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FILED PURSUANT TO RULE 424(b)(1)
REGISTRATION NO. 33-56255
PROSPECTUS
[LOGO OF INTERNATIONAL LEASE FINANCE CORPORATION]
500 SHARES OF MARKET AUCTION PREFERRED STOCK, SERIES E
500 SHARES OF MARKET AUCTION PREFERRED STOCK, SERIES F
Liquidation Preference $100,000 Per Share
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Dividends on the Market Auction Preferred Stock, Series E and Series F
(collectively, the "MAPS") are cumulative from the Date of Original Issue and
are payable when, as and if declared by the Board of Directors of
International Lease Finance Corporation. The Initial Dividend Payment Date and
Initial Dividend Rate will be May 1, 1995 and 4.80% per annum for the Series E
MAPS and March 21, 1995 and 4.60% per annum for the Series F MAPS. Thereafter,
dividends will be payable at the Applicable Rate in effect from time to time
when, as and if declared on each subsequent Dividend Payment Date which is,
subject to certain exceptions, (i) every seventh Monday for the Series E MAPS
and (ii) every seventh Tuesday for the Series F MAPS for the Standard Dividend
Period of 49 days, subject to certain exceptions, commencing on the prior
Dividend Payment Date. Under certain circumstances, the Company may specify
that a Dividend Period be a Short Dividend Period (50 to 364 days) or a Long
Dividend Period (one year or longer).
After the Initial Dividend Period, the Applicable Rate for each Dividend
Period will be determined on the basis of Orders placed in an Auction
conducted on the Business Day preceding the commencement of a Dividend Period,
subject to certain exceptions. In each Auction each Existing Holder will
indicate its desire (i) to continue to hold shares of a Series without regard
to the Applicable Rate that results from such Auction, (ii) to continue to
hold shares of a Series if the Applicable Rate that results from such Auction
is equal to or greater than the rate bid by such Existing Holder and/or (iii)
to sell shares of a Series without regard to the Applicable Rate that results
from such Auction. Potential Holders may submit bids in which they will offer
to purchase shares of a Series if the Applicable Rate that results from such
Auction is equal to or greater than the rate bid by such Potential Holder. The
Applicable Rate that results from an Auction for any Dividend Period will not
be greater than a rate per annum (the "Maximum Applicable Rate"), determined
by reference to the credit ratings of the MAPS, that is a percentage of the
Applicable "AA" Composite Commercial Paper Rate, in the case of a Standard
Dividend Period or a Short Dividend Period of 183 days or less, or a
percentage of the Applicable Treasury Bill Rate, in the case of a Short
Dividend Period of 184 days to 364 days or the Applicable Treasury Note Rate
in the case of a Long Dividend Period. The Maximum Applicable Rate may range
from 150% to 275% of such rates, and on the date of delivery of the MAPS is
anticipated to be 200% thereof. If the Company fails to make timely payments
to the Auction Agent of the full amount of any dividend on the MAPS or the
redemption price of MAPS called for redemption, the Applicable Rate will not
be based on the results of an Auction but instead will be the Default Rate,
unless such failure to pay is cured within three Business Days.
Shares of MAPS may be transferred only in whole shares and pursuant to a Bid
or a Sell Order placed in an Auction, to or through a Broker-Dealer or to a
person that has delivered a signed Master Purchaser's Letter to a Broker-
Dealer. Prospective purchasers should carefully review the Auction Procedures
described in this Prospectus (including its Appendices) and should note that
(i) a Bid or Sell Order constitutes a commitment to purchase or sell shares of
MAPS based upon the results of an Auction, (ii) Auction participation will be
through telephonic communications, (iii) settlement for purchases and sales
will be on the Business Day following an Auction and (iv) ownership of MAPS
will be maintained in book-entry form by or through the Securities Depositary.
Each Series of MAPS is redeemable on any Dividend Payment Date for such
Series, in whole or in part, at the option of the Company, at $100,000 per
share, plus accrued and unpaid dividends.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-----------
PRICE $100,000 PER SHARE
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY (3)
--------- -------------- -----------
<S> <C> <C> <C>
Per Share.............. $100,000 $1,375 $98,625
Total.................. $100,000,000 $1,375,000 $98,625,000
</TABLE>
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(1) Plus accrued dividends, if any, from the Date of Original Issue.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deduction of estimated expenses for the account of the Company of
$270,000, of which $125,000 will be paid by the Underwriters.
-----------
Each share of MAPS is offered, subject to prior sale, when, as and if
accepted by the Underwriters named herein, and subject to approval of certain
legal matters by Milbank, Tweed, Hadley & McCloy, counsel for the Underwriters.
It is expected that delivery of the MAPS will be made on or about February 1,
1995, through the facilities of The Depository Trust Company, against payment
therefor in immediately available funds.
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MORGAN STANLEY & CO. LEHMAN BROTHERS
Incorporated
January 25, 1995
<PAGE>
AVAILABLE INFORMATION
International Lease Finance Corporation (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission").
Such reports and other information filed by the Company can be inspected and
copied at the Public Reference Room of the Commission, Room 1024, at 450 Fifth
Street, N.W., Washington, D.C., 20549 and at the Commission's regional offices
at Seven World Trade Center, Room 1300, New York, New York 10048 and Suite
1400 Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of such materials can be obtained at prescribed rates from the
Public Reference Room of the Commission, Room 1024, at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"). This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is made to the Registration Statement, which may be examined without
charge at the public reference facilities maintained by the Commission at the
Public Reference Room of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies thereof may be obtained from the Commission
upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference in this Prospectus:
(1) Annual Report on Form 10-K for the year ended December 31, 1993;
(2) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994,
June 30, 1994 and September 30, 1994; and
(3) Current Reports on Form 8-K, event dates January 4, 1994, January 11,
1994, February 23, 1994, March 24, 1994, May 17, 1994, May 20, 1994, May
26, 1994, July 26, 1994, October 12, 1994, December 6, 1994, January 12,
1995 and January 17, 1995.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the MAPS hereunder
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of the filing of such reports and documents. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which is incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will furnish without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the documents incorporated herein by reference (not including exhibits to such
documents, unless such exhibits are specifically incorporated by reference in
such documents). Requests should be directed to: Julie I. Sackman, Secretary,
International Lease Finance Corporation, 1999 Avenue of the Stars, 39th Floor,
Los Angeles, California 90067 (telephone: (310) 788-1999).
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2
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information................................................ 2
Incorporation of Certain Documents by Reference...................... 2
Prospectus Summary................................................... 4
International Lease Finance Corporation.............................. 9
Use of Proceeds...................................................... 9
Capitalization of the Company........................................ 9
Selected Financial Data.............................................. 10
American International Group, Inc.................................... 11
Description of MAPS.................................................. 11
Certain Income Tax Consequences...................................... 29
Underwriters......................................................... 31
Experts.............................................................. 32
Legal Matters........................................................ 32
Index of Terms....................................................... 33
Appendix A: Settlement Procedures.................................... A-1
Appendix B: Auction Procedures....................................... B-1
Appendix C: Master Purchaser's Letter................................ C-1
</TABLE>
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NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON
IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS AT ANY TIME NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
3
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PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in its
entirety by reference to the detailed information appearing elsewhere in this
Prospectus. Terms not defined in this Summary are defined elsewhere herein or
in the Appendices hereto.
INTERNATIONAL LEASE FINANCE CORPORATION
The Company is primarily engaged in the acquisition of new and used
commercial jet aircraft and the leasing and sale of such aircraft to domestic
and foreign airlines. The Company, in terms of the number and value of
transactions concluded, is a major owner-lessor of commercial jet aircraft.
Since its formation in 1973, the Company has engaged in over 650 transactions
involving the lease or sale of commercial aircraft to more than 120 airlines.
In addition, the Company is engaged in the remarketing of commercial jets for
airlines and financial institutions. At September 30, 1994, the Company owned
253 aircraft including aircraft owned in joint ventures. At September 30, 1994,
the Company had committed to purchase 220 aircraft deliverable through 1999 at
an estimated aggregate purchase price of $13.0 billion. It also had options to
purchase an additional 43 aircraft deliverable through 1999 at an estimated
aggregate purchase price of $2.6 billion.
USE OF PROCEEDS
The net proceeds from the sale of the MAPS offered hereby will be
approximately $98,480,000. The Company intends to use the net proceeds to repay
maturing commercial paper. At January 25, 1995, the Company had approximately
$1.9 billion of commercial paper outstanding with a weighted interest rate of
approximately 5.99%.
AMERICAN INTERNATIONAL GROUP, INC.
The Company is a wholly-owned subsidiary of American International Group,
Inc. ("AIG"). AIG is a holding company which through its subsidiaries is
primarily engaged in a broad range of insurance and insurance-related
activities in the United States and abroad. AIG's primary activities include
both general and life insurance operations. The principal insurance company
subsidiaries of AIG are American Home Assurance Company, National Union Fire
Insurance Company of Pittsburgh, Pa., New Hampshire Insurance Company,
Lexington Insurance Company, American International Underwriters Overseas,
Ltd., American Life Insurance Company, American International Assurance
Company, Limited, The Philippine American Life Insurance Company, American
International Reinsurance Company, Ltd. and United Guaranty Residential
Insurance Company. Other significant activities of AIG include financial
services and insurance agency and service fee operations. The common stock of
AIG is listed on, among others, the New York Stock Exchange.
THE MAPS ARE NOT OBLIGATIONS OF AIG.
THE OFFERING
The Company is offering two Series of MAPS ("Series E" and "Series F," each a
"Series"), each consisting of 500 shares. Each Series of MAPS is being offered
at an offering price of $100,000 per share.
DIVIDENDS
The MAPS of each Series will entitle the holder thereof to receive cumulative
preferred dividends, when, as and if declared by the Board of Directors of the
Company, out of funds available therefor under applicable law and the Articles
of Incorporation. See "Description of MAPS--General." Dividend rates and
Dividend Payment Dates for the Initial Dividend Period for each Series of MAPS
shall be as indicated on the cover page of this Prospectus. After the Initial
Dividend Period, except as provided below, the dividend rate on the
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MAPS of each Series will be the Applicable Rate for such Series that the
Auction Agent advises the Company has resulted from an Auction relating to such
Series. Separate Auctions will be conducted for each Series. See "Description
of MAPS--Dividends--Determination of Dividend Rate." The dividend rate on each
Series of MAPS shall not exceed the Maximum Applicable Rate for any Dividend
Period (except following a Failure to Deposit, in which case the dividend rate
shall be the Default Rate).
After the Initial Dividend Period for each Series of MAPS, the term of each
subsequent Dividend Period for each Series of MAPS will be a Standard Dividend
Period (currently a period of 49 days) or, if established by the Company, a
Short Dividend Period (50 to 364 days) or a Long Dividend Period (one year or
longer). See "Description of MAPS--Dividends--Dividend Periods." Dividends will
be payable (a) for any Series with respect to a Standard Dividend Period, on
(i) each seventh Monday for the Series E MAPS and (ii) each seventh Tuesday for
the Series F MAPS following the commencement of such Dividend Period; (b) for
any Series with respect to a Short Dividend Period, on the day following the
last day of such Short Dividend Period and on such other dates as are
established at the time such Short Dividend Period is determined; and (c) for
any Series with respect to a Long Dividend Period, on the day following the
last day of such Long Dividend Period and on the first day of the fourth
calendar month after the commencement of such Long Dividend Period and
quarterly thereafter on the first day of each applicable month, in each case
subject to certain adjustments. See "Description of MAPS--Dividends--Dividend
Payment Dates."
The Maximum Applicable Rate on any Auction Date shall be the rate obtained by
multiplying the Applicable Determining Rate on such date by the percentage
determined as set forth below based on the lower of the credit ratings assigned
to the MAPS by Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Corporation ("S&P").
<TABLE>
<CAPTION>
CREDIT RATINGS APPLICABLE PERCENTAGE
-------------- OF APPLICABLE
MOODY'S S&P DETERMINING RATE
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<S> <C> <C>
"aa3" or Above AA- or Above 150%
"a3" to "a1" A- to A+ 200%
"baa3" to "baa1" BBB- to BBB+ 225%
Below "baa3" Below BBB- 275%
</TABLE>
The Applicable Determining Rate with respect to MAPS with a Standard Dividend
Period or a Short Dividend Period of 183 days or less is the Applicable "AA"
Composite Commercial Paper Rate; with respect to MAPS with a Short Dividend
Period of 184 to 364 days, it is the Applicable Treasury Bill Rate; and with
respect to MAPS with a Long Dividend Period, it is the Applicable Treasury Note
Rate. See "Description of MAPS--Auction Procedures--Determination of Sufficient
Clearing Bids, Winning Bid Rate and Applicable Rate."
The Company may give a Notice of Short Dividend Period or a Notice of Long
Dividend Period, not less than ten and not more than 30 days prior to an
Auction Date for any Series of MAPS, to the Auction Agent and the Securities
Depositary. Each such Notice will specify (i) the next succeeding Dividend
Period as a Short Dividend Period or a Long Dividend Period, (ii) the term
thereof, (iii) in the case of any Long Dividend Period, additional redemption
provisions or restrictions on redemption, if any, and (iv) the Dividend Payment
Dates; provided that, for any Auction occurring after the initial Auction, the
Company may not give a Notice of a Short Dividend Period or a Notice of a Long
Dividend Period (and any such Notice shall be null and void) unless Sufficient
Clearing Bids were made in the last occurring Auction of any series of Market
Auction Preferred Stock of the Company now or hereafter authorized (the
"Authorized MAPS") (or all shares of such series of Authorized MAPS were
subject to Submitted Hold Orders) and full cumulative dividends, if any, for
all Authorized MAPS payable prior to such date have been paid in full. A Notice
may be revoked by the Company on or prior to the Business Day prior to the
related Auction Date by giving a Notice of Revocation to the Auction Agent and
the Securities Depositary. If the Company does not give a Notice with respect
to the succeeding Dividend Period for any Series of MAPS or gives a Notice of
Revocation with respect thereto, such next succeeding Dividend Period will be a
Standard Dividend Period.
In addition, if the Company has given a Notice with respect to the next
succeeding Dividend Period for a Series and has not given a Notice of
Revocation with respect thereto, but Sufficient Clearing Bids are not
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<PAGE>
made in the related Auction (other than because all shares of such Series were
subject to Submitted Hold Orders) or such Auction is not held for any reason,
(i) such next succeeding Dividend Period will, notwithstanding such Notice, be
a Standard Dividend Period and (ii) the Company may not again give a Notice
(and any such Notice shall be null and void) until Sufficient Clearing Bids
have been made in an Auction of a series of Authorized MAPS or an Auction has
been held in which all shares of a series of Authorized MAPS were subject to
Submitted Hold Orders.
Each Broker-Dealer will be required to notify promptly each person that has
purchased MAPS of either Series from or through such Broker-Dealer and, to the
knowledge of such Broker-Dealer, remains an Existing Holder of MAPS of such
Series, as to any Notice or Notice of Revocation given by the Company relating
to such Series. Holders of MAPS for which a Notice has been delivered should
contact their respective Broker-Dealers for further information. See
"Description of MAPS--Dividends--Extension of Dividend Period."
In the event of the failure by the Company to pay to the Auction Agent by
12:00 noon, New York City time, (i) on the Business Day next preceding any
Dividend Payment Date, the full amount of any dividend (whether or not earned
or declared) to be paid on such Dividend Payment Date for any Series of MAPS or
(ii) on the Business Day next preceding any redemption date, the full
redemption price (including accumulated and unpaid dividends) to be paid on
such redemption date for any share of any Series of MAPS (in each case referred
to as a "Failure to Deposit"), then, until the full amount due shall have been
paid to the Auction Agent, Auctions will be suspended and the Applicable Rate
for such Series will be equal to the Applicable Determining Rate multiplied by
the percentage shown opposite the lowest Credit Ratings category on the
preceding page determined as of the Business Day preceding such Failure to
Deposit (the "Default Rate"). If such Failure to Deposit is cured within three
Business Days, the Applicable Rate during the period from the Dividend Payment
Date in respect of which such Failure to Deposit occurred through the day
preceding the Business Day next succeeding the Auction held following such cure
will be the Default Rate and the Applicable Rate for the Dividend Period
commencing on the second Business Day following such cure will be based on the
results of an Auction to be held on the Business Day following such cure.
Unless such a cure is effected, the Default Rate shall continue in effect until
there shall occur a Dividend Payment Date at least two Business Days prior to
which the full amount of any dividends (whether or not earned or declared)
payable on each Dividend Payment Date prior to and including such Dividend
Payment Date, and the full amount of any redemption price (including
accumulated and unpaid dividends) then due, shall have been paid to the Auction
Agent, and thereupon Auctions shall resume on the terms stated herein for
Dividend Periods commencing with such Dividend Payment Date. If an Auction is
not held on an Auction Date for any reason (other than because of suspension of
Auctions due to a Failure to Deposit), the dividend rate therefor shall be the
Maximum Applicable Rate determined as of such Auction Date. See "Description of
MAPS--Dividends--Determination of Dividend Rate."
