumulate and said Shares will no longer be deemed
to be Outstanding, and all rights of the holders thereof as stockholders of
the Company (except the right to receive the redemption price) will cease.
After the date designated for redemption such Shares will not be transferable
on the stock books of the Company. Upon surrender in accordance with that
notice of the Shares so redeemed (properly endorsed or assigned for transfer,
if the notice shall so state), the redemption price set forth above will be
paid by the paying agent.
Shares of Stock which have been redeemed or otherwise acquired by the
Company will be cancelled and if permitted by applicable law may be restored
to the status of authorized but undesignated and unissued Shares of Variable
Cumulative Preferred Stock.
If upon giving effect to any redemption of Shares of Stock the ratio of debt
to equity of the Company is greater than 8 to 1, GE Company, the Company's
indirect parent company, will replace such redeemed Stock with an equal amount
of another form of equity to the extent necessary to reduce the Company's
ratio of debt to equity to 8 to 1.
LIQUIDATION PREFERENCE
Upon the involuntary or voluntary liquidation, dissolution or winding up of
the Company, the holders of Shares of Stock will have preference and priority
over the Common Stock or any other class of stock of the Company ranking on
liquidation junior to the Shares of Stock, for payment out of the assets of
the Company or proceeds thereof, available for distribution to stockholders,
whether from capital or surplus, or $100,000 per Share plus all dividends
accumulated and unpaid thereon. If, in the case of any such liquidation,
dissolution or winding up of the Company the assets of the Company or proceeds
thereof shall be insufficient to make the full liquidation payment of $100,000
per Share plus all accumulated and unpaid dividends on the Stock, then those
assets and proceeds will be distributed among the holders of the Stock ratably
in accordance with the respective amounts which would be payable on such Stock
if all amounts thereon were paid in full.
VOTING RIGHTS
Holders of Common Stock are entitled to one vote per share on all matters
which arise at any meeting of shareholders of the Company.
The holders of the Stock have no voting rights except as required by law and
except that the Company may not alter any of the preferences, privileges,
voting powers or other restrictions or qualifications of a Series of Stock in
a manner substantially prejudicial to the holders thereof without the consent
of the holders of at least two-thirds of the total number of Shares of such
Series.
AUCTION PROCEDURES
GENERAL
The provisions of the Organization Certificate authorizing the issuance of
the Stock of each Series offered hereby provide that the Dividend Rate per
annum for each Dividend Period after the Initial Dividend Period for Stock
will be equal to the rate per annum that the Trust Company advises the Company
has resulted from the Auction for each Series held on the Business Day
preceding the first day of such Dividend Period of such Series pursuant to the
Auction Procedures, in which persons determine to hold or offer to purchase or
sell Shares of Stock based on dividend rates bid by them. However, if a
Payment Failure has occurred the application of the Auction Procedures will be
suspended and the Dividend Rate will be determined as provided above.
Trust Company Agreement. The Company has entered into an agreement (as
amended, the "Trust Company Agreement") with Bankers Trust Company (together
with any such successor bank or trust company
11
<PAGE>
or other entity entering into a similar agreement with the Company, the "Trust
Company") which provides, among other things, that the Trust Company will
follow the Auction Procedures for the purposes of determining the Dividend
Rate for Stock so long as the Dividend Rate is to be based on the results of
an Auction. Each periodic implementation of such procedures is herein referred
to as an "Auction." Each Series of Stock will have a separate Auction.
Separate Auctions for more than one Series of Stock may be held on any Auction
Date; if on any Auction Date two or more Series of Stock with Dividend Periods
of the same length will be auctioned, then a single Auction will be held with
respect to all such Series.
Broker-Dealer Agreements. Each Auction requires the participation of one or
more broker-dealers. The Trust Company will enter into an agreement
(collectively, the "Broker-Dealer Agreements") with one or more broker-dealers
(collectively, the "Broker-Dealers") selected by the Company which provide for
the participation of the Broker-Dealers in Auctions.
Master Purchaser's Letter. Each prospective purchaser of Shares of Stock
will be required to sign and deliver to a Broker-Dealer, as a condition to
purchasing Shares of Stock in any Auction or otherwise, a Master Purchaser's
Letter, an execution copy of which is attached to this Prospectus after
Appendix D (the "Master Purchaser's Letter"). By signing a Master Purchaser's
Letter, such prospective purchaser agrees, among other things, so long as no
Payment Failure has occurred:
(a) to participate in Auctions for Stock on the terms set forth in
Appendix B hereto;
(b) to sell, transfer or otherwise dispose of Shares of Stock only
pursuant to a Bid or a Sell Order (as defined below) in an Auction, or to
or through a Broker-Dealer or to a person that has delivered or caused to
be delivered on its behalf a signed copy of a Master Purchaser's Letter to
the Trust Company; provided, however, that in the case of all transfers
other than those pursuant to Auctions, the Existing Holder (as defined
below) of the Shares so transferred, its Agent Member (as defined below) or
its Broker-Dealer advises the Trust Company of such transfer; and
(c) to have the ownership of the Shares of Stock as to which such
purchase is the Existing Holder maintained in book entry form by The
Depository Trust Company ("DTC," together with any successor securities
depository selected by the Company, the "Stock Depository") for the account
of its agent member (the "Agent Member") of such Stock Depository, which in
turn will maintain records of such purchaser's beneficial ownership, and to
authorize such Agent Member to disclose to the Trust Company such
information with respect to such purchaser's beneficial ownership as the
Trust Company may request.
One executed copy of a Master Purchaser's Letter must be delivered to a
Broker-Dealer, who will deliver copies thereof to the Trust Company. Execution
of a Master Purchaser's Letter is not a commitment to purchase Shares of Stock
in the offering being made by this Prospectus or in any Auction, but is a
condition precedent to purchasing Shares of Stock.
As used herein, "Existing Holder" of Shares of Stock means a person who has
signed a Master Purchaser's Letter and is listed as the beneficial holder of
such Shares of Stock in the records of the Trust Company. The Trust Company
may rely upon, as evidence of the identities of the Existing Holders of Stock,
a list of the initial holders of the Shares of Stock provided by the Company,
the results of Auctions and notices from any Existing Holder, the Agent Member
of such Existing Holder or the Broker-Dealer of such Existing Holder with
respect to such Existing Holder's transfer of Shares to another person. The
Trust Company will be required to register a transfer of Shares of Stock from
an Existing Holder to another person only if such transfer is made to a person
that has delivered a signed Master Purchaser's Letter to the Trust Company and
if (i) such transfer is pursuant to an Auction or (ii) the Trust Company has
been notified in writing (A) by such Existing Holder, the Agent Member of such
Existing Holder or the Broker-Dealer of such Existing Holder of such transfer
of (B) by the Broker-Dealer of any person that purchased or sold such Shares
in an Auction of the failure of such Shares to be transferred as a result of
such Auction. The Trust Company is not required to accept any such notice for
an Auction unless it is received by the Trust Company by 3:00 p.m., New York
City time, on the Business Day preceding such Auction.
The Trust Company is not required to accept the Master Purchaser's Letter of
any Potential Holder who wishes to submit a Bid for the first time in an
Auction or of any Potential Holder or Existing Holder who wishes
12
<PAGE>
to amend its Master Purchaser's Letter unless it is received by the Trust
Company by 3:00 p.m., New York City time, on the Business Day preceding such
Auction.
Stock Depository. DTC will act as Stock Depository for the Agent Members
with respect to Shares of Stock. One certificate for all of the Shares of
Stock of each Series offered hereby will be registered in the name of Cede &
Co. ("Cede") as nominee of the Stock Depository. Such certificate will bear a
legend to the effect that such certificate is issued subject to the provisions
restricting transfers of Shares of Stock contained in the Organization
Certificate and the Master Purchaser's Letters. The Company will also issue
stop-transfer instructions to the transfer agent for Stock. As long as the
Dividend Rate is based upon the results of any Auction, Cede will be the
holder of record of all Shares of Stock of each Series, and Existing Holders
of Shares of Stock will not receive certificates representing their ownership
interest in such Shares. Upon the occurrence of a Payment Failure, as set
forth under "General" above, an Existing Holder may obtain a certificate for
the Shares of Stock owned by it. DTC, which is a New York-chartered limited
purpose trust company, performs services for its participants (including the
Agent Members), some of whom (and/or their representatives) own shares of
common stock of DTC. The Stock Depository will maintain lists of its
participants and the Shares of Stock of each Series held by each Agent Member
whether as an Existing Holder for its own account or as a nominee for another
Existing Holder.
The following is a brief summary of the procedures to be used in conducting
Auctions. This summary is qualified by reference to the Auction Procedures set
forth in Appendix B to this Prospectus. The settlement procedures to be used
with respect to Auctions are set forth in Appendix C to this Prospectus.
AUCTION DATES
An Auction for Stock of each Series to determine the Dividend Rate for each
Dividend Period for such Series after the Initial Dividend Period will be held
on the first Business Day prior to the first day of such Dividend Period.
ORDERS BY EXISTING HOLDERS AND POTENTIAL HOLDERS IN AN AUCTION
On or prior to the Submission Deadline (as defined under "Submission of
Orders by Broker-Dealers to Trust Company" below) on each Auction Date for a
Series;
(a) each Existing Holder may submit to a Broker-Dealer by telephone a:
(i) Hold Order--indicating the number of Outstanding Shares of
Subject Stock, if any, held by such Existing Holder which such Existing
Holder desires to continue to hold for the next succeeding Dividend
Period without regard to the rate determined by the Auction Procedures;
(ii) Bid--indicating the number of Outstanding Shares of Subject
Stock, if any, held by such Existing Holder which such Existing Holder
desires to continue to hold for the next succeeding Dividend Period if
the rate determined by the Auction Procedures shall not be less than
the rate per annum specified by such Existing Holder; and/or
(iii) Sell Order--indicating the number of Outstanding Shares of
Subject Stock, if any, held by such Existing Holder which such Existing
Holder offers to sell without regard to the rate determined by the
Auction Procedures; and
(b) Broker-Dealers will contact prospective purchasers of Shares of
Subject Stock of such Series (each such prospective purchaser is herein
referred to as a "Potential Holder" and the term Potential Holder includes
an Existing Holder with respect to an offer by such Existing Holder to
purchase additional Shares of Subject Stock of such Series) by telephone or
otherwise to determine whether such Potential Holders desire to submit
Bids. In these Bids, Potential Holders will indicate the number of Shares
of Subject Stock of such Series that they offer to purchase if the rate
determined by the Auction Procedures for such Series for the next Dividend
Period shall not be less than the rates per annum specified in those Bids.
13
<PAGE>
The communication to a Broker-Dealer of the foregoing information is herein
referred to as an "Order" and collectively as "Orders." An Existing Holder or
a Potential Holder placing an Order is herein referred to as a "Bidder" and
collectively as "Bidders."
An Existing Holder may submit different types of Orders in an Auction with
respect to Shares of Subject Stock of a Series held by such Existing Holder;
provided, however, that the total number of Shares of Subject Stock covered by
Hold or Sell Orders does not exceed the number of Shares of Subject Stock of
such Series then held by the Existing Holder. For information concerning the
priority given to different types of Orders place by Existing Holders, see
"Submission of Orders by Broker-Dealers to Trust Company" below.
