<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST 31, 2000
$1,140,000,000
BOEING CAPITAL CORPORATION
SERIES XI MEDIUM-TERM NOTES
WITH MATURITIES OF NINE MONTHS OR MORE FROM DATE OF ISSUE
We plan to offer and sell notes (a "Note" or the "Notes") with various terms,
which may include the following:
- Senior notes, subordinated notes or both
- Maturity of nine months or more from the date of issue
- Interest at fixed or floating rates, or no interest at all. The floating
rate interest rate may be based on one or more of the following indices,
plus or minus a spread and/or spread multiplier:
<TABLE>
<CAPTION>
<S> <C>
- CD Rate - Treasury Rate
- Commercial Paper Rate - LIBOR
- Federal Funds Rate - CMT Rate
- Eleventh District Cost of Funds Rate - Prime Rate
- Any other rate specified by us in the pricing supplement
- Any combination of rates specified by us in the pricing supplement
</TABLE>
- A currency in which the notes will be denominated, which may be United
States dollars or any foreign currency
- An interest payment date or dates
- Book-entry (through The Depository Trust Company) or certificated form
- Minimum denominations of U.S. $100,000 increased in multiples of $1,000 or
other specified denominations for foreign currencies
- Redemption and/or repayment provisions, if applicable, whether mandatory
or at our option or the option of the holder
We will specify the final terms for each Note, which may be different from
the terms described in this Prospectus Supplement, in the applicable Pricing
Supplement.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" ON
PAGE S-3.
------------------------
The address and telephone number of our headquarters are 500 Naches Avenue,
SW, Third Floor, Renton, Washington 98055; (425) 393-0153.
We may sell Notes to the agents as principals for resale at varying or fixed
offering prices or through the agents as agents on our behalf. If we sell all of
the Notes, we expect to receive proceeds from such sale of between
$1,138,575,000 and $1,131,450,000, after paying agents' discounts and
commissions of between $1,425,000 and $8,550,000. However, the agents' discounts
and commissions may exceed these amounts with respect to sales of notes with
stated maturities in excess of 30 years.
These securities have not been approved by the Securities and Exchange
Commission or any state securities commission, nor have these organizations
determined that this Prospectus Supplement, the Prospectus or any Pricing
Supplement is truthful or complete. It is illegal for anyone to tell you
otherwise.
CHASE SECURITIES INC. CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO. MORGAN STANLEY DEAN WITTER
Dated August 31, 2000
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
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<S> <C>
RISK FACTORS................................................ S-3
DESCRIPTION OF NOTES........................................ S-5
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS..... S-25
HOW WE PLAN TO DISTRIBUTE THE NOTES......................... S-34
</TABLE>
PROSPECTUS
<TABLE>
<CAPTION>
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION ABOUT US................ 3
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS............ 3
DESCRIPTION OF OUR BUSINESS AND OUR COMPANY................. 4
GENERAL INFORMATION ABOUT BOEING CAPITAL.................... 4
USE OF PROCEEDS............................................. 5
RATIO OF EARNINGS TO FIXED CHARGES.......................... 5
THE DEBT SECURITIES......................................... 5
HOW WE PLAN TO DISTRIBUTE THE DEBT SECURITIES............... 16
LEGAL OPINIONS REGARDING THE VALIDITY OF THE DEBT
SECURITIES................................................ 17
EXPERTS..................................................... 17
</TABLE>
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RISK FACTORS
An investment in these Notes involves risk. This Prospectus Supplement does
not describe all of the possible risks for investments in notes that may be
denominated or payable in or determined by reference to a currency or composite
currency other than United States dollars or that result from the calculation of
any amounts payable under the Notes by reference to one or more interest rates,
currencies or other indices or formulas.
Those Notes denominated or payable in a foreign or composite currency, and
those Notes with payments calculated by reference to one or more interest rates,
currencies or other indices or formulas are not suitable for you if you are
unsophisticated with respect to transactions involving the applicable interest
rate index or currency index or other indices or formulas. You should consult
with your own financial and legal advisors about the risks associated with
investing in the Notes, including those risks set forth below, before deciding
whether to invest in the Notes. We disclaim any responsibility to advise you of
the risks as they exist as of the date of this Prospectus Supplement or as these
risks change from time to time.
STRUCTURE RISKS
Investment in indexed notes and foreign currency notes entails significant
risks that are not associated with similar investments in conventional fixed
rate or floating rate debt securities. These risks include, among others,
fluctuation of the indices or formulas and the possibility that you will receive
a lower or no amount of principal, premium or interest, and at different times
than you expected. Such risks depend on a variety of interrelated factors,
including economic, financial and political events over which we have no
control. In addition, if an index or formula used to determine any amounts
payable under the Notes contains a multiplier or leverage factor, the multiplier
or leverage factor will magnify the effect of any change in the index or
formula. While values of certain indices and formulas have at times been highly
volatile and such volatility may be expected to continue in the future, past
experience is not necessarily indicative of what may occur in the future.
We may choose to exercise any optional redemption rights in the Notes when
prevailing interest rates are relatively low. If we do this, you might not be
able to reinvest the redemption proceeds in alternative investments with an
effective interest rate as high as the interest rate on the Notes we redeemed.
The Notes will not have an established trading market when issued. We cannot
assure you that a trading market for your Notes will ever develop or be
maintained. A number of factors that are unrelated to our creditworthiness may
affect the secondary market for the notes. These factors include:
- the complexity and volatility of any index or formula applicable to the
Notes;
- the method of calculating the principal of, premium, if any, and interest
on the Notes;
- the time remaining to the maturity of the Notes;
- the outstanding amount of the Notes;
- the redemption features of the Notes;
- the amount of other debt securities linked to any index or formula
applicable to the Notes; and
- the level, direction and volatility of market interest rates generally.
In addition, certain Notes may have a more limited trading market and may
experience more price volatility because they were designed for specific
investment objectives or strategies. There may be a limited number of buyers
when you decide to sell your Notes. You should not purchase Notes unless
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you understand that and are able to bear the risk that the Notes may not be
readily salable and can otherwise bear the investment risks described above.
LIQUIDITY RISKS
We have significant liquidity requirements. We attempt to fund our business
such that scheduled receipts from our portfolio will cover our expenses and debt
payments as they become due. We believe that, absent a severe or prolonged
economic downturn which results in defaults materially in excess of those
provided for, receipts from the portfolio will cover the payment of expenses and
debt payments as they become due. If cash provided by operations, issuances of
commercial paper, borrowings under bank credit lines and term borrowings do not
provide the necessary liquidity, we would be required to restrict our new
business volume, unless we obtained access to other sources of capital at rates
that would allow for a reasonable return on new business.
Our ability to make scheduled payments of the principal of, or to pay
interest on, or to refinance our indebtedness, including the Notes, depends on
the future performance of our investment portfolio. The performance of such
portfolio, in turn, is subject to economic, financial, competitive and other
factors that are beyond our control. While we believe that future cash flows
from the portfolio, together with available borrowings under our revolving
credit line will be adequate to meet our anticipated requirements for working
capital, interest payments and scheduled principal payments, we cannot assure
you that we will be able to generate sufficient cash flows in the future to
service our debt obligations. If we are unable to do so, we may be required to
refinance all or a portion of our existing debt, including the Notes, sell
assets or obtain additional financing. We cannot assure you that any such
refinancing will be possible or that any such sale of assets or additional
financing could be achieved.
EXCHANGE RATE AND EXCHANGE RATE CONTROLS
Investment in foreign currency notes involves risks that are not associated
with similar investments that are denominated and payable in United States
dollars. These risks include the possibility of material changes in the exchange
rate between United States dollars and the currency in which your currency is
denominated and payable, and the possibility that either the United States or
the foreign governments will impose or modify exchange rate controls.
We have no control over the factors that generally affect these risks, such
as economic, financial and political events and the supply and demand for the
applicable currencies. Moreover, if payments on your foreign currency notes are
determined by reference to a formula containing a multiplier or leverage factor,
the multiplier or leverage factor will magnify the effect of any change in the
exchange rates between the applicable currencies. In recent years, the exchange
rates between certain currencies have been highly volatile, and such volatility
may continue to persist in the future. However, fluctuations between currencies
in the past are not necessarily indicative of fluctuations that may occur in the
future. Depreciation of your payment currency would result in a decrease in the
United States dollar equivalent yield of your foreign currency notes, in the
United States dollar equivalent value of the principal and any premium payable
at maturity or earlier redemption of your foreign currency notes and, generally,
in the United States dollar equivalent market value of your foreign currency
notes.
Governmental exchange controls or changes thereto could affect exchange
rates and the availability of the applicable foreign currency on a required
payment date. Even if there are no exchange controls, an applicable foreign
currency may not be available on a required payment due date due to
circumstances that are beyond our control or because such foreign currency is no
longer in use. If this happens, we will be entitled to satisfy our payment
obligations on your foreign currency notes in United States dollars.
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CREDIT RATINGS
Any credit ratings that are assigned to the Notes may not reflect the
potential impact of all risks on the market value of the Notes. We urge you to
consult your financial and legal advisors as to the risks entailed by an
investment in the Notes and the suitability of such an investment in light of
your particular circumstances.
DESCRIPTION OF NOTES
The Notes will be either Senior Notes or Subordinated Notes. The Senior
Notes and the Subordinated Notes are respective series of our "Senior
Securities" and "Subordinated Securities" described in the accompanying
Prospectus. The Senior Notes will be issued as a single series under an
indenture dated as of August 31, 2000 (the "Senior Indenture"), between Boeing
Capital and Bankers Trust Company ("Bankers Trust" or the "Trustee"), as
Trustee. The Subordinated Notes will be issued as a single series under an
indenture dated as of August 31, 2000 (the "Subordinated Indenture"), between
Boeing Capital and Bankers Trust, as Trustee. The Senior Indenture and the
Subordinated Indenture are collectively referred to herein as the "Indentures".
The Indentures are subject to, and governed by, the Trust Indenture Act of 1939,
as amended. The following summary of certain provisions of the Notes and the
Indentures does not purport to be complete and is qualified in its entirety by
reference to the actual provisions of the Notes and the Indentures. Capitalized
terms used but not defined herein shall have the meanings given to them in the
accompanying Prospectus, the Notes or the Indentures, as the case may be. The
term "Debt Securities", as used in this Prospectus Supplement, refers to all
debt securities, including the Notes, issued and issuable from time to time
under the Indentures. The following description of Notes will apply to each Note
offered hereby unless otherwise specified in the applicable Pricing Supplement.
GENERAL
The Indentures do not limit the aggregate initial offering price of Debt
Securities that may be issued thereunder and Debt Securities may be issued
thereunder from time to time in one or more series up to the aggregate initial
offering price from time to time authorized by Boeing Capital for each series.
As of the date of this Prospectus Supplement, Boeing Capital has not issued any
Debt Securities under the Indentures. Boeing Capital may, from time to time,
without the consent of the Holders of the Notes, provide for the issuance of
Notes or other Debt Securities under the Indentures in addition to the
$1,140,000,000 aggregate initial offering price of Notes offered hereby.
The Notes will be unsecured general obligations of Boeing Capital. The
Senior Notes will rank PARI PASSU with all other Senior Securities of Boeing
Capital and with all other unsecured and unsubordinated indebtedness of Boeing
Capital. The Subordinated Notes, together with other subordinated indebtedness,
if any, issued by Boeing Capital, will be subordinate in right of payment to the
prior payment in full of all Senior Notes and all existing and future Senior
Indebtedness of Boeing Capital, including Senior Notes, and, unless specifically
designated as ranking junior to other subordinated debt securities of Boeing
Capital, will rank PARI PASSU with all other subordinated debt securities of
Boeing Capital which have not been specifically designated as ranking junior to
other subordinated debt securities of Boeing Capital. See "Description of the
Securities--Subordination" in the accompanying Prospectus. At June 30, 2000, the
outstanding senior indebtedness of Boeing Capital was approximately
$3,074.7 million.
As of the date hereof, Boeing Capital has authorized the issuance and sale
of up to $1,140,000,000 aggregate initial offering price, or the equivalent
thereof in one or more foreign or composite currencies, of Notes. The Notes are
expected to be offered on a continuing basis, subject to Boeing Capital's
capital requirements and the pricing of other sources of capital which may be
available to Boeing Capital, and will mature on any day nine months or more from
their dates of issue (each, a
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"Stated Maturity Date"), as specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
interest-bearing Notes will either be Fixed Rate Notes or Floating Rate Notes,
as specified in the applicable Pricing Supplement. Notes may also be issued that
do not bear any interest currently or that bear interest at a below market rate.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in, and payments of principal, premium, if any, and/or
interest will be made in, United States dollars. The Notes also may be
denominated in, and payments of principal, premium, if any, and/or interest may
be made in, one or more foreign currencies or composite currencies ("Foreign
Currency Notes"). See "Risk Factors--Exchange Rates and Exchange Rate Controls"
and "Special Provisions Relating to Foreign Currency Notes--Payments of
Principal, Premium, if any, and Interest". The currency or composite currency in
which a Note is denominated, whether United States dollars or otherwise, is
herein referred to as the "Specified Currency". References herein to "United
States dollars", "U.S. dollars" or "$" are to the lawful currency of the United
States of America (the "United States").
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for the Notes in the applicable Specified Currency. At the
present time, there are limited facilities in the United States for the
conversion of United States dollars into foreign currencies or composite
currencies and vice versa, and commercial banks do not generally offer
non-United States dollar checking or savings account facilities in the United
States. The applicable Agent may be prepared to arrange for the conversion of
United States dollars into the applicable Specified Currency to enable the
purchaser to pay for the related Foreign Currency Note, provided that a request
is made to such Agent on or prior to the third Business Day (as hereinafter
defined) preceding the date of delivery of such Foreign Currency Note, or by
such other day as determined by the applicable Agent. Each such conversion will
be made by the applicable Agent on such terms and subject to such conditions,
limitations and charges as such Agent may from time to time establish in
accordance with its regular foreign exchange practices. All costs of exchange
will be borne by the purchaser of each such Foreign Currency Note. See "Special
Provisions Relating to Foreign Currency Notes".
Interest rates offered by Boeing Capital with respect to the Notes may
differ depending upon, among other things, the aggregate principal amount of
Notes purchased in any single transaction. Interest rates or formulae and other
terms of Notes are subject to change by Boeing Capital from time to time, but no
such change will affect any Note already issued or as to which an offer to
purchase has been accepted by Boeing Capital.
Each Note will be issued in fully registered form in the form of a global
security, which we refer to as a Book-Entry Note in certificated form, which we
refer to as a Certificated Note. The authorized denominations of each Note other
than a Foreign Currency Note will be $100,000 and integral multiples of $1,000
in excess thereof, unless otherwise specified in the applicable Pricing
Supplement, while the authorized denominations of each Foreign Currency Note
will be specified in the applicable Pricing Supplement.
Payments of principal of, and premium, if any, and interest on, Book-Entry
Notes will be made by Boeing Capital through the Trustee to The Depository Trust
Company, which we refer to as the Depositary. See "Book-Entry Notes". In the
case of Certificated Notes, payment of principal and premium, if any, due on the
Stated Maturity Date or any prior date on which the principal, or an installment
of principal, of each Certificated Note becomes due and payable, whether by the
declaration of acceleration, notice of redemption at the option of Boeing
Capital, notice of the Holder's option to elect repayment or otherwise (the
Stated Maturity Date or such prior date, as the case may be, is herein referred
to as the "Maturity Date" with respect to the principal repayable on such date)
will be made in immediately available funds upon presentation and surrender
thereof at the office or agency maintained by Boeing Capital for such purpose in
the Borough of Manhattan, The City of New York (or, in the case of any repayment
on an Optional Repayment Date, upon
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presentation of such Certificated Note and a duly completed election form in
accordance with the provisions described below), currently the corporate trust
office of the Trustee located at Four Albany Street, New York, New York 10006.
Payment of interest due on the Maturity Date of each Certificated Note will be
made to the person to whom payment of the principal and premium, if any, shall
be made. Payment of interest due on each Certificated Note on any Interest
Payment Date (as hereinafter defined) other than the Maturity Date will be made
at the office or agency referred to above maintained by Boeing Capital for such
purpose or, at the option of Boeing Capital, may be made by check mailed to the
address of the Holder entitled thereto as such address shall appear in the
Security Register of Boeing Capital. Notwithstanding the foregoing, a Holder of
$10,000,000 (or, if the applicable Specified Currency is other than United
States dollars, the equivalent thereof in such Specified Currency) or more in
aggregate principal amount of Notes (whether having identical or different terms
and provisions) will be entitled to receive interest payments on any Interest
Payment Date other than the Maturity Date by wire transfer of immediately
available funds if appropriate wire transfer instructions have been received in
writing by the Trustee not less than 15 days prior to such Interest Payment
Date. Any such wire transfer instructions received by the Trustee shall remain
in effect until revoked by such Holder. For special payment terms applicable to
Foreign Currency Notes, see "Special Provisions Relating to Foreign Currency
Notes--Payments of Principal, Premium, if any, and Interest".
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which commercial banks are
authorized or required by law, regulation or executive order to close in The
City of New York; provided, however, that, with respect to Foreign Currency
Notes, such day is also not a day on which commercial banks are authorized or
required by law, regulation or executive order to close in the Principal
Financial Center (as hereinafter defined) of the country issuing the Specified
Currency (or, if the Specified Currency is Euro, such day is also a day on which
the Trans-European Automated Real-Time Gross Settlement Express Transfer
(TARGET) System is open); provided, further, that, with respect to Notes as to
which LIBOR is an applicable Interest Rate Basis, such day is also a London
Business Day (as hereinafter defined). "London Business Day" means a day on
which commercial banks are open for business (including dealings in the
Designated LIBOR Currency (as hereinafter defined)) in London.