REDEMPTION
At the option of the Company, the shares of any Series of MAPS may be
redeemed, in whole or from time to time in part, out of funds legally available
therefor, on any Dividend Payment Date for such Series, upon at least 15 but
not more than 45 days' notice, at a redemption price per share equal to the sum
of $100,000 plus an amount equal to accumulated and unpaid dividends thereon
(whether or not earned or declared) to the date that the Company pays the full
amount payable upon redemption of such shares. Pursuant to such right of
optional redemption, the Company may elect to redeem some or all of the shares
of a series of Authorized MAPS without redeeming shares of any other series of
Authorized MAPS. See "Description of MAPS--Redemption."
LIQUIDATION PREFERENCE
The liquidation preference for MAPS will be $100,000 per share, plus an
amount equal to accumulated and unpaid dividends (whether or not declared) to
and including the date of distribution. See "Description of MAPS--Liquidation
Preference."
6
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VOTING RIGHTS
Except in certain limited circumstances described in this Prospectus or as
expressly required by law, holders of MAPS will have no voting rights. See
"Description of MAPS--Voting Rights."
AUCTION PROCEDURES
Separate Auctions will be conducted for each Series of MAPS on the Business
Day prior to the beginning of each Dividend Period after the Initial Dividend
Period. As used herein, "Existing Holder" means a person who has signed a
Master Purchaser's Letter and is listed as the beneficial owner of any MAPS in
the records of the Auction Agent, and "Potential Holder" means a person who has
signed a Master Purchaser's Letter.
Prior to the Submission Deadline on each Auction Date for the applicable
Series of MAPS, each Existing Holder may submit to a Broker-Dealer its:
. Hold Order--indicating its desire to hold shares of MAPS without regard
to the Applicable Rate for the next Dividend Period.
. Bid--indicating its desire to sell shares of MAPS, provided that the
Applicable Rate for the next Dividend Period is less than the rate per
annum specified in such Bid.
. Sell Order--indicating its desire to sell shares of MAPS without regard
to the Applicable Rate for the next Dividend Period.
An Existing Holder may submit different types of Orders in an Auction with
respect to different shares of MAPS then held by such Existing Holder. An
Existing Holder that offers to purchase additional shares of MAPS is, for
purposes of such offer, treated as a Potential Holder. Any Bid specifying a
rate higher than the Maximum Applicable Rate on the Auction Date will (a) be
treated as a Sell Order if submitted by an Existing Holder and (b) not be
considered if submitted by a Potential Holder. A Hold Order will be deemed to
have been submitted on behalf of an Existing Holder if an Order is not timely
submitted on behalf of such Existing Holder for any reason, including the
failure of a Broker-Dealer to submit such Existing Holder's Order to the
Auction Agent in a timely manner. See "Description of MAPS--Auction
Procedures--Orders by Existing Holders and Potential Holders."
If Sufficient Clearing Bids have been made, the Auction Agent will determine
the lowest rate specified in the Submitted Bids (the "Winning Bid Rate") which
would result in Existing Holders continuing to hold (pursuant to Submitted
Bids) an aggregate number of shares of MAPS which, when added to the number of
shares of MAPS to be purchased by Potential Holders, based on the rates in
their Submitted Bids, would equal not less than the number of Available Shares
of MAPS. In such event, the Winning Bid Rate will be the Applicable Rate for
the next Dividend Period for all MAPS of such Series.
If Sufficient Clearing Bids have not been made (other than because all of the
Outstanding shares of MAPS are subject to Submitted Hold Orders), the next
succeeding Dividend Period will be a Standard Dividend Period and the
Applicable Rate for the next Dividend Period for all shares of MAPS of such
Series will be equal to the Maximum Applicable Rate for a Standard Dividend
Period determined as of the Business Day immediately preceding such Auction. If
Sufficient Clearing Bids have not been made, Existing Holders that have
submitted Sell Orders will not be able to sell in the Auction all, and may not
be able to sell any, shares of MAPS subject to such Submitted Sell Orders.
If all of the Outstanding shares of MAPS of any Series are subject to
Submitted Hold Orders, the Applicable Rate for the next Dividend Period will be
59% of the Applicable "AA" Composite Commercial Paper Rate, if the next
Dividend Period for such Series of MAPS is a Standard Dividend Period or a
Short Dividend Period of 183 days or less; or 59% of the Applicable Treasury
Bill Rate, if the next Dividend Period for such Series of MAPS is a Short
Dividend Period of 184 days to 364 days; or 59% of the Applicable
7
<PAGE>
Treasury Note Rate, if the next Dividend Period for such Series of MAPS is a
Long Dividend Period, in each case as in effect on the related Auction Date.
See "Description of MAPS--Auction Procedures--Determination of Sufficient
Clearing Bids, Winning Bid Rate and Applicable Rate."
The Auction Procedures provide for a pro rata allocation of shares of MAPS
for purchase and sale, which may result in an Existing Holder continuing to
hold or selling, or a Potential Holder purchasing, a number of shares of MAPS
that is fewer than the number of shares of MAPS specified in its Order. If, as
a result of the Auction Procedures, (1) any Existing Holder would be entitled
or required to sell, or any Potential Holder would be entitled or required to
purchase, a fraction of a share, the Auction Agent will, in such manner as in
its sole discretion it will determine, round up or down the number of shares
being sold and purchased on such Auction Date so that the number of shares sold
or purchased by each Existing Holder or Potential Holder will be whole shares
or (2) any Potential Holder would be entitled or required to purchase less than
a whole share, the Auction Agent will, in such manner as in its sole discretion
it will determine, allocate shares of MAPS for purchase among Potential Holders
so that only whole shares are purchased by any such Potential Holder, even if
such allocation results in one or more of such Potential Holders not purchasing
shares of MAPS. Existing Holders that submitted or were deemed to have
submitted Hold Orders will continue to hold the shares of MAPS subject to such
Hold Orders. See "Description of MAPS--Auction Procedures--Acceptance and
Rejection of Submitted Bids and Submitted Sell Orders and Allocation of MAPS."
MASTER PURCHASER'S LETTER
Each prospective purchaser of MAPS of any Series will be required to sign and
deliver a Master Purchaser's Letter to a Broker-Dealer, in which such
prospective purchaser will agree, among other things, that (i) MAPS may be
transferred only pursuant to a Bid or Sell Order placed in an Auction, or to or
through a Broker-Dealer or to a person that has delivered a signed Master
Purchaser's Letter to a Broker-Dealer, provided that in the case of all
transfers other than those pursuant to an Auction, such prospective purchaser,
its Broker-Dealer or its Agent Member promptly advises the Auction Agent of
such transfer, and (ii) such prospective purchaser's ownership of shares of
MAPS of any Series will be maintained in book-entry form by the Securities
Depositary, in the account of such prospective purchaser's Agent Member, which
in turn will maintain records of such prospective purchaser's beneficial
ownership.
EXECUTION OF A MASTER PURCHASER'S LETTER IS NOT A COMMITMENT TO PURCHASE MAPS
OF ANY SERIES IN THE OFFERING MADE BY THIS PROSPECTUS OR IN ANY AUCTION, BUT IS
A CONDITION PRECEDENT TO PURCHASING MAPS OF ANY SERIES.
CERTAIN INCOME TAX CONSEQUENCES
The Company has received an opinion of O'Melveny & Myers, special counsel to
the Company, that the MAPS will constitute equity of the Company and
distributions thereon (other than distributions in redemption of the MAPS
subject to Section 302(b) of the Code) will constitute dividends for federal
income tax purposes to the extent made out of the current or accumulated
earnings and profits of the Company as determined under federal income tax
principles. In the opinion of such counsel, a corporate holder of MAPS, who is
otherwise entitled to the 70% Dividends-Received Deduction permitted by Section
243 of the Code, will be entitled to that deduction with respect to dividends
received on the MAPS. It should be noted that opinions of counsel are not
binding on the IRS or the courts. Thus, it is possible that the IRS might take
a position contrary to the opinion of counsel expressed above and seek to deny
the Dividends-Received Deduction with respect to dividends paid on the MAPS.
Counsel is of the opinion that if the IRS asserted such a position, the IRS
would not prevail in a judicial proceeding in which the issues were properly
presented.
See "Certain Income Tax Consequences" for a more complete description of
counsel's opinion and the income tax consequences of an investment in MAPS.
8
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
The Company is primarily engaged in the acquisition of new and used
commercial jet aircraft and the leasing and sale of such aircraft to domestic
and foreign airlines. The Company, in terms of the number and value of
transactions concluded, is a major owner-lessor of commercial jet aircraft.
Since its formation in 1973, the Company has engaged in over 650 transactions
involving the lease or sale of commercial aircraft to more than 120 airlines.
In addition, the Company is engaged in the remarketing of commercial jets for
airlines and financial institutions. At September 30, 1994, the Company owned
253 aircraft including aircraft owned in joint ventures. At September 30, 1994,
the Company had committed to purchase 220 aircraft deliverable through 1999 at
an estimated aggregate purchase price of $13.0 billion. It also had options to
purchase an additional 43 aircraft deliverable through 1999 at an estimated
aggregate purchase price of $2.6 billion.
The Company is a wholly owned subsidiary of AIG.
The Company is incorporated in the State of California and its principal
executive offices are located at 1999 Avenue of the Stars, 39th Floor, Los
Angeles, California 90067, with telephone and telecopier numbers of (310) 788-
1999 and (310) 788-1990, respectively.
USE OF PROCEEDS
The net proceeds from the sale of the MAPS offered hereby will be
approximately $98,480,000. The Company intends to use the net proceeds to repay
maturing commercial paper. Commercial paper borrowings were used for general
corporate purposes, including working capital and the acquisition of aircraft.
At January 25, 1995, the Company had approximately $1.9 billion of commercial
paper outstanding with a weighted interest rate of approximately 5.99%.
CAPITALIZATION OF THE COMPANY
The following table sets forth the total capitalization of the Company at
September 30, 1994, and as adjusted to give effect to (i) the issuance of the
MAPS and (ii) the application of net proceeds from the issuance of the MAPS as
described above. See "Use of Proceeds." This table should be read in
conjunction with the consolidated financial statements of the Company contained
in the Company's Quarterly Report on Form 10-Q for the period ended September
30, 1994 incorporated herein by reference. See "Incorporation of Certain
Documents by Reference."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt financing...................................... $7,156,089 $7,057,609
Shareholders' equity:
Preferred stock, without par value; authorized:
20,000,000 shares of preferred stock; issued: 500
shares of Series A MAPS, 500 shares of Series B
MAPS, 500 shares of Series C MAPS, and 500 shares
of Series D MAPS, liquidation preference $100,000
per share; (as adjusted: issued 500 Series A
MAPS, 500 Series B MAPS, 500 Series C MAPS, 500
Series D MAPS, 500 Series E MAPS and 500 Series F
MAPS, liquidation preference $100,000 per share). 200,000 300,000
Common stock, without par value; authorized:
100,000,000 shares; issued and outstanding:
35,818,122 shares................................ 3,582 3,582
Additional paid-in capital........................ 532,941 531,421
Retained earnings................................. 810,353 810,353
---------- ----------
Total shareholders' equity...................... 1,546,876 1,645,356
---------- ----------
Total capitalization (including short-term
debt).......................................... $8,702,965 $8,702,965
========== ==========
</TABLE>
9
<PAGE>
SELECTED FINANCIAL DATA
The following table summarizes selected consolidated financial data and
operating information of the Company. The selected consolidated financial data
should be read in conjunction with the Consolidated Financial Statements and
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained in the Company's Annual Report on Form 10-
K for the year ended December 31, 1993 which is incorporated herein by
reference.
<TABLE>
<CAPTION>
13 MONTHS YEAR ENDED NINE MONTHS ENDED
YEAR ENDED ENDED DECEMBER 31, SEPTEMBER 30,
NOVEMBER DECEMBER 31, ---------------------------------- ----------------------
30, 1989 1990 1991 1992 1993 1993 1994
---------- ------------ ---------- ---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Rentals of flight equip-
ment................... $ 249,530 $ 367,649 $ 433,505 $ 628,600 $ 795,437 $ 581,086 $ 723,759
Flight equipment market-
ing.................... 52,962 45,408 38,238 46,845 53,680 12,184 59,531
Interest and other in-
come................... 31,589 53,023 54,968 55,072 62,515 50,029 30,553
Total revenues.......... 334,081 466,080 526,711 730,517 911,632 643,299 813,843
Expenses................ 239,211 343,080 387,011 484,277 633,992 461,683 570,866
Income before income
taxes.................. 94,870 123,000 139,700 246,240 277,640 181,616 242,977
Net income(1)........... 61,164 69,901 89,530 157,749 168,565 107,681 153,418
RATIO OF EARNINGS TO
FIXED CHARGES AND PRE-
FERRED STOCK DIVI-
DENDS(2)............... 1.35x 1.33x 1.44x 1.75x 1.68x 1.59x 1.66x
BALANCE SHEET DATA:
Flight equipment under
operating leases (net
of
accumulated deprecia-
tion).................. $1,909,465 $2,633,627 $3,453,149 $4,759,899 $6,515,837 $6,371,663 $8,351,732
Net investment in fi-
nance and sales-type
leases................. 278,347 260,396 247,936 242,445 290,269 293,217 59,115
Total assets............ 2,580,481 3,523,626 4,563,622 6,079,765 8,139,821 7,616,792 9,774,604
Total debt.............. 1,800,244 2,497,074 3,242,010 4,242,288 5,819,481 5,578,642 7,156,089
Shareholders' equity.... 500,165 632,323 815,208 1,156,195 1,409,181 1,253,428 1,546,876
OTHER DATA:
Aircraft owned at period
end.................... 78 106 132 176 230 224 253
Aircraft sold or
remarketed during the
period................. 9 13 8 7 9 8 28
</TABLE>
- --------
(1) Includes an extraordinary loss of $7,035,000 in 1990.
(2) For the purpose of computing such ratios, "earnings" represents the sum of
net income, provision for income taxes and fixed charges, less capitalized
interest. "Fixed charges" represents interest expense, capitalized interest
and the interest factor of rents under operating leases. "Preferred stock
dividends" represents preferred dividend requirements multiplied by the
ratio which pre-tax income bears to net income.
10
<PAGE>
AMERICAN INTERNATIONAL GROUP, INC.
AIG is a holding company which through its subsidiaries is primarily engaged
in a broad range of insurance and insurance-related activities in the United
States and abroad. AIG's primary activities include both general and life
insurance operations. The principal insurance company subsidiaries of AIG are
American Home Assurance Company, National Union Fire Insurance Company of
Pittsburgh, Pa., New Hampshire Insurance Company, Lexington Insurance Company,
American International Underwriters Overseas, Ltd., American Life Insurance
Company, American International Assurance Company, Limited, The Philippine
American Life Insurance Company, American International Reinsurance Company,
Ltd. and United Guaranty Residential Insurance Company. Other significant
activities of AIG include financial services and insurance agency and service
fee operations. The common stock of AIG is listed on, among others, the New
York Stock Exchange.
THE MAPS ARE NOT OBLIGATIONS OF AIG.
DESCRIPTION OF MAPS
The following description of the terms of the MAPS does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Restated Articles of Incorporation of the Company (the "Articles of
Incorporation"), as the same will be amended prior to the issuance of the MAPS
by the filing of certificates of determination designating and establishing the
voting rights, preferences, limitations and special rights of the MAPS (the
"Designation"), the Auction Agent Agreement and the Broker-Dealer Agreements,
the forms of which will be made available to prospective investors upon
request, and to the Appendices to this Prospectus.
GENERAL
The MAPS of each Series will be preferred shares of the Company entitling the
holders thereof to receive cumulative preferred dividends when, as and if
declared by the Board of Directors of the Company out of funds available
therefor under applicable law and the Articles of Incorporation. No fractional
MAPS will be issued. When issued in the manner described herein, the MAPS will
be fully paid and nonassessable. The MAPS will not be convertible into Common
Stock or other shares of the Company and holders thereof will have no
preemptive rights.
The Company is authorized by the Articles of Incorporation to issue, without
stockholder approval, up to 20,000,000 shares of Preferred Stock, no par value,
in one or more series, with such designations, preferences and other rights and
limitations or restrictions and qualifications as may be fixed by the Board of
Directors in resolutions providing for the issuance of such series. As of the
date of this Prospectus, 500 shares of Market Auction Preferred Stock, Series A
(the "Series A MAPS"), 500 shares of Market Auction Preferred Stock, Series B
(the "Series B MAPS"), 500 shares of Market Auction Preferred Stock, Series C
(the "Series C MAPS") and 500 shares of Market Auction Preferred Stock, Series
D (the "Series D MAPS") are outstanding. The Designation will authorize MAPS
comprised of 500 shares of Series E MAPS and 500 shares of Series F MAPS. The
terms of each Series of MAPS will be set forth in and established by the
Designation.
Each Series of MAPS will be represented by a single certificate issued to The
Depository Trust Company, as Securities Depositary, and registered in the name
of its nominee and, so long as there is a Securities Depositary, no person
acquiring MAPS will be entitled to receive a certificate evidencing such MAPS,
unless otherwise required by law. See "Securities Depositary."