Any Bid specifying a rate higher than the Maximum Rate will (i) be treated
as a Sell Order if submitted by an Existing Holder and (ii) not be accepted if
submitted by a Potential Holder. The Auction Procedures establish the Maximum
Rate as the maximum rate per annum that can be determined in an Auction. See
"Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable
Rate" and "Acceptance and Rejection of Submitted Bids and Submitted Sell
Orders and Allocation of Shares in an Auction" below.
Pursuant to the terms of the Master Purchaser's Letter, a Sell Order placed
by an Existing Holder will constitute an irrevocable offer to sell, and if the
rate specified in a Bid is greater than the rate determined in an Auction, a
Bid placed by an Existing Holder will constitute an irrevocable offer to sell
the number of Shares of Subject Stock subject thereto. A Bid made by a
Potential Holder will constitute an irrevocable offer to purchase the number
of Shares of Subject Stock specified in that Bid if the rate specified in the
Bid is lower than or equal to the rate determined in the Auction. The number
of Shares of Subject Stock purchased or sold may be subject to proration
procedures. See "Acceptance and Rejection of Submitted Bids and Submitted Sell
Orders and Allocation of Shares in an Auction" below. Each purchase or sale
shall be made for settlement on the Business Day following the Auction Date at
a price per Share of $100,000. See "Notification of Auction Results;
Settlement" below.
If an Order or Orders covering all of the Outstanding Shares of Subject
Stock held by any Existing Holder is or are not submitted for any reason to
the Trust Company prior to the Submission Deadline (as defined below), whether
or not a Broker-Dealer failed to contact such Existing Holder, the Trust
Company will deem a Hold Order to have been submitted on behalf of such
Existing Holder covering the number of Outstanding Shares of Subject Stock
held by such Existing Holder and not subject to Orders submitted to the Trust
Company, except that a Sell Order will be deemed to have been submitted on
behalf of an Existing Holder if an Order is not submitted on behalf of such
Existing Holder in the case of an Auction for a Dividend Period which differs
in duration by more than seven days from the preceding Dividend Period or an
Auction for a Dividend Period of two years or more. The Trust Company may rely
upon the terms of any Order submitted to it by a Broker-Dealer.
For the purposes of an Auction, Shares for which the Company shall have
given notice of redemption as set forth under "Description of the Stock--
Redemption" will not be considered as Outstanding and will not be included in
such Auction. Neither the Company nor any Affiliate thereof may submit an
Order in an Auction.
SUBMISSION OF ORDERS BY BROKER-DEALERS TO TRUST COMPANY
Prior to 1:00 p.m., New York City time, on each Auction Date, or such other
time on the Auction Date as specified by the Trust Company with the consent of
the Company (the "Submission Deadline"), each Broker-Dealer will submit to the
Trust Company in writing all Orders obtained by it for the Auction to be
conducted on such Auction Date.
If any rate specified in any Bid contains more than three figures to the
right of the decimal point, the Trust Company shall round such rate up to the
next highest one-thousandth (.001 of 1%).
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If one or more Orders are submitted to the Trust Company by any Existing
Holder which cover more than the aggregate number of Shares of Subject Stock
of a Series held by that Existing Holder, such Orders will be considered valid
in the following order of priority:
(i) all Hold Orders shall be considered valid, but only up to and
including the aggregate number of Shares of Subject Stock held by that
Existing Holder and if the number of Shares of Subject Stock subject to
those Hold Orders exceeds the number of Shares of Subject Stock held by
that Existing Holder, the number of Shares of Subject Stock subject to each
Hold Order will be reduced pro rata to cover the number of shares of
Subject Stock held by that Existing Holder;
(ii) (A) any Bid will be considered valid up to and including the excess
of the number of Outstanding Shares of Subject Stock held by such Existing
Holder over the number of Shares of Subject Stock subject to any Hold Order
referred to in clause (i) above;
(B) Subject to subclause (A), if more than one Bid with the same rate
is submitted on behalf of an Existing Holder and the number of Shares
of Subject Stock subject to those Bids is greater than the excess
described in the preceding subclause (A), those Bids will be considered
valid up to the amount of the excess and the number of Shares of
Subject Stock subject to each Bid with the same rate will be reduced
pro rata to cover the number of Shares of Subject Stock equal to such
excess;
(C) subject to subclause (A), if more than one Bid with different
rates is submitted on behalf of an Existing Holder, those Bids will be
considered valid in the ascending order of their respective rates up to
the amount of that excess; and
(D) any Shares of Subject Stock subject to Bids not valid under this
clause (ii) will be treated as the subject of a Bid by a Potential
Holder; and
(iii) all Sell Orders will be considered valid but only up to and
including in the aggregate the excess of the number of Outstanding Shares
of Subject Stock held by that Existing Holder over the sum of the Shares of
Subject Stock subject to Hold Orders referred to in clause (i) and valid
Bids by that Existing Holder referred to in clause (ii) above.
If more than one Bid is submitted on behalf of any Potential Holder, each
Bid submitted shall be a separate Bid specifying the rate and number of Shares
of Subject Stock.
DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND DIVIDEND RATE
Not earlier than the Submission Deadline, the Trust Company will assemble
all Orders submitted or deemed submitted to it by the Broker-Dealers (each
such Hold Order, Bid or Sell Order as submitted or deemed submitted by a
Broker-Dealer being herein referred to as a "Submitted Hold Order," a
"Submitted Bid" or a "Submitted Sell Order," as the case may be, or as a
"Submitted Order," and collectively as "Submitted Hold Orders," "Submitted
Bids" or "Submitted Sell Orders," as the case may be, or as "Submitted
Orders") and will determine the excess of the aggregate number of Outstanding
Shares of Subject Stock over the number of Outstanding Shares of Subject Stock
subject to Submitted Hold Orders (each excess being herein referred to as the
"Available Shares") and whether Sufficient Clearing Bids have been made in the
Auction.
Sufficient Clearing Bids will have been made if the number of Outstanding
Shares of Subject Stock that are subject to Submitted Bids by Potential
Holders specifying rates not higher than the Maximum Rate equals or exceeds
the number of Outstanding Shares of Subject Stock that are the subject of
Submitted Sell Orders (including the number of Shares subject to Bids by
Existing Holders specifying rates higher than the Maximum Rate).
If Sufficient Clearing Bids have been made, the Trust Company, taking into
account the rates in all Submitted Bids of Existing Holders and Potential
Holders, will determine the lowest rate specified in the Submitted Bids (the
"Winning Bid Rate") which, when adding the number of Outstanding Shares of
Subject Stock which would continue to be held by Existing Holders (other than
pursuant to Hold Orders) to the number
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of Outstanding Shares of Subject Stock to be purchased by Potential Holders,
would equal not less than the Available Shares. If Sufficient Clearing Bids
have been made, the Winning Bid Rate will be the Dividend Rate for the next
Dividend Period for all Shares of Subject Stock.
If Sufficient Clearing Bids have not been made (other than because all of
the Outstanding Shares of Subject Stock are subject to Submitted Hold Orders),
the Dividend Rate for the next Dividend Period for all Shares will be equal to
the Maximum Rate. If Sufficient Clearing Bids have not been made, Existing
Holders that have submitted Sell Orders will be unable to sell in the Auction
all Shares subject to those Submitted Sell Orders. See "Acceptance and
Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares
in an Auction" below.
If all of the Outstanding Shares of Subject Stock are subject to Submitted
Hold Orders, the Dividend Rate for the next Dividend Period for all such
Shares will be 58% of the Applicable Determining Rate.
ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL ORDERS AND
ALLOCATION OF SHARES IN AN AUCTION
Based on the determinations made under "Determination of Sufficient Clearing
Bids, Winning Bid Rate and Dividend Rate" above, and subject to the discretion
of the Trust Company to round as described below, Submitted Bids and Submitted
Sell Orders will be accepted or rejected in the order of priority set forth in
the Auction Procedures with the result that Existing Holders and Potential
Holders of Shares will sell, continue to hold and/or purchase Shares of
Subject Stock as set forth below. Existing Holders that submitted or were
deemed to have submitted Hold Orders will continue to hold the Shares subject
to those Hold Orders.
If Sufficient Clearing Bids have been made:
(a) each Existing Holder that placed a Submitted Bid specifying any rate
higher than the Winning Bid Rate or a Submitted Sell Order will sell the
Shares of Subject Stock subject to that Submitted Bid or Submitted Sell
Order;
(b) each Existing Holder that placed a Submitted Bid specifying a rate
lower than the Winning Bid Rate will continue to hold the Shares of Subject
Stock subject to that Submitted Bid;
(c) each Potential Holder that placed a Submitted Bid specifying a rate
lower than the Winning Bid Rate will purchase the Shares of Subject Stock
subject to that Submitted bid;
(d) each Existing Holder that placed a Submitted Bid specifying a rate
equal to the Winning Bid Rate will continue to hold the Shares of Subject
Stock subject to that Submitted Bid, unless the number of Shares of Subject
Stock subject to all such Submitted Bids is greater than the excess of the
Available Shares over the number of Shares of Subject Stock accounted for
in clauses (b) and (c) above, in which event each Existing Holder placing
such a Submitted Bid will sell a number of Shares of Subject Stock subject
to that Submitted Bid determined on a pro rata basis based on the number of
Shares of Subject Stock subject to all such Submitted Bids by the Existing
Holders; and
(e) each Potential Holder that placed a Submitted Bid specifying a rate
equal to the Winning Bid Rate will purchase any Available Shares not
accounted for in clause (b), (c) or (d) above on a pro rata basis based on
the number of Shares of Subject Stock subject to all such Submitted Bids.
If Sufficient Clearing Bids have not been made (except where all Outstanding
Shares of Subject Stock are subject to Submitted Hold Orders):
(a) each Existing Holder that placed a Submitted Bid specifying a rate
equal to or lower than the Maximum Rate will continue to hold the Shares of
Subject Stock subject to that Submitted Bid;
(b) each Potential Holder that placed a Submitted Bid specifying a rate
equal to or lower than the Maximum Rate will purchase the Shares of Subject
Stock subject to that Submitted Bid; and
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(c) each Existing Holder that placed a Submitted Bid specifying a rate
higher than the Maximum Rate or a Submitted Sell Order will sell a pro rata
portion of the number of Shares of Subject Stock held by that Existing
Holder based on the number of Shares of Subject Stock subject to all the
Submitted Bids and Submitted Sell Orders.
If as a result of the Auction Procedures described above, (i) any Existing
Holder would be entitled or required to sell, or any Potential Holder would be
entitled or required to purchase, a fraction of a Share of Subject Stock, the
Trust Company will round up or down the number of Shares of Subject Stock
being sold and purchased on that Auction Date so that the number of Shares of
Subject Stock sold or purchased by each Existing Holder or Potential Holder
will be whole Shares of Subject Stock and (ii) any Potential Holder would be
entitled or required to purchase less than a whole Share of Subject Stock, the
Trust Company will allocate Shares of Subject Stock to purchase among
Potential Holders so that only whole Shares of Subject Stock are purchased by
any Potential Holder, even if that allocation results in one or more of the
Potential Holders not purchasing Shares of Subject Stock.