"Principal Financial Center" means (i) the capital city of the country
issuing the Specified Currency or (ii) the capital city of the country to which
the Designated LIBOR Currency relates, as applicable, except, in the case of
(i) or (ii) above, that with respect to United States dollars, Australian
dollars, Canadian dollars, Deutsche marks, Dutch guilders, Italian lire,
Portuguese escudos, South African rand and Swiss francs, the "Principal
Financial Center" shall be The City of New York, Sydney and (solely in the case
of the Specified Currency) Melbourne, Toronto, Frankfurt, Amsterdam, Milan,
London (solely in the case of the Designated LIBOR Currency), Johannesburg and
Zurich, respectively.
Book-Entry Notes may be transferred or exchanged only through the
Depositary. See "Book-Entry Notes". Registration of transfer or exchange of
Certificated Notes will be made at the office or agency maintained by Boeing
Capital for such purpose in the Borough of Manhattan, The City of New York. No
service charge will be made by Boeing Capital or the Trustee for any such
registration of transfer or exchange of Notes, but Boeing Capital may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith (other than exchanges pursuant to the
Indenture not involving any transfer).
REDEMPTION AT THE OPTION OF BOEING CAPITAL
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The Notes will be redeemable at the
option of Boeing Capital prior to the Stated Maturity Date only if an Initial
Redemption Date is specified in the applicable Pricing Supplement. If
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so specified, the Notes will be subject to redemption at the option of Boeing
Capital on any date on and after the applicable Initial Redemption Date in whole
or from time to time in part in increments of $1,000 or such other minimum
denomination specified in such Pricing Supplement (provided that any remaining
principal amount thereof shall be at least $100,000 or such other minimum
denomination), at the applicable Redemption Price (as hereinafter defined),
together with unpaid interest accrued to the date of redemption, on notice given
not more than 60 nor less than 30 calendar days prior to the date of redemption
and in accordance with the provisions of the Indenture. "Redemption Price", with
respect to a Note, means an amount equal to the Initial Redemption Percentage
specified in the applicable Pricing Supplement (as adjusted by the Annual
Redemption Percentage Reduction, if applicable) multiplied by the unpaid
principal amount to be redeemed. The Initial Redemption Percentage, if any,
applicable to a Note shall decline at each anniversary of the Initial Redemption
Date by an amount equal to the applicable Annual Redemption Percentage
Reduction, if any, until the Redemption Price is equal to 100% of the unpaid
principal amount to be redeemed. See also "Original Issue Discount Notes".
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be repayable by Boeing Capital at the option of the Holders
thereof prior to the Stated Maturity Date only if one or more Optional Repayment
Dates are specified in the applicable Pricing Supplement. If so specified, the
Notes will be subject to repayment at the option of the Holders thereof on any
Optional Repayment Date in whole or from time to time in part in increments of
$1,000 or such other minimum denomination specified in the applicable Pricing
Supplement (provided that any remaining principal amount thereof shall be at
least $100,000 or such other minimum denomination), at a repayment price equal
to 100% of the unpaid principal amount to be repaid, together with unpaid
interest accrued to the date of repayment. For any Note to be repaid, such Note
must be received, together with the form thereon entitled "Option to Elect
Repayment" duly completed, by the Trustee at its corporate trust office (or such
other address of which Boeing Capital shall from time to time notify the
Holders) not more than 60 nor less than 30 calendar days prior to the date of
repayment. Exercise of such repayment option by the Holder will be irrevocable.
See also "Original Issue Discount Notes".
Only the Depositary may exercise the repayment option in respect of Global
Securities representing Book-Entry Notes. Accordingly, Beneficial Owners (as
hereinafter defined) of Global Securities that desire to have all or any portion
of the Book-Entry Notes represented by such Global Securities repaid must direct
the Participant (as hereinafter defined) through which they own their interest
to direct the Depositary to exercise the repayment option on their behalf by
delivering the related global security and duly completed election form to the
Trustee as aforesaid. In order to ensure that such global security and election
form are received by the Trustee on a particular day, the applicable Beneficial
Owner must so direct the Participant through which it owns its interest before
such Participant's deadline for accepting instructions for that day. Different
firms may have different deadlines for accepting instructions from their
customers. Accordingly, Beneficial Owners should consult the Participants
through which they own their interest for the respective deadlines for such
Participants. All instructions given to Participants from Beneficial Owners of
Global Securities relating to the option to elect repayment shall be
irrevocable. In addition, at the time such instructions are given, each such
Beneficial Owner shall cause the Participant through which it owns its interest
to transfer such Beneficial Owner's interest in the global security or
Securities representing the related Book-Entry Notes, on the Depositary's
records, to the Trustee. See "Book-Entry Notes".
If applicable, Boeing Capital will comply with the requirements of
Rule 14e-1 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and any other securities laws or regulations in connection with any such
repayment.
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Boeing Capital may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by Boeing Capital may, at the
discretion of Boeing Capital, be held, resold or surrendered to the Trustee for
cancellation.
INTEREST
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, each
interest-bearing Note will bear interest from its date of issue at the rate per
annum, in the case of a Fixed Rate Note, or pursuant to the interest rate
formula, in the case of a Floating Rate Note, in each case as specified in the
applicable Pricing Supplement, until the principal thereof is paid or duly made
available for payment. Unless otherwise specified in the applicable Pricing
Supplement, interest payments in respect of Fixed Rate Notes and Floating Rate
Notes will equal the amount of interest accrued from and including the
immediately preceding Interest Payment Date in respect of which interest has
been paid or duly made available for payment (or from and including the date of
issue, if no interest has been paid or duly made available for payment with
respect to the applicable Note) to but excluding the applicable Interest Payment
Date or the Maturity Date, as the case may be (each, an "Interest Period").
Interest on Fixed Rate Notes and Floating Rate Notes will be payable in
arrears on each Interest Payment Date and on the Maturity Date. Unless otherwise
specified in the applicable Pricing Supplement, the first payment of interest on
any Note originally issued between a Record Date (as hereinafter defined) and
the related Interest Payment Date will be made on the Interest Payment Date
immediately following the next succeeding Record Date to the Holder on such next
succeeding Record Date. Unless otherwise specified in the applicable Pricing
Supplement, a "Record Date" shall be the fifteenth calendar day (whether or not
a Business Day) immediately preceding the related Interest Payment Date.
FIXED RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be payable on March 15 and September 15 in the case of
Senior Fixed Rate Notes, and on January 15 and July 15, in the case of
Subordinated Fixed Rate Notes, of each year (each, an "Interest Payment Date")
and on the Maturity Date. Unless otherwise specified in the applicable Pricing
Supplement, interest on Fixed Rate Notes will be computed on the basis of a
360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note falls
on a day that is not a Business Day, the required payment of principal, premium,
if any, and/or interest will be made on the next succeeding Business Day as if
made on the date such payment was due, and no interest will accrue on such
payment for the period from and after such Interest Payment Date or the Maturity
Date, as the case may be, to the date of such payment on the next succeeding
Business Day.
FLOATING RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. The applicable Pricing Supplement
will specify certain terms with respect to which each Floating Rate Note is
being delivered, including: whether such Floating Rate Note is a "Regular
Floating Rate Note", a "Floating Rate/Fixed Rate Note" or an "Inverse Floating
Rate Note", the Fixed Rate Commencement Date, if applicable, Fixed Interest
Rate, if applicable, Interest Rate Basis or Bases, Initial Interest Rate, if
any, Initial Interest Reset Date, Interest Reset Period and Dates, Interest
Payment Period and Dates, Index Maturity, Maximum Interest Rate and/or Minimum
Interest Rate, if any, and Spread and/or Spread Multiplier, if any, as such
terms are defined below. If one or more of the applicable Interest Rate Bases is
LIBOR or the CMT Rate, the applicable Pricing Supplement will
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also specify the Designated LIBOR Currency and Designated LIBOR Page or the
Designated CMT Maturity Index and Designated CMT Telerate Page, respectively, as
such terms are defined below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note" or an "Inverse Floating Rate Note" or as having an Addendum attached
or having "Other/Additional Provisions" apply, such Floating Rate Note will be
designated as a "Regular Floating Rate Note" and, except as described below or
in the applicable Pricing Supplement, will bear interest at the rate determined
by reference to the applicable Interest Rate Basis or Bases (a) plus or minus
the applicable Spread, if any, and/or (b) multiplied by the applicable Spread
Multiplier, if any. Commencing on the Initial Interest Reset Date, the rate at
which interest on such Regular Floating Rate Note shall be payable shall be
reset as of each Interest Reset Date; provided, however, that the interest rate
in effect for the period, if any, from the date of issue to the Initial Interest
Reset Date will be the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating Rate/Fixed Rate
Note", then, except as described below or in the applicable Pricing Supplement,
such Floating Rate Note will bear interest at the rate determined by reference
to the applicable Interest Rate Basis or Bases (a) plus or minus the applicable
Spread, if any, and/or (b) multiplied by the applicable Spread Multiplier, if
any. Commencing on the Initial Interest Reset Date, the rate at which interest
on such Floating Rate/Fixed Rate Note shall be payable shall be reset as of each
Interest Reset Date; provided, however, that (y) the interest rate in effect for
the period, if any, from the date of issue to the Initial Interest Reset Date
will be the Initial Interest Rate and (z) the interest rate in effect for the
period commencing on the Fixed Rate Commencement Date to the Maturity Date shall
be the Fixed Interest Rate, if such rate is specified in the applicable Pricing
Supplement or, if no such Fixed Interest Rate is specified, the interest rate in
effect thereon on the day immediately preceding the Fixed Rate Commencement
Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating Rate
Note", then, except as described below or in the applicable Pricing Supplement,
such Floating Rate Note will bear interest at the Fixed Interest Rate minus the
rate determined by reference to the applicable Interest Rate Basis or Bases
(a) plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any; provided, however, that, unless otherwise
specified in the applicable Pricing Supplement, the interest rate thereon will
not be less than zero. Commencing on the Initial Interest Reset Date, the rate
at which interest on such Inverse Floating Rate Note shall be payable shall be
reset as of each Interest Reset Date; provided, however, that the interest rate
in effect for the period, if any, from the date of issue to the Initial Interest
Reset Date will be the Initial Interest Rate.
The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to such Floating Rate Note.
The "Spread Multiplier" is the percentage of the related Interest Rate Basis or
Bases applicable to such Floating Rate Note by which such Interest Rate Basis or
Bases will be multiplied to determine the applicable interest rate on such
Floating Rate Note. The "Index Maturity" is the period to maturity of the
instrument or obligation with respect to which the related Interest Rate Basis
or Bases will be calculated.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Pricing Supplement, the interest rate in effect on each day shall
be (i) if such day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date (as hereinafter defined) immediately preceding
such Interest Reset Date or (ii) if such day is not an Interest Reset Date, the
interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date.
S-10
<PAGE>
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper
Rate, (iv) the Eleventh District Cost of Funds Rate, (v) the Federal Funds Rate,
(vi) LIBOR, (vii) the Prime Rate, (viii) the Treasury Rate, or (ix) such other
Interest Rate Basis or interest rate formula as may be specified in the
applicable Pricing Supplement; provided, however, that the interest rate in
effect on a Floating Rate Note for the period, if any, from the date of issue to
the Initial Interest Reset Date will be the Initial Interest Rate; provided,
further, that with respect to a Floating Rate/ Fixed Rate Note the interest rate
in effect for the period commencing on the Fixed Rate Commencement Date to the
Maturity Date shall be the Fixed Interest Rate, if such rate is specified in the
applicable Pricing Supplement or, if no such Fixed Interest Rate is specified,
the interest rate in effect thereon on the day immediately preceding the Fixed
Rate Commencement Date.
The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually or on such other specified basis (each an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Dates will be, in the case of
Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Floating Rate Notes
as to which the Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month (with the exception of monthly reset Floating Rate
Notes as to which the Eleventh District Cost of Funds Rate is an applicable
Interest Rate Basis, which will reset on the first calendar day of the month);
(iv) quarterly, the third Wednesday of March, June, September and December of
each year; (v) semiannually, the third Wednesday of the two months specified in
the applicable Pricing Supplement; and (vi) annually, the third Wednesday of the
month specified in the applicable Pricing Supplement; provided however, that,
with respect to Floating Rate/Fixed Rate Notes, the rate of interest thereon
will not reset after the applicable Fixed Rate Commencement Date. If any
Interest Reset Date for any Floating Rate Note would otherwise be a day that is
not a Business Day, such Interest Reset Date will be postponed to the next
succeeding Business Day, except that in the case of a Floating Rate Note as to
which LIBOR is an applicable Interest Rate Basis and such Business Day falls in
the next succeeding calendar month, such Interest Reset Date will be the
immediately preceding Business Day. In addition, in the case of a Floating Rate
Note as to which the Treasury Rate is an applicable Interest Rate Basis, if the
Interest Determination Date would otherwise fall on an Interest Reset Date, the
particular Interest Reset Date will be postponed to the next succeeding Business
Day.
The interest rate applicable to each Interest Reset Period commencing on the
related Interest Reset Date will be the rate determined by the Calculation Agent
(as hereinafter defined) as of the applicable Interest Determination Date and
calculated on or prior to the Calculation Date (as hereinafter defined), except
with respect to LIBOR and the Eleventh District Cost of Funds Rate, which will
be calculated on such Interest Determination Date. The "Interest Determination
Date" with respect to the Federal Funds Rate and the Prime Rate will be the
Business Day immediately preceding the applicable Interest Reset Date; the
Interest Determination Date with respect to the CD Rate, the CMT Rate and the
Commercial Paper Rate will be the second Business Day immediately preceding the
applicable Interest Reset Date; the "Interest Determination Date" with respect
to the Eleventh District Cost of Funds Rate will be the last working day of the
month immediately preceding the applicable Interest Reset Date on which the
Federal Home Loan Bank of San Francisco (the "FHLB of San Francisco") publishes
the Index (as hereinafter defined); and the "Interest Determination Date" with
respect to LIBOR will be the second London Business Day immediately preceding
the applicable Interest Reset Date, unless the Designated LIBOR Currency is
British pounds sterling, in which case the "Interest Determination Date" will be
the applicable Interest Reset Date. With respect to the Treasury Rate, the
"Interest Determination Date" will be the day in the week in which the
applicable Interest Reset Date falls on which day Treasury Bills (as hereinafter
defined) are normally auctioned
S-11
<PAGE>
(Treasury Bills are normally sold at an auction held on Monday of each week,
unless such Monday is a legal holiday, in which case the auction is normally
held on the immediately succeeding Tuesday although such auction may be held on
the preceding Friday); provided, however, that if an auction is held on the
Friday of the week preceding the applicable Interest Reset Date, the "Interest
Determination Date" will be such preceding Friday; provided, further, that if
the Interest Determination Date would otherwise fall on an Interest Reset Date,
then such Interest Reset Date will be postponed to the next succeeding Business
Day. The "Interest Determination Date" pertaining to a Floating Rate Note the
interest rate of which is determined by reference to two or more Interest Rate
Bases will be the most recent Business Day which is at least two Business Days
prior to the applicable Interest Reset Date for such Floating Rate Note on which
each Interest Rate Basis is determinable. Each Interest Rate Basis will be
determined as of such date, and the applicable interest rate will take effect on
the applicable Interest Reset Date.
Notwithstanding the foregoing, a Floating Rate Note may also have either or
both of the following: (i) a Maximum Interest Rate, or ceiling, that may accrue
during any Interest Period and (ii) a Minimum Interest Rate, or floor, that may
accrue during any Interest Period. In addition to any Maximum Interest Rate that
may apply to any Floating Rate Note, the interest rate on Floating Rate Notes
will in no event be higher than the maximum rate permitted by New York law, as
the same may be modified by United States law of general application.
Except as provided below or in the applicable Pricing Supplement, the
date(s) on which interest on Floating Rate Notes is payable (each, an "Interest
Payment Date" with respect to Floating Rate Notes) will be, in the case of
Floating Rate Notes which reset:
- daily, weekly or monthly, the third Wednesday of each month or on the
third Wednesday of March, June, September and December of each year, as
specified in the applicable Pricing Supplement;
- quarterly, the third Wednesday of March, June, September and December of
each year;
- semiannually, the third Wednesday of the two months of each year specified
in the applicable Pricing Supplement;
- annually, the third Wednesday of the month of each year specified in the
applicable Pricing Supplement; and
- the Maturity Date.
If any Interest Payment Date other than the Maturity Date for any Floating
Rate Note would otherwise be a day that is not a Business Day, such Interest
Payment Date will be postponed to the next succeeding Business Day, except that
in the case of a Floating Rate Note as to which LIBOR is an applicable Interest
Rate Basis and such Business Day falls in the next succeeding calendar month,
such Interest Payment Date will be the immediately preceding Business Day. If
the Maturity Date of a Floating Rate Note falls on a day that is not a Business
Day, the required payment of principal, premium, if any, and interest will be
made on the next succeeding Business Day as if made on the date such payment was
due, and no interest will accrue on such payment for the period from and after
the Maturity Date to the date of such payment on the next succeeding Business
Day.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five-one millionths of a percentage point rounded upwards (E.G. 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used in
or resulting from such calculation on Floating Rate Notes will be rounded, in
the case of United States dollars, to the nearest cent or, in the case of a
foreign currency, to the nearest unit (with one-half cent or unit being rounded
upwards).
S-12
<PAGE>
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the applicable Interest Period. Unless otherwise specified in the
applicable Pricing Supplement, the interest factor for each such day will be
computed by dividing the interest rate applicable to such day by 360, in the
case of Floating Rate Notes for which an applicable Interest Rate Basis is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of days
in the year in the case of Floating Rate Notes for which an applicable Interest
Rate Basis is the CMT Rate or the Treasury Rate. Unless otherwise specified in
the applicable Pricing Supplement, the interest factor for Floating Rate Notes
for which the interest rate is calculated with reference to two or more Interest
Rate Bases will be calculated in each period in the same manner as if only the
applicable Interest Rate Basis specified in the applicable Pricing Supplement
applied.