As described in more detail herein, each Series of MAPS may have different
Dividend Payment Dates and Dividend Periods. Separate Auctions will be
conducted for each Series of MAPS, which may occur on different Auction Dates.
These separate Auctions may result in a different Applicable Rate for each
Series of MAPS.
11
<PAGE>
The MAPS will not be subject to any sinking fund but will be subject to
redemption at the option of the Company. MAPS of any Series are redeemable by
the Company at its sole option, in whole or from time to time in part, upon
not less than 15 nor more than 45 days notice on any Dividend Payment Date at
a redemption price of $100,000 per share plus the accumulated but unpaid
dividends (whether or not earned or declared) to the date that the Company
pays the full amount payable upon redemption of such shares. The Company may
elect to redeem all or any portion of any Series of MAPS. In connection with
the selection of a Long Dividend Period, the Company may restrict its ability
to redeem the MAPS of such Series by providing for the payment of a redemption
premium or fixing a period of time during which the MAPS may not be redeemed.
See "Redemption--Optional Redemption."
The Designation permits the Company to establish a Short Dividend Period and
a Long Dividend Period. See "Auction Procedures--Determination of Sufficient
Clearing Bids, Winning Bid Rate and Applicable Rate."
Pursuant to an agreement (the "Auction Agent Agreement") between the Company
and the Auction Agent (initially, Chemical Bank), the Auction Agent will also
be the transfer agent, paying agent, registrar and redemption agent for each
Series of MAPS. See "The Auction Agent."
DIVIDENDS
General. Holders of MAPS shall be entitled to receive, when, as and if
declared by the Board of Directors of the Company, out of funds available
therefor under applicable law and the Articles of Incorporation, cumulative
cash dividends at the Applicable Rate, determined as set forth below, payable
on the respective dates set forth below that may be applicable with respect to
such MAPS. For the Initial Dividend Period, dividends will accumulate at a
rate per annum of 4.80% in the case of Series E MAPS and 4.60% in the case of
Series F MAPS (each, an "Initial Dividend Rate"). For each subsequent Dividend
Period, the dividend rate for each Series of MAPS will be the Applicable Rate,
determined as set forth herein, and will be payable on the respective dates
set forth below.
Dividend Payment Dates. Dividends on the MAPS will accumulate (whether or
not declared) from the date on which the Company originally issues the MAPS
(the "Date of Original Issue"). Dividends on any Series of MAPS with a
Standard Dividend Period will be payable on the Dividend Payment Date for such
Series specified on the cover page of this Prospectus during the Initial
Dividend Period (the "Initial Dividend Payment Date" for such Series) and
thereafter, except as provided below, on (i) each seventh Monday for the
Series E MAPS and (ii) each seventh Tuesday for the Series F MAPS following
the preceding Dividend Payment Date for such Series. Dividends on any Series
of MAPS with a Short Dividend Period will be payable, except as provided
below, on the day following the last day of such Short Dividend Period and
will also be payable on such other dates as are established at the time such
Short Dividend Period is determined. Dividends on any Series of MAPS with a
Long Dividend Period will be payable, except as provided below, on the day
following the last day of such Long Dividend Period and on the first day of
the fourth calendar month after the commencement of such Long Dividend Period
and quarterly thereafter on the first day of each applicable month. Each day
on which dividends on MAPS of each Series would be payable as determined as
set forth in this paragraph but for the adjustments set forth below is
referred to herein as a "Normal Dividend Payment Date."
In the case of dividends payable with respect to a Series of MAPS with a
Standard Dividend Period or a Short Dividend Period, if:
(a)(i) the Securities Depositary shall continue to make available to
Agent Members the amounts due as dividends on the MAPS of such Series in
next-day funds on the dates on which such dividends are payable and (ii) a
Normal Dividend Payment Date is not a Business Day, or the day next
succeeding such Normal Dividend Payment Date is not a Business Day, then
dividends shall be payable on the first Business Day preceding such Normal
Dividend Payment Date that is next succeeded by a Business Day; or
12
<PAGE>
(b)(i) the Securities Depositary shall make available to Agent Members
the amounts due as dividends on MAPS of such Series in immediately
available funds on the dates on which such dividends are payable (and the
Securities Depositary shall have so advised the Auction Agent) and (ii) a
Normal Dividend Payment Date is not a Business Day, then dividends shall be
payable on the first Business Day following such Normal Dividend Payment
Date.
In the case of dividends payable with respect to a Series of MAPS with a Long
Dividend Period, if:
(a)(i) the Securities Depositary shall continue to make available to
Agent Members the amounts due as dividends on the MAPS of such Series in
next-day funds on the dates on which such dividends are payable and (ii) a
Normal Dividend Payment Date is not a Business Day, or the day next
succeeding such Normal Dividend Payment Date is not a Business Day, then
dividends shall be payable on the first Business Day following such Normal
Dividend Payment Date that is next succeeded by a Business Day; or
(b)(i) the Securities Depositary shall make available to Agent Members
the amounts due as dividends on the MAPS of such Series in immediately
available funds on the dates on which such dividends are payable (and the
Securities Depositary shall have so advised the Auction Agent) and (ii) a
Normal Dividend Payment Date is not a Business Day, then dividends shall be
payable on the first Business Day following such Normal Dividend Payment
Date.
Notwithstanding the foregoing, in case of payment in next-day funds, if the
date on which dividends on shares of any Series of MAPS would be payable as
determined as set forth in the preceding paragraphs is a day that would result
in the number of days between successive Auction Dates for such Series
(determined by excluding the first Auction Date and including the second
Auction Date) not being at least equal to the then-current minimum holding
period (currently set forth in Section 246(c) of the Code) (the "Minimum
Holding Period") required for corporate taxpayers to be entitled to the
dividends-received deduction on preferred stock held by nonaffiliated
corporations (currently set forth in Section 243(a) of the Code) (the
"Dividends-Received Deduction"), then dividends on such shares shall be payable
on the first Business Day following such date on which dividends would be so
payable that is next succeeded by a Business Day that results in the number of
days between such successive Auction Dates (determined as set forth above)
being at least equal to the then-current Minimum Holding Period.
Each date on which dividends for each Series of MAPS shall be payable as
determined as set forth above is referred to herein as a "Dividend Payment
Date". If applicable, the period from the preceding Dividend Payment Date to
the next Dividend Payment Date for any Series of MAPS with a Long Dividend
Period is hereby referred to as a "Dividend Quarter." Although any particular
Dividend Payment Date may not occur on the originally scheduled Normal Dividend
Payment Date because of the adjustments set forth above, each succeeding
Dividend Payment Date will be, subject to such adjustments, the date determined
as set forth above as if each preceding Dividend Payment Date had occurred on
the respective originally scheduled Normal Dividend Payment Date.
In addition, notwithstanding the foregoing, in the event of a change in law
altering the Minimum Holding Period, the period of time between Dividend
Payment Dates shall automatically be adjusted so that there shall be a uniform
number of days in subsequent Dividend Periods (such number of days without
giving effect to the adjustment referred to above being referred to herein as
the "Subsequent Dividend Period Days") commencing after the date of such change
in law equal to or to the extent necessary, in excess of the then-current
Minimum Holding Period, provided that the number of Subsequent Dividend Period
Days shall not exceed by more than nine days the length of such then-current
Minimum Holding Period and shall be evenly divisible by seven, and the maximum
number of Subsequent Dividend Period Days, as adjusted pursuant to this
provision, in no event shall exceed 119 days.
In addition, following such change in law, under the Broker-Dealer Agreement
each Broker-Dealer is required to notify each Existing Holder who acquired
shares of any Series of MAPS through such Broker-Dealer and, to the knowledge
of such Broker-Dealer, has not disposed of such shares, at least ten days prior
13
<PAGE>
to both (i) the first day of the first Dividend Period preceding the Dividend
Period for which such change is to be effective and (ii) the first day of the
first Dividend Period for which such change is to be effective, if possible.
Dividend Periods. After the Initial Dividend Period for each Series of MAPS,
each subsequent Dividend Period for such Series will (except for the
adjustments for non-Business Days described above) be 49 days (each such 49-day
period, subject to any adjustment as a result of a change in law altering the
Minimum Holding Period as described above, being herein referred to as a
"Standard Dividend Period"), unless, as described under "Extension of Dividend
Period" below, the Company specifies that any such subsequent Dividend Period
for a particular Series of MAPS will be a Dividend Period of 50 to 364 days and
consisting of a whole number of weeks (a "Short Dividend Period") or a Dividend
Period of one year or longer (a "Long Dividend Period"). Each such Standard
Dividend Period, Short Dividend Period and Long Dividend Period (together with
the periods commencing on the Date of Original Issue and ending on the
respective Initial Dividend Payment Date for each Series (each, an "Initial
Dividend Period")) being referred to herein as a "Dividend Period." After the
Initial Dividend Period for each Series of MAPS, each successive Dividend
Period will commence on the Dividend Payment Date for the preceding Dividend
Period for such Series and will end (i) in the case of a Standard Dividend
Period, on the day preceding the next Dividend Payment Date and (ii) in the
case of a Short Dividend Period or a Long Dividend Period, on the last day of
the Short Dividend Period or the Long Dividend Period specified by the Company
in the related Notice.
Extension of Dividend Period. The Company may give telephonic and written
notice, not less than ten and not more than 30 days prior to an Auction Date,
to the Auction Agent and the Securities Depositary that the next succeeding
Dividend Period will be a Short Dividend Period (a "Notice of Short Dividend
Period") or a Long Dividend Period (a "Notice of Long Dividend Period" and,
together with a Notice of Short Dividend Period, a "Notice"). Each such Notice
will specify (i) the next succeeding Dividend Period as a Short Dividend Period
or a Long Dividend Period, (ii) the term thereof, (iii) in the case of any Long
Dividend Period, additional redemption provisions or restrictions on
redemption, if any, and (iv) the Dividend Payment Dates; provided that, for any
Auction occurring after the initial Auction, the Company may not give a Notice
of a Short Dividend Period or a Notice of a Long Dividend Period (and any such
Notice shall be null and void) unless Sufficient Clearing Bids were made in the
last occurring Auction of any series of Authorized MAPS (or all shares of such
series were subject to Submitted Hold Orders) and full cumulative dividends, if
any, for all series of Authorized MAPS payable prior to such date have been
paid in full. The Board of Directors of the Company may establish a Short
Dividend Period or a Long Dividend Period for any Series of MAPS. Notice may be
revoked by the Company on or prior to the Business Day prior to the related
Auction Date by telephonic and written notice (a "Notice of Revocation") to the
Auction Agent and the Securities Depositary.
If the Company does not give a Notice with respect to the next succeeding
Dividend Period for any Series of MAPS or gives a Notice of Revocation with
respect thereto, such next succeeding Dividend Period will be a Standard
Dividend Period with respect to such Series. In addition, if the Company has
given Notice with respect to the next succeeding Dividend Period for a Series
of MAPS and has not given Notice of Revocation with respect thereto, but
Sufficient Clearing Bids are not made in the related Auction (other than
because all shares of such Series were subject to Submitted Hold Orders) or
such Auction is not held for any reason, such next succeeding Dividend Period
for such Series will, notwithstanding such Notice, be a Standard Dividend
Period and the Company may not again give a Notice (and such Notice shall be
null and void) until Sufficient Clearing Bids have been made in an Auction for
a series of Authorized MAPS or an Auction has been held in which all shares of
a series of Authorized MAPS were subject to Submitted Hold Orders.
The Auction Agent will be required to notify promptly each Broker-Dealer, and
each Broker-Dealer will be required to notify promptly each person that has
purchased MAPS of such Series from or through
14
<PAGE>
such Broker-Dealer and, to the knowledge of such Broker-Dealer, remains an
Existing Holder of MAPS of such Series, as to any Notice or any Notice of
Revocation given by the Company. Holders of MAPS for which a Notice has been
delivered should contact their respective Broker-Dealers for further
information.
Dividend Payments. Prior to each Dividend Payment Date for each Series of
MAPS, the Company is required to deposit with the Auction Agent sufficient
funds for the payment of declared dividends.
Each dividend will be payable to the holder or holders of record of MAPS as
they appear on the stock books of the Company on the Business Day next
preceding the applicable Dividend Payment Date. Dividends in arrears for any
past Dividend Period (and for any past Dividend Quarter during a Long Dividend
Period) may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to the holder or holders of record of MAPS. Any dividend
payment made on any Series shall first be credited against the dividends
accumulated with respect to the earliest Dividend Period (or, if applicable,
the earliest Dividend Quarter) for which dividends have not been paid with
respect to such Series. So long as the MAPS are held of record by the nominee
of the Securities Depositary, dividends will be paid to the nominee of the
Securities Depositary on each Dividend Payment Date. The Securities Depositary
will credit the accounts of the Agent Members of Existing Holders in accordance
with the Securities Depositary's normal procedures, which now provide for
payments in next-day funds settled through the New York Clearing House. The
Agent Member of an Existing Holder will be responsible for holding or
disbursing such payments to Existing Holders in accordance with the
instructions of such Existing Holders. See "Master Purchaser's Letter."
Holders of shares of each Series of MAPS shall not be entitled to any
dividends, whether payable in cash, property or stock, in excess of full
cumulative dividends. No dividends will be declared or paid or set apart for
payment on the shares of any series of Authorized MAPS for any period unless
full cumulative dividends have been or contemporaneously are declared and paid
on all other series of Authorized MAPS through the most recent applicable
Dividend Payment Date for such other series of Authorized MAPS. No interest, or
sum of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on the MAPS which may be in arrears.
So long as any Authorized MAPS are Outstanding, the Company shall not
declare, pay or set aside for payment any dividend or other distribution in
respect of Junior Capital Stock or call for redemption, redeem, purchase or
otherwise acquire for consideration any shares of Junior Capital Stock unless
(a) full cumulative dividends for all past Dividend Periods (and, if
applicable, for all past Dividend Quarters) and all Dividend Payment Dates
occurring on or prior to the date of the transaction shall have been declared
and paid (or declared and a sum sufficient for payment of the dividends set
apart for payment) on all such Authorized MAPS Outstanding and (b) the Company
has redeemed (or set apart for payment a sum sufficient for redemption) the
full number of Authorized MAPS required to be redeemed after giving any notice
of an optional redemption.
The amount of dividends per share of any Series of MAPS payable for each
Dividend Period (or for each Dividend Quarter) shall be computed by multiplying
the Applicable Rate for each Dividend Period (or Dividend Quarter) by a
fraction, the numerator of which shall be the number of days in the Dividend
Period (or Dividend Quarter) (calculated by counting both the last day and the
first day thereof) such share was Outstanding, and the denominator of which
shall be 360 and multiplying the amount so obtained by $100,000.
"Business Day" means a day on which the New York Stock Exchange is open for
trading and which is not a Saturday, Sunday or other day on which banks in New
York City are authorized or obligated by law to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock, whether outstanding on the Date of Original Issue or
thereafter.
15
<PAGE>
"Junior Capital Stock" means, with respect to the Company, any and all
Capital Stock of the Company ranking junior to the MAPS with respect to the
payment of dividends or the distribution of assets upon liquidation.
"Parity Capital Stock" means any and all shares of Capital Stock of the
Company ranking on a parity with or equal to the MAPS as to the payment of
dividends and distribution of assets.
Determination of Dividend Rate. The Initial Dividend Rate for each Series of
MAPS during the period from and after the Date of Original Issue to the Initial
Dividend Payment Date will be the respective rates per annum set forth on the
cover page of this Prospectus, and the dividend rate for each subsequent
Dividend Period for each Series of MAPS will be, except as provided below, a
rate per annum (the "Applicable Rate") that results from the next preceding
Auction. See "Auction Procedures--Determination of Sufficient Clearing Bids,
Winning Bid Rate and Applicable Rate."
Notwithstanding the results of any Auction or the application of any of the
provisions of the Designation, the dividend rate on each Series of MAPS shall
not exceed the Maximum Applicable Rate for any Dividend Period. See "Auction
Procedures--Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate." The provisions of the immediately preceding sentence
notwithstanding, at any time that the application of the provisions of the next
paragraph would result in a dividend rate on the MAPS being in excess of the
Maximum Applicable Rate, the maximum dividend rate applicable to such Series of
MAPS shall be such higher dividend rate as provided below.