NOTIFICATION OF AUCTION RESULTS; SETTLEMENT
The Trust Company will advise each Broker-Dealer that submitted a Bid or
Sell Order on behalf of a Bidder by telephone at approximately 3:00 p.m., New
York City time, on each Auction Date whether such Bid or Sell Order was
accepted, in whole or in part, or rejected and the Dividend Rate for the next
Dividend Period. Each Broker-Dealer that submitted a Bid or Sell Order on
behalf of a Bidder will then advise the Bidder whether such Bid or Sell Order
was accepted, in whole or in part, or rejected; will confirm purchases and
sales with each Bidder purchasing or selling Shares of Subject Stock as a
result of the Auction; and will advise each Bidder purchasing or selling
Shares of Subject Stock subject to that Auction to instruct its Agent Member
of the Stock Depository to pay the purchase price against delivery of such
Shares of Subject Stock or to deliver such Shares of Subject Stock against
payment therefor as appropriate. Each Broker-Dealer that submitted a Hold
Order on behalf of an Existing Holder will also advise such Existing Holder of
the Dividend Rate for the next Dividend Period. The Trust Company will record
on the registry of Existing Holders to be maintained by the Trust Company each
transfer of Shares of Subject Stock subject to that Auction. See "General"
above.
In accordance with the Stock Depository's normal procedures, on the Business
Day after the Auction Date, the transactions described above will be executed
through the Stock Depository and the accounts of the respective Agent Members
at the Stock Depository will be debited and credited and Shares of Subject
Stock delivered as necessary to effect the purchases and sales of Shares of
Subject Stock as determined in the Auction. Purchasers will make payment to
the Stock Depository through their Agent Members in same-day funds against
delivery; the Stock Depository will make payments in accordance with its
normal procedures for payment in same day funds.
If any Existing Holder selling Shares of Subject Stock in an Auction fails
to deliver those Shares of Subject Stock, the Broker-Dealer of any person that
was to have purchased Shares of Subject Stock in such Auction may deliver to
such person a number of whole Shares of Subject Stock that is less than the
number of Shares of Subject Stock that otherwise was to be purchased by such
person. In such event, the number of Shares of Subject Stock to be so
delivered will be determined by such Broker-Dealer. Delivery of such lesser
number of Shares of Subject Stock will constitute delivery.
CONCERNING THE TRUST COMPANY
The Trust Company is acting as agent for the Company in connection with the
Auctions. In the absence of bad faith or negligence on its part, the Trust
Company will not be liable for any action taken, suffered, or omitted or for
any error of judgment made by it in the performance of its duties under the
Trust Company Agreement and will not be liable for any error of judgment made
in good faith unless the Trust Company shall have been negligent in
ascertaining the pertinent facts.
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The Trust Company may upon notice to the Company terminate the Trust Company
Agreement on a date no earlier than the first to occur of (i) the first
Business Day after the date occurring 90 days after the giving of such notice
or (ii) the date on which the Company has entered into an agreement containing
substantially the same terms and conditions as the Trust Company Agreement
with a successor Trust Company. If the Trust Company resigns, the Company will
use its best efforts to enter into an agreement in respect of the Stock of
each Series with a successor Trust Company containing substantially the same
terms and conditions as the Trust Company Agreement. The Company may terminate
the Trust Company Agreement at any time, provided that prior to the
termination, the Company shall have entered into an agreement containing
substantially the same terms and conditions with a successor Trust Company.
BROKER-DEALERS
The Trust Company after each Auction will pay a service charge, from funds
provided by the Company, to each Broker-Dealer which initially will be at the
annual rate of 1/4 of 1% of the purchase price of Shares of Subject Stock
placed by such Broker-Dealer at such Auction. For the purposes of the
preceding sentence, Shares of Subject Stock will be considered as placed by a
Broker-Dealer if the Shares were (i) the subject of Hold Orders deemed to have
been made by Existing Holders and were acquired by such Existing Holders
through that Broker-Dealer or (ii) the subject of the following Orders
submitted by that Broker-Dealer: (A) a Submitted Bid of an Existing Holder
that was accepted so that such Existing Holder continues to hold those Shares
of Subject Stock as a result of the Auction, (B) a Submitted Bid of a
Potential Holder that was accepted so that the Potential Holder purchases
those Shares of Subject Stock as a result of the Auction or (C) a valid Hold
Order.
The Broker-Dealer Agreements provide that a Broker-Dealer may submit Orders
in Auctions for its own account, unless the Company notifies all Broker-
Dealers that they may no longer do so. However, in that case, Broker-Dealers
may continue to submit Hold Orders and Sell Orders. Any Broker-Dealer
submitting an Order for its own account in any Auction might have an advantage
over other Bidders in that it would have knowledge of other Orders placed
through it in that Auction, but it would not have knowledge of Orders
submitted by other Broker-Dealers. In the Broker-Dealer Agreements, Broker-
Dealers agree to handle customer orders in accordance with their respective
duties under applicable securities laws and rules. A Broker-Dealer that is an
Affiliate of the Company may not submit for its own account Bids or Hold
Orders in Auctions.
TAX CONSIDERATIONS
The following discussion of certain U.S. Federal income tax consequences to
holders of Shares of Stock is based upon the provisions of the Code,
applicable Treasury regulations thereunder, judicial authority and
administrative rulings and practice now in effect. Future legislative,
judicial or administrative changes or interpretations, which may or may not be
retroactive, could modify such tax consequences. The Company has not
requested, and does not intend to request, any rulings from the Internal
Revenue Service (the "IRS") concerning the Federal income tax consequences of
an investment in Shares of Stock. The summary below does not discuss all
aspects of Federal income taxation that may be relevant to a particular holder
in light of the holder's particular investment circumstances, or to certain
types of holders subject to special treatment under the Federal income tax
laws (for example, dealers in securities, life insurance companies, tax-exempt
entities, and foreign persons), and does not discuss any aspect of state,
local or foreign tax laws.
EACH PROSPECTIVE HOLDER IS ADVISED TO CONSULT WITH ITS OWN TAX ADVISOR
REGARDING THE CONSEQUENCES OF ACQUIRING, HOLDING OR DISPOSING OF SHARES OF
STOCK IN LIGHT OF CURRENT TAX LAWS, THE HOLDER'S PARTICULAR INVESTMENT
CIRCUMSTANCES, AND THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS.
FEDERAL INCOME TAXES
In the opinion of James M. Kalashian, General Tax Counsel of General
Electric Capital Corporation, tax counsel to the Company, (i) the Shares of
Stock will constitute stock of the Company for Federal income tax
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purposes, (ii) distributions on Shares of Stock, to the extent paid out of
current or accumulated earnings and profits of the Company (as calculated for
Federal income tax purposes), will constitute dividends for Federal income tax
purposes and (iii) any beneficial owner of Shares of Stock that is a
corporation otherwise entitled to the 70% dividends-received deduction under
Section 243(a)(1) of the Code (the "Dividends-Received Deduction") will be
entitled to the Dividends-Received Deduction with respect to distributions on
Shares of Stock that are treated as dividends of the Company for Federal
income tax purposes. Although in Revenue Ruling 90-27 the IRS determined,
among other things, that the use of a dutch auction similar to the Auction
Procedures to reset the dividend rate on the Stock would not result in
preferred stock being characterized as debt rather than stock, it is possible
that the IRS might take the position that the Shares of Stock constitute debt
rather than stock for Federal income tax purposes. If this position were
upheld, distributions by the Company to the holders of Shares of Stock would
constitute interest income, not eligible for the Dividends-Received Deduction.
It should be noted that opinions of counsel are not binding on the Service or
on the courts and it is possible that the Service might take positions
contrary to the opinions of counsel expressed herein. In order to enable
counsel to render its opinions, the Company has provided counsel with certain
representations upon which the opinion relies.
Corporate holders of Shares of Stock should be aware that Section 246(c) of
the Code, which was recently amended, disallows the Dividends-Received
Deduction in its entirety if the stock with respect to which the dividend is
paid is not held for at least 46 days during the 90-day period that begins 45
days before the date on which such Shares of Stock becomes ex-dividend with
respect to each dividend. To the extent that a holder receives a dividend with
respect to such Shares of Stock which is attributable to a period or periods
aggregating in excess of 366 days, the shares must be held at least 91 days
during the 180 day period that begins 90 days before such Shares of Stock
becomes ex-dividend with respect to each dividend (together with the 46-day
period referred to in the prior sentence, the "Minimum Holding Period"). A
holder may not count towards the Minimum Holding Period any period in which
the holder (i) has an option to sell, is under a contractual obligation to
sell or has made (and not closed) a short sale of the Shares of Stock or
substantially identical stock or securities, (ii) is the grantor of an option
to buy (other than a qualified covered call) such Shares or substantially
identical stock or securities or (iii) has otherwise diminished its risk of
loss by holding one or more other positions with respect to substantially
similar or related property. Treasury Regulations provide, generally, that a
taxpayer has diminished its risk of loss on stock by holding positions with
respect to substantially similar or related property if, when the positions
are entered into, changes in the fair market value of the stock and the
positions are expected to vary inversely. In addition, positions that reflect
the value of more than one stock may, in certain circumstances, be considered
to be substantially similar or related property that diminishes the risk of
loss with respect to the stock. Furthermore, Section 246(c) of the Code
disallows the Dividends-Received Deduction for a dividend if the holder of the
Shares of Stock is obligated to make related payments with respect to
positions in substantially similar or related property. This disallowance
applies even if the Minimum Holding Period has been met.
Shares of Stock may have Dividend Periods of less than 46 days. Holders of
Shares of Stock who are entitled to receive a dividend prior to meeting the
applicable Minimum Holding Period requirement will not be entitled to the
Dividends-Received Deduction unless they ultimately hold their Shares of Stock
for at least 46 (or 91) days during the relevant period. Furthermore, the IRS
may argue that a holder who has elected to retain its Shares of Stock upon a
change in the Dividend Rate and/or the length of the Dividend Period with
respect to such Shares of Stock has constructively exchanged its Shares of
Stock for another class of Shares of Stock. Even if the transaction were so
treated, (i) no gain or loss would be recognized by the holder or the Company,
(ii) the Shares of Stock deemed received in the transaction would have a basis
equal to that of the Shares of Stock deemed surrendered and (iii) the holder
would include the holding period of the Shares of Stock deemed surrendered in
its holding period of the Shares of Stock deemed received, provided the Shares
of Stock deemed surrendered were held as a capital asset at the time of the
constructive exchange. Thus, a holder would meet the Minimum Holding Period
with respect to dividends received subsequent to such an exchange if, upon
adding the holding period of the Shares of Stock deemed surrendered to the
holding period of the shares deemed received, the sum of such holding periods
were greater than the Minimum Holding Period during the relevant period. It is
possible, however, that the holding period of the Shares of Stock deemed
received in the exchange would not be added to the holding period of the
Shares of Stock deemed surrendered, which might result in a holding period
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of less than the Minimum Holding Period for the Shares of Stock deemed
surrendered. Although there is no authority regarding the application of the
holding period provisions in this situation, counsel is of the opinion that
Section 246(c) of the Code is likely to be construed so as to permit
continuation of the holding period for purposes of the Dividend-Received
Deduction with respect to dividends paid on shares deemed surrendered in such
an exchange. This possibility would not affect the treatment of dividends for
periods after the exchange, if the aggregate holding period, including the
holding period of the Shares deemed surrendered in the exchange, satisfied the
Minimum Holding Period requirement. Prospective investors who intend to
purchase Shares with a Dividend Period of less than 46 days (or 91 days, as
the case may be) should consult their own tax advisors as to whether the
dividend related to a Dividend Period that is shorter than the Minimum Holding
Period will ultimately qualify for the Dividends-Received Deduction where such
investor holds such Shares, in total, for at least 46 days (or 91 days, as the
case may be).