Unless otherwise specified in the applicable Pricing Supplement, Bankers
Trust will be the "Calculation Agent." Upon request of the Holder of any
Floating Rate Note, the Calculation Agent will disclose the interest rate then
in effect and, if determined, the interest rate that will become effective as a
result of a determination made for the next succeeding Interest Reset Date with
respect to such Floating Rate Note. Unless otherwise specified in the applicable
Pricing Supplement, the "Calculation Date," if applicable, pertaining to any
Interest Determination Date will be the earlier of (i) the tenth calendar day
after such Interest Determination Date or, if such day is not a Business Day,
the next succeeding Business Day or (ii) the Business Day immediately preceding
the applicable Interest Payment Date or the Maturity Date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, the
Calculation Agent shall determine each Interest Rate Basis in accordance with
the following provisions.
CD RATE. Unless otherwise specified in the applicable Pricing Supplement,
"CD Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CD Rate (a "CD Rate Interest Determination Date"), the rate on such date for
negotiable United States dollar certificates of deposit having the Index
Maturity specified in the applicable Pricing Supplement as published in
H.15(519) (as hereinafter defined) under the heading "CDs (secondary market)"
or, if not so published by 3:00 P.M., New York City time, on the related
Calculation Date, the rate on such CD Rate Interest Determination Date for
negotiable United States dollar certificates of deposit of the Index Maturity
specified in the applicable Pricing Supplement as published in H.15 Daily Update
(as hereinafter defined), or such other recognized electronic source used for
the purpose of displaying such rate, under the caption "CDs (secondary market)."
If such rate is not yet published in H.15(519), H.15 Daily Update or another
recognized electronic source by 3:00 P.M., New York City time, on the related
Calculation Date, then the CD Rate on such CD Rate Interest Determination Date
will be calculated by the Calculation Agent and will be the arithmetic mean of
the secondary market offered rates as of 10:00 A.M., New York City time, on such
CD Rate Interest Determination Date, of three leading nonbank dealers in
negotiable United States dollar certificates of deposit in The City of New York
(which may include the Agents or their affiliates) selected by the Calculation
Agent for negotiable United States dollar certificates of deposit of major
United States money market banks for negotiable certificates of deposit with a
remaining maturity closest to the Index Maturity specified in the applicable
Pricing Supplement in an amount that is representative for a single transaction
in that market at that time; provided, however, that if the dealers so selected
by the Calculation Agent are not quoting as mentioned in this sentence, the CD
Rate determined as of such CD Rate Interest Determination Date will be the CD
Rate in effect on such CD Rate Interest Determination Date.
"H.15(519)" means the weekly statistical release designated as such, or any
successor publication, published by the Board of Governors of the Federal
Reserve System.
S-13
<PAGE>
"H.15 Daily Update" means the daily update of H.15(519), available through
the world-wide-web site of the Board of Governors of the Federal Reserve System
at http://www.bog.frb.fed.us/releases/ h15/update, or any successor site or
publication.
CMT RATE. Unless otherwise specified in the applicable Pricing Supplement,
"CMT Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CMT Rate (a "CMT Rate Interest Determination Date"), the rate displayed on
the Designated CMT Telerate Page under the caption "...Treasury Constant
Maturities...Federal Reserve Board Release H.15...Mondays Approximately
3:45 P.M.," under the column for the Designated CMT Maturity Index for (i) if
the Designated CMT Telerate Page is 7051, such CMT Rate Interest Determination
Date and (ii) if the Designated CMT Telerate Page is 7052, the weekly or monthly
average, as specified in the applicable Pricing Supplement, for the week or the
month, as applicable, ended immediately preceding the week or the month, as
applicable, in which the related CMT Rate Interest Determination Date falls. If
such rate is no longer displayed on the relevant page or is not so displayed by
3:00 P.M., New York City time, on the related Calculation Date, then the CMT
Rate for such CMT Rate Interest Determination Date will be such treasury
constant maturity rate for the Designated CMT Maturity Index as published in
H.15(519). If such rate is no longer published or is not so published by
3:00 P.M., New York City time, on the related Calculation Date, then the CMT
Rate on such CMT Rate Interest Determination Date will be such treasury constant
maturity rate for the Designated CMT Maturity Index (or other United States
Treasury rate for the Designated CMT Maturity Index) for the CMT Rate Interest
Determination Date with respect to such Interest Reset Date as may then be
published by either the Board of Governors of the Federal Reserve System or the
United States Department of the Treasury that the Calculation Agent determines
to be comparable to the rate formerly displayed on the Designated CMT Telerate
Page and published in H.15(519). If such information is not so provided by
3:00 P.M., New York City time, on the related Calculation Date, then the CMT
Rate on the CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity, based on the arithmetic mean
of the secondary market offered rates as of approximately 3:30 P.M., New York
City time, on such CMT Rate Interest Determination Date reported, according to
their written records, by three leading primary United States government
securities dealers in The City of New York (which may include the Agents or
their affiliates) (each, a "Reference Dealer") selected by the Calculation Agent
(from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for the most recently issued direct noncallable fixed rate obligations
of the United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to maturity
of not less than such Designated CMT Maturity Index minus one year. If the
Calculation Agent is unable to obtain three such Treasury Note quotations, the
CMT Rate on such CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity based on the arithmetic mean
of the secondary market offered rates as of approximately 3:30 P.M., New York
City time, on such CMT Rate Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected by
the Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with an original maturity of
the number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least $100 million. If three or four (and not five)
of such Reference Dealers are quoting as described above, then the CMT Rate will
be based on the arithmetic mean of the offered rates obtained and neither the
highest nor the lowest of such quotes will be eliminated; provided, however,
that if fewer than three Reference Dealers so selected by the Calculation Agent
are quoting as mentioned herein, the CMT Rate determined as of such CMT Rate
Interest Determination Date will be the CMT Rate in effect on such CMT Rate
Interest Determination Date. If two Treasury Notes with an original maturity as
S-14
<PAGE>
described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the Calculation Agent will
obtain quotations for the Treasury Note with the shorter remaining term to
maturity.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified in
the applicable Pricing Supplement with respect to which the CMT Rate will be
calculated or, if no such maturity is specified in the applicable Pricing
Supplement, 2 years.
"Designated CMT Telerate Page" means the display on Bridge Telerate, Inc.
(or any successor service) on the page specified in the applicable Pricing
Supplement (or any other page as may replace such page on such service) for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519) or,
if no such page is specified in the applicable Pricing Supplement, page 7052.
COMMERCIAL PAPER RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Commercial Paper Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Commercial Paper Rate (a "Commercial Paper
Rate Interest Determination Date"), the Money Market Yield (as hereinafter
defined) on such date of the rate for commercial paper having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the caption "Commercial Paper-Nonfinancial" or, if not so published by
3:00 P.M., New York City time, on the related Calculation Date, the Money Market
Yield of the rate on such Commercial Paper Rate Interest Determination Date for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement as published in H.15 Daily Update, or such other recognized
electronic source used for the purpose of displaying such rate, under the
caption "Commercial Paper-Nonfinancial." If such rate is not yet published in
H.15(519), H.15 Daily Update or another recognized electronic source by
3:00 P.M., New York City time, on the related Calculation Date, then the
Commercial Paper Rate on such Commercial Paper Rate Interest Determination Date
will be calculated by the Calculation Agent and will be the Money Market Yield
of the arithmetic mean of the offered rates at approximately 11:00 A.M., New
York City time, on such Commercial Paper Rate Interest Determination Date of
three leading dealers of United States dollar commercial paper in The City of
New York (which may include the Agents or their affiliates) selected by the
Calculation Agent for commercial paper having the Index Maturity specified in
the applicable Pricing Supplement placed for industrial issuers whose bond
rating is "Aa", or the equivalent, from a nationally recognized statistical
rating organization; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Commercial
Paper Rate determined as of such Commercial Paper Rate Interest Determination
Date will be the Commercial Paper Rate in effect on such Commercial Paper Rate
Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
<TABLE>
<S> <C> <C>
D X 360
Money Market Yield = -------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the applicable Interest Reset Period.
S-15
<PAGE>
ELEVENTH DISTRICT COST OF FUNDS RATE. Unless otherwise specified in the
applicable Pricing Supplement, "Eleventh District Cost of Funds Rate" means,
with respect to any Interest Determination Date relating to a Floating Rate Note
for which the interest rate is determined with reference to the Eleventh
District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate Interest
Determination Date"), the rate equal to the monthly weighted average cost of
funds for the calendar month immediately preceding the month in which such
Eleventh District Cost of Funds Rate Interest Determination Date falls as set
forth under the caption "11th District" on the display on Bridge Telerate, Inc.
(or any successor service) on page 7058 (or any other page as may replace such
page on such service) ("Telerate Page 7058") as of 11:00 A.M., San Francisco
time, on such Eleventh District Cost of Funds Rate Interest Determination Date.
If such rate does not appear on Telerate Page 7058 on such Eleventh District
Cost of Funds Rate Interest Determination Date, then the Eleventh District Cost
of Funds Rate on such Eleventh District Cost of Funds Rate Interest
Determination Date shall be the monthly weighted average cost of funds paid by
member institutions of the Eleventh Federal Home Loan Bank District that was
most recently announced (the "Index") by the FHLB of San Francisco as such cost
of funds for the calendar month immediately preceding such Eleventh District
Cost of Funds Rate Interest Determination Date. If the FHLB of San Francisco
fails to announce the Index on or prior to such Eleventh District Cost of Funds
Rate Interest Determination Date for the calendar month immediately preceding
such Eleventh District Cost of Funds Rate Interest Determination Date, the
Eleventh District Cost of Funds Rate determined as of such Eleventh District
Cost of Funds Rate Interest Determination Date will be the Eleventh District
Cost of Funds Rate in effect on such Eleventh District Cost of Funds Rate
Interest Determination Date.
FEDERAL FUNDS RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for United States dollar
federal funds as published in H.15(519) under the heading "Federal Funds
(Effective)", as such rate is displayed on Bridge Telerate, Inc. (or any
successor service) on page 120 (or any other page as may replace such page on
such service) ("Telerate Page 120"), or, if such rate does not appear on
Telerate Page 120 or is not so published by 3:00 P.M., New York City time, on
the related Calculation Date, the rate on such Federal Funds Rate Interest
Determination Date for United States dollar federal funds as published in H.15
Daily Update, or such other recognized electronic source used for the purpose of
displaying such rate, under the caption "Federal Funds (Effective)." If such
rate does not appear on Telerate Page 120 or is not yet published in H.15(519),
H.15 Daily Update or another recognized electronic source by 3:00 P.M., New York
City time, on the related Calculation Date, then the Federal Funds Rate on such
Federal Funds Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the rates for the last
transaction in overnight United States dollar federal funds arranged by three
leading brokers of United States dollar federal funds transactions in The City
of New York (which may include the Agents or their affiliates) selected by the
Calculation Agent prior to 9:00 A.M., New York City time, on such Federal Funds
Rate Interest Determination Date; provided, however, that if the brokers so
selected by the Calculation Agent are not quoting as mentioned in this sentence,
the Federal Funds Rate determined as of such Federal Funds Rate Interest
Determination Date will be the Federal Funds Rate in effect on such Federal
Funds Rate Interest Determination Date.
LIBOR. Unless otherwise specified in the applicable Pricing Supplement,
"LIBOR" means the rate determined in accordance with the following provisions:
(i) With respect to any Interest Determination Date relating to a Floating
Rate Note for which the interest rate is determined with reference to LIBOR (a
"LIBOR Interest Determination Date"), LIBOR will be either: (a) if "LIBOR
Telerate" is specified in the applicable Pricing Supplement or if neither "LIBOR
Reuters" nor "LIBOR Telerate" is specified in the applicable Pricing Supplement
as
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<PAGE>
the method for calculating LIBOR, the rate for deposits in the Designated LIBOR
Currency having the Index Maturity specified in such Pricing Supplement,
commencing on such Interest Reset Date, that appears on the Designated LIBOR
Page as of 11:00 A.M., London time, on such LIBOR Interest Determination Date;
or (b) if "LIBOR Reuters" is specified in the applicable Pricing Supplement, the
arithmetic mean of the offered rates (unless the Designated LIBOR Page by its
terms provides only for a single rate, in which case such single rate shall be
used) for deposits in the Designated LIBOR Currency having the Index Maturity
specified in such Pricing Supplement, commencing on the applicable Interest
Reset Date, that appear (or, if only a single rate is required as aforesaid,
appears) on the Designated LIBOR Page as of 11:00 A.M., London time, on such
LIBOR Interest Determination Date. If fewer than two such offered rates so
appear, or if no such rate so appears, as applicable, LIBOR on such LIBOR
Interest Determination Date will be determined in accordance with the provisions
described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer than
two offered rates appear, or no rate appears, as the case may be, on the
Designated LIBOR Page as specified in clause (i) above, the Calculation Agent
will request the principal London offices of each of four major reference banks
(which may include affiliates of the Agents) in the London interbank market, as
selected by the Calculation Agent, to provide the Calculation Agent with its
offered quotation for deposits in the Designated LIBOR Currency for the period
of the Index Maturity specified in the applicable Pricing Supplement, commencing
on the applicable Interest Reset Date, to prime banks in the London interbank
market at approximately 11:00 A.M., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative for a single
transaction in the Designated LIBOR Currency in such market at such time. If at
least two such quotations are so provided, then LIBOR on such LIBOR Interest
Determination Date will be the arithmetic mean of such quotations. If fewer than
two such quotations are so provided, then LIBOR on such LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 A.M., in the applicable Principal Financial Center, on such
LIBOR Interest Determination Date by three major banks (which may include
affiliates of the Agents) in such Principal Financial Center selected by the
Calculation Agent for loans in the Designated LIBOR Currency to leading European
banks, having the Index Maturity specified in the applicable Pricing Supplement
and in a principal amount that is representative for a single transaction in the
Designated LIBOR Currency in such market at such time; provided, however, that
if the banks so selected by the Calculation Agent are not quoting as mentioned
in this sentence, LIBOR determined as of such LIBOR Interest Determination Date
will be LIBOR in effect on such LIBOR Interest Determination Date.
"Designated LIBOR Currency" means the currency specified in the applicable
Pricing Supplement as to which LIBOR shall be calculated or, if no such currency
is specified in the applicable Pricing Supplement, United States dollars.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) on the page specified in such Pricing
Supplement (or any other page as may replace such page on such service) for the
purpose of displaying the London interbank rates of major banks for the
Designated LIBOR Currency, or (b) if "LIBOR Telerate" is specified in the
applicable Pricing Supplement or neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable Pricing Supplement as the method for calculating
LIBOR, the display on Bridge Telerate, Inc. (or any successor service) on the
page specified in such Pricing Supplement (or any other page as may replace such
page on such service) for the purpose of displaying the London interbank rates
of major banks for the Designated LIBOR Currency.
PRIME RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Prime Rate" means, with respect to any Interest Determination Date
relating to a Floating Rate Note for which the interest rate is determined with
reference to the Prime Rate (a "Prime Rate Interest Determination
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Date"), the rate on such date as such rate is published in H.15(519) under the
caption "Bank Prime Loan" or, if not published by 3:00 P.M., New York City time,
on the related Calculation Date, the rate on such Prime Rate Interest
Determination Date as published in H.15 Daily Update, or such other recognized
electronic source used for the purpose of displaying such rate, under the
caption "Bank Prime Loan." If such rate is not yet published in H.15(519), H.15
Daily Update or another recognized electronic source by 3:00 P.M., New York City
time, on the related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen US PRIME 1 Page (as hereinafter defined) as such
bank's prime rate or base lending rate as of 11:00 A.M., New York City time, on
such Prime Rate Interest Determination Date. If fewer than four such rates so
appear on the Reuters Screen US PRIME 1 Page for such Prime Rate Interest
Determination Date, then the Prime Rate shall be the arithmetic mean of the
prime rates or base lending rates quoted on the basis of the actual number of
days in the year divided by a 360-day year as of the close of business on such
Prime Rate Interest Determination Date by three major banks (which may include
affiliates of the Agents) in The City of New York selected by the Calculation
Agent; provided, however, that if the banks so selected by the Calculation Agent
are not quoting as mentioned in this sentence, the Prime Rate determined as of
such Prime Rate Interest Determination Date will be the Prime Rate in effect on
such Prime Rate Interest Determination Date.
"Reuters Screen US PRIME 1 Page" means the display on the Reuter Monitor
Money Rates Service (or any successor service) on the "US PRIME 1" page (or such
other page as may replace the US PRIME 1 page on such service) for the purpose
of displaying prime rates or base lending rates of major United States banks.
TREASURY RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Treasury Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is determined
by reference to the Treasury Rate (a "Treasury Rate Interest Determination
Date"), the rate from the auction held on such Treasury Rate Interest
Determination Date (the "Auction") of direct obligations of the United States
("Treasury Bills") having the Index Maturity specified in the applicable Pricing
Supplement under the caption "INVESTMENT RATE" on the display on Bridge
Telerate, Inc. (or any successor service) on page 56 (or any other page as may
replace such page on such service) ("Telerate Page 56") or page 57 (or any other
page as may replace such page on such service) ("Telerate Page 57") or, if not
so published by 3:00 P.M., New York City time, on the related Calculation Date,
the Bond Equivalent Yield (as hereinafter defined) of the rate for such Treasury
Bills as published in H.15 Daily Update, or such other recognized electronic
source used for the purpose of displaying such rate, under the caption "U.S.