In the event of the failure by the Company to pay to the Auction Agent by
12:00 noon, New York City time, (i) on the Business Day next preceding any
Dividend Payment Date, the full amount of any dividend (whether or not earned
or declared) to be paid on such Dividend Payment Date on any Series of MAPS or
(ii) on the Business Day next preceding any redemption date, the full
redemption price (including accumulated and unpaid dividends) to be paid on
such redemption date for any share of any Series of MAPS (in each case referred
to as a "Failure to Deposit"), then, until the full amount due shall have been
paid to the Auction Agent, Auctions will be suspended and the Applicable Rate
for such Series shall be the Default Rate as determined as of the Business Day
preceding the Failure to Deposit. If such Failure to Deposit is cured within
three Business Days as provided below, the Applicable Rate for the Dividend
Period commencing on the second Business Day following such cure will be based
upon the results of an Auction to be held on the Business Day next succeeding
such cure for such Series. Unless such a cure is effected, the Default Rate
shall continue in effect until there shall occur a Dividend Payment Date at
least two Business Days prior to which the full amount of any dividends
(whether or not earned or declared) payable on each Dividend Payment Date prior
to and including such Dividend Payment Date, and the full amount of any
redemption price (including accumulated and unpaid dividends) then due, shall
have been paid to the Auction Agent, and thereupon Auctions shall resume on the
terms stated herein for Dividend Periods commencing with such Dividend Payment
Date. If an Auction is not held on an Auction Date for any reason (other than
because of a suspension of Auctions due to a Failure to Deposit), the dividend
rate for the applicable Dividend Period shall be the Maximum Applicable Rate
determined as of such Auction Date.
Any Failure to Deposit with respect to any Series of MAPS shall be deemed to
be cured if, within three Business Days of such Failure to Deposit, with
respect to a Failure to Deposit relating to (a) the payment of dividends on
such Series of MAPS, the Company deposits with the Auction Agent by 12:00 noon,
New York City time, all accumulated and unpaid dividends on such Series of
MAPS, including the full amount of any dividends to be paid with respect to the
Dividend Period with respect to which the Failure to Deposit occurred, plus an
amount computed by multiplying the Default Rate by a fraction, the numerator of
which shall be the number of days during the period from the Dividend Payment
Date in respect of which such Failure to Deposit occurred through the day
preceding the Business Day next succeeding the Auction held following such cure
and the denominator of which shall be 360, and applying the rate obtained
against the
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<PAGE>
aggregate liquidation preference of such Series of MAPS and (b) the redemption
of shares of MAPS of any Series, the deposit by the Company with the Auction
Agent, by 12:00 noon, New York City time, of funds sufficient for the
redemption of such shares (including accumulated and unpaid dividends), plus an
amount computed by multiplying the Default Rate by a fraction, the numerator of
which shall be the number of days for which such Failure to Deposit is not
cured in accordance with this paragraph (including the day such Failure to
Deposit occurs and excluding the day such Failure to Deposit is cured) and the
denominator of which shall be 360, and applying the rate obtained against the
aggregate liquidation preference of the shares of MAPS in such Series to be
redeemed, and the giving of irrevocable instructions by the Company to apply
such funds and, if applicable, the income and proceeds therefrom, to the
payment of the redemption price (including accumulated and unpaid dividends)
for such shares of the MAPS. If the Company shall have cured such Failure to
Deposit by making timely payment to the Auction Agent, the Auction Agent will
give telephonic and written notice of such cure to each Existing Holder of MAPS
at the telephone number and address specified in such Existing Holder's Master
Purchaser's Letter and to each Broker-Dealer as promptly as practicable after
such cure is effected and schedule an Auction for such Series for the next
Business Day.
Certain Restrictions on Dividends. Pursuant to certain covenants contained in
certain of the Company's bank loan agreements and indentures, the Company is
restricted to paying dividends in an amount which does not exceed 50% of its
cumulative net income from various dates. In addition, in certain agreements,
the Company is prohibited from paying dividends during the pendancy of an
"event of default."
REDEMPTION
Optional Redemption. At the option of the Company, the shares of any Series
of MAPS may be redeemed, in whole or from time to time in part, out of funds
legally available therefor, on any Dividend Payment Date for such Series of
MAPS, upon at least 15 but not more than 45 days' notice, at a redemption price
per share equal to the sum of $100,000 plus an amount equal to accumulated and
unpaid dividends thereon (whether or not earned or declared) to the date that
the Company pays the full amount payable upon redemption of such shares. The
Company may only redeem MAPS of each Series in whole shares. Pursuant to such
right of optional redemption, the Company may elect to redeem some or all of
the shares of a series of Authorized MAPS without redeeming shares of any other
series of Authorized MAPS.
In connection with the selection of a Long Dividend Period, the Company may
restrict its ability to redeem the MAPS of such Series by providing for the
payment of a redemption premium or fixing a period of time during which the
MAPS may not be redeemed.
Redemption Procedures. If MAPS are to be redeemed, the Auction Agent will, at
the direction of the Company, cause to be sent, by first-class or air mail
(postage prepaid) or facsimile, a notice of redemption to each holder of record
(initially Cede & Co., as nominee of the Securities Depositary) and Existing
Holder of MAPS to be redeemed. Such notice of redemption shall be sent not
fewer than 15 nor more than 45 days prior to the redemption date. Each notice
of redemption will state (a) the redemption date, (b) the redemption price, (c)
the number of shares of MAPS and the Series thereof to be redeemed and (d) the
CUSIP number of such shares to be redeemed. The notice of redemption will also
be published once in The Wall Street Journal.
No defect in the notice of redemption or in the mailing thereof will affect
the validity of the redemption proceedings, except as required by applicable
law. A notice of redemption will be deemed given on the day that it is mailed
and published in accordance with the foregoing description.
The Company may elect to redeem some or all of the shares of each Series of
MAPS. So long as the Securities Depositary or its nominee is the record holder
of all of the shares of MAPS to be redeemed, the Auction Agent will give notice
to the Securities Depositary, and the Securities Depositary will determine the
number of shares of each such Series to be redeemed from the account of the
Agent Member of each Existing Holder. An Agent Member may determine to redeem
shares of MAPS from some Existing Holders (which may include an Agent Member
holding shares of a Series for its own account) without redeeming shares of
17
<PAGE>
MAPS from the accounts of other Existing Holders. Any such redemption will be
made in accordance with applicable laws and rules. If the Securities
Depositary's nominee is not the record holder of all the shares of MAPS to be
redeemed, the particular shares of MAPS to be redeemed shall be selected by the
Company or, at the Company's request, the Auction Agent by lot or by such other
method as such Person shall deem fair and equitable.
Upon any date fixed for redemption (unless a Failure to Deposit occurs), all
rights of the holders of shares of MAPS of the Series called for redemption
will cease and terminate, except the right of such holders to receive the
amounts payable in respect of such redemption therefor, but without interest,
and such shares of MAPS will be deemed no longer Outstanding.
So long as all of the shares of MAPS of any Series to be redeemed are held of
record by a nominee of the Securities Depositary, the redemption price
(including accumulated and unpaid dividends) for such shares of MAPS will be
paid to the Securities Depositary on the redemption date for distribution to
Agent Members in accordance with its normal procedures. Such Agent Members
will, in turn, distribute such funds to the persons for whom they are acting as
agents.
LIQUIDATION PREFERENCE
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, holders of the MAPS will be entitled
to receive, out of the assets of the Company available for distribution to
shareholders after satisfying claims of creditors but before any payment or
distribution of assets is made to holders of Junior Capital Stock, a
preferential liquidation distribution in the amount of the issue price of such
share (i.e., $100,000 per share of MAPS) plus an amount equal to accumulated
and unpaid dividends on each such share (whether or not declared) to and
including the date of such distribution. If upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the assets of the
Company are insufficient to pay the holders of the MAPS the full amount of the
preferential liquidation distributions to which they are entitled, holders of
MAPS will share ratably in any such distribution of such assets with holders of
Parity Capital Stock. Unless and until payment in full has been made to holders
of MAPS of the liquidation distributions to which they are entitled as
described in this paragraph, no dividends or distributions will be made to
holders of the Company's Junior Capital Stock, and no purchase, redemption or
other acquisition for any consideration by the Company will be made in respect
of the Company's Junior Capital Stock. After the payment to the holders of the
MAPS of the full amount of the preferential liquidation distributions to which
they are entitled pursuant to this paragraph, such holders (in their capacity
as such holders) will have no right or claim to any of the remaining assets of
the Company. A consolidation or merger of the Company with or into any other
corporation or corporations, or a sale or transfer of all or substantially all
of the assets of the Company, will not be deemed to be a liquidation,
dissolution or winding up of the Company.
VOTING RIGHTS
Holders of MAPS will have no voting rights except as hereinafter described or
as expressly required by law.
During any period when dividends on the MAPS or any other Parity Capital
Stock of the Company which have voting rights comparable to the MAPS which are
then exercisable (the MAPS and all such other securities being referred to as
the "Parity Securities") shall be in arrears for at least 180 consecutive days
and shall not have been paid in full (a "Default Period"), the holders of
record of the Parity Securities voting as described below will be entitled to
elect two directors to the Board of Directors (the "Additional Directors")
whether or not the Board of Directors of the Company has taken appropriate
action to increase the established number of directors of the Company by two,
and the holders of the Common Stock as a class, shall be entitled to elect the
remaining number of directors. If the Board of Directors has not taken
appropriate action to authorize an increase in the number of directors by two
and there are not two vacancies
18
<PAGE>
then existing on the Board of Directors, then, upon the election of the two
Additional Directors as provided below, the term of all previously sitting
directors shall cease (a "Termination of Directors").
As soon as practicable after the beginning of a Default Period (or a
reinstatement of the voting rights of holders of Parity Securities as provided
herein), the Board of Directors of the Company will call or cause to be called
a special meeting of the holders of Parity Securities and, in the case of a
Termination of Directors, all holders of Capital Stock of the Company entitled
to vote for the election of directors generally ("Other Voting Securities"), by
mailing or causing to be mailed to such holders a notice of such special
meeting to be held not less than ten and not more than 45 days after the date
such notice is given. If the Board of Directors of the Company does not call or
cause to be called such a special meeting, it may be called by any of such
holders on like notice. The record date for determining the holders of the
Parity Securities and, if applicable, Other Voting Securities entitled to
notice of and to vote at such special meeting will be the close of business on
the Business Day preceding the day on which such notice is mailed. At any such
special meeting, the holders of Parity Securities, by plurality vote, voting
together as a single class without regard to series (to the exclusion of the
holders of Junior Capital Stock) will be entitled to elect the two Additional
Directors on the basis of one vote per $100,000 liquidation preference
(excluding amounts in respect of accumulated and unpaid dividends) and, in the
case of a Termination of Directors, the holders of Other Voting Securities
shall be entitled to elect the remaining members of the Board of Directors in
the same manner as if such election had occurred at an annual meeting of the
Company. The holder or holders of one-third of the Parity Securities then
outstanding, present in person or by proxy, will constitute a quorum for the
election of the Additional Directors except as otherwise provided by law.
Notice of all meetings at which holders of MAPS shall be entitled to vote will
be given to such holders at their addresses as they appear on the register of
the Company. If a Default Period shall terminate after the notice of a special
meeting has been given but before such special meeting has been held, the
Company shall, as soon as practicable after such termination, mail or cause to
be mailed notice of such termination to holders of the Parity Securities and,
if applicable, Other Voting Securities that would have been entitled to vote at
such special meeting.
So long as a Default Period continues, (i) any vacancy in the office of an
Additional Director may be filled (except as provided in the following clause
(ii)) by the person appointed in an instrument in writing signed by the
remaining Additional Director and filed with the Secretary of the Company or,
in the event there is no remaining Additional Director, by vote of the holders
of the outstanding Parity Securities, voting together as a single class without
regard to series, in a meeting of shareholders or at a meeting of holders of
Parity Securities called for such purpose, and (ii) in the case of the removal
of any Additional Director, the vacancy may be filled by appointment by the
person elected by the vote of the holders of the outstanding Parity Securities,
voting together as a single class without regard to series, at the same meeting
at which such removal shall be voted upon or any subsequent meeting. Each
director who shall be elected or appointed by the remaining Additional Director
as aforesaid shall be an Additional Director.
At such time as a Default Period shall terminate, (i) the term of office of
the Additional Directors shall terminate and (ii) the voting rights of the
holders of the Parity Securities to elect directors shall cease (subject to the
occurrence of a subsequent Default Period).
PRIORITY
Except as provided in the following paragraph, so long as any MAPS remain
Outstanding, the Company shall not, without the consent of the holders of at
least two-thirds of all of the Authorized MAPS then Outstanding, given in
person or by proxy, either in writing or at a meeting (voting separately as a
single class), (i) authorize, create or issue, or increase the authorized
amount of, any Capital Stock of the Company of any class ranking, as to
dividends or upon the liquidation, dissolution or winding up of the Company,
prior to the MAPS, or reclassify any authorized Capital Stock of the Company
into any such Capital Stock, or authorize, create or issue any obligation or
security convertible into or evidencing the right to purchase any such Capital
Stock, or (ii) amend, alter or repeal the provisions of the Company's Articles
of
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<PAGE>
Incorporation, whether by merger, consolidation, share exchange, division or
otherwise, so as to adversely affect any preference, limitation or special
right of the MAPS.
Except as provided by law, the consent of the holders of MAPS is not required
and such holders are not entitled to vote upon (i) the authorization, creation,
issuance or increase in the authorized amount of the Common Stock, additional
series of Authorized MAPS or any Capital Stock of the Company of any class
ranking, as to dividends and upon the liquidation, dissolution or winding up of
the Company, on a parity with or junior to the MAPS, or (ii) any merger,
consolidation, share exchange or division of the Company (or any successor
corporation) with or into another corporation, the result of which is that the
MAPS that may be Outstanding from time to time may be junior to any preferred
shares of such corporation as to dividends and upon the liquidation,
dissolution or winding up of the surviving corporation, if on or prior to the
date of effectiveness of such merger or consolidation, the Company shall have
given Moody's and S&P written notice of such merger or consolidation and
Moody's and S&P shall have confirmed in writing that the transaction will not
adversely affect the then existing rating for the MAPS. If either Moody's or
S&P shall change its rating categories for preferred stock, then the
determination of whether the transaction will not adversely affect the then
existing rating for the MAPS shall be made based upon the substantially
equivalent new rating categories for preferred stock of such rating agency. If
either Moody's or S&P, or both, shall not make a rating available for the MAPS
necessary to make such a determination or will not confirm whether the
transaction will adversely affect its then existing rating for the MAPS, such
confirmation will be sought from two substitute rating agencies if they have
made ratings available for the MAPS necessary to make the determination and are
willing to make such confirmation or, in the event that only one such rating
agency shall make such ratings available and is willing to make such
confirmation, based upon such rating agency's confirmation.
THE AUCTION
The Applicable Rate for each Series of MAPS for each Dividend Period after
the Initial Dividend Period will be equal to the rate per annum that the
Auction Agent advises the Company has resulted on the Auction Date from the
implementation with respect to such Series, of the auction procedures described
below and in Appendix B to this Prospectus (the "Auction Procedures"), pursuant
to which Persons determine to hold or offer to purchase or sell shares of MAPS
of such Series. Each periodic implementation of the Auction Procedures is
referred to as an "Auction." The Securities Depositary (or its nominee) will be
the holder of record of all MAPS. See "Securities Depositary."
AUCTION PROCEDURES
The following is a brief summary of the procedures to be used in conducting
Auctions as described in the Auction Procedures set forth in Appendix B hereto.
This summary is qualified by reference to the Auction Procedures. The
settlement procedures to be used with respect to Auctions are set forth in
Appendix A hereto.
Auction Dates. An Auction with respect to MAPS of each Series will be held on
the first Business Day preceding the first day of each Dividend Period (except
for the Initial Dividend Period) to determine the Applicable Rate for such
Series for such Dividend Period (the date of each Auction being referred to
herein as an "Auction Date").
So long as the Company does not exercise its right to select a Short Dividend
Period or a Long Dividend Period, each Auction for MAPS of a Series will
normally be held on the same day of the week, and each Dividend Period for such
Series will normally commence on the same day of the week (which also will be a
Dividend Payment Date). The Auction Date and the first day of the related
Dividend Period (both of which must be Business Days) need not be consecutive
calendar days. For example, in most cases, if a Friday that otherwise would be
an Auction Date is not a Business Day, then such Auction Date will be the
preceding Thursday and the first day of the related Dividend Period will
continue to be the following Monday. See "Dividends" for information concerning
the circumstances in which (i) the Auction Date or the first day of a
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<PAGE>
Dividend Period, or both, may be moved to a different date and (ii) the Company
may increase or decrease the length of a Dividend Period prior to the
commencement thereof.
Orders by Existing Holders and Potential Holders. Prior to the Submission
Deadline on each Auction Date for the applicable Series of MAPS:
(a) each Existing Holder may submit to a Broker-Dealer its:
(i) Hold Order--indicating the number of Outstanding shares of MAPS,
if any, that such Existing Holder desires to continue to hold without
regard to the Applicable Rate for the next succeeding Dividend Period;
(ii) Bid--indicating the number of Outstanding shares of MAPS, if
any, that such Existing Holder desires to sell, provided that the
Applicable Rate for the next succeeding Dividend Period is less than
the rate per annum specified by such Existing Holder; and/or
(iii) Sell Order--indicating the number of Outstanding shares of
MAPS, if any, that such Existing Holder desires to sell without regard
to the Applicable Rate for the next succeeding Dividend Period; and
(b) Broker-Dealers will contact Existing Holders and Potential Holders
(the term Potential Holder includes an Existing Holder with respect to an
offer by such Existing Holder to purchase additional shares of MAPS) by
telephone or otherwise to notify such Existing Holders and Potential
Holders as to the length of the next Dividend Period and, (i) with respect
to any Short Dividend Period or Long Dividend Period, the Dividend Payment
Date(s), and (ii) with respect to any Long Dividend Period, any dates
before which shares of MAPS may not be redeemed and any redemption premium
applicable in an optional redemption, and to determine the number of
Outstanding shares of MAPS, if any, with respect to which each such
Existing Holder desires to submit an Order and each such Potential Holder
desires to submit a Bid.