Section 246A of the Code provides for the reduction or elimination of the
Dividends-Received Deduction where a corporation has indebtedness "directly
attributable to investment" in portfolio stock, such as Shares of Stock.
In addition, corporate holders should be aware that dividend income that is
not subject to regular corporate taxation as a consequence of the Dividends-
Received Deduction may give rise to alternative minimum tax liability.
Under Section 1059 of the Code, which was recently amended, a corporate
holder may be required to reduce its tax basis in any Shares of Stock (but not
below zero) by the "nontaxed portion" of any "extraordinary dividend" it
receives from the Company with respect to such Stock, if it has not held the
underlying Stock for more than two years (or without regard to holding period
in the case of preferred stock structured to avoid application of Section
1059) before the dividend announcement date (i.e., the date on which the
Company declares, announces, or agrees to either the amount or the payment of
the dividend, whichever is earliest). Periods that would be excluded from the
determination of the Minimum Holding Period (as described above) are also
excluded from the determination of the two-year period. Extraordinary
dividends are determined by reference to tax basis (as adjusted for prior
distributions) or, if the taxpayer elects, by reference to the fair market
value of the Shares of Stock as of the day before the ex-dividend date
(provided the taxpayer can establish the fair market value to the satisfaction
of the IRS). A dividend payment generally will be extraordinary if it equals
or exceeds 5% of tax basis (as adjusted) or fair market value, as the case may
be. Dividends paid that have ex-dividend dates within 85 consecutive days are
treated as one distribution, as are dividends paid that have ex-dividend dates
within 365 consecutive days if the aggregate dividends exceed 20% of tax basis
(as adjusted) or fair market value, as the case may be.
The "nontaxed portion" of the dividend generally is equal to the Dividends-
Received Deduction. The reduction in basis will increase any gain (or reduce
the amount of any loss) realized by the holder on a sale, redemption or other
disposition of Shares of Stock. In addition, if the reduction would otherwise
exceed tax basis (as adjusted), the amount of such excess will be taxable as
gain from the sale or exchange of Shares of Stock in the taxable year in which
the extraordinary dividend is received.
To the extent that distributions are made by the Company to the holders of
Shares of Stock that do not constitute dividends for Federal income tax
purposes because they exceed current and accumulated earnings and profits of
the Company, such distributions will be treated for Federal income tax
purposes as a return of capital, which will first reduce the holder's basis in
the Shares of Stock by the amount of such excess and then, to the extent such
distributions are in excess of the holder's basis, result in capital gain
(provided the Shares of Stock are held by the holder as a capital asset).
STATE AND LOCAL INCOME TAXES
The holders of Shares of Stock may be liable for state and local income
taxes with respect to dividends paid on Shares of Stock. As many states and
localities may not allow, in whole or in part, a Dividends-Received Deduction
to corporations, each prospective purchaser of Shares of Stock is advised to
consult its own tax advisor in regard to state and local taxes.
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UNDERWRITING
From time to time, the Company may receive, and may solicit, offers from
underwriters to purchase all or a part of any Series of Stock, to be reoffered
to the public through underwriting syndicates led by one or more managing
underwriters or through one or more underwriters acting alone or otherwise.
The managing underwriter or underwriters, if any, with respect to the offer
and sale of any Series of Stock to which the Prospectus Supplement
accompanying this Prospectus relates are set forth in such Prospectus
Supplement and the members of the underwriting syndicate, if any, are named in
such Prospectus Supplement. The Company will execute an underwriting agreement
(the "Underwriting Agreement") with any such underwriters at the time of sale
to them and the names of the underwriters and the terms of the transaction
will be set forth in the Prospectus Supplement, which will be used by the
underwriters to make resales of any Series of Stock in respect of which this
Prospectus is delivered to the public. Such Prospectus Supplement also will
state the discounts and commissions, if any, to be allowed or paid to the
underwriters by the Company, and describe all other items, if any,
constituting underwriting compensation, the discounts and commissions to be
allowed or paid to dealers, if any, and the exchanges, if any, on which
application will be made to list any Series of Stock.
GE Capital Services, which owns all of the outstanding common stock of the
Company, currently owns through subsidiaries (including the Company)
approximately 22% of the issued and outstanding common stock of PaineWebber
Group Inc. ("PaineWebber") and the Company owns Redeemable Preferred Stock of
PaineWebber. As a result, any offering of the Shares is required to be made in
compliance with the applicable provisions of Rule 2720 of the Conduct Rules of
the National Association of Securities Dealers, Inc. ("NASD"), which Rule
applies to offerings of securities of issuers affiliated with NASD members. In
accordance therewith, no underwriter or dealer may confirm sales of the Shares
to accounts over which they exercise discretionary authority.
The relevant Underwriting Agreement will provide that the obligations of the
underwriters are subject to certain conditions precedent, and the Company will
agree, under the Underwriting Agreement, to indemnify the underwriters against
certain civil liabilities, including liabilities under the Securities Act of
1933.
LEGAL OPINIONS
Except as may be otherwise specified in the Prospectus Supplement
accompanying this Prospectus, the legality of the Stock will be passed upon
for the Company by Nancy E. Barton, a director and Senior Vice President,
General Counsel and Secretary of the Company, or Bruce C. Bennett, Associate
General Counsel, Treasury Operation and Assistant Secretary of the Company;
and for any underwriters by Davis Polk & Wardwell, 450 Lexington Avenue, New
York, New York 10017. Ms. Barton and Messrs. Bennett and James M. Kalashian
(who is referred to under "Tax Considerations"), together with members of
their families, own, have options to purchase and have other interests in
shares of common stock of GE Company.
EXPERTS
The financial statements and schedule of General Electric Capital
Corporation and consolidated affiliates as of December 31, 1996 and 1995 and
for each of the years in the three-year period ended December 31, 1996,
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, have been incorporated by reference herein in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
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APPENDIX A
GLOSSARY OF TERMS
"Affiliate" shall mean any Person known to the Trust Company to be
controlled by, in control of or under common control with the Company.
"Agent Member" shall mean the member of the Stock Depository that will act
on behalf of a Bidder and is identified as such in such Bidder's Master
Purchaser's letter.
"Applicable Determining Rate" shall mean with respect to a Dividend Period
of seven days to 89 days, the Effective Composite Commercial Paper Rate; with
respect to a Dividend Period of 90 days to 364 days, the Effective LIBOR Rate;
with respect to a Dividend Period of two years to 10 years, the U.S. Treasury
Note Rate; and with respect to a Dividend Period in excess of 10 years, the
U.S. Treasury Bond Rate.
"Auction" shall mean the periodic implementation of the Auction Procedures.
"Auction Date" shall mean the Business Day immediately preceding the first
day of a Dividend Period for Stock.
"Auction Method" shall mean a method of determining Dividend periods and
Dividend Rates for the Shares of Stock of a Series pursuant to the Auction
Procedures, as described in this Prospectus.
"Auction Procedures" shall mean the procedures for conducting Auctions set
forth in Appendix B to this Prospectus.
"Available Shares" shall have the meaning specified in paragraph (a) of
Section 3 of the Auction Procedures.
"Bid" and "Bids" shall have the respective meanings specified in paragraph
(a) of Section 1 of the Auction Procedures.
"Bidder" and "Bidders" shall have the respective meanings specified in
paragraph (a) of Section 1 of the Auction Procedures.
"Broker-Dealer" shall mean any broker-dealer, or other entity permitted by
law to perform the function required of a Broker-Dealer in the Auction
Procedures that is a member of, or a participant in, the Stock Depository, and
that has been selected by the Company and has entered into a Broker-Dealer
Agreement with the Trust Company that remains effective.
"Broker-Dealer Agreement" shall mean an agreement between the Trust Company
and Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the
Auction Procedures.
"Business Day" shall mean a day on which the New York Stock Exchange, Inc.,
is open for trading and which is neither a Saturday, Sunday nor other day on
which banks in the City of New York, New York, are authorized by law to close.
"Cede" shall mean Cede & Co.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the shares of Common Stock, par value of $200 per
share, of the Company.
"Company" shall mean General Electric Capital Corporation, a New York
corporation.
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"Date of Original Issue" shall mean, as to any Share of Stock, the date on
which the Company initially issues such Shares.
"Dividend Payment Date" shall mean, with respect to each Share of Stock, the
last day of each Dividend Period applicable thereto, regardless of its length,
and, in addition, in the case of Dividend Periods of more than 99 days, on the
following additional dates: (a) if such Dividend Period is from 100 to 190
days, on the 91st day; (b) if such Dividend Period is from 191 to 281 days, on
the 91st and 182nd days; (c) if such Dividend Period is from 282 to 364 days,
on the 91st, 182nd and 273rd days; and (d) if such Dividend Period is from two
to 30 years, on January 15, April 15, July 15 and October 15 of each year;
provided, however, that in all such cases, if such date is not a Business Day,
the Dividend Payment Date will be the Business Day next succeeding such date.
"Dividend Period" and "Dividend Periods" shall mean, as to each Share of
Stock, each period with respect to which dividends on such Share accumulate
and are payable, each such dividend period to be determined pursuant to the
Auction Method.
"Dividend Rate" and "Dividend Rates" shall mean, as to each Share of Stock,
each rate at which dividends accumulate and are payable on such Share, such
dividend rate to be determined pursuant to the Auction Method.
"Dividends-Received Deduction" shall mean the deduction that a corporation
is entitled to under Section 243(a)(1) of the Code with respect to
distributions made on Shares of Stock that are treated as dividends for
Federal income tax purposes provided that the minimum holding period in
Section 246 of the Code and other requirements applicable to the particular
holder are met.
"DTC" shall mean The Depository Trust Company.