Government Securities/Treasury Bills/Auction High" or, if not so published by
3:00 P.M., New York City time, on the related Calculation Date, the Bond
Equivalent Yield of the auction rate of such Treasury Bills as announced by the
United States Department of the Treasury. In the event that the auction rate of
Treasury Bills having the Index Maturity specified in the applicable Pricing
Supplement is not so announced by the United States Department of the Treasury,
or if no such Auction is held, then the Treasury Rate will be the Bond
Equivalent Yield of the rate on such Treasury Rate Interest Determination Date
of Treasury Bills having the Index Maturity specified in the applicable Pricing
Supplement as published in H.15(519) under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market" or, if not yet published by
3:00 P.M., New York City time, on the related Calculation Date, the rate on such
Treasury Rate Interest Determination Date of such Treasury Bills as published in
H.15 Daily Update, or such other recognized electronic source used for the
purpose of displaying such rate, under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market." If such rate is not yet published
in H.15(519), H.15 Daily Update or another recognized electronic source, then
the Treasury Rate will be calculated by the Calculation Agent and will be the
Bond Equivalent Yield of the arithmetic mean of the secondary market bid rates,
as of approximately 3:30 P.M., New York City time, on such Treasury Rate
Interest Determination Date, of three primary United States government
securities dealers (which may include the Agents or their affiliates) selected
by the Calculation Agent, for the issue of Treasury
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Bills with a remaining maturity closest to the Index Maturity specified in the
applicable Pricing Supplement; provided, however, that if the dealers so
selected by the Calculation Agent are not quoting as mentioned in this sentence,
the Treasury Rate determined as of such Treasury Rate Interest Determination
Date will be the Treasury Rate in effect on such Treasury Rate Interest
Determination Date.
"Bond Equivalent Yield" means a yield (expressed as a percentage) calculated
in accordance with the following formula:
<TABLE>
<S> <C> <C>
D X N
Bond Equivalent Yield = -------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for Treasury Bills quoted on a
bank discount basis, "N" refers to 365 or 366, as the case may be, and "M"
refers to the actual number of days in the applicable Interest Reset Period.
OTHER/ADDITIONAL PROVISIONS; ADDENDUM
Any provisions with respect to the Notes, including the specification and
determination of one or more Interest Rate Bases, the calculation of the
interest rate applicable to a Floating Rate Note, the Interest Payment Dates,
the Maturity Date or any other term relating thereto, may be modified and/or
supplemented as specified under "Other/Additional Provisions" on the face
thereof or in an Addendum relating thereto, if so specified on the face thereof.
Such provisions will be described in the applicable Pricing Supplement.
AMORTIZING NOTES
Boeing Capital may from time to time offer Amortizing Notes. Unless
otherwise specified in the applicable Pricing Supplement, interest on each
Amortizing Note will be computed on the basis of a 360-day year of twelve 30-day
months. Payments with respect to Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. Further information concerning additional terms and
provisions of Amortizing Notes will be specified in the applicable Pricing
Supplement, including a table setting forth repayment information for such
Amortizing Notes.
ORIGINAL ISSUE DISCOUNT NOTES
Boeing Capital may offer Notes ("Original Issue Discount Notes") from time
to time that have an Issue Price (as specified in the applicable Pricing
Supplement) that is less than 100% of the principal amount thereof (i.e., par).
Original Issue Discount Notes may not bear any interest currently or may bear
interest at a rate that is below market rates at the time of issuance. The
difference between the Issue Price of an Original Issue Discount Note and par is
referred to herein as the "Discount". In the event of redemption, repayment or
acceleration of maturity of an Original Issue Discount Note, the amount payable
to the Holder of such Original Issue Discount Note will be equal to the sum of
(i) the Issue Price (increased by any accruals of Discount) and, in the event of
any redemption of such Original Issue Discount Note (if applicable), multiplied
by the Initial Redemption Percentage specified in the applicable Pricing
Supplement (as adjusted by the Annual Redemption Percentage Reduction, if
applicable) and (ii) any unpaid interest on such Original Issue Discount Note
accrued from the date of issue to the date of such redemption, repayment or
acceleration of maturity.
Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any date
on which a redemption, repayment or acceleration of maturity occurs for an
Original Issue Discount Note, such Discount will be accrued using a constant
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yield method. The constant yield will be calculated using a 30-day month,
360-day year convention, a compounding period that, except for the Initial
Period (as defined below), corresponds to the shortest period between Interest
Payment Dates for the applicable Original Issue Discount Note (with ratable
accruals within a compounding period), a coupon rate equal to the initial coupon
rate applicable to such Original Issue Discount Note and an assumption that the
maturity of such Original Issue Discount Note will not be accelerated. If the
period from the date of issue to the initial Interest Payment Date for an
Original Issue Discount Note (the "Initial Period") is shorter than the
compounding period for such Original Issue Discount Note, a proportionate amount
of the yield for an entire compounding period will be accrued. If the Initial
Period is longer than the compounding period, then such period will be divided
into a regular compounding period and a short period with the short period being
treated as provided in the preceding sentence. The accrual of the applicable
Discount may differ from the accrual of original issue discount for purposes of
the Internal Revenue Code of 1986, as amended (the "Code"), certain Original
Issue Discount Notes may not be treated as having original issue discount within
the meaning of the Code, and Notes other than Original Issue Discount Notes may
be treated as issued with original issue discount for federal income tax
purposes. See "Certain United States Federal Income Tax Considerations" herein.
INDEXED NOTES
Notes may be issued with the amount of principal, premium and/or interest
payable in respect thereof to be determined with reference to the price or
prices of specified commodities or stocks, to the exchange rate of one or more
designated currencies relative to an indexed currency or to such other price(s)
or exchange rate(s) ("Indexed Notes"), as specified in the applicable Pricing
Supplement. In certain cases, Holders of Indexed Notes may receive a principal
payment on the Maturity Date that is greater than or less than the principal
amount of such Indexed Notes depending upon the relative value on the Maturity
Date of the specified indexed item. Information as to the method for determining
the amount of principal, premium, if any, and/or interest payable in respect of
Indexed Notes, certain historical information with respect to the specified
indexed item and tax considerations associated with an investment in Indexed
Notes may be specified in the applicable Pricing Supplement. See "Risk Factors".
APPLICABILITY OF DEFEASANCE PROVISIONS
The Indentures contain provisions, applicable to the Notes, relating to
defeasance and discharge which are described in the accompanying Prospectus
under "Description of the Securities--Discharge and Defeasance".
BOOK-ENTRY NOTES
Boeing Capital has established a depositary arrangement with The Depository
Trust Company with respect to the Book-Entry Notes, the terms of which are
summarized below. Any additional or differing terms of the depositary
arrangement with respect to the Book-Entry Notes will be described in the
applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes of like tenor or terms up to
$400,000,000 aggregate principal amount bearing interest (if any) at the same
rate or pursuant to the same formula and having the same date of issue, currency
of denomination and payment, Interest Payment Dates (if any), Stated Maturity
Date, redemption provisions (if any), repayment provisions (if any) and other
terms will be represented by a single global security. Each Global Security
representing Book-Entry Notes will be deposited with, or on behalf of, the
Depositary and will be registered in the name of the Depositary or a nominee of
the Depositary. No global security may be transferred except as a whole by a
nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or such nominee to a successor of the
Depositary or a nominee of such successor.
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So long as the Depositary or its nominee is the registered owner of a global
security, the Depositary or its nominee, as the case may be, will be the sole
holder of the Book-Entry Notes represented thereby for all purposes under the
Indenture. Except as otherwise provided in this section, the Beneficial Owners
of the global security or Securities representing Book-Entry Notes will not be
entitled to receive physical delivery of Certificated Notes and will not be
considered the Holders thereof for any purpose under the Indenture, and no
global security representing Book-Entry Notes shall be exchangeable or
transferable. Accordingly, each Beneficial Owner must rely on the procedures of
the Depositary and, if such Beneficial Owner is not a Participant, on the
procedures of the Participant through which such Beneficial Owner owns its
interest in order to exercise any rights of a Holder under such global security
or the Indenture. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of such securities in certificated form.
Such limits and such laws may impair the ability to transfer beneficial
interests in a global security representing Book-Entry Notes.
Unless otherwise specified in the applicable Pricing Supplement, each global
security representing Book-Entry Notes will be exchangeable for Certificated
Notes of like tenor and terms and of differing authorized denominations
aggregating a like principal amount, only if (i) the Depositary notifies Boeing
Capital that it is unwilling or unable to continue as Depositary for the global
securities, (ii) an Event of Default with respect to the global securities has
occurred and is continuing or (iii) Boeing Capital in its sole discretion
determines that the global securities shall be exchangeable for Certificated
Notes. Upon any such exchange, the Certificated Notes shall be registered in the
names of the Beneficial Owners of the global security or Securities representing
Book-Entry Notes, which names shall be provided by the Depositary's relevant
Participants (as identified by the Depositary) to the Trustee.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Book-Entry Notes.
The Book-Entry Notes will be issued as fully registered securities registered in
the name of Cede & Co. (the Depositary's partnership nominee). One fully
registered global security will be issued for each issue of Book-Entry Notes,
each in the aggregate principal amount of such issue, and will be deposited with
the Depositary. If, however, the aggregate principal amount of any issue exceeds
$400,000,000, one global security will be issued with respect to each
$400,000,000 of principal amount and an additional global security will be
issued with respect to any remaining principal amount of such issue.
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its participants ("Participants")
deposit with the Depositary. The Depositary also facilitates the settlement
among Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants of the Depositary ("Direct
Participants") include securities brokers and dealers (including the Agent),
banks, trust companies, clearing corporations and certain other organizations.
The Depositary is owned by a number of its Direct Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the Depositary's system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to the Depositary and its Participants are on file with the
Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be made by
or through Direct Participants, which will receive a credit for such Book-Entry
Notes on the Depositary's records. The
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ownership interest of each actual purchaser of each Book-Entry Note represented
by a global security ("Beneficial Owner") is in turn to be recorded on the
records of Direct and Indirect Participants. Beneficial Owners will not receive
written confirmation from the Depositary of their purchase, but Beneficial
Owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the Direct
or Indirect Participants through which such Beneficial Owner entered into the
transaction. Transfers of ownership interests in a global security representing
Book-Entry Notes are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners of a
global security representing Book-Entry Notes will not receive Certificated
Notes representing their ownership interests therein, except in the event that
use of the book-entry system for such Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all global securities representing
Book-Entry Notes which are deposited with, or on behalf of, the Depositary are
registered in the name of the Depositary's nominee, Cede & Co. The deposit of
global securities with, or on behalf of, the Depositary and their registration
in the name of Cede & Co. effect no change in beneficial ownership. The
Depositary has no knowledge of the actual Beneficial Owners of the global
securities representing the Book-Entry Notes; the Depositary's records reflect
only the identity of the Direct Participants to whose accounts such Book-Entry
Notes are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect to
the global securities representing the Book-Entry Notes. Under its usual
procedures, the Depositary mails an Omnibus Proxy to Boeing Capital as soon as
possible after the applicable record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose accounts
the Book-Entry Notes are credited on the applicable record date (identified in a
listing attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest payments, if any, on the global
securities representing the Book-Entry Notes will be made in immediately
available funds to the Depositary. The Depositary's practice is to credit Direct
Participants' accounts on the applicable payment date in accordance with the
respective holdings shown on the Depositary's records unless the Depositary has
reason to believe that it will not receive payment on such date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name", and will be the
responsibility of such Participant and not of the Depositary, the Trustee or
Boeing Capital, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal, premium, if any, and/or
interest, if any, to the Depositary is the responsibility of Boeing Capital and
the Trustee, disbursement of such payments to Direct Participants shall be the
responsibility of the Depositary, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the Book-Entry Notes of like tenor and terms are being redeemed, the
Depositary's practice is to determine by lot the amount of the interest of each
Direct Participant in such issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by Boeing Capital, through its Participant, to the
Trustee, and shall effect delivery of such Book-Entry Notes by causing the
Direct Participant to transfer the Participant's interest in the global security
or Securities representing such Book-Entry Notes, on the Depositary's records,
to the Trustee. The
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requirement for physical delivery of Book-Entry Notes in connection with a
demand for repayment will be deemed satisfied when the ownership rights in the
global security or securities representing such Book-Entry Notes are transferred
by Direct Participants on the Depositary's records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving reasonable
notice to Boeing Capital or the Trustee. Under such circumstances, in the event
that a successor securities depository is not obtained, Certificated Notes are
required to be printed and delivered.
Boeing Capital may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository). In that
event, Certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that Boeing Capital believes
to be reliable, but Boeing Capital takes no responsibility for the accuracy
thereof.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Foreign
Currency Notes will not be sold in, or to residents of, the country issuing the
applicable currency. The information set forth in this Prospectus Supplement is
directed to prospective purchasers who are United States residents and, with
respect to Foreign Currency Notes, is by necessity incomplete. Boeing Capital
and the Agents disclaim any responsibility to advise prospective purchasers who
are residents of countries other than the United States with respect to any
matters that may affect the purchase, holding or receipt of payments of
principal of, and premium, if any, and interest on, the Foreign Currency Notes.
Such persons should consult their own financial and legal advisors with regard
to such matters. See "Risk Factors--Exchange Rate and Exchange Rate Controls".
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement, Boeing
Capital is obligated to make payments of principal of, and premium, if any, and
interest on, Foreign Currency Notes in the applicable Specified Currency (or, if
such Specified Currency is not at the time of such payment legal tender for the
payment of public and private debts, in such other coin or currency of the
country which issued such Specified Currency as at the time of such payment is
legal tender for the payment of such debts). Any such amounts payable by Boeing
Capital in a foreign currency or composite currency will, unless otherwise
specified in the applicable Pricing Supplement, be converted by the Exchange
Rate Agent named in the applicable Pricing Supplement into United States dollars
for payment to Holders. However, the Holder of a Foreign Currency Note may elect
to receive amounts payable in a Foreign currency or composite currency in such
foreign currency or composite currency as hereinafter described.
Any United States dollar amount to be received by a Holder of a Foreign
Currency Note will be based on the highest bid quotation in The City of New York
received by the Exchange Rate Agent at approximately 11:00 A.M., New York City
time, on the second Business Day preceding the applicable payment date from
three recognized foreign exchange dealers (one of whom may be the Exchange Rate
Agent) selected by the Exchange Rate Agent and approved by Boeing Capital for
the purchase by the quoting dealer of the applicable foreign currency or
composite currency for United States dollars for settlement on such payment date
in the aggregate amount of such currency or composite currency payable to all
Holders of Foreign Currency Notes scheduled to receive United States dollar
payments and at which the applicable dealer commits to execute a contract. All
currency exchange costs will be
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borne by the Holders of such Foreign Currency Notes by deductions from such
payments. If three such bid quotations are not available, payments will be made
in the applicable foreign currency or composite currency.
Holders of Foreign Currency Notes may elect to receive all or a specified
portion of any payment of principal, premium, if any, and/or interest, if any,
in the Specified Currency by submitting a written request for such payment to
the Trustee at its corporate trust office in The City of New York on or prior to
the applicable Record Date or at least fifteen calendar days prior to the
Maturity Date, as the case may be. Such written request may be mailed or hand
delivered or sent by cable, telex or other form of facsimile transmission.
Holders of Foreign Currency Notes may elect to receive all or a specified
portion of all future payments in the Specified Currency and need not file a
separate election for each payment. Such election will remain in effect until
revoked by written notice to the Trustee, but written notice of any such
revocation must be received by the Trustee on or prior to the applicable Record
Date or at least fifteen calendar days prior to the Maturity Date, as the case
may be. Holders of Foreign Currency Notes to be held in the name of a broker or
nominee should contact such broker or nominee to determine whether and how an
election to receive payments in the Specified Currency may be made.
Unless otherwise specified in the applicable Pricing Supplement, if the
Specified Currency is other than United States dollars, a Beneficial Owner of
the related global security or securities which elects to receive payments of
principal, premium, if any, and/or interest, if any, in the Specified Currency
must notify the Participant through which it owns its interest on or prior to
the applicable Record Date or at least fifteen calendar days prior to the
Maturity Date, as the case may be, of such Beneficial Owner's election. Such
Participant must notify the Depositary of such election on or prior to the third
Business Day after such Record Date or at least twelve calendar days prior to
the Maturity Date, as the case may be, and the Depositary will notify the
Trustee of such election on or prior to the fifth Business Day after such Record
Date or at least ten calendar days prior to the Maturity Date, as the case may
be. If complete instructions are received by the Participant from the Beneficial
Owner and forwarded by the Participant to the Depositary, and by the Depositary
to the Trustee, on or prior to such dates, then such Beneficial Owner will
receive payments in the Specified Currency.
Payments of the principal of, and premium, if any, and/or interest, if any,
on, Foreign Currency Notes which are to be made in United States dollars will be
made in the manner specified herein with respect to Notes denominated in United
States dollars. See "Description of Notes--General." Payments of interest, if
any, on Foreign Currency Notes which are to be made in the Specified Currency on
an Interest Payment Date other than the Maturity Date will be made by check
mailed to the address of the Holders of such Foreign Currency Notes as they
appear in the Security Register, subject to the right to receive such interest
payments by wire transfer of immediately available funds under the circumstances
described under "Description of Notes--General." Payments of principal of, and
premium, if any, and/or interest, if any, on, Foreign Currency Notes which are
to be made in the Specified Currency on the Maturity Date will be made by wire
transfer of immediately available funds to an account with a bank designated at
least fifteen calendar days prior to the Maturity Date by each Holder thereof,
provided that such bank has appropriate facilities therefor and that the
applicable Foreign Currency Note is presented and surrendered at the office or
agency maintained by Boeing Capital for such purpose in the Borough of
Manhattan, The City of New York, currently the corporate trust office of the
Trustee located at Four Albany Street, New York, New York 10006, in time for the
Trustee to make such payments in such funds in accordance with its normal
procedures.
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AVAILABILITY OF SPECIFIED CURRENCY
If the Specified Currency for a Foreign Currency Note is not available for
the required payment of principal, premium, if any, and/or interest, if any, in
respect thereof due to the imposition of exchange controls or other
circumstances beyond the control of Boeing Capital, Boeing Capital will be
entitled to satisfy its obligations to the Holder of such Foreign Currency Note
by making such payment in United States dollars on the basis of the Market
Exchange Rate, computed by the Exchange Rate Agent, on the second Business Day
prior to such payment or, if such Market Exchange Rate is not then available, on
the basis of the most recently available Market Exchange Rate, or as otherwise
specified in the applicable Pricing Supplement.