The communication to a Broker-Dealer by an Existing Holder or by a Potential
Holder of the information referred to in paragraphs (a) and (b) above is
hereafter referred to an "Order." An Existing Holder or a Potential Holder
placing an Order is herein referred to as a "Bidder."
The Master Purchaser's Letter to be signed by each Existing Holder and each
Potential Holder provides that (a) a Sell Order placed by an Existing Holder
will constitute an irrevocable offer to sell the shares of MAPS subject
thereto, (b) a Bid placed by an Existing Holder will constitute an irrevocable
offer to sell the shares of MAPS subject thereto if the rate specified in such
Bid is greater than the Applicable Rate determined in the Auction and (c) a Bid
placed by a Potential Holder will constitute an irrevocable offer to purchase
the shares of MAPS subject thereto if the rate specified in such Bid is less
than or equal to the Applicable Rate determined in the Auction. An Existing
Holder may submit different types of Orders in an Auction with respect to
different shares of MAPS then held by such Existing Holder. An Existing Holder
that offers to purchase additional shares of MAPS is, for purposes of such
offer, treated as a Potential Holder. Any Bid specifying a rate higher than the
Maximum Applicable Rate on the Auction Date will (a) be treated as a Sell Order
if submitted by an Existing Holder and (b) not be considered if submitted by a
Potential Holder. The number of shares of MAPS purchased or sold may be subject
to proration procedures.
Each purchase or sale of MAPS will be settled on the first Business Day
following the Auction Date at a price per share equal to $100,000. See
"Notification of Results and Settlement."
If one or more Orders covering all of the shares held by any Existing Holder
are not submitted to the Auction Agent prior to the Submission Deadline for any
reason, including the failure of a Broker-Dealer to submit such Existing
Holder's Order to the Auction Agent in a timely manner, the Auction Agent will
deem a Hold Order to have been submitted on behalf of such Existing Holder
covering the number of shares of MAPS held by such Existing Holder and not
subject to Orders submitted to the Auction Agent.
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<PAGE>
Submission of Orders by Broker-Dealers to Auction Agent. Prior to 1:00 P.M.,
New York City time, on each Auction Date, or such other time on the Auction
Date specified by the Auction Agent (the "Submission Deadline"), each Broker-
Dealer will submit to the Auction Agent in writing all Orders obtained by it
for the Auction to be conducted on such Auction Date (each such Hold Order, Bid
or Sell Order as submitted or deemed submitted by a Broker-Dealer being herein
referred to as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell
Order," as the case may be, or as a "Submitted Order"). If any rate specified
in any Submitted Bid contains more than three figures to the right of the
decimal point, the Auction Agent will round such rate up to the next highest
one-thousandth (.001) of 1%.
If any Existing Holder submits through a Broker-Dealer to the Auction Agent
one or more Orders covering in the aggregate more than the number of
Outstanding shares of the applicable Series of MAPS held by such Existing
Holder, such Orders will be considered valid in the following order of
priority:
(a) any Submitted Hold Order of such Existing Holder will be considered
valid up to and including the number of Outstanding shares of MAPS held by
such Existing Holder, provided that, if there is more than one such
Submitted Hold Order and the aggregate number of shares of MAPS subject to
such Submitted Hold Orders exceeds the number of Outstanding shares of MAPS
held by such Existing Holder, the number of shares of MAPS subject to each
such Submitted Hold Order will be reduced pro rata so that such Submitted
Hold Orders in the aggregate will cover exactly the number of Outstanding
shares of MAPS held by such Existing Holder;
(b) any Submitted Bid of such Existing Holder will be considered valid
(in the ascending order of their respective rates per annum if there is
more than one Submitted Bid of such Existing Holder) for the number of
Outstanding shares of MAPS held by such Existing Holder equal to the
difference between (i) the number of Outstanding shares of MAPS held by
such Existing Holder and (ii) the number of Outstanding shares of MAPS
subject to any Submitted Hold Order of such Existing Holder referred to in
clause (a) above (and, if more than one Submitted Bid of such Existing
Holder specifies the same rate per annum and together they cover more than
the remaining number of shares of MAPS that can be the subject of valid
Submitted Bids of such Existing Holder after application of clause (a)
above and of the foregoing portion of this clause (b) to any Submitted Bid
or Submitted Bids of such Existing Holder specifying a lower rate or rates
per annum, the number of shares of MAPS subject to each of such Submitted
Bids specifying the same rate per annum will be reduced pro rata so that
such Submitted Bids, in the aggregate, cover exactly such remaining number
of Outstanding shares of MAPS of such Existing Holder); and
(c) any Submitted Sell Order of such Existing Holder will be considered
valid up to and including the excess of the number of Outstanding shares of
MAPS held by such Existing Holder over the sum of the number of shares of
MAPS subject to valid Submitted Hold Orders by such Existing Holder
referred to in clause (a) and the number of shares of MAPS subject to valid
Submitted Bids by such Existing Holder referred to in clause (b) above;
provided that, if there is more than one Submitted Sell Order of such
Existing Holder and the number of shares of MAPS subject to such Submitted
Sell Orders is greater than such excess, the number of shares of MAPS
subject to each of such Submitted Sell Orders will be reduced pro rata so
that such Submitted Sell Orders, in the aggregate, will cover exactly the
number of shares of MAPS equal to such excess.
If more than one Bid is submitted on behalf of any Potential Holder, each Bid
submitted will be a separate Bid with respect to the rate per annum and number
of shares of MAPS therein specified.
Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable
Rate. Not earlier than the Submission Deadline, the Auction Agent will assemble
all Submitted Orders and will determine the excess of the total number of
Outstanding shares of MAPS over the number of shares of MAPS subject to
Submitted Hold Orders (such excess being herein referred to as the "Available
Shares of MAPS") and whether Sufficient Clearing Bids have been made in the
Auction. "Sufficient Clearing Bids" will have been made if the number of
Outstanding shares of MAPS that are the subject of Submitted Bids by Potential
Holders specifying rates
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<PAGE>
not higher than the Maximum Applicable Rate equals or exceeds the number of
Outstanding shares of MAPS that are the subject of Submitted Sell Orders
(including the number of Outstanding shares of MAPS subject to Submitted Bids
by Existing Holders specifying rates higher than the Maximum Applicable Rate).
If Sufficient Clearing Bids have been made, the Auction Agent will determine
the lowest rate specified in the Submitted Bids (the "Winning Bid Rate") which
would result in Existing Holders continuing to hold (pursuant to Submitted
Bids) an aggregate number of shares of MAPS which, when added to the number of
Outstanding shares of MAPS to be purchased by Potential Holders, based on the
rates in their Submitted Bids, would equal not less than the number of
Available Shares of MAPS. In such event, the Winning Bid Rate will be the
Applicable Rate for the next Dividend Period for all MAPS of such Series.
Subject to the matters described above under "Dividends--Determination of
Dividend Rate," if Sufficient Clearing Bids have not been made (other than
because all of the Outstanding shares of MAPS are subject to Submitted Hold
Orders), the next succeeding Dividend Period will be a Standard Dividend Period
and the Applicable Rate for the next Dividend Period for all shares of MAPS of
such Series will be equal to the Maximum Applicable Rate for a Standard
Dividend Period determined as of the Business Day immediately preceding such
Auction. If Sufficient Clearing Bids have not been made, Existing Holders that
have submitted Sell Orders will not be able to sell in the Auction all, and may
not be able to sell any, shares of MAPS subject to such Submitted Sell Orders.
See "Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of MAPS" below.
The Maximum Applicable Rate on any Auction Date shall be the rate obtained by
multiplying the Applicable Determining Rate on such date by the percentage
determined as set forth below based on the lower of the credit ratings assigned
to the MAPS by Moody's and S&P.
<TABLE>
<CAPTION>
APPLICABLE
PERCENTAGE
CREDIT RATINGS OF APPLICABLE
----------------------------------------- DETERMINING
MOODY'S S&P RATE
---------------- ------------ -------------
<S> <C> <C>
"aa3" or Above AA- or Above 150%
"a3" to "a1" A- to A+ 200%
"baa3" to "baa1" BBB- to BBB+ 225%
Below "baa3" Below BBB- 275%
</TABLE>
The Company will take all reasonable action necessary to enable S&P and
Moody's to provide ratings for the MAPS. If either S&P or Moody's does not make
such a rating available, or neither S&P nor Moody's make such a rating
available, the Company will designate a rating agency or rating agencies as a
substitute rating agency or substitute rating agencies, as the case may be,
subject to the approval by Morgan Stanley & Co. Incorporated ("Morgan Stanley")
and Lehman Brothers Inc. ("Lehman Brothers"), such approval not to be
unreasonably withheld, and the Company will take all reasonable action to
enable such rating agency or rating agencies to provide a rating or ratings for
the MAPS.
The Applicable Determining Rate with respect to MAPS with a Standard Dividend
Period or a Short Dividend Period of 183 days or less is the Applicable "AA"
Composite Commercial Paper Rate; with respect to MAPS with a Short Dividend
Period of 184 to 364 days, it is the Applicable Treasury Bill Rate; and with
respect to MAPS with a Long Dividend Period, it is the Applicable Treasury Note
Rate.
"Applicable 'AA' Composite Commercial Paper Rate," on any date, shall mean in
the case of any Standard Dividend Period or Short Dividend Period of (1) 49
days or more but less than 70 days, the interest equivalent of the 60-day rate,
(2) 70 days or more but less than 85 days, the arithmetic average of the
interest equivalent of the 60-day and 90-day rates, (3) 85 days or more but
less than 120 days, the interest equivalent of the 90-day rate, (4) 120 days or
more but less than 148 days, the arithmetic average of the interest
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<PAGE>
equivalent of the 90-day and 180-day rates, and (5) 148 days or more but less
than 184 days, the interest equivalent of the 180-day rate, in each case, on
commercial paper placed on behalf of issuers whose corporate bonds are rated
"AA" by S&P or "Aa" by Moody's, or the equivalent of such rating by another
rating agency, as made available on a discount basis or otherwise by the
Federal Reserve Bank of New York for the Business Day immediately preceding
such date. In the event that the Federal Reserve Bank of New York does not make
available any of the foregoing rates, then such rates shall be the 60-day rate
or arithmetic average of such rates, as the case may be, as quoted on a
discount basis or otherwise, by Morgan Stanley and Lehman Brothers, or, in lieu
thereof, their respective affiliates or successors (collectively, the
"Commercial Paper Dealers") to the Auction Agent as of the close of business on
the Business Day next preceding such date. If any Commercial Paper Dealer does
not quote a rate required to determine the Applicable "AA" Composite Commercial
Paper Rate, the Applicable "AA" Composite Commercial Paper Rate shall be
determined on the basis of the quotation or quotations furnished by the
remaining Commercial Paper Dealer (if any) and any Substitute Commercial Paper
Dealer or Substitute Commercial Paper Dealers selected by the Company to
provide such rate or rates or, if the Company does not select any Substitute
Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the
remaining Commercial Paper Dealer (if any). "Substitute Commercial Paper
Dealer" means Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated or Salomon Brothers Inc or their respective affiliates or
successors or, if no such dealer furnishes such quotations, a leading dealer in
the commercial paper market selected by the Company in good faith. For purposes
of this definition, the "interest equivalent" means the equivalent yield on a
360-day basis of a discount-basis security to an interest-bearing security.
"Applicable Treasury Bill Rate" for any Short Dividend Period in excess of
183 days and "Applicable Treasury Note Rate" for any Long Dividend Period, on
any date, shall mean the interest equivalent of the rate for direct obligations
of the United States Treasury having an original maturity which is equal to, or
next lower than, the length of such Short Dividend Period or Long Dividend
Period, as the case may be, as published weekly by the Board of Governors of
the Federal Reserve System (the "Board") in "Federal Reserve Statistical
Release H.15(519)-Selected Interest Rates," or any successor publication by the
Board, within five Business Days preceding such date. In the event that the
Board does not publish such rate, or if such release is not available, the
Applicable Treasury Bill Rate or Applicable Treasury Note Rate will be the
arithmetic mean of the secondary market bid rate as of approximately 3:30 P.M.,
New York City time, on the Business Day next preceding such date of Morgan
Stanley and Lehman Brothers, or, in lieu thereof, their respective affiliates
or successors (collectively, the "U.S. Government Securities Dealers")
furnished to the Auction Agent for the issue of direct obligations of the
United States Treasury, in an aggregate principal amount of at least $1,000,000
with a remaining maturity equal to, or next lower than, the length of such
Short Dividend Period or Long Dividend Period, as the case may be. If any U.S.
Government Securities Dealer does not quote a rate required to determine the
Applicable Treasury Bill Rate or Applicable Treasury Note Rate, the Applicable
Treasury Bill Rate or Applicable Treasury Note Rate shall be determined on the
basis of the quotation or quotations furnished by the remaining U.S. Government
Securities Dealer (if any) or any Substitute U.S. Government Securities Dealer
or Dealers selected by the Company to provide such rate or rates or, if the
Company does not select any such Substitute U.S. Government Securities Dealer
or Dealers, by the remaining U.S. Government Securities Dealer (if any).
"Substitute U.S. Government Securities Dealers" means Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated or Salomon Brothers Inc or
their respective affiliates or successors or, if no such dealer provides such
quotes, a leading dealer in the government securities market selected by the
Company in good faith. For purposes of this definition, the "interest
equivalent" of a rate stated on a discount basis shall be equal to the quotient
of (A) the discount rate divided by (B) the difference between 1.00 and the
discount rate.
If all of the Outstanding shares of MAPS of any Series are subject to
Submitted Hold Orders, the Applicable Rate for the next Dividend Period will be
59% of the Applicable "AA" Composite Commercial Paper Rate, if the next
Dividend Period for such Series of MAPS is a Standard Dividend Period or a
Short Dividend Period of 183 days or less; or 59% of the Applicable Treasury
Bill Rate, if the next Dividend Period
24
<PAGE>
for such Series of MAPS is a Short Dividend Period of 184 days to 364 days; or
59% of the Applicable Treasury Note Rate, if the next Dividend Period for such
Series of MAPS is a Long Dividend Period, in each case as in effect on the
related Auction Date.
Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of MAPS. Based on the determinations made as described under
"Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable
Rate" above and subject to the discretion of the Auction Agent to round as
described below, Submitted Bids and Submitted Sell Orders will be accepted or
rejected in the order of priority set forth in the Auction Procedures, with the
result that Existing Holders and Potential Holders of shares of MAPS will sell,
continue to hold or purchase shares of MAPS as set forth below. Existing
Holders that submitted or were deemed to have submitted Hold Orders will
continue to hold the shares of MAPS subject to such Hold Orders.
If Sufficient Clearing Bids have been made:
(a) Each Existing Holder that placed a Submitted Sell Order or a
Submitted Bid specifying any rate higher than the Winning Bid Rate will
sell the Outstanding shares of MAPS subject to such Submitted Sell Order or
Submitted Bid;
(b) Each Existing Holder that placed a Submitted Bid specifying a rate
lower than the Winning Bid Rate will continue to hold the Outstanding
shares of MAPS subject to such Submitted Bid;
(c) Each Potential Holder that placed a Submitted Bid specifying a rate
lower than the Winning Bid Rate will purchase the number of Outstanding
shares of MAPS subject to such Submitted Bid;
(d) Each Existing Holder that placed a Submitted Bid specifying a rate
equal to the Winning Bid Rate will continue to hold the shares of MAPS
subject to such Submitted Bid, unless the number of Outstanding shares of
MAPS subject to all such Submitted Bids of Existing Holders is greater than
the excess of the Available Shares of MAPS over the number of shares of
MAPS accounted for in clauses (b) and (c) above, in which event each
Existing Holder with such a Submitted Bid will sell a number of Outstanding
shares of MAPS subject to such Submitted Bid determined on a pro rata basis
based on the number of Outstanding shares of MAPS subject to all such
Submitted Bids by Existing Holders; and
(e) Each Potential Holder that placed a Submitted Bid specifying a rate
equal to the Winning Bid Rate will purchase any Available Shares of MAPS
not accounted for in clause (b), (c) or (d) above on a pro rata basis based
on the Outstanding shares of MAPS subject to all such Submitted Bids of
Potential Holders.