"Effective Composite Commercial Paper Rate" shall mean, on any date, (i) the
Money Market Yield of the rate on commercial paper placed on behalf of issuers
whose corporate bonds are rated "AA" by Standard & Poor's or "Aa" by Moody's
or the equivalent of such rating by another nationally recognized rating
agency, for a maturity that equals the duration of the relevant Dividend
Period as such rate is made available on a discount basis or otherwise by the
Federal Reserve Bank of New York on such date, or (ii) in the event that the
Federal Reserve Bank of New York does not make available such a rate by 2:00
p.m., New York City time, on such date, the Money Market Yield of the
arithmetic mean of the rates on commercial paper of such maturity placed on
behalf of such issuers, as quoted on a discount basis or otherwise by Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs & Co., and Lehman
Commercial Paper Incorporated, or, in lieu of any thereof, their respective
affiliates or successors that are commercial paper dealers (the "Commercial
Paper Dealers"), to the Trust Company or Tender Agent, as the case may be, for
the close of business on the Business Day immediately preceding such date. In
the event that the Federal Reserve Bank of New York does not make available
such a rate and if any Commercial Paper Dealer does not quote a rate required
to determine the Effective Composite Commercial Paper Rate, the Effective
Composite Commercial Paper Rate shall be determined on the basis of the
quotation or quotations furnished by the remaining Commercial Paper Dealer or
Commercial Paper Dealers and any Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers selected by the Company to provide such
rate or rates not being supplied by any Commercial Paper Dealer or Commercial
Paper Dealers, as the case may be, or, if the Company does not select any such
Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by
the remaining Commercial Paper Dealer or Commercial Paper Dealers. "Substitute
Commercial Paper Dealers" shall mean The First Boston Corporation or Morgan
Stanley & Co. Incorporated or, in lieu of either thereof, their respective
affiliates or successors that are commercial paper dealers. In the event that
no quoted rates are available for a maturity that equals the duration of the
relevant Dividend Period, then the rate will be the higher of the quoted rates
for the maturity immediately shorter or immediately longer than the duration
of the relevant Dividend Period.
"Effective LIBOR Rate" shall mean, on any date, the offered rates for
deposits in dollars for a period of the same duration as the relevant Dividend
Period, which appear on the Reuters Screen LIBO Page as of
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11:00 a.m., London time, on such date. If at least two such offered rates
appear on the Reuters Screen LIBO Page, the Effective LIBOR Rate in respect of
such date will be the arithmetic mean of such offered rates. If fewer than two
offered rates appear, the Effective LIBOR Rate in respect of such date will be
determined on the basis of the rates quoted to the Trust Company at which
deposits in dollars are offered by the Reference Banks at approximately 11:00
a.m., London time, on the day that is the Business Day preceding such date to
prime banks in the London interbank market for a period of the same duration
as the relevant Dividend Period. The Company will request the principal London
office of each of the Reference Banks to provide a quotation of such rate to
the Trust Company. If at least two such quotations are provided, the Effective
LIBOR Rate in respect of such date will be the arithmetic mean of the
quotations. If fewer than two quotations are provided as requested, the
Effective LIBOR Rate in respect of such date will be the arithmetic mean of
the rates quoted to the Trust Company by major banks in New York City,
selected by the Company, at approximately 11:00 a.m., New York City time, on
such date for loans in dollars to leading European banks for a period of the
same duration as the relevant Dividend Period. "Reference Banks" means four
major banks in the London interbank market, selected by the Company. In the
event that no quoted rates are available for a maturity that equals the
duration of the relevant Dividend Period, then the rate will be the higher of
the quoted rates for the maturity immediately shorter or immediately longer
than the duration of the relevant Dividend Period.
"Existing Holder" shall mean, when used with respect to Shares of Stock, a
Person who has signed a Master Purchaser's Letter and is listed as the
beneficial owner of such Shares of such Series of Stock in the records of the
Trust Company.
"Federal Funds Rate" shall mean, on any date (i) the overnight Federal funds
rate as such rate is made available by the Federal Reserve Bank of New York or
(ii) in the event that the Federal Reserve Bank of New York does not make
available such a rate by 2:00 p.m., New York City time, on any day, then the
arithmetic mean of the rates for the last transaction in overnight Federal
funds arranged by each of the three leading brokers of Federal funds
transactions in New York City as selected by the Company prior to 9:00 a.m.,
New York City time, on that day.
"GE Capital Services" shall mean General Electric Capital Services, Inc., a
Delaware corporation.
"GE Company" shall mean General Electric Company, a New York corporation.
"Hold Order" and "Hold Orders" shall have the respective meanings specified
in paragraph (a) of Section 1 of the Auction Procedures.
"Initial Dividend Period" shall mean, for each Share, the initial Dividend
Period applicable to such Shares.
"IRS" shall mean the Internal Revenue Service.
"Master Purchaser's Letter" shall mean a letter addressed to the Company,
the Trust Company and an Agent Member in which a Person agrees that if such
Person should offer to purchase, purchase, offer to sell and/or sell Shares of
a Series of Stock, such Person will be bound by the Auction Procedures.
"Maximum Rate" shall mean, on any date, with respect to any Share of Stock,
the percentage (determined as set forth below based on the prevailing rating
of such Share of Stock in effect at the close of business on the Business Day
immediately preceding such date and on the duration of the relevant Dividend
Period) of the Applicable Determining Rate for such Share on such date;
provided, however, that during the continuance of a Payment Failure the
applicable percentage shall be 200%:
<TABLE>
<CAPTION>
FOR DIVIDEND PERIODS FOR DIVIDEND PERIODS
PREVAILING RATING OF LESS THAN ONE YEAR OF TWO YEARS OR MORE
----------------- --------------------- --------------------
<S> <C> <C>
AA/Aa or above.................. 110% 125%
A/A............................. 125% 140%
BBB/Baa......................... 150% 175%
Below BBB/Baa................... 200% 225%
</TABLE>
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For purposes of this definition, the "prevailing rating" of each Series of
the Stock shall be (i) AA/Aa or above, if the Shares of Stock have a rating of
AA- or better by Standard & Poor's and Aa3 or better by Moody's or the
equivalent of both of such ratings by a substitute rating agency or agencies
selected as provided below, (ii) if not AA/Aa or above, then A/A if the Shares
of each Series of the Stock have a rating of A- or better by Standard & Poor's
and A3 or better and by Moody's or the equivalent of both of such ratings by a
substitute rating agency or agencies selected as provided below, (iii) if not
AA/Aa or above or A/A, then BBB/Baa if the Shares of each Series of the Stock
have a rating BBB- or better by Standard & Poor's and Baa3 or better by
Moody's or the equivalent of both of such ratings by a substitute rating
agency or agencies selected as provided below, and (iv) if not AA/Aa or above,
A/A or BBB/Baa, then below BBB/Baa. The Company will take all reasonable
action necessary to enable Standard & Poor's and Moody's to provide a rating
for each Series of the Stock. If either Standard & Poor's or Moody's fails to
make such a rating available, the Company will select one or two nationally
recognized securities rating agencies to act as a substitute rating agency or
agencies, as the case may be.
"Money Market Yield" shall mean, with respect to any rate that is quoted on
a bank discount basis, a yield (expressed as a percentage) calculated in
accordance with the following formula:
D X 360
Money Market Yield = X 100
360 - (D X M)
where "D" refers to the per annum rate, quoted on a bank discount basis and
expressed as a decimal; and "M" refers to the number of days for which such
discount rate is quoted.
"Moody's" shall mean Moody's Investor Services, Inc. and its successors.
"1986 Act" shall mean the Tax Reform Act of 1986, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Order" and "Orders" shall have the respective meanings specified in
paragraph (a) of Section 2 of the Auction Procedures.
"Organization Certificate" shall mean the Organization Certificate of the
Company, as amended and restated to the date hereof.
"Outstanding" shall mean, as of any date, Shares of a Series of Stock
theretofore issued by the Company except (i) any Shares of such Series of
Stock theretofore cancelled or delivered for cancellation or redeemed by the
Company or as to which a notice of redemption shall have been given by the
Company, (ii) any Shares of such Series of Stock as to which the Company or
any Affiliate thereof shall be an owner (except that any Shares acquired by an
Affiliate that is a Broker-Dealer and that acquired such Shares in the normal
course of its business shall be deemed to be Outstanding), or (iii) any Shares
of such Series of Stock represented by any certificate in lieu of which a new
certificate has been executed and delivered by the company.
"Paying Agent" shall mean a bank or trust company duly appointed as such
Paying Agent.
"Payment Failure" shall mean that the Company shall fail to pay: (i) all
dividends in respect of any Share of Stock which have accumulated during any
Dividend Period applicable to such Share by no later than the third Business
Day following the last day of such Dividend Period or (ii) the redemption
price in respect of Shares of Stock called for redemption on the date when due
if, in each such case, such failure shall continue unremedied.
"Person" shall mean and include an individual, a partnership, a corporation,
a trust, an unincorporated association, a joint venture or other entity or a
government or any agency or political subdivision thereof.
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"Potential Holder" shall mean any Person, including any Existing Holder, (i)
who shall have executed a Master Purchaser's Letter and (ii) who may be
interested in acquiring Shares of Stock of such Series (or, in the case of an
Existing Holder, additional Shares of Stock of such Series).
"Sell Order" and "Sell Orders" shall have the respective meanings specified
in paragraph (a) of Section 1 of the Auction Procedures.
"Series" shall mean a series of Stock.
"Shares" shall mean the shares of Stock.
"Standard & Poor's" shall mean Standard & Poor's Corporation and its
successors.
"Stock" shall mean the Variable Cumulative Preferred Stock of the Company.
"Stock Depository" shall mean The Depository Trust Company and its
successors or any other securities depository selected by the Company which
agrees to follow the procedures required to be followed by such securities
depository in connection with Shares of Stock.
"Subject Stock" shall mean, with respect to any Auction Date, the Shares of
Stock subject to Auction on such date.
"Submission Deadline" shall mean 1:00 p.m., New York City time, on any
Auction Date or such other time on any Auction Date by which Broker-Dealers
are required to submit Orders to the Trust Company as specified by the Trust
Company from time to time.
"Submitted Bid" and "Submitted Bids" shall have the respective meanings
specified in paragraph (a) of Section 3 of the Auction Procedures.
"Submitted Hold Order" and "Submitted Hold Orders" shall have the respective
meanings specified in paragraph (a) of Section 3 of the Auction Procedures.
"Submitted Order" and "Submitted Orders" shall have the respective meanings
specified in paragraph (a) of Section 3 of the Auction Procedures.
"Submitted Sell Order" and "Submitted Sell Orders" shall have the respective
meanings specified in paragraph (a) of Section 3 of the Auction Procedures.
"Subsequent Dividend Period" and "Subsequent Dividend Periods" shall mean,
for each Share of Stock, each Dividend Period applicable thereto other than
the Initial Dividend Period applicable thereto.
"Sufficient Clearing Bids" shall have the meaning specified in paragraph (a)
of Section 3 of the Auction Procedures.
"Trust Company" shall mean a bank or trust company duly appointed as such.
"Underwriting Agreement" shall mean the underwriting agreement among the
Company and the underwriters of the Shares of Stock.
"U.S. Treasury Bond Rate" shall mean on any date (i) the yield as calculated
by reference to the bid price quotation of the actively traded, current coupon
Treasury Bond with a remaining maturity most nearly comparable to 30 years
from such date, as such bid price quotation is published on the Business Day
immediately preceding such date by the Federal Reserve Bank of New York in its
Composite 3:30 P.M. Quotations for U.S. Government Securities report for such
Business Day, or (ii) if such yield as so calculated is not available, the
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Alternate Treasury Bond Rate on such date. "Alternate Treasury Bond Rate" on
any date means the yield as calculated by reference to the arithmetic average
of the bid price quotations of the actively traded, current coupon Treasury
Bond with a remaining maturity most nearly comparable to 30 years from such
date, as determined by bid price quotations as of any time on the Business Day
immediately preceding such date, obtained by the Trust Company from at least
three recognized primary U.S. Government securities dealers selected by the
Company.