The "Market Exchange Rate" for a Specified Currency other than United States
dollars means the noon dollar buying rate in The City of New York for cable
transfers for such Specified Currency as certified for customs purposes (or, if
not so certified, as otherwise determined) by the Federal Reserve Bank of New
York. Any payment made in United States dollars under such circumstances where
the required payment is in a Specified Currency other than United States dollars
will not constitute an Event of Default under the Indenture with respect to the
Notes.
All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Holders of the Foreign Currency
Notes.
JUDGMENTS
Under current New York law, a state court in the State of New York rendering
a judgment in respect of a Foreign Currency Note would be required to render
such judgment in the Specified Currency, and such judgment would be converted
into United States dollars at the exchange rate prevailing on the date of entry
of such judgment. Accordingly, the Holder of such Foreign Currency Note would be
subject to exchange rate fluctuations between the date of entry of a judgment in
a foreign currency and the time the amount of such foreign currency judgment is
paid to such Holder in United States dollars and converted by such Holder into
the Specified Currency. It is not certain, however, whether a non-New York state
court would follow the same rules and procedures with respect to conversions of
foreign currency judgments.
Boeing Capital will indemnify the Holder of any Note against any loss
incurred by such Holder as a result of any judgment or order being given or made
for any amount due under such Note and such judgment or order requiring payment
in a currency (the "Judgment Currency") other than the Specified Currency, and
as a result of any variation between (i) the rate of exchange at which the
Specified Currency amount is converted into the Judgment Currency for the
purpose of such judgment or order, and (ii) the rate of exchange at which the
Holder of such Note, on the date of payment of such judgment or order, is able
to purchase the Specified Currency with the amount of the Judgment Currency
actually received by such Holder, as the case may be.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal with
holders other than original purchasers (except where otherwise specifically
noted). Persons considering the purchase of the Notes should consult their
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own tax advisors concerning the application of United States federal income tax
laws to their particular situations as well as any consequences of the purchase,
ownership and disposition of the Notes arising under the laws of any other
taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity (treated
as a corporation or a partnership for federal income tax purposes) created or
organized in or under the laws of the United States, any state thereof or the
District of Columbia, (other than a partnership that is not treated as a United
States person under any applicable Treasury regulations), (iii) an estate whose
income is subject to United States federal income tax regardless of its source
or (iv) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in Treasury
regulations, certain trusts in existence on August 20, 1996, and treated as
United States persons under the United States Internal Revenue Code of 1986, as
amended (the "Code") and applicable Treasury regulations thereunder prior to
such date, that elect to continue to be treated as United States persons under
the Code or applicable Treasury regulations thereunder also will be a U.S.
Holder. Moreover, as used herein, the term "U.S. Holder" includes any holder of
a Note whose income or gain in respect to its investment in a Note is
effectively connected with the conduct of a U.S. trade or business. As used
herein, the term "non-U.S. Holder" means a beneficial owner of a Note that is
not a U.S. Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular method
of tax accounting).
ORIGINAL ISSUE DISCOUNT. The following summary is a general discussion of
the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of Notes issued with original issue discount
("Discount Notes"). The following summary is based upon final Treasury
regulations (the "OID Regulations") released by the Internal Revenue Service
("IRS") on January 27, 1994, as amended on June 11, 1996, under the original
issue discount provisions of the Code.
For United States federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a DE MINIMIS amount (generally 1/4 of 1%
of the Note's stated redemption price at maturity multiplied by the number of
complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest (as
defined below) prior to maturity, multiplied by the weighted average maturity of
such Note). The issue price of each Note in an issue of Notes equals the first
price at which a substantial amount of such Notes has been sold (ignoring sales
to bond houses, brokers, or similar persons or organizations acting in the
capacity of underwriters, placement agents, or wholesalers). The stated
redemption price at maturity of a Note is the sum of all payments provided by
the Note other than "qualified stated interest" payments. The term "qualified
stated interest" generally means stated interest that is unconditionally payable
in cash or property (other than debt instruments of the issuer) at least
annually at a single fixed rate. In addition, under the OID Regulations, if a
Note bears interest for one or more accrual periods at a rate below the rate
applicable for the remaining term of such Note (E.G., Notes with teaser rates or
interest holidays), and if the greater of either the resulting foregone interest
on such Note or any "true" discount on such Note (I.E., the excess of the Note's
stated principal amount over its issue price) equals or exceeds a
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specified DE MINIMIS amount, then the stated interest on the Note would be
treated as original issue discount rather than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of such U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the initial U.S. Holder of a Discount Note is the
sum of the daily portions of original issue discount with respect to such
Discount Note for each day during the taxable year (or portion of the taxable
year) on which such U.S. Holder held such Discount Note. The "daily portion" of
original issue discount on any Discount Note is determined by allocating to each
day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Discount Note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The amount of original issue
discount allocable to each accrual period is generally equal to the difference
between (i) the product of the Discount Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and appropriately
adjusted to take into account the length of the particular accrual period) and
(ii) the amount of any qualified stated interest payments allocable to such
accrual period. The "adjusted issue price" of a Discount Note at the beginning
of any accrual period is the sum of the issue price of the Discount Note plus
the amount of original issue discount allocable to all prior accrual periods
minus the amount of any prior payments on the Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium." Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder must
include in its gross income with respect to such Discount Note for any taxable
year (or portion thereof in which the U.S. Holder holds the Discount Note) will
be reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the total
noncontingent principal payments due under the Variable Note by more than a
specified DE MINIMIS amount and (b) it provides for stated interest, paid or
compounded at least annually, at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than 0.65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than 0.65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more
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qualified floating rates that can reasonably be expected to have approximately
the same values throughout the term of the Variable Note (E.G., two or more
qualified floating rates with values within 25 basis points of each other as
determined on the Variable Note's issue date) will be treated as a single
qualified floating rate. Notwithstanding the foregoing, a variable rate that
would otherwise constitute a qualified floating rate but which is subject to one
or more restrictions such as a maximum numerical limitation (I.E., a cap) or a
minimum numerical limitation (I.E., a floor) may, under certain circumstances,
fail to be treated as a qualified floating rate under the OID Regulations unless
such cap or floor is fixed throughout the term of the Note. An "objective rate"
is a rate that is not itself a qualified floating rate but which is determined
using a single fixed formula and that is based on objective financial or
economic information. A rate will not qualify as an objective rate if it is
based on information that is within the control of the issuer (or a related
party) or that is unique to the circumstances of the issuer (or a related
party), such as dividends, profits, or the value of the issuer's stock (although
a rate does not fail to be an objective rate merely because it is based on the
credit quality of the issuer). A "qualified inverse floating rate" is any
objective rate where such rate is equal to a fixed rate minus a qualified
floating rate, as long as variations in the rate can reasonably be expected to
inversely reflect contemporaneous variations in the qualified floating rate. The
OID Regulations also provide that if a Variable Note provides for stated
interest at a fixed rate for an initial period of one year or less followed by a
variable rate that is either a qualified floating rate or an objective rate and
if the variable rate on the Variable Note's issue date is intended to
approximate the fixed rate (E.G., the value of the variable rate on the issue
date does not differ from the value of the fixed rate by more than 25 basis
points), then the fixed rate and the variable rate together will constitute
either a single qualified floating rate or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations and if
the interest on such Note is unconditionally payable in cash or property (other
than debt instruments of the issuer) at least annually, then all stated interest
on the Note will constitute qualified stated interest and will be taxed
accordingly. Thus, a Variable Note that provides for stated interest at either a
single qualified floating rate or a single objective rate throughout the term
thereof and that qualifies as a "variable rate debt instrument" under the OID
Regulations will generally not be treated as having been issued with original
issue discount unless the Variable Note is issued at a "true" discount (I.E., at
a price below the Note's stated principal amount) in excess of a specified DE
MINIMIS amount. The amount of qualified stated interest and the amount of
original issue discount, if any, that accrues during an accrual period on such a
Variable Note is determined under the rules applicable to fixed rate debt
instruments by assuming that the variable rate is a fixed rate equal to (i) in
the case of a qualified floating rate or qualified inverse floating rate, the
value, as of the issue date, of the qualified floating rate or qualified inverse
floating rate, or (ii) in the case of an objective rate (other than a qualified
inverse floating rate), a fixed rate that reflects the yield that is reasonably
expected for the Variable Note. The qualified stated interest allocable to an
accrual period is increased (or decreased) if the interest actually paid during
an accrual period exceeds (or is less than) the interest assumed to be paid
during the accrual period pursuant to the foregoing rules.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed rate
that reflects the yield that is reasonably expected for the Variable Note. In
the case of a Variable Note that qualifies as a "variable rate debt instrument"
and provides for stated
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interest at a fixed rate in addition to either one or more qualified floating
rates or a qualified inverse floating rate, the fixed rate is initially
converted into a qualified floating rate (or a qualified inverse floating rate,
if the Variable Note provides for a qualified inverse floating rate). Under such
circumstances, the qualified floating rate or qualified inverse floating rate
that replaces the fixed rate must be such that the fair market value of the
Variable Note as of the Variable Note's issue date is approximately the same as
the fair market value of an otherwise identical debt instrument that provides
for either the qualified floating rate or qualified inverse floating rate rather
than the fixed rate. Subsequent to converting the fixed rate into either a
qualified floating rate or a qualified inverse floating rate, the Variable Note
is then converted into an "equivalent" fixed rate debt instrument in the manner
described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and qualified
stated interest as if the U.S. Holder held the "equivalent" fixed rate debt
instrument. In each accrual period appropriate adjustments will be made to the
amount of qualified stated interest or original issue discount assumed to have
been accrued or paid with respect to the "equivalent" fixed rate debt instrument
in the event that such amounts differ from the actual amount of interest accrued
or paid on the Variable Note during the accrual period.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. U.S. Holders should be aware that on June
11, 1996, the Treasury Department issued final regulations (the "CPDI
Regulations") concerning the proper United States Federal income tax treatment
of contingent payment debt instruments. In general, the CPDI Regulations would
cause the timing and character of income, gain or loss reported on a contingent
payment debt instrument to substantially differ from the timing and character of
income, gain or loss reported on a contingent payment debt instrument under
general principles of current United States Federal income tax law.
Specifically, the CPDI Regulations generally require a U.S. Holder of such an
instrument to include future contingent and noncontingent interest payments in
income as such interest accrues based upon a projected payment schedule.
Moreover, in general, under the CPDI Regulations, any gain recognized by a U.S.
Holder on the sale, exchange, or retirement of a contingent payment debt
instrument will be treated as ordinary income and all or a portion of any loss
realized could be treated as ordinary loss as opposed to capital loss (depending
upon the circumstances). The CPDI Regulations apply to debt instruments issued
on or after August 13, 1996. The proper United States Federal income tax
treatment of Variable Notes that are treated as contingent payment debt
obligations will be more fully described in the applicable Pricing Supplement.
Furthermore, any other special United States Federal income tax considerations,
not otherwise discussed herein, which are applicable to any particular issue of
Notes will be discussed in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity (a "call option") and/or (ii) may be repayable at
the option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, DE
MINIMIS original issue discount, market discount, DE MINIMIS market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
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SHORT-TERM NOTES. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects to
do so. If such an election is not made, any gain recognized by the U.S. Holder
on the sale, exchange or maturity of the Short-Term Note will be ordinary income
to the extent of the original issue discount accrued on a straight-line basis,
or upon election under the constant yield method (based on daily compounding),
through the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States federal income tax
purposes under the accrual method, and certain other holders including banks and
dealers in securities, are required to accrue original issue discount on a
Short-Term Note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
MARKET DISCOUNT. If a U.S. Holder purchases a Note, other than a Discount
Note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of a Discount Note, for an amount that is less than its adjusted issue price as
of the purchase date, such U.S. Holder will be treated as having purchased such
Note at a "market discount," unless such market discount is less than a
specified DE MINIMIS amount.
Under the market discount rules, a U.S. Holder will be re-quired to treat
any partial principal payment (or, in the case of a Discount Note, any payment
that does not constitute qualified stated interest) on, or any gain realized on
the sale, exchange, retirement or other disposition of, a Note as ordinary
income to the extent of the lesser of (i) the amount of such payment or realized
gain or (ii) the market discount which has not previously been included in
income and is treated as having accrued on such Note at the time of such payment
or disposition. Market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the Note, unless the
U.S. Holder elects to accrue market discount on the basis of semiannual
compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to the
extent the interest expense exceeds an allocable portion of market discount. A
U.S. Holder may elect to include market discount in income currently as it
accrues (on either a ratable or semiannual compounding basis), in which case the
rules described above regarding the treatment as ordinary income of gain upon
the disposition of the Note and upon the receipt of certain cash payments and
regarding the deferral of interest deductions will not apply. Generally, such
currently included market discount is treated as ordinary interest for United
States federal income tax purposes. Such an election will apply to all debt
instruments acquired by the U.S. Holder on or after the first day of the first
taxable year to which such election applies and may be revoked only with the
consent of the IRS.
PREMIUM. If a U.S. Holder purchases a Note for an amount that is greater
than the sum of all amounts payable on the Note after the purchase date other
than payments of qualified stated interest, such U.S. Holder will be considered
to have purchased the Note with "amortizable bond premium" equal in amount to
such excess. A U.S. Holder may elect to amortize such premium using a constant
yield method over the remaining term of the Note and may offset interest
otherwise required to be included in respect of the Note during any taxable year
by the amortized amount of such excess for the taxable year. However, if the
Note may be optionally redeemed after the U.S. Holder acquires it at a price in
excess of its stated redemption price at maturity, special rules would apply
which could result in a deferral of the amortization of some bond premium until
later in the term of the Note. Any election to amortize bond premium applies to
all taxable debt instruments held by the U.S. Holder at
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the beginning of the first taxable year to which the election applies and to all
taxable debt instruments acquired on or after such date. The election may be
revoked only with the consent of the IRS.
DISPOSITION OF A NOTE. Except as discussed above, upon the sale, exchange
or retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest) and
such U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax
basis in a Note generally will equal such U.S. Holder's initial investment in
the Note increased by any original issue discount included in income (and
accrued market discount, if any, if the U.S. Holder has included such market
discount in income) and decreased by the amount of any payments, other than
qualified stated interest payments, received and amortizable bond premium taken
with respect to such Note. Such gain or loss generally will be long-term capital
gain or loss if the Note were held for more than one year.
NOTES DENOMINATED OR ON WHICH INTEREST IS PAYABLE IN A FOREIGN CURRENCY
As used herein, "Foreign Currency" means a currency or currency unit other
than U.S. dollars.
PAYMENTS OF INTEREST IN A FOREIGN CURRENCY.
CASH METHOD. A U.S. Holder who uses the cash method of accounting for
United States Federal income tax purposes and who receives a payment of interest
on a Note (other than original issue discount or market discount) will be
required to include in income the U.S. dollar value of the Foreign Currency
payment (determined on the date such payment is received) regardless of whether
the payment is in fact converted to U.S. dollars at that time, and such U.S.
dollar value will be the U.S. Holder's tax basis in such Foreign Currency.
ACCRUAL METHOD. A U.S. Holder who uses the accrual method of accounting for
United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the U.S.
dollar value of the amount of interest income (including original issue discount
or market discount and reduced by amortizable bond premium to the extent
applicable) that has accrued and is otherwise required to be taken into account
with respect to a Note during an accrual period. The U.S. dollar value of such
accrued income will be determined by translating such income at the average rate
of exchange for the accrual period or, with respect to an accrual period that
spans two taxable years, at the average rate for the partial period within the
taxable year. A U.S. Holder may elect, however, to translate such accrued
interest income using the rate of exchange on the last day of the accrual period
or, with respect to an accrual period that spans two taxable years, using the
rate of exchange on the last day of the taxable year. If the last day of an
accrual period is within five business days of the date of receipt of the
accrued interest, a U.S. Holder may translate such interest using the rate of
exchange on the date of receipt. The above election will apply to other debt
obligations held by the U.S. Holder and may not be changed without the consent
of the IRS. A U.S. Holder should consult a tax advisor before making the above
election. A U.S. Holder will recognize exchange gain or loss (which will be
treated as ordinary income or loss) with respect to accrued interest income on
the date such income is received. The amount of ordinary income or loss
recognized will equal the difference, if any, between the U.S. dollar value of
the Foreign Currency payment received (determined on the date such payment is
received) in respect of such accrual period and the U.S. dollar value of
interest income that has accrued during such accrual period (as determined
above).
PURCHASE, SALE AND RETIREMENT OF NOTES. A U.S. Holder who purchases a Note
with previously owned Foreign Currency will recognize ordinary income or loss in
an amount equal to the difference, if any, between such U.S. Holder's tax basis
in the Foreign Currency and the U.S. dollar fair market value of the Foreign
Currency used to purchase the Note, determined on the date of purchase.
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Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss generally will be capital gain or loss (except to the extent of any
accrued market discount not previously included in the U.S. Holder's income) and
will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by such U.S. Holder for more than the
applicable holding period. To the extent the amount realized represents accrued
but unpaid interest, however, such amounts must be taken into account as
interest income, with exchange gain or loss computed as described in "Payments
of Interest in a Foreign Currency" above. If a U.S. Holder receives Foreign
Currency on such a sale, exchange or retirement the amount realized will be
based on the U.S. dollar value of the Foreign Currency on the date the payment
is received or the Note is disposed of (or deemed disposed of as a result of a
material change in the terms of the Note). In the case of a Note that is
denominated in Foreign Currency and is traded on an established securities
market, a cash basis U.S. Holder (or, upon election, an accrual basis U.S.