If Sufficient Clearing Bids have not been made (unless as a result of all of
the Outstanding shares of MAPS being subject to Submitted Hold Orders in an
Auction):
(a) Each Existing Holder that placed a Submitted Bid specifying a rate
equal to or lower than the Maximum Applicable Rate will continue to hold
the Outstanding shares of MAPS subject to such Submitted Bid;
(b) Each Potential Holder that placed a Submitted Bid specifying a rate
equal to or lower than the Maximum Applicable Rate will purchase the number
of Outstanding shares of MAPS subject to such Submitted Bid; and
(c) Each Existing Holder that placed a Submitted Bid specifying a rate
higher than the Maximum Applicable Rate or a Submitted Sell Order will sell
only such number of shares of MAPS, determined on a pro rata basis based on
the number of Outstanding shares of MAPS subject to all such Submitted Bids
and Submitted Sell Orders, as are needed to be purchased pursuant to (b)
above.
If, as a result of the Auction Procedures, (1) any Existing Holder would be
entitled or required to sell, or any Potential Holder would be entitled or
required to purchase, a fraction of a share, the Auction Agent will, in such
manner as in its sole discretion it will determine, round up or down the number
of shares being sold and purchased on such Auction Date so that the number of
shares sold or purchased by each Existing Holder or Potential Holder will be
whole shares or (2) any Potential Holder would be entitled or required to
purchase less than a whole share, the Auction Agent will, in such manner as in
its sole discretion it will
25
<PAGE>
determine, allocate shares of MAPS for purchase among Potential Holders so that
only whole shares are purchased by any such Potential Holder, even if such
allocation results in one or more of such Potential Holders not purchasing
shares of MAPS.
Notification of Results and Settlement. The Auction Agent will advise each
Broker-Dealer that submitted an Order of the duration of and Applicable Rate
for the next Dividend Period and, if such Order was a Bid or Sell Order,
whether such Bid or Sell Order was accepted or rejected, in whole or in part,
by telephone by 3:00 P.M., New York City time, on each Auction Date. Each such
Broker-Dealer will then (i) advise each Bidder represented by it of the
Applicable Rate for the next Dividend Period and, if such Bidder's Order was a
Bid or a Sell Order, whether such Bid or Sell Order was accepted or rejected in
whole or in part; (ii) confirm purchases and sales with each such Bidder
purchasing or selling shares of MAPS as a result of the Auction; and (iii)
advise each such Bidder purchasing or selling shares of MAPS as a result of the
Auction to give instructions to its Agent Member of the Securities Depositary
to pay the purchase price against delivery of such MAPS or to deliver such MAPS
against payment therefor, as appropriate. If an Existing Holder selling shares
of MAPS as a result of an Auction shall fail to instruct its Agent Member to
deliver such shares of MAPS, the Broker-Dealer that submitted such Existing
Holder's Bid or Sell Order will instruct such Agent Member to deliver such
shares of MAPS against payment therefor. Each Broker-Dealer that submitted a
Hold Order in an Auction on behalf of an Existing Holder will also advise such
Existing Holder of the Applicable Rate for the next Dividend Period. The
Auction Agent will record each transfer of shares of MAPS on the registry of
Existing Holders to be maintained by the Auction Agent.
In accordance with the Securities Depositary's normal procedures, on the
Business Day after the Auction Date, the transactions described above will be
executed through the Securities Depositary and the accounts of the respective
Agent Members at the Securities Depositary will be debited and credited and
shares of MAPS delivered as necessary to effect the purchases and sale of MAPS
as determined in the Auction. Purchasers will make payment through their Agent
Members in same-day funds to the Securities Depositary against delivery to
their Agent Members, and the Securities Depositary will make payment in
accordance with its normal procedures. If any Existing Holder selling shares of
MAPS in an Auction fails to deliver such shares (by authorized book-entry), the
Broker-Dealer of any person that was to have purchased such shares in such
Auction may deliver to such person a number of whole shares that is less than
the number of shares that otherwise was to be purchased by such person. In such
event, the number of shares of MAPS to be so delivered will be determined by
such Broker-Dealer in its sole discretion. Delivery of such lesser number of
shares of MAPS will constitute good delivery. Notwithstanding the foregoing,
any delivery or non-delivery of shares of MAPS that shall represent any
departure from the results of an Auction, as determined by the Auction Agent,
shall be of no effect unless and until the Auction Agent shall be notified of
such delivery or non-delivery in accordance with the provisions of the Auction
Agent Agreement and the Broker-Dealer Agreements. Any payment by a Broker-
Dealer for shares of MAPS purchased on behalf of a purchaser will not relieve
the purchaser of any liability to such Broker-Dealer for payment for such
shares of MAPS. Each Broker-Dealer Agreement will provide that neither the
Auction Agent nor the Broker-Dealer party thereto (in its capacity as Broker-
Dealer) will have any responsibility or liability with respect to the failure
of a Potential Holder, Existing Holder or an Agent Member to pay for shares of
MAPS or to deliver shares of MAPS purchased or sold in an Auction or otherwise,
nor shall the Company have any such responsibility or liability, or any other
responsibility or liability under such agreement to the Auction Agent or any
Existing Holder, Potential Holder or Broker-Dealer.
Participation by the Company. Neither the Company nor any of its affiliates
may submit any Order in any Auction except as set forth in the next sentence.
Any Broker-Dealer that is an affiliate of the Company may submit Orders in
Auctions but only if such Orders are not for its own account, except that if
such affiliate Broker-Dealer holds shares of MAPS for its own account, it must
submit a Sell Order in the next Auction with respect to such shares of MAPS.
THE AUCTION AGENT
The Auction Agent, initially Chemical Bank (the "Auction Agent"), has agreed
to act as agent for the Company in connection with Auctions and as transfer
agent, paying agent, registrar and redemption agent.
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<PAGE>
In the absence of bad faith or negligence on its part, the Auction Agent will
not be liable for any action taken, suffered or omitted or for any error of
judgment made by it in the performance of its duties under the
Auction Agent Agreement and will not be liable for any error of judgment made
reasonably and in good faith unless the Auction Agent has been negligent in
ascertaining (or failing to ascertain) the pertinent facts. The Company has
agreed to indemnify the Auction Agent with respect to certain liabilities
incurred by the Auction Agent without negligence or bad faith on its part in
connection with its provision of services under the Auction Agent Agreement.
The Auction Agent Agreement provides that the Company may remove the Auction
Agent at any time. The Auction Agent may resign as Auction Agent upon prior
notice to the Company on any date that is no earlier than the earlier of the
first Business Day after the last to occur of the second Dividend Payment Date
after such notice with respect to each Series of MAPS Outstanding or six months
after delivery of such notice. Upon receipt of a notice of resignation from the
Auction Agent, the Company will use its best efforts to enter into an agreement
with a successor Auction Agent containing substantially the same terms and
conditions as the Auction Agent Agreement. No resignation by the Auction Agent
or termination by the Company will be effective until the Company has entered
into such an agreement with a successor Auction Agent and such successor
Auction Agent has entered into agreements with the Broker-Dealers.
BROKER-DEALERS
Each Auction requires the participation of one or more broker-dealers. The
Auction Agent will initially enter into agreements with Morgan Stanley and
Lehman Special Securities Inc. providing for such broker-dealer's participation
in Auctions. After Morgan Stanley and Lehman Special Securities Inc. determine
that Auctions for each Series of MAPS have been stabilized (which stabilization
is expected to occur after three Auctions of MAPS), the Auction Agent may enter
into similar agreements with one or more additional broker-dealers selected by
the Company which provide for the participation of such broker-dealers in
Auctions. Morgan Stanley, Lehman Government Securities Inc., and any such
additional broker-dealers are herein referred to collectively as "Broker-
Dealers," and the agreements pursuant to which Broker-Dealers participate in
Auctions are herein referred to collectively as "Broker-Dealer Agreements."
After each Auction with respect to a Standard Dividend Period and a Short
Dividend Period, the Auction Agent will pay a service charge to each Broker-
Dealer at the annual rate of .25% of the purchase price of shares of MAPS
placed by such Broker-Dealer at such Auction. After each Auction with respect
to a Long Dividend Period, the Auction Agent will pay a service charge to each
Broker-Dealer at the annual rate of such percentage of the purchase price of
shares of MAPS placed by such Broker-Dealer at such Auction as the Company and
such Broker-Dealers may agree at the time the Company establishes such Long
Dividend Period. For the purposes of the two preceding sentences, shares of
MAPS will have been "placed" by a Broker-Dealer if such shares of MAPS were (i)
the subject of Hold Orders deemed to have been made by Existing Holders and
were acquired by such Existing Holders through such Broker-Dealer (unless such
Existing Holder has transferred such shares of MAPS to another Person other
than pursuant to an Auction and such transfer was to or effected by a Broker-
Dealer other than such Broker-Dealer) or (ii) the subject of the following
Orders submitted by such Broker-Dealer: (A) a Submitted Bid of an Existing
Holder that resulted in such Existing Holder continuing to hold such shares of
MAPS as a result of the Auction, (B) a Submitted Bid of a Potential Holder that
resulted in such Potential Holder purchasing such shares of MAPS as a result of
the Auction, (C) a Submitted Hold Order or (D) a Submitted Sell Order of an
Existing Holder that was rejected.
The Broker-Dealer Agreements provide that a Broker-Dealer that signs a Master
Purchaser's Letter may submit Orders in Auctions for its own account, unless
the Company notifies all Broker-Dealers that they may no longer do so, in which
case Broker-Dealers may continue to submit Hold Orders and Sell Orders for
their own accounts. Investors should consider the fact that if a Broker-Dealer
submits an Order for its own account in any Auction, it might have an advantage
over other Bidders because it would have knowledge of Orders placed through it
in that Auction, but that such Broker-Dealer, however, would not have knowledge
of Orders submitted by other Broker-Dealers in that Auction. The Broker-Dealer
Agreements provide for
27
<PAGE>
each Broker-Dealer to handle customer orders in accordance with applicable
securities statutes and rules. The Auction Agent may request the Broker-Dealer
to provide a list of its customers that are Existing Holders, which information
(as well as any other information received as to the identity of Bidders in any
Auction) the Auction Agent will keep confidential, except that it may provide
such information to the Company upon request for the Company's confidential
use.
MASTER PURCHASER'S LETTER
As a condition to purchasing shares of any series of Authorized MAPS and as a
condition to participating in any Auction, each prospective purchaser of
Authorized MAPS will be required to sign and deliver to a Broker-Dealer a
Master Purchaser's Letter in substantially the form attached to this Prospectus
as Appendix C. In the Master Purchaser's Letter each such prospective purchaser
will agree, among other things:
(i) to sell, transfer or otherwise dispose of shares of Authorized MAPS
only pursuant to a Bid or a Sell Order in an Auction, or to or through a
Broker-Dealer or to a person that has delivered a signed Master Purchaser's
Letter to a Broker-Dealer, provided that, in the case of all transfers
other than those pursuant to an Auction, such prospective purchaser, its
Broker-Dealer or its Agent Member promptly advises the Auction Agent of
such transfer;
(ii) that any Bid or Sell Order placed by such purchaser will constitute
an irrevocable offer to purchase or sell the shares of the series of
Authorized MAPS subject to such Bid or Sell Order, or such lesser number of
shares of the series of Authorized MAPS as such purchaser will be required
to purchase or sell, respectively, as a result of such Auction; and that a
failure by such purchaser or its Broker-Dealer to place a Bid or Sell Order
with respect to any shares of any series of Authorized MAPS owned by such
purchaser will be deemed to constitute a Hold Order with respect to such
shares; and
(iii) that it understands and agrees that (A) the ownership of the shares
of any series of Authorized MAPS as to which such purchaser is the Existing
Holder will be maintained in book-entry form by the Securities Depositary,
in the account of such purchaser's Agent Member, which in turn will
maintain records of such purchaser's ownership, (B) such Agent Member is
authorized to disclose to the Auction Agent such information with respect
to such purchaser's beneficial ownership as the Auction Agent shall request
and (C) so long as there is a Securities Depositary or unless otherwise
required by law, such purchaser will not be entitled to receive
certificates evidencing shares of any series of Authorized MAPS.
An execution copy of the Master Purchaser's Letter is included inside the
back cover of this Prospectus. EXECUTION OF A MASTER PURCHASER'S LETTER IS NOT
A COMMITMENT TO PURCHASE SHARES OF ANY SERIES OF AUTHORIZED MAPS IN THE
OFFERING BEING MADE BY THIS PROSPECTUS OR IN ANY AUCTION, BUT IS A CONDITION
PRECEDENT TO PURCHASING SHARES OF ANY SERIES OF AUTHORIZED MAPS.
The Auction Agent may rely upon, as evidence of the identities of the
Existing Holders, a list of the initial owners of shares of any series of
Authorized MAPS provided by the Company, the results of Auctions and notices
from the Broker-Dealers with respect to an Existing Holder's transfer of shares
of any series of Authorized MAPS to another person. The Auction Agent will be
required to register a transfer of shares of any series of Authorized MAPS from
an Existing Holder to another person only if such transfer is made to a person
that has delivered a signed Master Purchaser's Letter to a Broker-Dealer and if
(a) such transfer is pursuant to an Auction or (b) the Auction Agent has been
notified in writing (i) by the Broker-Dealer of such Existing Holder of such
transfer or (ii) by the Broker-Dealer of any person that purchased or sold such
shares in an Auction of the failure of such shares to be transferred as a
result of the Auction. The Auction Agent is not required to accept any such
notice of transfer prior to an Auction with respect to such shares unless it is
received by the Auction Agent by 3:00 P.M., New York City time, on the Business
Day immediately preceding the related Auction Date.
SECURITIES DEPOSITARY
Each Series of MAPS will be represented by a single certificate issued to the
Securities Depositary and registered in the name of its nominee. So long as
there is a Securities Depositary, each Series of MAPS will
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<PAGE>
be represented by a single certificate registered in the name of the Securities
Depositary or its nominee, and no Existing Holder or other person acquiring
MAPS will be entitled to receive a certificate evidencing such MAPS unless
otherwise required by law. Payment and communications made by the Company to
holders of the MAPS will be duly made by making payments to, and communicating
with, the Securities Depositary. Accordingly, each purchaser of MAPS must rely
on (i) the procedures of the Securities Depositary and, if such purchaser is
not a member of the Securities Depositary, such purchaser's Agent Member to
receive dividends, distributions and notices, and to direct the exercise of any
limited voting or nominating rights, with respect to such MAPS, and (ii) the
records of the Securities Depositary and, if such purchaser is not a member of
the Securities Depositary, of such purchaser's Agent Member to evidence its
ownership of such MAPS.
So long as the Securities Depositary (or its nominee) is the sole holder of
record of the MAPS, no Existing Holder will, as a matter of California law, be
deemed to be a shareholder of the Company.
The Depository Trust Company, the initial Securities Depositary, is a New
York-chartered limited purpose trust company that performs services for its
participants (including Agent Members), some of whom (and/or their
representatives) own The Depository Trust Company. The Depository Trust Company
maintains lists of its participants and will maintain the positions (ownership
interests) held by each Agent Member in MAPS, whether as an Existing Holder for
its own account or as a nominee for another Existing Holder.
CERTAIN INCOME TAX CONSEQUENCES
FEDERAL INCOME TAXES
This discussion of the material federal income tax consequences of an
investment in MAPS and the opinions of counsel referred to herein are based
upon the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Regulations promulgated thereunder, and judicial or
administrative interpretations thereof, all as in effect on the date of this
Prospectus. Future legislative, regulatory, judicial or administrative changes
could significantly modify the conclusions expressed below and could affect the
tax consequences to holders of MAPS, possibly with retroactive effect. The
Company will not request any rulings from the Internal Revenue Service (the
"IRS") concerning the federal income tax consequences of an investment in the
MAPS.
In the opinion of O'Melveny & Myers, special counsel to the Company, the MAPS
will constitute equity of the Company and distributions thereon (other than
distributions in redemption of the MAPS subject to Section 302(b) of the Code)
will constitute dividends for federal income tax purposes to the extent made
out of the current or accumulated earnings and profits of the Company as
determined under federal income tax principles. In the opinion of such counsel,
a corporate holder of MAPS, who is otherwise entitled to the 70% Dividends-
Received Deduction permitted by Section 243 of the Code, will be entitled to
that deduction with respect to dividends received on the MAPS.
It should be noted that opinions of counsel are not binding on the IRS or the
courts and it is possible that the IRS might take a position contrary to the
opinions of counsel expressed above and seek to deny the Dividends-Received
Deduction with respect to dividends paid on the MAPS. Counsel is of the opinion
that if the IRS asserted such a position, the IRS would not prevail in a
judicial proceeding in which the issues were properly presented. In particular,
prospective purchasers of MAPS should be aware that, in Revenue Ruling 90-27,
the IRS ruled that preferred stock with terms similar in many respects to those
of the MAPS was equity for federal income tax purposes. In that ruling,
however, the IRS suggested that it may seek to disallow the Dividends-Received
Deduction with respect to dividends paid on preferred stock that provides
holders with rights that result in a diminution of risk and that are of a type
usually associated with debt.