"U.S. Treasury Note Rate" shall mean, on any date, (i) the yield as
calculated by reference to the bid price quotation of the actively traded,
current coupon Treasury Note with a maturity most nearly comparable to the
length of the related Dividend Period, as such bid price quotation is
published on the Business Day immediately preceding such date by the Federal
Reserve Bank of New York in its Composite 3:30 P.M. Quotations for U.S.
Government Securities report for such Business Day, or (ii) if such yield as
so calculated is not available, the Alternate Treasury Note Rate on such date.
"Alternate Treasury Note Rate" on any date means the yield as calculated by
reference to the arithmetic average of the bid price quotations of the
actively traded, current coupon Treasury Note with a maturity most nearly
comparable to the length of the related Dividend Period, as determined by bid
price quotations as of any time on the Business Day immediately preceding such
date, obtained by the Trust Company from at least three recognized primary
U.S. Government securities dealers selected by the Company.
"Winning Bid Rate" shall have the meaning specified in paragraph (a) of
Section 3 of the Auction Procedures.
A-6
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APPENDIX B
AUCTION PROCEDURES
The following Procedures will be set forth in the Organization Certificate
relating to the Subject Stock of each Series. The terms not defined below (and
referred to as defined in the Organization Certificate) are defined in
Appendix A to this Prospectus.
1. Orders by Existing Holders and Potential Holders in an Auction.
(a) On or prior to the Submission Deadline on each Auction Date:
(i) each Existing Holder may submit to a Broker-Dealer information as to:
(A) the number of Outstanding Shares of Subject Stock, if any, held
by such Existing Holder which such Existing Holder desires to continue
to hold for the next succeeding Dividend Period without regard to the
rate determined by the Auction Procedures for the next succeeding
Dividend Period;
(B) the number of Outstanding Shares of Subject Stock, if any, that
such Existing Holder desires to continue to hold for the next
succeeding Dividend Period if the rate determined by the Auction
Procedures shall not be less than the rate per annum specified by such
Existing Holder; and/or
(C) the number of Outstanding Shares of Subject Stock, if any, held
by such Existing Holder which such Existing Holder offers to sell
without regard to the rate determined by the Auction Procedures for the
next succeeding Dividend Period; and
(ii) one or more Broker-Dealers shall in good faith for the purpose of
conducting a competitive Auction in a commercially reasonable manner,
contact Potential Holders, including Persons that are not Existing Holders,
by telephone or otherwise to determine the number of Shares of Subject
Stock, if any, which each such Potential Holder offers to purchase,
provided that the rate determined by the Auction Procedures for the next
succeeding Dividend Period shall not be less than the rate per annum
specified by such Potential Holder.
For the purposes hereof, the communication to a Broker-Dealer of information
referred to in clause (i)(A), (i)(B), (i)(C) or (ii) of this paragraph (a) is
hereinafter referred to as an "Order" and collectively as "Orders" and each
Existing Holder and each Potential Holder placing an Order is hereafter
referred to as a "Bidder" and collectively as "Bidders"; and Order containing
the information referred to in clause (i)(A) of this paragraph (a) is
hereafter referred to as a "Hold Order" and collectively as "Hold Orders"; an
Order containing the information referred to in clause (i)(B) or (ii) of this
paragraph (a) is hereinafter referred to as a "Bid" and collectively as
"Bids"; and an Order containing the information referred to in clause (i)(C)
of this paragraph (a) is hereafter referred to as a "Sell Order" and
collectively as "Sell Orders."
(b) (i) A Bid by an Existing Holder shall constitute an irrevocable offer to
sell:
(A) the number of Outstanding Shares of Subject Stock specified in such
Bid if the rate determined by the Auction Procedures on such Auction Date
shall be less than the rate specified therein; or
(B) such number or a lesser number of Outstanding Shares of Subject Stock
to be determined as set forth in subparagraph (a)(iv) of Section 4 hereof
if the rate determined by the Auction Procedures on such Auction Date shall
be equal to the rate specified therein; or
(C) a lesser number of Outstanding Shares of Subject Stock to be
determined as set forth in subparagraph (b)(iii) of Section 4 hereof if the
rate specified therein shall be higher than the Maximum Rate and Sufficient
Clearing Bids do not exist.
(ii) A Sell Order by an Existing Holder shall constitute an irrevocable
offer to sell:
(A) the number of Outstanding Shares of Subject Stock specified in such
Sell order, or
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(B) such number or a lesser number of Outstanding Shares of Subject Stock
as set forth in subparagraph (b)(iii) of Section 4 hereof if Sufficient
Clearing Bids do not exist.
(iii) A Bid by a Potential Holder shall constitute an irrevocable offer to
purchase:
(A) the number of Outstanding Shares of Subject Stock specified in such
Bid if the rate determined by the Auction Procedures on such Auction Date
shall be higher than the rate specified therein; or
(B) such number of a lesser number of Outstanding Shares of Subject Stock
as set forth in subparagraph (a)(v) of Section 4 hereof it the rate
determined by the Auction Procedures on such Auction Date shall be equal to
the rate specified therein.
2. Submission of Orders by Broker-Dealers to Trust Company.
(a) Each Broker-Dealer shall submit in writing to the Trust Company prior to
the Submission Deadline on each Auction Date all Orders obtained by such
Broker-Dealer and specify with respect to each Order:
(i) the name of the Bidder placing such Order;
(ii) the aggregate number of Shares of Subject Stock that are the subject
of such Order;
(iii) to the extent that such Bidder is an Existing Holder:
(A) the number of Shares of Subject Stock, if any, subject to any
Hold Order;
(B) the number of Shares of Subject Stock, if any, subject to any Bid
and the rate specified in such Bid; and
(C) the number of Shares of Subject Stock, if any, subject to any
Sell Order; and
(iv) to the extent such Bidder is a Potential Holder, the rate specified
in such Potential Holder's Bid.
(b) If any rate specified in any Bid contains more than three figures to the
right of the decimal point, the Trust Company shall round such rate up to the
next highest one thousandth (.001 of 1%).
(c) If an Order or Orders covering all of the Outstanding Shares of Subject
Stock held by any Existing Holder is or are not submitted for any reason to
the Trust Company prior to the Submission Deadline, the Trust Company shall
deem a Hold Order to have been submitted on behalf of such Existing Holder
covering the number of Outstanding Shares of Subject Stock held by such
Existing Holder and not subject to Orders submitted to the Trust Company,
except that a Sell Order will be deemed to have been submitted on behalf of an
Existing Holder if an Order is not submitted on behalf of such Existing Holder
in the case of an Auction for a Dividend Period which differs in duration by
more than seven days from the preceding Dividend Period or an Auction for a
Dividend Period of two years or more.
(d) If one or more Orders covering in the aggregate more than the number of
Outstanding Shares of Subject Stock held by an Existing Holder are submitted
to the Trust Company, such Orders shall be considered valid as follows and in
the following order of priority:
(i) all Hold Orders shall be considered valid, but only up to and
including in the aggregate the number of Shares of Subject Stock held by
such Existing Holder, and, if the number of Shares of Subject Stock subject
to such Hold Orders exceeds the number of Shares of Subject Stock held by
such Existing Holder, the number of Shares of Subject Stock subject to each
such Hold Order shall be reduced pro rata to cover the number of Shares of
Subject Stock held by such Existing Holder;
(ii) (A) any Bid shall be considered valid up to and including the excess
of the number of Outstanding Shares of Subject stock held by such Existing
Holder over the number of Shares of Subject Stock subject to any Hold Order
referred to in subparagraph (i) above,
(B) subject to clause (A), if more than one Bid with the same rate is
submitted on behalf of such Existing Holder and the number of Shares of
Subject Stock subject to such Bids is greater than such excess, such Bids
shall be considered valid up to the amount of such excess, and the number
of Shares of Subject
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Stock subject to each Bid with the same rate shall be reduced pro rata to
cover the number of Shares of Subject Stock equal to such excess,
(C) subject to clause (A), if more than one Bid with different rates is
submitted on behalf of such Existing Holder, such Bids shall be considered
valid in the ascending order of their respective rates up to the amount of
such excess, and
(D) in any such event the number, if any, of such Shares of Subject Stock
subject to Bids not valid under this subparagraph (ii) shall be treated as
the subject of a Bid by a Potential Holder; and
(iii) all Sell Orders shall be considered valid but only up to and
including in the aggregate the excess of the number of Outstanding Shares
of Subject Stock held by such Existing Holder over the sum of the Shares of
Subject Stock subject to Hold Orders referred to in subparagraph (i) and
valid Bids by Existing Holders referred to in subparagraph (ii) above.
(e) If more than one bid is submitted on behalf of any Potential Holder,
each Bid submitted shall be a separate Bid with the rate therein specified.
(f) Separate Auctions for more than one Series of Stock may be held on any
Auction Date. If on any Auction Date two or more Series of Stock with Dividend
Periods of the same length will be auctioned, then a single Auction shall be
held with respect to all such Series, and all references to Subject Auction
Stock in these Auction Procedures with respect to such Auction shall be deemed
to be references to the Subject Auction Stock of all such Series,
collectively.
3. Determination of Sufficient Clearing Bids, Winning Bid Rate and Dividend
Rate.
(a) Not earlier than the Submission Deadline on each Auction Date, the Trust
Company shall assemble all Orders submitted or deemed submitted to it by
Broker-Dealers (each such Order as submitted or deemed submitted by a Broker-
Dealer being hereinafter referred to individually as a "Submitted Hold Order,"
a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as a
"Submitted Order" and collectively as "Submitted Hold Orders," "Submitted
Bids" or "Submitted Sell Orders," as the case may be, or as "Submitted
Orders") and shall determine:
(i) the excess of the total number of Outstanding Shares of Subject Stock
over the number of Outstanding Shares of Subject Stock that are the subject
of Submitted Hold Orders (such excess being hereinafter referred to as the
"Available Shares");
(ii) from the Submitted Orders whether the number of Outstanding Shares
of Subject Stock that are the subject of Submitted Bids by Potential
Holders specifying one or more rates equal to or lower than the Maximum
Rate exceeds or is equal to the sum of:
(A) the number of Outstanding Shares of Subject Stock that are the
subject of Submitted Bids by Existing Holders specifying one or more
rates higher than the Maximum Rate, and
(B) the number of Outstanding Shares of Subject Stock that are
subject to Submitted Sell Orders
(in the event of such excess or such equality other than because
the number of Shares of Subject Stock in clauses (A) and (B) above
is zero because all of the Outstanding Shares of Subject Stock are
the subject of Submitted Hold Orders, such Submitted Bids in clause
(ii) above being hereinafter referred to collectively as "Sufficient
Clearing Bids"); and
(iii) if Sufficient Clearing Bids exist, the lowest rate specified in the
Submitted Bids (the "Winning Bid Rate") which if:
(A) (i) each Submitted Bid from Existing Holders specifying such
lowest rate and (ii) all other Submitted Bids from Existing Holders
specifying lower rates were accepted, thus entitling such Existing
Holders to continue to hold the Shares of Subject Stock that are the
subject of such Submitted Bids, and
(B) (i) each Submitted Bid from Potential Holders specifying such
lowest rate and (ii) all other Submitted Bids from Potential Holders
specifying lower rates were accepted, thus entitling the Potential
Holders to purchase the Shares of Subject Stock that are the subject of
those Submitted Bids,
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would result in such Existing Holders described in clause (A) continuing to
hold an aggregate number of Outstanding Shares of Subject Stock which, when
added to the number of Outstanding Shares of Subject Stock to be purchased
by such Potential Holders described in clause (B) would equal not less than
the Available Shares.