Holder) will determine the U.S. dollar value of the amount realized by
translating the Foreign Currency payment at the spot rate of exchange on the
settlement date of the sale. A U.S. Holder's adjusted tax basis in a Note will
equal the cost of the Note to such holder, increased by the amounts of any
market discount or original issue discount previously included in income by the
holder with respect to such Note and reduced by any amortized acquisition or
other premium and any principal payments received by the holder. A U.S. Holder's
tax basis in a Note, and the amount of any subsequent adjustments to such
holder's tax basis, will be the U.S. dollar value of the Foreign Currency amount
paid for such Note, or of the Foreign Currency amount of the adjustment,
determined on the date of such purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that
is attributable to fluctuations in currency exchange rates will be ordinary
income or loss which will not be treated as interest income or expense. Gain or
loss attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date such payment is received or the Note is disposed
of, and the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date the U.S. Holder acquired the Note. Such Foreign
Currency gain or loss will be recognized only to the extent of the total gain or
loss realized by the U.S. Holder on the sale, exchange or retirement of the
Note.
ORIGINAL ISSUE DISCOUNT. In the case of a Discount Note or Short-Term Note,
(i) original issue discount is determined in units of the Foreign Currency, (ii)
accrued original issue discount is translated into U.S. dollars as described in
"Payments of Interest in a Foreign Currency--Accrual Method" above and (iii) the
amount of Foreign Currency gain or loss on the accrued original issue discount
is determined by comparing the amount of income received attributable to the
discount (either upon payment, maturity or an earlier disposition), as
translated into U.S. dollars at the rate of exchange on the date of such
receipt, with the amount of original issue discount accrued, as translated
above.
PREMIUM AND MARKET DISCOUNT. In the case of a Note with market discount,
(i) market discount is determined in units of the Foreign Currency, (ii) accrued
market discount taken into account upon the receipt of any partial principal
payment or upon the sale, exchange, retirement or other disposition of the Note
(other than accrued market discount required to be taken into account currently)
is translated into U.S. dollars at the exchange rate on such disposition date
(and no part of such accrued market discount is treated as exchange gain or
loss) and (iii) accrued market discount currently includible in income by a U.S.
Holder for any accrual period is translated into U.S. dollars on the basis of
the average exchange rate in effect during such accrual period, and the exchange
gain or loss is determined upon the receipt of any partial principal payment or
upon the sale, exchange, retirement or other disposition of the Note in the
manner described in "Payments of Interest in a Foreign
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Currency--Accrual Method" above with respect to computation of exchange gain or
loss on accrued interest.
With respect to a Note acquired with amortizable bond premium, such premium
is determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. Although not entirely clear, a U.S. Holder should
recognize exchange gain or loss equal to the difference between the U.S. dollar
value of the bond premium amortized with respect to a period, determined on the
date the interest attributable to such period is received, and the U.S. dollar
value of the bond premium determined on the date of the acquisition of the Note.
EXCHANGE OF FOREIGN CURRENCIES. A U.S. Holder will have a tax basis in any
Foreign Currency received as interest or on the sale, exchange or retirement of
a Note equal to the U.S. dollar value of such Foreign Currency, determined at
the time the interest is received or at the time of the sale, exchange or
retirement. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of Foreign Currency (including its exchange for U.S. dollars or its
use to purchase Notes) will be ordinary income or loss.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount, if any) on a Note, unless such non-U.S. Holder is a direct or indirect
10% or greater shareholder of the Company, a controlled foreign corporation
related to the Company or a bank receiving interest described in section
881(c)(3)(A) of the Code. To qualify for the exemption from taxation, the last
United States payor in the chain of payment prior to payment to a non-U.S.
Holder (the "Withholding Agent") must have received in the year in which a
payment of interest or principal occurs, or in either of the two preceding
calendar years, a statement that (i) is signed by the beneficial owner of the
Note under penalties of perjury, (ii) certifies that such owner is not a U.S.
Holder and (iii) provides the name and address of the beneficial owner. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the beneficial owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by the
beneficial owner to the organization or institution. The Treasury Department is
considering implementation of further certification requirements aimed at
determining whether the issuer of a debt obligation is related to holders
thereof.
Generally, a non-U.S. Holder will not be subject to federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, unless such non- U.S. Holder is an individual who is present in the United
States for 183 days or more in the taxable year of the disposition and such gain
is derived from sources within the United States. Certain other exceptions may
be applicable, and a non-U.S. Holder should consult its tax advisor in this
regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the Company
or, at the time of such individual's death, payments in respect of the Notes
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
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<PAGE>
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would establish
an exemption from backup withholding for those non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the IRS, unless either (i) the broker determines that the
seller is an exempt recipient or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States federal income tax provided the required
information is furnished to the IRS.
NEW WITHHOLDING REGULATIONS
Final regulations dealing with withholding tax on income paid to foreign
persons, backup withholding and related matters (the "New Withholding
Regulations") were issued by the Treasury Department on October 6, 1997. The New
Withholding Regulations generally attempt to unify certification requirements
and modify reliance standards. The New Withholding Regulations generally will be
effective for payments made after December 31, 2000, subject to certain
transition rules.
Prospective investors are strongly urged to consult their own tax advisors
with respect to the New Withholding Regulations.
HOW WE PLAN TO DISTRIBUTE THE NOTES
The Notes are being offered on a continuing basis for sale by Boeing Capital
to or through Chase Securities Inc., Credit Suisse First Boston Corporation,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Morgan Stanley & Co.
Incorporated (the "Agents"). The Agents, individually or in a syndicate, may
purchase Notes, as principal, from Boeing Capital from time to time for resale
to investors and other purchasers at varying prices relating to prevailing
market prices at the time of resale as determined by the applicable Agent or, if
so specified in the applicable Pricing Supplement, for resale at a fixed
offering price. However, if agreed to by Boeing Capital and an Agent at the
particular time, such Agent will utilize its reasonable efforts on an agency
basis to solicit offers to purchase Notes at 100% of the principal amount
thereof, unless otherwise specified in the applicable Pricing Supplement. Boeing
Capital will pay a commission to an Agent, ranging from .125% to .750% of the
principal amount of each Note, depending upon its stated maturity, sold through
such Agent as an agent of Boeing Capital. Commissions with respect to Notes with
stated maturities in excess of 30 years that are sold through an Agent as an
agent of Boeing Capital will be negotiated between Boeing Capital and such Agent
at the time of such sale and may exceed .750% of the principal amount of such
Notes. In addition, the expenses incurred by Boeing Capital in connection with
the offering and
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<PAGE>
sale of the Notes, including reimbursement of certain of the Agents' expenses,
is currently estimated to be $623,124.
Unless otherwise specified in the applicable Pricing Supplement, any Note
sold to an Agent as principal will be purchased by such Agent at a price equal
to 100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale of a Note of
identical maturity. An Agent may sell Notes it has purchased from Boeing Capital
as principal to certain dealers less a concession equal to all or any portion of
the discount received in connection with such purchase. Such Agent may allow,
and such dealers may reallow, a discount to certain other dealers. After the
initial offering of Notes, the offering price (in the case of Notes to be resold
on a fixed offering price basis), the concession and the reallowance may be
changed.
Boeing Capital reserves the right to withdraw, cancel or modify the offer
made hereby without notice and may reject offers in whole or in part (whether
placed directly with Boeing Capital or through an Agent). Each Agent will have
the right, in its discretion reasonably exercised, to reject in whole or in part
any offer to purchase Notes received by it on an agency basis.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in the Specified Currency in The City of New York on the date of
settlement. See "Description of Notes--General."
Upon issuance, the Notes will not have an established trading market. The
Notes will not be listed on any securities exchange. The Agents may from time to
time purchase and sell Notes in the secondary market, but the Agents are not
obligated to do so, and there can be no assurance that a secondary market for
the Notes will develop or that there will be liquidity in the secondary market
if one develops. From time to time, the Agents may make a market in the Notes,
but the Agents are not obligated to do so and may discontinue any market-making
activity at any time.
In connection with an offering of Notes purchased by one or more Agents as
principal on a fixed offering price basis, such Agent(s) will be permitted to
engage in certain transactions that stabilize the price of Notes. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of Notes. If the Agent creates or the Agents create, as
the case may be, a short position in Notes, i.e., if it sells or they sell Notes
in an aggregate principal amount exceeding the amount referred to in the
applicable Pricing Supplement, such Agent(s) may reduce that short position by
purchasing Notes in the open market. In general, purchases of Notes for the
purpose of stabilization or to reduce a short position could cause the price of
Notes to be higher than it might be in the absence of such purchases.
Neither Boeing Capital nor any of the Agents makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described in the immediately preceding paragraph may have on the price of Notes.
In addition, neither Boeing Capital nor any of the Agents makes any
representation that the Agents will engage in any such transactions or that such
transactions, once commenced, will not be discontinued without notice.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). Boeing Capital has
agreed to indemnify the Agents against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments the Agents
may be required to make in respect thereof.
In the ordinary course of its business, the Agents and their affiliates have
engaged and may in the future engage in investment and commercial banking
transactions with Boeing Capital and certain of its affiliates.
From time to time, Boeing Capital may issue and sell other securities
described in the accompanying Prospectus, and the amount of Notes offered hereby
is subject to reduction as a result of such sales.
S-35
<PAGE>
PROSPECTUS
for an offering for sale of
$2,640,000,000
of
BOEING CAPITAL CORPORATION
DEBT SECURITIES
- This Prospectus describes debt securities which Boeing Capital Corporation
may issue and sell at various times. The section of this Prospectus
entitled The Debt Securities provides general information about the debt
securities. The Prospectus Supplement provides the specific terms of the
debt securities.
- The total principal amount of the debt securities issued under this
Prospectus will not exceed $2,640,000,000.
- We may distribute the debt securities through underwriters, dealers or
agents, or may sell directly to investors. More detailed information is
provided under the heading "How We Plan to Distribute the Debt
Securities."
- The date of this Prospectus is August 31, 2000.
- Investing in our debt securities involves risks. You should read the "Risk
Factors" section in the accompanying Prospectus Supplement to find out
about these risks.
- Neither the Securities and Exchange Commission nor any state securities
commission has approved the debt securities or determined if this
Prospectus and the Prospectus Supplement are truthful or complete. It is
illegal for anyone to tell you otherwise.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION ABOUT US................ 3
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS............ 3
DESCRIPTION OF OUR BUSINESS AND OUR COMPANY................. 4
GENERAL INFORMATION ABOUT BOEING CAPITAL.................... 4
USE OF PROCEEDS............................................. 5
RATIO OF EARNINGS TO FIXED CHARGES.......................... 5
THE DEBT SECURITIES......................................... 5
HOW WE PLAN TO DISTRIBUTE THE DEBT SECURITIES............... 16
LEGAL OPINIONS REGARDING THE VALIDITY OF THE DEBT
SECURITIES................................................ 17
EXPERTS..................................................... 17
</TABLE>
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WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We are subject to the information requirements of the Securities and
Exchange Act of 1934, and accordingly we file reports, proxy statements and
other information with the SEC. You can inspect and copy these materials at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 50249.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. You can also find our SEC filings at the SEC's Internet website
at http://www.sec.gov.
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by referring
you to our SEC filings. Information incorporated by reference is considered to
be part of this Prospectus and information that we file with the SEC after the
date of this Prospectus will automatically update and supersede the information
in this Prospectus. We incorporate by reference in this Prospectus the following
filings we have made with the SEC:
- our annual report on Form 10-K for the year ended December 31, 1999 (as
amended by Form 10-K/A filed on March 27, 2000);
- our quarterly report on Form 10-Q for the quarter ended March 31, 2000;
- our quarterly report on Form 10-Q for the quarter ended June 30, 2000;
- our current report on Form 8-K dated March 31, 2000 as filed with the SEC
on April 13, 2000; and
- all future filings made by us with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 until we sell all of the
debt securities.
You may receive a copy of any of these filings, at no cost, by writing or
calling Boeing Capital Corporation, 4060 Lakewood Blvd., Sixth Floor, Long
Beach, California 90808-1700, Attention: Treasury Department, telephone: (562)
627-3000.
We have filed a registration statement with the SEC to register the debt
securities under the Securities Act of 1933. This Prospectus is part of that
registration statement, but omits certain information contained in the
registration statement as permitted by the SEC rules. You may obtain copies of
the registration statement by writing to the address or calling the telephone
number in the paragraph above.
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
Certain statements in or incorporated by reference in this Prospectus and in
the Prospectus Supplement are "forward-looking statements" under the Private
Securities Litigation Reform Act of 1995. These statements give our current
expectations or forecasts of future events and the future performance of Boeing
Capital and do not relate directly to historical or current events or the
historical or current performance of Boeing Capital. Most of these statements
contain words that identify them as forward-looking, such as "anticipate,"
"estimate," "expect," "project," "intend," "plan," "believe," or other words
that relate to future events, as opposed to past or current events.
You should understand as you read this Prospectus that any forward-looking
statement in this Prospectus or in the Prospectus Supplement may turn out to be
wrong. A forward-looking statement may turn out to be wrong because our
assumptions or predictions were in error, or because unknown risks arose after
the date of this Prospectus. For example, among other things, any of the
following could render a forward-looking statement inaccurate or wrong:
- changes in general economic and business conditions affecting the
commercial finance industry;
- our ability to compete with other commercial finance companies;
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<PAGE>
- the level of demand for financing; and
- changes in our business strategies (or in our parent company's
strategies).
Please realize that an inaccurate or incorrect forward-looking statement may
mean that the future performance of Boeing Capital will vary materially from the
future performance predicted in this Prospectus and from the historical and
current performance of Boeing Capital.
DESCRIPTION OF OUR BUSINESS AND OUR COMPANY
We are a commercial finance company. Our primary businesses are commercial
aircraft financing and commercial finance. Accordingly, our business is broken
into two main groups: the commercial aircraft finance group and the commercial
finance group. The commercial aircraft finance group operates primarily out of
Boeing Capital's headquarters located at 500 Naches Avenue, SW, Third Floor,
Renton, Washington 98055 and the commercial finance group operates primarily out
of Boeing Capital's office located at 4060 Lakewood Boulevard, Sixth Floor, Long
Beach, California 90808-1700 and their respective telephone numbers are
(425) 393-0153 and (562) 627-3000. Unless the context otherwise indicates, the
terms "we," "us," or "Boeing Capital" mean Boeing Capital Corporation and its
wholly-owned subsidiaries.
THE COMMERCIAL AIRCRAFT FINANCE GROUP
Through our commercial aircraft finance group, we finance commercial
aircraft by purchasing aircraft subject to lease to airlines and by providing
secured financing for aircraft purchases. Until 1986, Boeing Capital financed
only McDonnell Douglas aircraft. Since 1986, Boeing Capital has financed
aircraft manufactured by manufacturers other than McDonnell Douglas; however,
aircraft manufactured by McDonnell Douglas continue to comprise a majority of
Boeing Capital's commercial aircraft portfolio.
As of June 30, 2000 and December 31, 1999, the carrying value of Boeing
Capital's commercial aircraft portfolio was $2,511.9 million and $1,410.8
million, respectively. These numbers represent 59.2% and 48.5% respectively, of
Boeing Capital's total portfolio. The significant increase in both the carrying
value of Boeing Capital's commercial aircraft portfolio and the percentage of
Boeing Capital's total portfolio is due to the acquisition of a portfolio of
leases, the related aircraft equipment and loans secured by aircraft and related
assets from its parent, The Boeing Company.
THE COMMERCIAL FINANCE GROUP
Through our commercial finance group, we provide single-investor,
tax-oriented lease financing and debt financing. The group specializes in
leasing equipment such as executive aircraft, machine tools, over-the-road
transportation equipment, printing equipment, vessels and other types of
equipment which it believes will maintain strong collateral and residual values.
The group is based in Long Beach, but maintains marketing offices in Chicago,
Illinois, Atlanta, Georgia, Austin, Texas and Detroit, Michigan. The group
obtains business primarily through the direct solicitation of customers and
brokers/syndicators by its marketing personnel.
As of June 30, 2000 and December 31, 1999, the carrying value of Boeing
Capital's commercial finance portfolio was $1,727.7 million and $1,497.6
million, respectively. These numbers represent 40.7% and 51.5%, respectively, of
Boeing Capital's total portfolio.
GENERAL INFORMATION ABOUT BOEING CAPITAL
Boeing Capital was incorporated in Delaware in 1968 and is a wholly-owned
subsidiary of Boeing Capital Services Corporation, which is a wholly-owned
subsidiary of McDonnell Douglas Corporation, which, in turn, is a wholly-owned
subsidiary of The Boeing Company. We became an indirect subsidiary
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<PAGE>
of The Boeing Company on August 1, 1997 as the result of the merger of McDonnell
Douglas Corporation with a subsidiary of The Boeing Company.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, we will
use the net proceeds from the sale of the debt securities:
- to fund the acquisition of businesses and parts of businesses;
- to purchase equipment for leases and loans; and
- for other corporate purposes such as reducing indebtedness, including
indebtedness we owe to McDonnell Douglas Corporation and The Boeing
Company.
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows the ratio of our earnings to fixed charges for the
periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDING ENDED
DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------
1999 1998 1997 1996 1995 2000 1999
(DOLLARS IN MILLIONS) -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of income before provisions for income taxes
and fixed charges to fixed charges.............. 1.95 1.80 1.68 1.62 1.57 1.55 1.80
---- ---- ---- ---- ---- ---- ----
</TABLE>
We have computed these ratios by dividing earnings available for fixed
charges for each period by fixed charges for that period. For purposes of these
computations, we calculated "earnings" by adding our pre-tax income and our
fixed charges. We calculated "fixed charges" by adding the interest we pay on
our indebtedness, the amount we amortize for debt financing costs and our
estimate of the amount of the interest within our rental expense.
THE DEBT SECURITIES
We may offer and sell from time to time two types of debt securities. We
have designated the first type as Senior Securities and the second type as
Subordinated Securities.