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<PAGE>
In determining their entitlement to the Dividends-Received Deduction,
corporate holders should consider the holding period and other requirements of
Section 246(c) of the Code, the "debt-financed portfolio stock" rules of
Section 246A of the Code (under which the Dividends-Received Deduction could be
reduced to the extent that a holder incurs indebtedness directly attributable
to its investment in MAPS), and Section 1059 of the Code (which, under certain
circumstances, reduces the tax basis of stock by the portion of any
"extraordinary dividend" that is eligible for the Dividends-Received
Deduction), as well as any judicial or administrative interpretations of such
Code provisions. In particular, Section 246(c) of the Code disallows the
Dividends-Received Deduction in its entirety if the stock with respect to which
the dividend is paid is not held for a minimum holding period (generally 46
days), or the holder of such stock is obligated to make related payments with
respect to a position in substantially similar or related property. Section
246(c)(4) of the Code provides that a holder may not count towards the minimum
holding period any period during which the holder (1) has an option to sell, is
under a contractual obligation to sell or has made (and not closed) a short
sale of, substantially identical stock or securities, (2) is the grantor of an
option (other than a qualified covered call) to buy substantially identical
stock or securities or (3) has diminished its risk of loss by holding one or
more other positions with respect to substantially similar or related property.
In addition, corporate holders should be aware that dividend income that is not
subject to regular corporate taxation as a consequence of the Dividends-
Received Deduction may give rise to alternative minimum tax liability.
To the extent that distributions on MAPS exceed the earnings and profits of
the Company, such distributions will not qualify for the Dividends-Received
Deduction. Instead they will be treated as a return of capital and reduce the
holder's adjusted basis in its MAPS. Such reduction in basis will increase any
gain, or reduce any loss, realized by the holder on any subsequent sale,
redemption or other disposition of its MAPS. Any such distribution in excess of
a holder's adjusted basis in its MAPS will be treated as taxable gain, which
generally will be capital gain if the MAPS are held as a capital asset.
Although no assurance can be given, the Company expects to have earnings and
profits sufficient for the payment of dividends.
The Company may, at its option, redeem the MAPS. Gain or loss resulting from
a sale or redemption of MAPS generally will be taxed as capital gain or loss,
provided that the shares of MAPS are held as capital assets. Any portion of the
redemption price that is attributable to accumulated but unpaid dividends will
only be eligible for the Dividends-Received Deduction to the extent such
portion is designated as declared but unpaid dividends. If such portion is not
so designated, it will be treated as additional redemption proceeds, which may
result in an investor recognizing additional gain or a smaller loss on the
redemption.
STATE AND LOCAL INCOME TAXES
Holders of MAPS may be liable for state and local income taxes with respect
to dividends paid on the MAPS. Because many states and localities may not allow
a dividend-received deduction, each prospective purchaser of MAPS is advised to
consult its own tax advisor concerning state and local taxes.
EACH PROSPECTIVE PURCHASER OF MAPS IS ADVISED TO CONSULT ITS OWN TAX ADVISOR
REGARDING THE CONSEQUENCES OF ACQUIRING, HOLDING OR DISPOSING OF MAPS IN LIGHT
OF CURRENT TAX LAWS, THE PROSPECTIVE HOLDER'S PARTICULAR INVESTMENT
CIRCUMSTANCES, AND THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS.
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UNDERWRITERS
Under the terms of and subject to the conditions contained in an Underwriting
Agreement dated January 25, 1995, the Underwriters named below have severally
agreed to purchase, and the Company has agreed to sell to each Underwriter,
severally, the respective number of shares of MAPS set forth opposite their
respective names below:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OF SHARES OF
NAME SERIES E SERIES F
---- --------- ---------
<S> <C> <C>
Morgan Stanley & Co. Incorporated..................... 250 250
Lehman Brothers Inc. ................................. 250 250
--- ---
Total............................................. 500 500
=== ===
</TABLE>
The Underwriting Agreement provides that the several obligations of the
Underwriters are subject to the approval of certain legal matters by counsel
and to certain other conditions including the condition that no stop order
suspending the effectiveness of the Registration Statement is in effect and no
proceedings for such purpose are pending before or threatened by the
Commission. The nature of the Underwriters' obligation is such that they are
committed to take and pay for all of the MAPS if any are taken.
In the Underwriting Agreement, the Company has agreed to indemnify the
Underwriters against certain civil liabilities, including liabilities under the
Securities Act of 1933, as amended, and to afford the Underwriters certain
rights of contribution.
The several Underwriters propose to offer part of the MAPS directly to the
public at the public offering price set forth on the cover page hereof and part
to certain dealers at a price that represents a concession not in excess of
$900 per share.
The Company does not intend to apply for listing of the MAPS on a national
securities exchange, but has been advised by the Underwriters that they
currently intend to make a market in the MAPS, as permitted by applicable laws
and regulations. The Underwriters are not obligated, however, to make a market
in the MAPS and any such market making as to any Series may be discontinued at
any time at the sole discretion of the Underwriters. Accordingly, no assurance
can be given as to the liquidity of, or trading markets for, the MAPS.
Each Underwriter has agreed with the Company that it will sell MAPS only to a
person who agrees to execute and deliver a Master Purchaser's Letter in
accordance with the terms of this Prospectus or to a selected dealer who has
agreed with the Underwriters that it will (i) execute and deliver a Master
Purchaser's Letter in accordance with the terms of this Prospectus and (ii)
sell MAPS only to such a person or to another such selected dealer. Each
Underwriter will also agree with the Company that it will execute and deliver a
Master Purchaser's Letter in accordance with the terms of the Prospectus.
Morgan Stanley and Lehman Government Securities Inc., an affiliate of Lehman
Brothers Inc., will act in Auctions as Broker-Dealers as set forth under
"Description of MAPS--Broker-Dealers." Morgan Stanley and Lehman Brothers may
provide information to be used in ascertaining the Applicable "AA" Composite
Commercial Paper Rate, the Applicable Treasury Bill Rate and the Applicable
Treasury Note Rate as set forth under "Description of MAPS--The Auction--
Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable
Rate." Each of Morgan Stanley and Lehman Brothers has performed various other
investment banking and other financial services for the Company and its
affiliates.
31
<PAGE>
EXPERTS
The consolidated financial statements of International Lease Finance
Corporation and subsidiaries appearing in International Lease Finance
Corporation's Annual Report (Form 10-K) for the year ended December 31, 1993,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
The validity of the issuance of the MAPS offered hereby is being passed upon
for the Company by O'Melveny & Myers. Milbank, Tweed, Hadley & McCloy, Los
Angeles, California will pass upon certain legal matters for the Underwriters.
Certain tax matters will be passed upon for the Company by O'Melveny & Myers.
32
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
TERMS PAGE
- ----- -----
<S> <C>
Additional Directors...................................................... 18
AIG....................................................................... 4
Applicable "AA" Composite Commercial Paper Rate........................... 23
Applicable Determining Rate............................................... B-1
Applicable Rate........................................................... 16
Applicable Treasury Bill Rate............................................. 24
Applicable Treasury Note Rate............................................. 24
Articles of Incorporation................................................. 11
Auction................................................................... 20
Auction Agent............................................................. 26
Auction Agent Agreement................................................... 12
Auction Date.............................................................. 20
Auction Procedures........................................................ 20
Authorized MAPS........................................................... 5
Available Shares of MAPS.................................................. 22
Bidder.................................................................... 21
Board..................................................................... 24
Broker-Dealers............................................................ 27
Broker-Dealer Agreements.................................................. 27
Business Day.............................................................. 15
Capital Stock............................................................. 15
Code...................................................................... 29
Commercial Paper Dealers.................................................. 24
Commission................................................................ 2
Company................................................................... 2
Date of Original Issue.................................................... 12
Default Period............................................................ 18
Default Rate.............................................................. 6
Designation............................................................... 11
Dividend Payment Date..................................................... 13
Dividend Period........................................................... 14
Dividend Quarter.......................................................... 13
Dividends-Received Deduction.............................................. 13
Exchange Act.............................................................. 2
Existing Holder........................................................... 7
Failure to Deposit........................................................ 6, 16
Initial Dividend Payment Date............................................. 12
Initial Dividend Period................................................... 14
Initial Dividend Rate..................................................... 12
IRS....................................................................... 29
Junior Capital Stock...................................................... 16
Lehman Brothers........................................................... 23
Long Dividend Period...................................................... 14
MAPS...................................................................... 1
Master Purchaser's Letter................................................. 28
Maximum Applicable Rate................................................... 1
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
TERMS PAGE
- ----- -----
<S> <C>
Minimum Holding Period............................................................... 13
Moody's.............................................................................. 5
Morgan Stanley....................................................................... 23
Normal Dividend Payment Date......................................................... 12
Notice............................................................................... 14
Notice of Long Dividend Period....................................................... 14
Notice of Revocation................................................................. 14
Notice of Short Dividend Period...................................................... 14
Order................................................................................ 21
Outstanding.......................................................................... B-2
Parity Capital Stock................................................................. 16
Parity Securities.................................................................... 18
Potential Holder..................................................................... 7
Registration Statement............................................................... 2
S&P.................................................................................. 5
Securities Act....................................................................... 2
Securities Depositary................................................................ 28
Series............................................................................... 4
Series A MAPS........................................................................ 11
Series B MAPS........................................................................ 11
Series C MAPS........................................................................ 11
Series D MAPS........................................................................ 11
Series E............................................................................. 4
Series F............................................................................. 4
Short Dividend Period................................................................ 14
Standard Dividend Period............................................................. 14
Submission Deadline.................................................................. 22
Submitted Bid........................................................................ 22
Submitted Hold Order................................................................. 22
Submitted Sell Order................................................................. 22
Submitted Order...................................................................... 22
Subsequent Dividend Period Days...................................................... 13
Substitute Commercial Paper Dealer................................................... 24
Substitute U.S. Government Securities Dealers........................................ 24
Sufficient Clearing Bids............................................................. 22
U.S. Government Securities Dealers................................................... 24
Winning Bid Rate..................................................................... 7, 23
</TABLE>
34
<PAGE>
APPENDIX A
SETTLEMENT PROCEDURES
The following summary of Settlement Procedures sets forth the procedures
expected to be followed in connection with the settlement of each Auction and
will be incorporated by reference in the Auction Agent Agreement and each
Broker-Dealer Agreement. Nothing contained in this Appendix A constitutes a
representation by the Company that in each Auction each party referred to
herein will actually perform the procedures described herein to be performed by
such party. Capitalized terms used herein shall have the respective meanings
specified in the forepart of this Prospectus or Appendix B hereto, as the case
may be.
(a) On each Auction Date with respect to each Series of MAPS, the Auction
Agent shall notify by telephone or telecopy the Broker-Dealers that
participated in the Auction on such Auction Date and submitted an Order on
behalf of any Existing Holder or Potential Holder of:
(i) the Applicable Rate fixed for the next succeeding Dividend Period
and, with respect to any Short Dividend Period or Long Dividend Period,
the Dividend Payment Dates therefor;
(ii) whether Sufficient Clearing Bids existed for the determination
of the Applicable Rate;
(iii) if such Broker-Dealer (a "Seller's Broker-Dealer") submitted a
Bid or a Sell Order on behalf of an Existing Holder, the number of
shares of MAPS, if any, to be sold by such Existing Holder;
(iv) if such Broker-Dealer (a "Buyer's Broker-Dealer") submitted a
Bid on behalf of a Potential Holder, the number of shares of MAPS, if
any, to be purchased by such Potential Holder;
(v) if the aggregate number of shares of MAPS to be sold by all
Existing Holders on whose behalf such Broker-Dealer submitted a Bid or
a Sell Order exceeds the aggregate number of shares of MAPS to be
purchased by all Potential Holders on whose behalf such Broker-Dealer
submitted a Bid, the name or names of one or more Buyer's Broker-
Dealers (and the name of the Agent Member, if any, of each such Buyer's
Broker-Dealer) acting for one or more purchasers of such excess number
of shares of MAPS and the number of such shares to be purchased from
one or more Existing Holders on whose behalf such Broker-Dealer acted
by one or more Potential Holders on whose behalf each of such Buyer's
Broker-Dealers acted;
(vi) if the aggregate number of shares of MAPS to be purchased by all
Potential Holders on whose behalf such Broker-Dealer submitted a Bid
exceeds the aggregate number of shares of MAPS to be sold by all
Existing Holders on whose behalf such Broker-Dealer submitted a Bid or
a Sell Order, the name or names of one or more Seller's Broker-Dealers
(and the name of the Agent Member, if any, of each such Seller's
Broker-Dealer) acting for one or more sellers of such excess number of
shares of MAPS and the number of such shares to be sold to one or more
Potential Holders on whose behalf such Broker-Dealer acted by one or
more Existing Holders on whose behalf each of such Seller's Broker-
Dealers acted; and
(vii) the Auction Date of the next succeeding Auction with respect to
the MAPS.
(b) On each Auction Date with respect to each Series of MAPS, each
Broker-Dealer that submitted an Order on behalf of any Existing Holder or
Potential Holder shall:
(i) in the case of a Broker-Dealer that is a Buyer's Broker-Dealer,
instruct each Potential Holder on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, to instruct
such Potential Holder's Agent Member to pay in same-day funds to such
Broker Dealer (or its Agent Member) through the Securities Depositary
the amount necessary to purchase the number of shares of MAPS to be
purchased pursuant to such Bid against receipt of such shares and
advise such Potential Holder of the Applicable Rate for the next
succeeding Dividend Period;
(ii) in the case of a Broker-Dealer that is a Seller's Broker-Dealer,
instruct each Existing Holder on whose behalf such Broker-Dealer
submitted a Sell Order that was accepted, in whole or in part,
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<PAGE>
or a Bid that was rejected, in whole or in part, to instruct such
Existing Holder's Agent Member to deliver to such Broker-Dealer (or its
Agent Member) through the Securities Depositary the number of shares of
MAPS to be sold pursuant to such Order against payment therefor and
advise any such Existing Holder that will continue to hold shares of
MAPS of the Applicable Rate for the next succeeding Dividend Period;
(iii) advise each Existing Holder on whose behalf such Broker-Dealer
submitted a Hold Order of the Applicable Rate for the next succeeding
Dividend Period;
(iv) advise each Existing Holder on whose behalf such Broker-Dealer
submitted an Order of the Auction Date for the next succeeding Auction;
and
(v) advise each Potential Holder on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, of the Auction
Date for the next succeeding Auction.
(c) On the basis of the information provided to it pursuant to (a) above,
each Broker-Dealer that submitted a Bid or a Sell Order on behalf of a
Potential Holder or an Existing Holder shall, in such manner and at such
time or times as in its sole discretion it may determine, allocate any
funds received by it pursuant to (b)(i) above and any shares of MAPS
received by it pursuant to (b)(ii) above among the Potential Holders, if
any, on whose behalf such Broker-Dealer submitted Bids, the Existing
Holders, if any, on whose behalf such Broker-Dealer submitted Bids that
were accepted or Sell Orders, and any Broker-Dealer or Broker-Dealers
identified to it by the Auction Agent pursuant to (a)(v) or (a)(vi) above.
(d) On each Auction Date:
(i) each Potential Holder and Existing Holder shall instruct its
Agent Member as provided in (b)(i) or (b)(ii) above, as the case may
be;
(ii) each Seller's Broker-Dealer that is not an Agent Member of the
Securities Depositary shall instruct its Agent Member to (A) pay
through the Securities Depositary to the Agent Member of the Existing
Holder delivering shares of MAPS to such Broker-Dealer pursuant to
(b)(ii) above the amount necessary to purchase such shares against
receipt of such shares, and (B) deliver such shares through the
Securities Depositary to a Buyer's Broker-Dealer (or its Agent Member)
identified to such Seller's Broker-Dealer pursuant to (a)(v) above
against payment therefor; and
(iii) each Buyer's Broker-Dealer that is not an Agent Member of the
Securities Depositary shall instruct its Agent Member to (A) pay
through the Securities Depositary to a Seller's Broker-Dealer (or its
Agent Member) identified pursuant to (a)(vi) above the amount necessary
to purchase the shares of MAPS to be purchased pursuant to (b)(i) above
against receipt of such shares, and (B) deliver such shares of MAPS
through the Securities Depositary to the Agent Member of the purchaser
thereof against payment therefor.
(e) On the Business Day next succeeding the Auction Date:
(i) each Agent Member referred to in (d)(i) above shall instruct the
Securities Depositary to execute the transactions described under
(b)(i) or (b)(ii) above, and the Securities Depositary shall execute
such transactions;
(ii) each Seller's Broker-Dealer or its Agent Member shall instruct
the Securities Depositary to execute the transactions described in
(d)(ii) above, and the Securities Depositary shall execute such
transactions; and
(iii) each Buyer's Broker-Dealer or its Agent Member shall instruct
the Securities Depositary to execute the transactions described in
(d)(iii) above, and the Securities Depositary shall execute such
transactions.