(b) Promptly after the Trust Company has made the determinations pursuant to
paragraph (a) of this Section 3, the Trust Company shall advise the Company of
the Applicable Determining Rate and the Maximum Rate and, based on such
determinations, the Dividend Rate for the next succeeding Dividend Period as
follows:
(i) if Sufficient Clearing Bids exist, that the Dividend Rate for the
next succeeding Dividend Period shall be equal to the Winning Bid Rate so
determined;
(ii) if Sufficient Clearing Bids do not exist (other than because all of
the Outstanding Shares of Subject Stock of a Series are the subject of
Submitted Hold Orders), that the Dividend Rate for the next succeeding
Dividend Period shall be the Maximum Rate; or
(iii) if all of the Outstanding Shares of Subject Stock are the subject
of Submitted Hold Orders, that the Dividend Rate for the next succeeding
Dividend Period shall be equal to 58% of the Applicable Determining Rate.
4. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of Shares in an Auction. Based on the determinations made pursuant
to paragraph (a) of Section 3 hereof the Submitted Bids and Submitted Sell
Orders shall be accepted or rejected and the Trust Company shall take such
other action as set forth below:
(a) if Sufficient Clearing Bids have been made, subject to the provisions
of paragraphs (c) and (d) of this Section 4, Submitted Bids and Submitted
Sell Orders shall be accepted or rejected as follows in the following order
of priority and all other Submitted Bids shall be rejected:
(i) the Submitted Sell Orders of Existing Holders shall be accepted
and the Submitted Bids of each of the Existing Holders specifying any
rate that is higher than the Winning Bid Rate shall be rejected, thus
requiring each such Existing Holder to sell the Shares of Subject Stock
that are the subject of such Submitted Bids;
(ii) the Submitted Bids of each of the Existing Holders specifying
any rate that is lower than the Winning Bid Rate shall be accepted,
thus entitling each such Existing Holder to continue to hold the Shares
of Subject Stock that are the subject of such Submitted Bids;
(iii) the Submitted Bids of each of the Potential Holders specifying
any rate that is lower than the Winning Bid Rate shall be accepted;
(iv) the Submitted Bids of each of the Existing Holders specifying a
rate that is equal to the Winning Bid Rate shall be accepted, thus
entitling each such Existing Holder to continue to hold the Shares of
Subject Stock that are the subject of such Submitted Bids, unless the
number of Outstanding Shares of Subject Stock subject to all such
Submitted Bids shall be greater than the number of Shares ("Remaining
Shares") equal to the excess of the Available Shares over the number of
Shares of Subject Stock subject to Submitted Bids described in
subparagraphs (ii) and (iii) of this paragraph (a), in which event the
Submitted Bids of each such Existing Holder shall be rejected, and each
such Existing Holder shall be required to sell Shares of Subject Stock,
but only in an amount equal to the difference between (A) the number of
Outstanding Shares of Subject Stock then held by such Existing Holder
subject to such Submitted Bids and (B) the number of Shares of Subject
Stock obtained by multiplying the number of Remaining Shares by a
fraction the numerator of which shall be the number of Outstanding
Shares of Subject Stock held by such Existing Holder subject to such
Submitted Bids and the denominator of which shall be the sum of the
number of Outstanding Shares of Subject Stock subject to such Submitted
Bids made by all such Existing Holders that specified a rate equal to
the Winning Bid Rate; and
B-4
<PAGE>
(v) the Submitted Bids of each of the Potential Holders specifying a
rate that is equal to the Winning Bid Rate shall be accepted but only
in an amount equal to the number of Shares of Subject Stock obtained by
multiplying the difference between the Available Shares and the number
of Shares of Subject Stock subject to Submitted Bids described in
subparagraphs (ii), (iii) and (iv) of this paragraph (a) by a fraction
the numerator of which shall be the number of Outstanding Shares of
Subject Stock subject to such Submitted Bids and the denominator of
which shall be the sum of the number of Outstanding Shares of Subject
Stock subject to such Submitted Bids made by all such Potential Holders
that specified a rate equal to the Winning Bid Rate.
(b) If Sufficient Clearing Bids have not been made (other than because
all of the Outstanding Shares of Subject Stock are subject to Submitted
Hold Orders), subject to the provisions of paragraphs (c) and (d) of this
Section 4, Submitted Orders shall be accepted or rejected as follows in the
following order of priority and all other Submitted Bids shall be rejected:
(i) the Submitted Bids of each Existing Holder specifying any rate
that is equal to or lower than the Maximum Rate shall be accepted, thus
entitling such Existing Holder to continue to hold the Shares of
Subject Stock that are the subject of such Submitted Bids;
(ii) the Submitted Bids of each Potential Holder specifying any rate
that is equal to or lower than the Maximum Rate shall be accepted; and
(iii) the Submitted Bids of each Existing Holder specifying any rate
that is higher than the Maximum Rate shall be rejected and the
Submitted Sell Orders of each Existing Holder shall be accepted, in
both cases only in an amount equal to the difference between (A) the
number of Outstanding Shares of Subject Stock then held by such
Existing Holder subject to such Submitted Bids or Submitted Sell Orders
and (B) the number of Shares of Subject Stock obtained by multiplying
the difference between the Available Shares and the aggregate number of
Shares of Subject Stock subject to Submitted Bids described in
subparagraphs (i) and (ii) of this paragraph (b) by a fraction the
numerator of which shall be the number of
Outstanding Shares of Subject Stock held by such Existing Holder
subject to such Submitted Bids or Submitted Sell Orders and the
denominator of which shall be the number of Outstanding Shares of
Subject Stock subject to all such Submitted Bids and Submitted Sell
Orders.
(c) If as a result of the procedures described in paragraph (a) or (b) of
this Section 4, any Existing Holder would be entitled or required to sell,
or any Potential Holder would be entitled or required to purchase, a
fraction of a Share of Subject Stock on any Auction Date, the Trust Company
shall, in such manner as, in its sole discretion, it shall determine, round
up or down the number of Shares of Subject Stock to be purchased or sold by
any Existing Holder or Potential Holder on such Auction Date so that the
number of Shares of Subject Stock purchased or sold by each Existing Holder
or Potential Holder on such Auction Date shall be whole Shares of Subject
Stock.
(d) If, as a result of the procedures described in paragraph (a) of this
Section 4, any Potential Holder would be entitled or required to purchase
less than a whole Share of Subject Stock on any Auction Date, the Trust
Company shall, in such manner as, in its sole discretion, it shall
determine, allocate Shares of Subject Stock for purchase among Potential
Holders so that only whole Shares of Subject Stock are purchased on such
Auction Date by any Potential Holder, even if such allocation results in
one or more of such Potential Holders not purchasing Shares of Subject
Stock on such Auction Date.
5. Miscellaneous
(a) The Board of Directors of the Company or a duly authorized committee
thereof may interpret the provisions hereof to resolve any inconsistency or
ambiguity which may arise or be revealed in connection with the Auction
Procedures provided for herein.
(b) So long as the Dividend Rate is based on the results of an Auction, an
Existing Holder (i) may sell, transfer or otherwise dispose of Shares of
Subject Stock only pursuant to a Bid or Sell Order in accordance with
B-5
<PAGE>
the Procedures described herein or to or through a Broker-Dealer or to a
Person that has delivered a signed copy of a Master Purchaser's Letter to the
Trust Company, provided that in the case of all transfers other than pursuant
to Auctions such Existing Holder, its Agent Member or its Broker-Dealer
advises the Trust Company of such transfer, and (ii) shall have the ownership
of the Shares of Subject Stock of the Series held by it maintained in book
entry form by the Stock Depository in the account of its Agent Member, which
in turn will maintain records of such Existing Holder's beneficial ownership.
(c) Neither the Company nor any Affiliate thereof may submit an Order in any
Auction, except as set forth in the next sentence. Any Broker-Dealer that is
an Affiliate of the Company may submit Orders in Auctions but only is such
Orders are not for its own account, except that if such affiliated Broker-
Dealer holds shares of Stock for its own account, it must submit a Sell Order
in the next Auction with respect to such Shares.
(d) The Trust Company shall reject any Submitted Order of the Company or an
Affiliate, except for Sell Orders of affiliated Broker-Dealers permitted under
paragraph (c) of this Section 5.
(e) From and during the continuance of a payment failure Shares of each
Series may be registered for transfer or exchange and new certificates issued
upon surrender of the older certificates in form deemed by the Trust Company
(or any other transfer agent or registrar appointed by the Company) properly
endorsed for transfer will all necessary endorsers' signatures guaranteed in
such manner and form as the Trust Company (or such other transfer agent or
registrar) may require by a guarantor reasonably believed by the Trust Company
(or such other transfer agent or registrar) to be responsible, accompanied by
such assurances as the Trust Company (or such other transfer agent or
registrar) shall deem necessary or appropriate to evidence the genuineness and
effectiveness of each necessary endorsement and satisfactory evidence of
compliance with all applicable law relating to the collection of taxes or
funds necessary for the payment of such taxes.
(f) Unless preferential dividends on the Stock are in arrears, the Company
shall have the right from time to time (if and to the extent at the time
permitted under applicable law) to purchase on the open market or at private
sale, or otherwise acquire, Outstanding Shares of Stock of any Series at a
price not exceeding the price at which such Stock might at the time be
redeemed at the option of the Company, plus an amount equal to accumulated and
unpaid preferential dividends to the date of acquisition.
B-6
<PAGE>
APPENDIX C
AUCTION SETTLEMENT PROCEDURES
Capitalized terms used herein shall have the respective meanings specified
in Appendix A to this Prospectus.
(a) On each Auction Date, the Trust Company shall notify by telephone the
Broker-Dealer that participated in the Auction held on such Auction Date and
submitted an Order on behalf of any Existing Holder or Potential Holder of:
(i) the Dividend Rate fixed for the next succeeding Dividend Period;
(ii) whether Sufficient Clearing Bids existed for the determination of
the Winning Bid Rate;
(iii) if such Broker-Dealer submitted a Bid or a Sell Order on behalf of
an Existing Holder, whether such Bid or Sell Order was accepted or rejected
and the number of Shares, if any, then Outstanding to be sold by such
Existing Holder;
(iv) if such Broker-Dealer submitted a Bid on behalf of a Potential
Holder, whether such Bid was accepted or rejected and the number of Shares,
if any, to be purchased by such Potential Holder;
(v) if the aggregate number of Shares to be sold by all Existing Holders
on whose behalf such Broker-Dealer submitted Bids or Sell Orders is
different than the aggregate number of Shares to be purchased by all
Potential Holders on whose behalf such Broker-Dealer submitted a Bid, the
name or names of one or more other Broker-Dealers (and the Agent Member, if
any, of each such other Broker-Dealer) and the number of Shares to be (x)
purchased from one or more Existing Holders on whose behalf such other
Broker-Dealers submitted Bids or Sell Orders or (y) sold to one or more
Potential Holders on whose behalf such other Broker-Dealer submitted Bids;
and
(vi) the Auction Date of the next succeeding Auction.