The Senior Securities are to be issued under an indenture dated as of
August 31, 2000 (the "Senior Indenture"), between Boeing Capital and Bankers
Trust Company, as trustee ("Bankers Trust"). The Subordinated Securities are to
be issued pursuant to an indenture dated as of August 31, 2000 (the
"Subordinated Indenture"), between Boeing Capital and Bankers Trust, as trustee.
The Senior Securities and Subordinated Securities are referred to herein as the
"debt securities". The Senior Indenture and Subordinated Indenture are
collectively referred to herein as the "Indentures" and Bankers Trust is herein
referred to as the "Trustee".
The following description of the debt securities summarizes certain of the
material provisions of the Indentures and the debt securities. This summary is
not intended to be a full restatement of all of the terms of the debt
securities. We urge you to read the Indentures because they, and not this
description, will define your rights as a holder of the debt securities. We have
filed the Indentures as exhibits to the Registration Statement of which this
Prospectus is a part.
The following description relates generally to every series of debt
securities. The particular terms of any series of debt securities will be set
forth in the Prospectus Supplement that relates to such series. If any
information in the Prospectus Supplement differs from the general terms
described below, you should rely on the information in the Prospectus Supplement
with respect to the particular debt securities being offered.
5
<PAGE>
GENERAL
The debt securities will be unsecured general obligations of Boeing Capital.
The Senior Securities will rank equally with all of our other unsecured and
unsubordinated indebtedness. The Subordinated Securities will be subordinated to
all of our existing and future senior indebtedness as described below under
"Subordination".
The Indentures do not limit the aggregate principal amounts of debt
securities that may be issued thereunder. The Indentures allow us to issue debt
securities from time to time in one or more series with varying maturities, at
par or at a discount. The Indentures also give us the ability to reopen a
previous issue of a series of debt securities and issue additional debt
securities of such series or establish additional terms for such series of debt
securities.
You should refer to the Prospectus Supplement applicable to the debt
securities for which this Prospectus is being delivered with respect to the
following terms:
- the title of the debt securities being offered and whether they are Senior
Securities, Subordinated Securities or both;
- the aggregate principal amount and the denominations in which the debt
securities are being offered;
- the price or prices at which the debt securities are being offered;
- the date or dates on which the principal of the debt securities is
scheduled to become due;
- the rate or rates, which may be fixed or variable, at which the debt
securities will bear interest or the formula by which the interest will be
calculated; the date or dates from which such interest will accrue, and
the method by which such interest will be paid;
- the terms and conditions upon which we may redeem the debt securities;
- any obligation by us to redeem, purchase or repay the debt securities at
the option of the holder;
- any provisions for the establishment of a sinking, purchase or other
similar fund, if any;
- whether the debt securities are to be issued as fully registered
securities, bearer securities or both, and with or without coupons, or
both;
- whether the debt securities will be issued in whole or in part in the form
of a global certificate;
- any provisions for the payment of specified taxes, assessments or other
governmental charges to non-United States persons or option to redeem the
affected debt securities in lieu of making such payments;
- any additional covenants applicable to the debt securities;
- the currency or currency unit of payment of principal of and premium, if
any, and interest on such debt securities, and any index used to determine
the amount of principal of and premium, if any, and interest on such debt
securities;
- any events of default other than those described in the Indentures; and
- any other terms of such debt securities.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
The debt securities of a series may be issued in fully registered form, as
bearer securities with coupons attached or both. The debt securities of a series
may be issuable in permanent global form. If the debt securities are issuable as
both registered and bearer securities, the holder can opt to exchange
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<PAGE>
the bearer securities (accompanied by all unmatured coupons, except as provided
below, and all matured coupons in default) for registered securities of the same
series of any authorized denominations and of like aggregate principal amount
and tenor. Unless the Prospectus Supplement for such series provides otherwise,
bearer securities that are to be exchanged between a record date and a date on
which the next interest payment is due will be surrendered without the coupon
relating to such interest payment and such interest payment will be made to the
holder of the coupon when due. We will not issue bearer securities in exchange
for registered securities.
The debt securities may be presented for exchange and registration of
transfer at the offices of the Trustee, Four Albany Street, New York, New York
10006, Attention: Corporate Trust and Agency Group. The debt securities may also
be submitted to transfer agents designated by us in the applicable Prospectus
Supplement. The transfer or exchange will be effected when the Trustee or
authorized transfer agent is satisfied with the documents of title and the
identity of the person making the request. At a minimum, we will establish
transfer agents, in the case of registered securities, in each place where
payments can be made with respect to such series, and in the case of bearer
securities, in each place of payment for such series located outside the United
States. Additional transfer agents may be designated in the Prospectus
Supplement or otherwise from time to time and we reserve the right to rescind
the designation of any transfer agent or to approve a change in the location
through which any transfer agent acts. While there will be no service charge for
any registration of transfer or exchange of the debt securities, we may require
payment of an amount sufficient to cover any taxes and other governmental
charges associated with such registration.
If only part of a series of outstanding debt securities is to be called for
redemption, we will not be required to do the following:
1. register the transfer of or exchange debt securities of the series to be
redeemed from 15 days before the date notice is given identifying the serial
numbers of the debt securities to be redeemed and ending at the close of
business on (a) the day of mailing of the notice of redemption, if the debt
securities of such series are issuable only as registered securities, (b) the
first day of publication of the notice of redemption, if the debt securities of
such securities are issuable ONLY as bearer securities, or (c) the day of
mailing of the notice of redemption if the debt securities of such series are
issuable as both registered securities and bearer securities and no publication
of the notice has been made;
2. register the transfer or exchange of any registered security called for
redemption except for the portion, if any, that is not being redeemed;
3. exchange any bearer securities called for redemption, except in exchange
for registered securities of that series of like tenor and principal amount that
will be immediately surrendered for redemption.
PAYMENT
We will make payments of principal of and premium, if any, and interest, if
any, on registered securities at the offices of the agent or agents designated
by us to make such payments. We may also make payments of interest, at our
option, by check mailed to the address of the person appearing on the securities
register maintained by Trustee or by wire transfer to the account of the person
appearing on such register. Unless otherwise set forth in the applicable
Prospectus Supplement, we will make payments of interest due on the registered
securities to the holder of record as it appears on the register maintained by
the Trustee at the close of business on the date established for making such
determination.
Unless otherwise indicated in the applicable Prospectus Supplement, we will
make payments of principal of and premium, if any, and interest, if any, on
bearer securities, subject to any applicable law and regulations, at the offices
of paying agents designated by us located outside the United States, or by check
or wire transfer to an account maintained by the payee outside the United
States. Unless
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<PAGE>
otherwise indicated in the applicable Prospectus Supplement, we will only make
payments of interest on bearer securities against surrender of the coupon
relating to such interest installment.
We have designated the Trustee as our sole paying agent for debt securities
issuable solely as registered securities. We have designated, in the case of (a)
registered securities, the Trustee as paying agent in the Borough of Manhattan,
The City of New York and, (b) bearer securities, a paying agent in each place
outside of the United States where such debt securities or their associated
coupons may be surrendered for payment, provided, however, that if such debt
securities are listed on a stock exchange located outside the United States and
if required by the rules of such stock exchange, we have agreed to maintain a
paying agent in such cities outside the United States as required.
Additional paying agents may be designated in the Prospectus Supplement or
otherwise from time to time and we reserve the right to rescind the designation
of any paying agent or to approve a change in the location through which any
paying agent acts.
Any moneys we pay to a paying agent for the payment of principal of,
premium, or interest on the debt securities which remains unclaimed at the first
anniversary of the date such payment was due will be returned to us.
GLOBAL SECURITIES
We may issue the debt securities in global form. The global securities may
be issued in registered or bearer form and may be temporary or permanent. The
global securities will be deposited with, or on behalf of, the depository
identified in the applicable Prospectus Supplement. The Prospectus Supplement
will also describe the circumstances, if any, under which beneficial owners may
be able to exchange their interest in a global security for definitive
securities of the same series. You are advised to refer to the Prospectus
Supplement for more detailed information with respect to the issuance of
definitive securities and the terms thereof, and the terms of the depositary
arrangements we have made with respect to any global security.
CERTAIN COVENANTS
DEFINITIONS.
The following defined terms will be used in this description of the
covenants:
"Capital Stock" means any and all shares, interests, participations or other
equivalents (however designated) evidencing equity ownership.
"Consolidated Assets" means the amount of all assets which under generally
accepted accounting principles as in effect on the date of such balance sheet
would appear on our consolidated balance sheet (after deducting related
depreciation, amortization, unearned finance charges, allowance for credit
losses and other valuation reserves), but not including goodwill, unamortized
debt discount and expenses, corporate organization expenses, patents and
trademarks.
"Consolidated Liabilities" means the amount of all liabilities which under
generally accepted accounting principles as in effect on the date of such
balance sheet would appear on our consolidated balance sheet, including, without
limitation, the par value or involuntary liquidation value, whichever is
greater, of minority interests, if any, in preference stock of all subsidiaries,
but not including the following: redeemable preferred or preference stock,
minority interests, if any, in common stock of subsidiaries, valuation reserves
(including unearned finance charges and allowances for credit losses deducted
from assets), our Capital Stock and surplus and surplus reserves, deferred
taxes, deferred investment tax credits and any of our Subordinated Indebtedness.
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<PAGE>
"Debt" means, with respect to any person, all obligations for borrowed money
of such person which in accordance with generally accepted accounting principles
shall be classified upon a balance sheet of such person as liabilities of such
persons, including (a) direct debt and other similar monetary obligations of
such person, (b) obligations secured by any lien upon property owned by such
person or obligations created or arising under any conditional sale, capital
lease, or other title retention agreement with respect to property acquired by
such person; provided, however, that debt does not include any indebtedness,
including purchase money indebtedness, with respect to which a creditor has no
recourse against the obligor except recourse to specific property the
acquisition of which was financed by or otherwise secures such indebtedness, or
the proceeds of any sale or lease of such property or both, and (c) obligations
under agreements to pay installments of purchase price or other like payments
with respect to fixed assets not utilized by such person or its subsidiaries in
the ordinary course of business, including obligations ostensibly to pay rent
under which an equity interest is to be acquired in the rented property. Debt
includes all guarantees of such person to the extent the amount of such
guarantees is in excess of 50% of the Shareholder's Equity of such person.
"Lien" means any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on the common law, statute or contract (but excluding a landlord's
statutory lien for rent not yet due), and including, but not limited to, the
security interest lien arising from a mortgage, encumbrance, pledge, conditional
sale or trust receipt or a lease, consignment or bailment for security purposes.
The term "Lien" shall include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting Property. For the purpose of the
Indentures, Boeing Capital shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement, capital lease
or other arrangement pursuant to which title to the Property has been retained
by or vested in some other person for security purposes.
"Original Issue Discount Security" means any debt security which provides
for an amount less than the principal amount thereof to be due and payable.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Senior Indebtedness" means all of the indebtedness of, or guaranteed by,
Boeing Capital for borrowed money (including the principal of, premium, if any,
or interest on any such borrowed money and any commitment fees for unborrowed
amounts which, if borrowed, would constitute Senior Indebtedness), whether
currently outstanding or hereafter incurred, unless, under the instrument
evidencing the same or under which the same is outstanding, it is expressly
provided that such indebtedness is subordinate to other indebtedness and
obligations of Boeing Capital.
"Shareholder's Equity" of any Person means the shareholder's equity
appearing on the balance sheet of such Person as determined under generally
accepted accounting principles.
"Subordinated Indebtedness" means the Subordinated Securities and all other
indebtedness of, or guaranteed by, Boeing Capital whether or not outstanding on
the date of the Subordinated Indenture, which is by the terms thereof made
subordinate and junior in right of payment to all Senior Indebtedness.
LIMITATION UPON LIENS
The Indentures provide that we will not, create or permit to continue in
existence any Lien or charge of any kind, upon any of our Property or assets
unless the debt securities then outstanding shall be equally and ratably secured
(subject, in the case of the Subordinated Securities, to subordination as
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to rights of payment as provided in the Subordinated Indenture), with any other
obligation or indebtedness so secured, except that we may:
(a) lease or sublease Property to others in the ordinary course of our
business or lease or sublease any Property if such Property is not needed by us
in the operation of our business;
(b) create, assume and incur or permit to exist Liens on Property acquired
or constructed by us to secure the purchase price of such Property (or to secure
indebtedness for money borrowed or incurred prior to or within 12 months after
the acquisition or construction of any such Property to be subject to such Lien
for the purpose of such acquisition or construction), or Liens existing on any
such Property at the time of acquisition, whether or not assumed, or any Lien
existing on any Property of any Person at the time it becomes a subsidiary or is
merged or consolidated with Boeing Capital or at the time of acquisition of the
assets of a Person as an entirety or substantially as an entirety by Boeing
Capital, and any conditional sales agreement or other title retention agreement
with respect to any Property hereafter acquired; provided, however, that the
aggregate principal amount of the indebtedness secured by all such Liens on any
particular Property shall not exceed the cost of such Property, including the
improvements thereon, to Boeing Capital, and provided, further, that any such
Lien does not extend to other Property owned prior to such acquisition or
construction or to Property thereafter acquired or constructed;
(c) create, assume and incur such Liens that secure indebtedness for
borrowed money, including purchase money indebtedness, which are incurred to
finance or refinance (irrespective of whether the original acquisition of the
Property was with or from money borrowed) the acquisition of Property subject to
such Lien and in respect of which the creditor has no recourse against Boeing
Capital except recourse to such Property or to the proceeds of any sale or lease
of such Property or both;
(d) create, assume and incur or permit to exist Liens on Property of Boeing
Capital in favor of the United States of America or any state thereof, or any
department, governmental body, agency or instrumentality or political
subdivision of any such jurisdiction, to secure partial, progress, advance or
other payments pursuant to any contract, or statute relating thereto;
(e) make any deposit with or give any form of security to any governmental
agency or other body created or approved by law or governmental regulation in
order to enable Boeing Capital to maintain self-insurance, or to participate in
any fund or payment in connection with workmen's compensation, unemployment
insurance, old-age pensions, or other social security, or to share in any
privileges or other benefits available to corporations participating in such
arrangements, or for any other purpose at any time required by law or regulation
promulgated by any government agency or office as a condition to the transaction
of any business or the exercise of any privilege or license, or deposit assets
of Boeing Capital with any surety company or clerk of any court, or in escrow,
as collateral in connection with, or in lieu of, any bond on appeal by Boeing
Capital from any judgment or decree against it, or in connection with any other
proceedings in actions at law or suits in equity by or against Boeing Capital;
(f) incur or suffer to be incurred or to exist upon any of its Property or
assets (i) Liens for taxes, assessments or other governmental charges or levies
which are not yet due or payable without penalty or of which amount,
applicability or validity is being contested by Boeing Capital in good faith by
appropriate proceedings and Boeing Capital shall have set aside on its books
reserves which it deems to be adequate with respect thereto (segregated to the
extent required by generally accepted accounting principles), provided, that
foreclosure, distraint, sale or similar proceedings (other than those that may
be and are cured by payment) have not been commenced, (ii) the Liens of any
judgment and other similar Liens arising in connection with court proceedings,
provided such Lien is discharged or the execution or other enforcement of such
Lien is effectively stayed within six months of the creation of such Lien, (iii)
undetermined Liens or charges incident to construction, (iv) materialmen's,
mechanics', workmen's, repairmen's, landlords' liens for rent or other like
Liens arising in the ordinary course of business in respect of obligations which
are not overdue or which are being contested by Boeing
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Capital in good faith by appropriate proceedings, or deposits to obtain the
release of such Liens or (v) any encumbrances consisting of zoning restrictions,
licenses, easements and restrictions on the use of real property and minor
defects and irregularities in the title thereto, which do not materially impair
the use of such property by Boeing Capital in the operation of its business or
the value of such property for the purpose of such business;
(g) create or suffer to be created or to exist in favor of any lender of
moneys or holder of commercial paper of Boeing Capital in the ordinary course of
business a banker's lien or right of offset in the holder of such indebtedness
on moneys of Boeing Capital deposited with such lender or holder in the ordinary
course of business;
(h) create, assume and incur Liens that relate solely to the purchase of,
or the investment in or with respect to, a specific item or items of tangible
personal property and secures indebtedness evidenced by participation
certificates, trust certificates, indentures or the like, however denominated,
provided, further, that no such Lien shall constitute a general lien or mortgage
on substantially all the tangible assets of Boeing Company;
(i) refund, replace or extend any Lien permitted by the Indentures for
amounts not exceeding the principal amount of indebtedness so refunded or
extended at the time of the refunding or extension thereof, and covering only
the same Property theretofore securing the same;
(j) deposit or pledge assets as security for the performance of any
contract or undertaking not directly or indirectly related to the borrowing of
money or the securing of indebtedness, if made in the ordinary course of
business;
(k) permit to exist any Lien existing on the date of the Indentures;
(l) create, assume and incur or permit to exist any Lien on any aircraft or
equipment held by Boeing Capital for lease to third parties, if such Lien
secures an obligation in respect of money borrowed which provides that recourse
to Boeing Capital shall not be had for the payment of such obligation;
(m) for the avoidance of doubt, create, incur, or suffer to be created or
to exist Liens granted in connection with, or otherwise evidencing, the sale or
securitization of accounts, leases, chattel paper, instruments, general
intangibles or other financial assets of Boeing Capital or any subsidiary; and
(n) in addition to the Liens permitted by clauses (a) through (m) above,
secure an aggregate principal amount of indebtedness of Boeing Capital not in
excess of 15% of Consolidated Assets.
Reference is made to the Prospectus Supplement relating to the Securities
offered thereby for information with respect to additional covenants that may be
included in the terms of the debt securities.