(b) On each Auction Date, each Broker-Dealer that submitted an Order on
behalf of any Existing Holder or Potential Holder shall:
(i) advise each Existing Holder and Potential Holder on whose behalf such
Broker-Dealer submitted a Bid or Sell Order whether such Bid or Sell Order
was accepted or rejected;
(ii) instruct each Potential Holder on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, to instruct such
Bidder's Agent Member to pay to such Broker-Dealer (or its Agent Member)
through the Stock Depository the amount necessary to purchase the number of
Shares to be purchased pursuant to such Bid against receipt of such Shares
and advise such Potential Holder of the Dividend Rate for the next
succeeding Dividend Period;
(iii) instruct each Existing Holder on whose behalf such Broker-Dealer
submitted a Bid or a Sell Order that was accepted, in whole or in part, to
instruct such Bidder's Agent Member to deliver to such Broker-Dealer (or
its Agent Member) through the Stock Depository the number of Shares to be
sold pursuant to such Bid or Sell Order against payment therefor and advise
any such Existing Holder that will continue to hold Shares of the Dividend
Rate for the next succeeding Dividend Period;
(iv) advise each Existing Holder on whose behalf such Broker-Dealer
submitted a Hold Order of the Dividend Rate for the next succeeding
Dividend Period;
(v) advise each Existing Holder on whose behalf such Broker-Dealer
submitted an Order of the Auction Date of the next succeeding Auction; and
(vi) advise each Potential Holder on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, of the Auction Date
of the next succeeding Auction.
C-1
<PAGE>
(c) On the basis of the information provided to it pursuant to paragraph (a)
above, each Broker-Dealer that submitted a Bid or Sell Order shall, in such
manner and at such time or times as it in its sole discretion may determine,
allocate any funds received by it pursuant to subparagraph (b)(ii) above, and
any Shares received by it pursuant to subparagraph (b)(iii) above, among the
Potential Holders, if any, on whose behalf such Broker-Dealer submitted Bids
that were rejected or Sell Orders, and any Broker-Dealers identified to it by
the Trust Company pursuant to subparagraphs (a)(v) above.
(d) On the Business Day after the Auction Date, the Stock Depository shall
execute the transactions described above, debiting and crediting the amounts
of the respective Agent Members as necessary to effect the purchase and sales
of Shares as determined in the Auction.
C-2
<PAGE>
APPENDIX D
TO BE SUBMITTED TO YOUR BROKER-DEALER WHO WILL THEN DELIVER COPIES ON YOUR
BEHALF TO THE RESPECTIVE TRUST COMPANY
MASTER PURCHASER'S LETTER
RELATING TO SECURITIES INVOLVING RATE SETTINGS THROUGH AUCTIONS
The Company
The Trust Company
A Broker-Dealer
An Agent Member
Other Persons
Dear Sirs:
1. This letter is designed to apply to publicly or privately offered debt or
equity securities ("Securities") of any issuer ("Company") which are described
in any final prospectus or other offering materials relating to such
Securities as the same may be amended or supplemented (collectively, with
respect to the particular Securities concerned, the "Prospectus") and which
involve periodic rate settings through auctions ("Auctions"). This letter
shall be for the benefit of any Company and of any Trust Company, auction
agent, paying agent (collectively, "Trust Company"), broker-dealer, agent
member, securities depository or other interested person in connection with
any Securities and related Auctions (it being understood that such persons may
be required to execute specified agreements and nothing herein shall alter
such requirements). The terminology used herein is intended to be general in
its application and not to exclude any Securities in respect of which (in the
Prospectus or otherwise) alternative terminology is used.
2. We may from time to time offer to purchase, purchase, offer to sell
and/or sell Securities of any Company as described in the Prospectus relating
thereto. We agree that this letter shall apply to all such purchases, sales
and offers and to Securities owned by us. We understand that the dividend
interest rate on Securities may be based from time to time on the results of
Auctions as set forth in the Prospectus.
3. We agree that any bid or sell order placed by us in an Auction shall
constitute an irrevocable offer (except as otherwise described in the
Prospectus) by us to purchase or sell the Securities subject to such bid or
sell order, or such lesser amount of Securities as we shall be required to
sell or purchase as a result of such Auction, at the applicable price, all as
set forth in the Prospectus, and that if we fail to place a bid or sell order
with respect to Securities owned by us with a broker-dealer on any Auction
date, or a broker-dealer to which we communicate a bid or sell order fails to
submit such bid or sell order to the Trust Company concerned, we shall be
deemed to have placed a hold order with respect to such Securities as
described in the Prospectus. We authorize any broker-dealer that submits a bid
or sell order as our agent in Auctions to execute contracts for the sale of
Securities covered by such bid or sell order. We recognize that the payment by
such broker-dealer for Securities purchased on our behalf shall not relieve us
of any liability to such broker-dealer for payment for such Securities.
4. We agree that, during the applicable period as described in the
Prospectus, dispositions of Securities can be made only in the denominations
set forth in the Prospectus and we will sell, transfer or otherwise dispose of
any Securities held by us from time to time only pursuant to a bid or sell
order placed in an Auction, to or through a broker-dealer or, when permitted
in the Prospectus, to a person that has signed and delivered to the applicable
Trust Company a letter substantially in the form of this letter (or other
applicable purchaser's letter),
D-1
<PAGE>
provided that in the case of all transfers other than pursuant to Auctions we
or our broker-dealer or our agent member shall advise such Trust Company of
such transfer. We understand that a restrictive legend will be placed on
certificates representing the Securities and stop-transfer instructions will
be issued to the transfer agent and/or registrar, all as set forth in the
Prospectus.
5. We agree that, during the applicable period as described in the
Prospectus, ownership of Securities shall be represented by one or more global
certificates registered in the name of the applicable securities depository or
its nominee, that we will not be entitled to receive any certificate
representing the Securities and that our ownership of any Securities will be
maintained in book entry form by the securities depository for the account of
our agent member, which in turn will maintain records of our beneficial
ownership. We authorize and instruct our agent member to disclose to the
applicable Trust Company such information concerning our beneficial ownership
of Securities as such Trust Company shall request.
6. We acknowledge that partial deliveries of Securities purchased in
Auctions may be made to us and such deliveries shall constitute good delivery
as set forth in the Prospectus.
7. This letter is not a commitment by us to purchase any Securities.
8. This letter supersedes any prior-dated version of this master purchaser's
letter, and supplements any prior- or post-dated purchaser's letter specific
to particular Securities, and this letter may only be revoked by a signed
writing delivered to the original recipients hereof.
9. The descriptions of Auction procedures set forth in each applicable
Prospectus are incorporated by reference herein and in case of any conflict
between this letter, any purchaser's letter specific to particular Securities
and any such description, such description shall control.
10. Any xerographic or other copy of this letter shall be deemed of equal
effect as a signed original.
11. Our agent member of the Depository Trust Company currently is
.
12. Our personnel authorized to place orders with broker-dealers for the
purpose set forth in the Prospectus in Auctions currently is/are ,
telephone number ( ) - .
13. Our taxpayer identification number is .
14. In the case of each offer to purchase, purchase, offer to sell or sale
by us of Securities not registered under the Securities Act of 1933, as
amended (the "Act"), we represent and agree as follows:
A. We understand and expressly acknowledge that the Securities have not
been and will not be registered under the Act and, accordingly, that the
Securities may not be reoffered, resold or otherwise pledged, hypothecated
or transferred unless an applicable exemption from the registration
requirements of the Act is available.
B. We hereby confirm that any purchase of Securities made by us will be
for our own account, or for the account of one or more parties for which we
are acting as trustee or agent with complete investment discretion and with
authority to bind such parties, and not with a view to any public resale or
distribution thereof. We and each other party for which we are acting which
will acquire Securities will be "accredited investors" within the meaning
of Regulation D under the Act with respect to the Securities to be
purchased by us or such party, as the case may be, will have previously
invested in similar types of instruments and will be able and prepared to
bear the economic risk of investing in and holding such Securities.
D-2
<PAGE>
C. We acknowledge that prior to purchasing any Securities we shall have
received a Prospectus (or private placement memorandum) with respect
thereto and acknowledge that we will have had access to such financial and
other information, and have been afforded the opportunity to ask such
questions of representatives of the Company and receive answers thereto, as
we deem necessary in connection with our decision to purchase Securities.
D. We recognize that the Company and broker-dealers will rely upon the
truth and accuracy of the foregoing investment representations and
agreements, and we agree that each of our purchases of Securities now or in
the future shall be deemed to constitute our concurrence in all of the
foregoing which shall be binding on us and each party for which we are
acting as set forth in Subparagraph B above.
Dated: ______________________________
Mailing Address of Purchaser
(Name of Purchaser)
_____________________________________ By: _________________________________
_____________________________________ Printed Name: _______________________
_____________________________________ Title: ______________________________
D-3
<PAGE>
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRE-
SENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICI-
TATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE PREFERRED SHARES DE-
SCRIBED IN THIS PROSPECTUS SUPPLEMENT. THIS PROSPECTUS SUPPLEMENT AND THE PRO-
SPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY SUCH PREFERRED SHARES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICI-
TATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THEIR RESPECTIVE DATES OR THAT THE INFORMATION CONTAINED
OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUB-
SEQUENT TO THEIR RESPECTIVE DATES.
---------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of the Preferred Shares........................................ S-2
Use of Proceeds............................................................ S-2
Underwriting............................................................... S-2
Legal Opinions............................................................. S-3
PROSPECTUS
Available Information...................................................... 2
Documents Incorporated by Reference........................................ 2
Summary.................................................................... 3
The Company................................................................ 7
Use of Proceeds............................................................ 7
Description of the Stock................................................... 8
Auction Procedures......................................................... 11
Tax Considerations......................................................... 18
Underwriting............................................................... 21
Legal Opinions............................................................. 21
Experts.................................................................... 21
</TABLE>
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GENERAL ELECTRIC CAPITAL CORPORATION
500 SHARES OF VARIABLE CUMULATIVE
PREFERRED STOCK, SERIES AA
500 SHARES OF VARIABLE CUMULATIVE
PREFERRED STOCK, SERIES BB
500 SHARES OF VARIABLE CUMULATIVE
PREFERRED STOCK, SERIES CC
500 SHARES OF VARIABLE CUMULATIVE
PREFERRED STOCK, SERIES DD
----------------------
PROSPECTUS SUPPLEMENT
----------------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
December 9, 1997
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