MERGER AND SALES OF ASSETS BY BOEING CAPITAL
Boeing Capital may consolidate or merge with or into any other corporation,
and Boeing Capital may convey, transfer or lease all or substantially all of its
Properties or assets to another Person provided that:
(a) the corporation formed by such consolidation or into which Boeing
Capital is merged or the Person which acquires by conveyance or transfer, or
which leases, the properties and assets of Boeing Capital substantially as an
entirety shall be a corporation organized and existing under the laws of the
United States of America, any state thereof or the District of Columbia, and if
such corporation is not Boeing Capital, shall expressly assume, by an indenture
supplemental, executed and delivered to the Trustee, in form satisfactory to the
Trustee, the due and punctual payment of the principal of, (and premium, if any)
and interest (including all additional amounts, if any) on all the debt
securities and the performance of every covenant of the respective Indenture on
the part of Boeing Capital to be performed or observed;
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(b) immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of Boeing Capital as a result of such
transaction as having been incurred by Boeing Capital at the time of such
transaction, no event of default, and no event which, after notice or lapse of
time or both, would become an event of default, shall have happened and be
continuing;
(c) if, as a result of any such consolidation, merger, conveyance, transfer
or lease, the properties or assets of Boeing Capital would become subject to a
mortgage, pledge, lien, security interests or other encumbrances which would not
be permitted by the applicable Indenture, Boeing Capital or such successor
corporation or Person, as the case may be, shall take such steps as shall be
necessary to effectively secure the debt securities equally and ratably with (or
prior to) all indebtedness secured thereby; and
(d) Boeing Capital has delivered to the Trustee an officer's certificate
and an opinion of counsel, each stating that such consolidation (if the
corporation formed by such consolidation is not Boeing Capital), merger,
conveyance, transfer or lease and such supplemental indenture comply with the
terms of the respective Indentures and that all conditions precedent therein
provided for relating to such transaction shall have been complied with.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The following events are defined in the Indentures as "events of default":
- the non-payment of any interest extending 30 days beyond the date such
interest payment became due and whether or not, in the case of the
Subordinated Securities, such payment is prohibited by the subordination
provisions referred to below under "Subordination";
- non-payment of any principal of (or premium, if any, on) the debt
securities of the applicable series as such payments become due whether or
not, in the case of the Subordinated Securities, such payment is
prohibited by the subordination provisions referred to below under
"Subordination";
- default in the deposit of any sinking fund payment when and as due,
whether or not, in the case of the Subordinated Securities, such payment
is prohibited by the Subordination provisions referred to below under
"Subordination";
- default in the performance of any other covenant or warranty of Boeing
Capital in the respective Indenture which remains unremedied for a period
of 60 days after notice of default by the holders of at least 25% in
principal amount of the outstanding debt securities of that series or by
the Trustee;
- an event of default, as defined in any mortgage, indenture or instrument
evidencing any indebtedness of Boeing Capital for money borrowed
(including other series of debt securities) in excess of $35,000,000
aggregate principal amount then outstanding (except that such dollar
amount shall not apply with respect to a default with respect to debt
securities of any series outstanding), as a result of which such
indebtedness of Boeing Capital shall have been accelerated and such
acceleration shall not have been annulled or rescinded, or there having
been deposited in trust a sum of money sufficient to discharge in full
such indebtedness, within a period of 20 days after written notice
thereof;
- certain events of bankruptcy, insolvency or reorganization; or
- any other event of default provided in a supplemental indenture with
respect to debt securities of a particular series.
Reference is made to the Prospectus Supplement relating to any series of
offered debt securities which are Original Issue Discount Securities for the
particular provisions relating to the principal amount of such Original Issue
Discount Securities due upon acceleration upon the occurrence of an event of
default and its continuation.
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The Trustee is required, within 90 days after the occurrence of any default
which is known to the Trustee and is continuing, to give to the holders of the
applicable series of debt securities with respect to which such default has
occurred notice of such default, provided, that, except in the case of default
in the payment of principal, premium, if any (including any sinking fund
payment) or interest, if any, on a series of debt securities with respect to
which such default has occurred, the Trustee shall be protected in withholding
such notice if it determines in good faith that the withholding of such notice
is in the interest of the holder of the debt securities of such series.
If an event of default with respect to debt securities of any series then
outstanding shall have occurred and be continuing, the Trustee or the holders of
at least 25% in principal amount of the outstanding debt securities of such
series may declare the principal (or, if the debt securities of that series are
Original Issue Discount Securities, such portion of the principal amount as may
be specified in the terms of that series) and accrued interest of all the debt
securities of such series to be due and payable immediately; provided, however,
that in certain cases, the holders of a majority in aggregate principal amount
of the debt securities of such series then outstanding may rescind and annul
such declaration and its consequences.
The Trustee, subject to its duties during default to act with the required
standard of care, may require indemnification by the holders of a series of debt
securities with respect to which a default has occurred before proceeding to
exercise any right or power under the applicable Indenture at the request of the
holders of debt securities of such series. The holders of a majority in
principal amount of the outstanding debt securities of a series may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee.
In certain cases, the holders of not less than a majority in principal
amount of an outstanding series of debt securities may, on behalf of the holders
of all debt securities of such series, and any coupons appertaining thereto,
waive any past default with respect to such series except a default in the
payment of the principal, premium, if any, or interest (except to the extent
that such interest has been paid), if any, on such series of debt securities
with respect to which such default has occurred.
We are required to file annually with the Trustee a certificate as to the
absence of defaults under each Indenture.
The occurrence of an event of default under an Indenture may give rise to a
cross-default under other series of debt securities issued under such Indenture
and other indebtedness of ours that may be outstanding from time to time.
NOTICES
Except as otherwise provided in the Indentures, notices to holders of bearer
securities will be given by publication at least twice in a daily newspaper in
The City of New York and in such other city or cities as may be specified in
such debt securities. Notices to holders of registered securities will be given
by mail to the addresses of such holders as they appear in the security
registers maintained by the Trustee.
MODIFICATION OF THE INDENTURES
Modification and amendment of the Indentures may be made by us and the
Trustee without the consent of any holder, for any of these purposes:
- to evidence the succession of another corporation to Boeing Capital;
- to add to the covenants of Boeing Capital for the benefit of the holders
of all or any series of debt securities;
- to add additional events of default;
- to change any provision of the Indentures to facilitate the issuance of
bearer securities;
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- to change or eliminate any provision of any Indenture, provided no debt
security outstanding of any series is entitled to the benefit of such
provision;
- to secure the debt securities;
- to establish the form or terms of unissued debt securities;
- to provide for the acceptance of appointment by a successor trustee; or
- to cure any ambiguity, defect or inconsistency in either Indenture or both
of them provided such action does not adversely affect the interests of
holders of debt securities.
Modification and amendment of the Indentures may be made by us and the
Trustee with the consent of the holders of not less than 66 2/3% in principal
amount of the outstanding debt securities of an affected series, provided that
no such modification or amendment may, without the consent of the holder of each
outstanding debt security affected thereby:
- change the stated maturity date or the principal of, premium, if any, or
any installment of interest (or any additional amount) on, any such debt
security;
- reduce the principal amount or rate of interest thereon;
- change the redemption price, if applicable;
- change the place or currency of payment of principal of or premium, if
any, or interest on any debt security;
- impair the right to institute suit for the enforcement of any such payment
on or after the stated maturity thereof;
- reduce the above-stated percentage of outstanding debt securities
necessary to modify or amend the respective Indentures;
- modify the foregoing requirements or reduce the percentage of outstanding
debt securities necessary to waive any past default or compliance with
certain restrictive provisions to less than a majority; or
- with respect to the Senior Securities, reduce the amount of principal of
an Original Issue Discount Security payable upon acceleration of the
maturity thereof.
DISCHARGE AND DEFEASANCE
Under each of the Indentures, we may discharge certain obligations to
holders of any series of debt securities that have not already been delivered to
the Trustee for cancellation and that either have become due and payable or will
become due and payable within one year (or scheduled for redemption within one
year) by depositing with the applicable Trustee, in trust, funds in an amount
sufficient to pay the entire indebtedness on such debt securities in respect of
principal and premium, if any, and interest, if any, to the date of such deposit
(if such debt securities have become due and payable) or to the maturity
thereof, as the case may be.
Each Indenture further provides that, if applicable to the debt securities
of any series, we may elect to defease and be discharged from any and all
obligations with respect to such debt securities (except for, among other
things, the obligation to pay additional amounts, if any, upon the occurrence of
certain events of taxation, assessment or governmental charge with respect to
payments on such debt securities and the obligations to register the transfer or
exchange of such debt securities, to replace temporary or mutilated, destroyed,
lost or stolen securities, to maintain an office or agency in respect of such
debt securities and to hold moneys for payment in trust) ("defeasance") upon the
irrevocable deposit by us with the Trustee, in trust, of an amount of money or
U.S. Government Obligations (as defined below), or both, applicable to such debt
securities which through the scheduled payment of
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principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, if any) and interest, if
any, on such securities, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, (i) the
defeasance does not result in a breach or violation of, or constitute a default
under, the applicable Indenture or any other agreement or instrument to which we
are a party or by which we are bound, (ii) no default or event of default with
respect to the debt securities to be defeased shall have occurred and be
continuing on the date of the establishment of such a trust and (iii) we have
delivered to the Trustee an opinion of counsel (as specified in the applicable
Indenture) to the effect that the holders of such debt securities will not
recognize income, gain or loss for U.S. federal income tax purposes as a result
of such defeasance and will be subject to U.S. federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance had not occurred, and such opinion of counsel must refer to and
be based upon a letter ruling of the Internal Revenue Service received by us, a
Revenue Ruling published by the Internal Revenue Service or a change in
applicable U.S. federal income tax law occurring after the date of the
applicable Indenture.
"U.S. Government Obligations" means generally direct noncallable obligations
of the United States of America for the payment of which its full faith and
credit is pledged or obligations of a person controlled or supervised by and
acting as an agency or instrumentality of the United States of America, the
timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting defeasance, including any modifications to the provisions
described above, with respect to the debt securities of a particular series.
SUBORDINATION
The indebtedness evidenced by the Subordinated Securities and the payment of
the principal of and premium, if any, and interest, if any, on each and all of
the Subordinated Securities are subordinated in right of payment to the prior
payment in full of Senior Indebtedness and, unless specifically designated as
ranking junior to other subordinated debt securities of Boeing Capital, are PARI
PASSU with all other subordinated debt securities of Boeing Capital which have
not been specifically designated as ranking junior to other subordinated debt
securities of Boeing Capital. We have not issued any subordinated debt ranking
junior to the Subordinated Securities but we reserve the right to issue such
junior subordinated debt.
If we default in the payment of any Senior Indebtedness, unless and until
such default shall have been cured or waived, no direct or indirect payment
shall be made on account of the principal of and premium, if any, or interest,
if any, or any additional amounts on the Subordinated Securities, or in respect
of any sinking fund for, or redemption, retirement or purchase or other
acquisition of any of the Subordinated Securities.
If any other event of default occurs with respect to any Senior
Indebtedness, permitting the holders thereof to accelerate the maturity thereof,
then, unless and until such event of default shall have been cured or waived, no
direct or indirect payment shall be made on account of the principal of, or
premium, if any, or interest, if any (including additional amounts) on any
Subordinated Securities or in respect of any sinking fund for, or redemption,
retirement, purchase or other acquisition of the Subordinated Securities, during
any period of 90 days after written notice of such default shall have been given
to us by any holder of Senior Indebtedness or during any period in which any
judicial proceeding is pending in respect of such default and a notice of
acceleration of the maturity of such Senior Indebtedness has been transmitted to
us in respect of such default.
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In the event of: (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment or other similar proceeding relating to Boeing
Capital, its creditors or its property: (ii) any proceeding for the liquidation,
dissolution or other winding up of Boeing Capital, whether voluntary or
involuntary, whether or not involving bankruptcy proceedings; (iii) any
assignment by Boeing Capital for the benefit of creditors; or (iv) any other
marshalling of the assets of Boeing Capital, all Senior Indebtedness shall first
be paid in full before any payment or distribution shall be made to any holder
of Subordinated Securities.
If any such payment or distribution to be paid to the holders of Senior
Indebtedness shall be made to any holder of Subordinated Securities in
contravention of the foregoing and before all of the Senior Indebtedness shall
have been paid in full, such payment or distribution shall be received in trust
for the benefit of, and shall be paid over or delivered and transferred to, the
holders of Senior Indebtedness at the time outstanding in accordance with the
priorities then existing among such holders for applications to the payment of
all Senior Indebtedness remaining unpaid.
Senior Indebtedness shall not be deemed to have been paid in full unless the
holders thereof shall have received cash equal to the amount of Senior
Indebtedness then outstanding. Upon payment in full of all Senior Indebtedness,
the holders of Subordinated Securities shall be subrogated to all rights of any
holders of Senior Indebtedness to receive any further payments or distributions
applicable to the Senior Indebtedness until all amounts owing on the
Subordinated Securities shall have been paid in full, and such amounts or
distributions which otherwise would be paid or distributed to the holders of
Senior Indebtedness, shall, as between Boeing Capital and its creditors (other
than the holders of Senior Indebtedness), on the one hand, and the holders of
the Subordinated Securities, on the other hand, be deemed to be a payment by
Boeing Capital on account of Senior Indebtedness and on account of the
Subordinated Securities.
As of the date hereof, we had issued none of our Senior Securities pursuant
to the Senior Indenture and none of our Subordinated Securities pursuant to the
Subordinated Indenture. As of June 30, 2000, there was $3,074.7 million in
Senior Indebtedness outstanding and $44.9 million in Subordinated Indebtedness
outstanding.
The holders of the debt securities should not rely on the continued
existence of the covenants described above because they will expire (i) as the
indebtedness related thereto matures and is paid, (ii) if we prepay such related
indebtedness or (iii) if we amend or delete such restrictions through the
process of negotiation.
HOW WE PLAN TO DISTRIBUTE THE DEBT SECURITIES
METHOD OF DISTRIBUTION
We may sell the debt securities to or through underwriters, to be designated
from time to time, and we also may sell debt securities directly to investors or
through agents or broker-dealers. In addition, we may authorize agents of Boeing
Capital to solicit and receive offers from certain institutions to purchase the
debt securities. Any distributor to whom or through whom we will sell debt
securities will be named in the applicable Prospectus Supplement. Each
Prospectus Supplement will detail the method of distribution for the debt
securities offered in connection with such Prospectus Supplement.
PRICING
The debt securities may be sold from time to time in one or more
transactions at:
- a fixed price or prices, subject to change;
- market prices prevailing at the time of sale;
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- prices relating to prevailing market prices; or
- negotiated prices.
COMPENSATION TO DISTRIBUTORS OF THE DEBT SECURITIES
We, or purchasers of debt securities for whom underwriters act as agents,
may pay compensation to the distributors of the debt securities. Such
compensation may be discounts, concessions or commissions. This compensation, as
well as profit received by distributors in connection with the resale of debt
securities, may be deemed to be underwriting discounts and commissions under the
Securities Act of 1933. Each Prospectus Supplement will describe any distributor
receiving compensation from us deemed to be "underwriting discounts and
commissions" under the Securities Act of 1933 and the compensation received by
the distributor.
INDEMNIFICATION OF DISTRIBUTORS OF THE DEBT SECURITIES
We may enter into agreements with distributors of the debt securities to
indemnify them against certain liabilities, including liabilities under the
Securities Act of 1933.
BEARER DEBT SECURITIES
Each distributor of debt securities which are issuable as bearer debt
securities will agree not to offer, sell or deliver, in any manner, bearer debt
securities in the United States or to United States persons (other than
qualified institutional buyers) in connection with the original issuance of the
debt securities.
OTHER INFORMATION
Some distributors of the debt securities or affiliates of such persons may
perform services for Boeing Capital or engage in transactions with Boeing
Capital in the ordinary course of business. In connection with the distribution
of the debt securities, Boeing Capital may enter into swap or other hedging
transactions with, or arranged by, distributors of the debt securities or
affiliates of such persons. These distributors or their affiliates may receive
compensation, trading gain or other benefits from these transactions.
LEGAL OPINIONS REGARDING THE VALIDITY OF THE DEBT SECURITIES
Sidley & Austin, Los Angeles, California or Michael C. Draffin, Vice
President--Taxes & Associate General Counsel and Secretary of Boeing Capital or
H. David Heumann, Assistant General Counsel of Boeing Capital or Ashok K.
Tripathi, Counsel of Boeing Capital will pass upon the validity of the debt
securities for Boeing Capital. Brown & Wood LLP, New York, New York will pass
upon the validity of the debt securities for the underwriters and agents.
Mr. Draffin, Mr. Heumann or Mr. Tripathi may rely, as to all matters governed by
New York law, on the opinion of Brown & Wood LLP.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from Boeing Capital's Annual Report
on Form 10-K for the year ended December 31, 1999, and from Boeing Capital's
current report on Form 8-K dated March 31, 2000 as filed with the SEC on
April 13, 2000, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR
THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT,
THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE AGENT. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT,
THE APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER
AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS 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
IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Risk Factors................................... S-3
Description of Notes........................... S-5
Certain United States Federal Income Tax
Considerations................................ S-25
How We Plan to Distribute the Notes............ S-34
PROSPECTUS
Where You Can Find More Information About Us... 3
Cautionary Note About Forward-Looking
Statements.................................... 3
Description of Our Business and Our Company.... 4
General Information About Boeing Capital....... 4
Use of Proceeds................................ 5
Ratio of Earnings to Fixed Charges............. 5
The Debt Securities............................ 5
How We Plan to Distribute the Debt
Securities.................................... 16
Legal Opinions Regarding the Validity of the
Debt Securities............................... 17
Experts........................................ 17
</TABLE>
$1,140,000,000
BOEING CAPITAL CORPORATION
SERIES XI MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
-----------------
PROSPECTUS SUPPLEMENT
-----------------
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
MORGAN STANLEY
DEAN WITTER
------------
AUGUST 31, 2000
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