(f) If an Existing Holder selling shares of MAPS in an Auction fails to
deliver such shares (by authorized book-entry), a Broker-Dealer may deliver
to the Potential Holder on behalf of which it submitted a Bid that was
accepted a number of whole shares that is less than the number of shares
that otherwise was to be purchased by such Potential Holder. In such event,
the number of shares of MAPS
A-2
<PAGE>
to be so delivered shall be determined by such Broker-Dealer in its sole
discretion. Delivery of such lesser number of shares shall constitute good
delivery. Notwithstanding the foregoing terms of this subsection (f), any
delivery or non-delivery of shares of MAPS that shall represent any
departure from the results of an Auction, as determined by the Auction
Agent, shall be of no effect unless and until the Auction Agent shall have
been notified of such delivery or non-delivery in accordance with the
provisions of the Auction Agent Agreement and the Broker-Dealer Agreements.
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<PAGE>
APPENDIX B
AUCTION PROCEDURES
The following procedures will be set forth in or incorporated by reference in
the Designation and will be incorporated by reference in the Auction Agent
Agreement and each Broker-Dealer Agreement. Nothing contained in this Appendix
B constitutes a representation by the Company that in each Auction each party
referred to herein will actually perform the procedures described herein to be
performed by such party.
SECTION (A). CERTAIN DEFINITIONS
Capitalized terms not defined in this Section shall have the respective
meanings specified in the Prospectus. As used in these Auction Procedures, the
following terms shall have the following meanings, unless the context otherwise
requires:
(i) "Affiliate" shall mean any Person controlled by, in control of, or
under common control with, the Company.
(ii) "Agent Member" shall mean the member of the Securities Depositary
that will act on behalf of an Existing Holder or a Potential Holder and
that is identified as such in such Existing Holder's or Potential Holder's
Master Purchaser's Letter.
(iii) "Applicable Determining Rate" means, (i) for any Standard Dividend
Period or Short Dividend Period of 183 days or less, the Applicable "AA"
Composite Commercial Paper Rate, (ii) for any Short Dividend Period of 184
to 364 days, the Applicable Treasury Bill Rate and (iii) for any Long
Dividend Period, the Applicable Treasury Note Rate.
(iv) "Auction Date" shall mean the first Business Day preceding the first
day of a Dividend Period other than the Initial Dividend Periods.
(v) "Available Shares of MAPS" shall have the meaning specified in
Subsection (d)(i) below.
(vi) "Bid" shall have the meaning specified in Subsection (b)(i) below.
(vii) "Bidder" shall have the meaning specified in Subsection (b)(i)
below.
(viii) "Broker-Dealer" shall mean any broker-dealer, or other entity
permitted by law to perform the functions required of a Broker-Dealer in
these Auction Procedures, that has been selected by the Company and has
entered into a Broker-Dealer Agreement with the Auction Agent that remains
effective.
(ix) "Broker-Dealer Agreement" shall mean an agreement between the
Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer
agrees to follow the procedures specified in these Auction Procedures.
(x) "Hold Order" shall have the meaning specified in Subsection (b)(i)
below.
(xi) "MAPS" shall mean the MAPS being auctioned pursuant to these Auction
Procedures.
(xii) "Maximum Applicable Rate," on any Auction Date, shall mean the rate
obtained by multiplying the Applicable Determining Rate on such Auction
Date by the percentage determined as set forth below based on the lower of
the credit ratings assigned to the MAPS by Moody's and S&P (or if Moody's
or S&P or both shall not make such rating available, the equivalent of
either or both of such ratings by a Substitute Rating Agency or two
Substitute Rating Agencies, as the case may be, or in the event that only
one such rating shall be available, the percentage shall be based on such
rating).
<TABLE>
<CAPTION>
CREDIT RATINGS APPLICABLE PERCENTAGE
------------------------------------- OF APPLICABLE
MOODY'S S&P DETERMINING RATE
---------------- ------------ ---------------------
<S> <C> <C>
"aa3" or Above AA- or Above 150%
"a3" to "a1" A- to A+ 200%
"baa3" to "baa1" BBB- to BBB+ 225%
Below "baa3" Below BBB- 275%
</TABLE>
B-1
<PAGE>
(xiii) "Outstanding" shall mean, as of any date, Authorized MAPS
theretofore issued except, without duplication, (i) any Authorized MAPS
theretofore cancelled, delivered to the Company for cancellation or
redeemed and (ii) as of any Auction Date, any shares of Authorized MAPS
subject to redemption on the next following Business Day.
(xiv) "Person" shall mean and include an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or
other entity or a government or any agency or political subdivision
thereof.
(xv) "Potential Holder" shall mean any Person, including any Existing
Holder, (A) who shall have executed a Master Purchaser's Letter and (B) who
may be interested in acquiring shares of MAPS (or, in the case of an
Existing Holder, additional shares of MAPS).
(xvi) "Securities Depositary" shall mean The Depository Trust Company or
any other securities depository selected by the Company that agrees to
follow the procedures required to be followed by such securities depository
in connection with MAPS.
(xvii) "Sell Order" shall have the meaning specified in Subsection (b)(i)
below.
(xviii) "Submission Deadline" shall mean 1:00 p.m., New York City time,
on any Auction Date or such other time on any Auction Date as may be
specified from time to time by the Auction Agent as the time prior to which
each Broker-Dealer must submit to the Auction Agent in writing all Orders
obtained by it for the Auction to be conducted on such Auction Date.
(xix) "Submitted Bid" shall have the meaning specified in Subsection
(c)(i) below.
(xx) "Submitted Hold Order" shall have the meaning specified in
Subsection (c)(i) below.
(xxi) "Submitted Order" shall have the meaning specified in Subsection
(c)(i) below.
(xxii) "Submitted Sell Order" shall have the meaning specified in
Subsection (c)(i) below.
(xxiii) "Substitute Rating Agency" shall mean a nationally recognized
statistical rating organization (as that term is used in the rules and
regulations of the Securities Exchange Act of 1934) selected by the
Company, subject to the approval by Morgan Stanley and Lehman Brothers,
such approval not to be unreasonably withheld.
(xxiv) "Sufficient Clearing Bids" shall have the meaning specified in
Subsection (d)(i) below.
(xxv) "Winning Bid Rate" shall have the meaning specified in Subsection
(d)(i) below.
SECTION (B). ORDERS BY EXISTING HOLDERS AND POTENTIAL HOLDERS
(i) Prior to the Submission Deadline on each Auction Date for any Series of
MAPS:
(A) each Existing Holder may submit to a Broker-Dealer information as to:
(1) the number of Outstanding shares of MAPS, if any, held by such
Existing Holder that such Existing Holder desires to continue to hold
without regard to the Applicable Rate for the next succeeding Dividend
Period;
(2) the number of Outstanding shares of MAPS, if any, held by such
Existing Holder that such Existing Holder desires to sell, provided
that the Applicable Rate for the next succeeding Dividend Period is
less than the rate per annum specified by such Existing Holder; and/or
(3) the number of Outstanding shares of MAPS, if any, held by such
Existing Holder that such Existing Holder desires to sell without
regard to the Applicable Rate for the next succeeding Dividend Period;
and
(B) each Broker-Dealer, using a list of Potential Holders that shall be
maintained in accordance with the provisions set forth in the Broker-Dealer
Agreement for the purpose of conducting a competitive Auction, shall
contact both Existing Holders and Potential Holders, including Existing
Holders with
B-2
<PAGE>
respect to an offer by any such Existing Holder to purchase additional
shares of MAPS, on such list to notify such Existing Holders and Potential
Holders by telephone or otherwise as to the length of the next Dividend
Period and (i) with respect to any Short Dividend Period or Long Dividend
Period, the Dividend Payment Date(s) and (ii) with respect to any Long
Dividend Period, any dates before which shares of MAPS may not be redeemed
and any redemption premium applicable in an optional redemption and to
determine the number of Outstanding shares of MAPS, if any, with respect to
which each such Existing Holder desires to submit an Order and each such
Potential Holder desires to submit a Bid.
For the purposes hereof, the communication to a Broker-Dealer of information
referred to in clause (A) or (B) of this Subsection (b)(i) is hereinafter
referred to as an "Order" and each Existing Holder and each Potential Holder
placing an Order is hereinafter referred to as a "Bidder," an Order containing
the information referred to in clause (A)(1) of this Subsection (b)(i) is
hereinafter referred to as a "Hold Order," an Order containing the information
referred to in clause (A)(2) or (B) of this Subsection (b)(i) is hereinafter
referred to as a "Bid;" and an Order containing the information referred to in
clause (A)(3) of this Subsection (b)(i) is hereinafter referred to as a "Sell
Order."
(ii) (A) A Bid by an Existing Holder shall constitute an irrevocable offer to
sell:
(1) the number of Outstanding shares of MAPS specified in such Bid if the
Applicable Rate determined on such Auction Date shall be less than the rate
per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding shares of MAPS to be
determined as set forth in Subsections (e)(i)(D) and (e)(iii) if the
Applicable Rate determined on such Auction Date shall be equal to the rate
per annum specified therein; or
(3) a lesser number of Outstanding shares of MAPS to be determined as set
forth in Subsections (e)(ii)(C) and (e)(iii) if such specified rate per
annum shall be higher than the Maximum Applicable Rate and Sufficient
Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall constitute an irrevocable offer
to sell:
(1) the number of Outstanding shares of MAPS specified in such Sell
Order; or
(2) such number or a lesser number of Outstanding shares of MAPS to be
determined as set forth in Subsections (e)(ii)(C) and (e)(iii) if
Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an irrevocable offer to
purchase:
(1) the number of Outstanding shares of MAPS specified in such Bid if the
Applicable Rate determined on such Auction Date shall be higher than the
rate per annum specified in such Bid; or
(2) such number or a lesser number of Outstanding shares of MAPS to be
determined as set forth in Subsections (e)(i)(E) and (e)(iv) if the
Applicable Rate determined on such Auction Date shall be equal to the rate
per annum specified therein.
SECTION (C). SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT
(i) Each Broker-Dealer shall submit in writing to the Auction Agent prior to
the Submission Deadline on each Auction Date for any Series of MAPS all Orders
obtained by such Broker-Dealer, specifying with respect to each Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate number of Outstanding shares of MAPS that are the
subject of such Order;
(C) to the extent that such Bidder is an Existing Holder;
(1) the number of Outstanding shares of MAPS, if any, subject to any
Hold Order placed by such Existing Holder;
B-3
<PAGE>
(2) the number of Outstanding shares of MAPS, if any, subject to any
Bid placed by such Existing Holder and the rate per annum specified in
such Bid; and
(3) the number of Outstanding shares of MAPS, if any, subject to any
Sell Order placed by such Existing Holder; and
(D) to the extent such Bidder is a Potential Holder, the rate per annum
specified in such Potential Holder's Bid.
(Each "Hold Order," "Bid" or "Sell Order" as submitted or deemed
submitted by a Broker-Dealer being hereinafter referred to individually as
a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as
the case may be, or as a "Submitted Order.")
(ii) If any rate per annum specified in any Submitted Bid contains more than
three figures to the right of the decimal point, the Auction Agent shall round
such rate up to the next highest one-thousandth (.001) of 1%.
(iii) If one or more Orders covering in the aggregate all of the Outstanding
shares of MAPS held by an Existing Holder are not submitted to the Auction
Agent prior to the Submission Deadline for any reason (including the failure of
a Broker-Dealer to contact such Existing Holder or to submit such Existing
Holder's Order or Orders), such Existing Holder shall be deemed to have
submitted a Hold Order covering the number of Outstanding shares of MAPS held
by such Existing Holder that are not subject to Orders submitted to the Auction
Agent.
(iv) A Submitted Order or Submitted Orders of an Existing Holder that cover
in the aggregate more than the number of Outstanding shares of MAPS held by
such Existing Holder will be considered valid in the following order of
priority:
(A) any Submitted Hold Order of such Existing Holder will be considered
valid up to and including the number of Outstanding shares of MAPS held by
such Existing Holder, provided that, if there is more than one such
Submitted Hold Order and the aggregate number of shares of MAPS subject to
such Submitted Hold Orders exceeds the number of Outstanding shares of MAPS
held by such Existing Holder, the number of shares of MAPS subject to each
such Submitted Hold Order will be reduced pro rata so that such Submitted
Hold Orders in the aggregate will cover exactly the number of Outstanding
shares of MAPS held by such Existing Holder;
(B) any Submitted Bids of such Existing Holder will be considered valid
(in the ascending order of their respective rates per annum if there is
more than one Submitted Bid of such Existing Holder) for the number of
Outstanding shares of MAPS held by such Existing Holder equal to the
difference between (i) the number of Outstanding shares of MAPS held by
such Existing Holder and (ii) the number of Outstanding shares of MAPS
subject to any Submitted Hold Order of such Existing Holder referred to in
clause (iv)(A) above (and, if more than one Submitted Bid of such Existing
Holder specifies the same rate per annum and together they cover more than
the remaining number of shares of MAPS that can be the subject of valid
Submitted Bids of such Existing Holder after application of clause (iv)(A)
above and of the foregoing portion of this clause (iv)(B) to any Submitted
Bid or Submitted Bids of such Existing Holder specifying a lower rate or
rates per annum, the number of shares of MAPS subject to each of such
Submitted Bids specifying the same rate per annum will be reduced pro rata
so that such Submitted Bids, in the aggregate, cover exactly such remaining
number of Outstanding shares of MAPS of such Existing Holder);
(C) any Submitted Sell Order of such Existing Holder will be considered
valid up to and including the excess of the number of Outstanding shares of
MAPS held by such Existing Holder over the sum of (a) the number of shares
of MAPS subject to Submitted Hold Orders by such Existing Holder referred
to in clause (iv)(A) above and (b) the number of shares of MAPS subject to
valid Submitted Bids by such Existing Holder referred to in clause (iv)(B)
above; provided that, if there is more than one Submitted Sell Order of
such Existing Holder and the number of shares of MAPS subject to such
B-4
<PAGE>
Submitted Sell Orders is greater than such excess, the number of shares of
MAPS subject to each of such Submitted Sell Orders will be reduced pro rata
so that such Submitted Sell Orders, in the aggregate, will cover exactly
the number of shares of MAPS equal to such excess.
The number of Outstanding shares of MAPS, if any, subject to Submitted Bids of
such Existing Holder not valid under clause (iv)(B) above shall be treated as
the subject of a Submitted Bid by a Potential Holder at the rate per annum
specified in such Submitted Bids.
(v) If there is more than one Submitted Bid by any Potential Holder in any
Auction, each such Submitted Bid shall be considered a separate Submitted Bid
with respect to the rate per annum and number of shares of MAPS specified
therein.
SECTION (D). DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND
APPLICABLE RATE
(i) Not earlier than the Submission Deadline on each Auction Date, for any
Series of MAPS, the Auction Agent shall assemble all Orders submitted or deemed
submitted to it by the Broker-Dealers and shall determine:
(A) the excess of the total number of Outstanding shares of MAPS over the
number of shares of MAPS that are the subject of Submitted Hold Orders
(such excess being hereinafter referred to as the "Available Shares of
MAPS");
(B) from the Submitted Orders, whether the number of Outstanding shares
of MAPS that are the subject of Submitted Bids by Potential Holders
specifying one or more rates per annum equal to or lower than the Maximum
Applicable Rate exceeds or is equal to the sum of:
(1) the number of Outstanding shares of MAPS that are the subject of
Submitted Bids by Existing Holders specifying one or more rates per
annum higher than the Maximum Applicable Rate, and
(2) the number of Outstanding shares of MAPS that are subject to
Submitted Sell Orders.
(if such excess or such equality exists (other than because the number of
Outstanding shares of MAPS in clauses (1) and (2) above are each zero
because all of the Outstanding shares of MAPS are the subject of Submitted
Hold Orders), there shall exist "Sufficient Clearing Bids" and such
Submitted Bids by Potential Holders shall be hereinafter referred to
collectively as "Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids exist, the winning bid rate (the "Winning
Bid Rate"), which shall be the lowest rate per annum specified in the
Submitted Bids that if:
(1) each Submitted Bid from Existing Holders specifying the Winning
Bid Rate and all other Submitted Bids from Existing Holders specifying
lower rates per annum were accepted, thus entitling such Existing
Holders to continue to hold the shares of MAPS that are the subject of
such Submitted Bids, and
(2) each Submitted Bid from Potential Holders specifying the Winning
Bid Rate and all other Submitted Bids from Potential Holders specifying
lower rates per annum were accepted, thus entitling such Potential
Holders to purchase the shares of MAPS that are the subject of such
Submitted Bids,
would result in such Existing Holders described in subclause (C)(1) continuing
to hold an aggregate number of Outstanding shares of MAPS that, when added to
the number of Outstanding shares of MAPS to be purchased by such Potential
Holders described in subclause (C)(2), would equal or exceed the number of
Available Shares of MAPS.
(ii) In connection with any Auction and promptly after the Auction Agent has
made the determinations pursuant to Subsection (d)(i), the Auction Agent shall
advise the Company of the Maximum Applicable Rate and, based on such
determinations, the Applicable Rate for the next succeeding Dividend Period as
follows:
(A) if Sufficient Clearing Bids exist, that the Applicable Rate for the
next succeeding Dividend Period shall be equal to the Winning Bid Rate;
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(B) if Sufficient Clearing Bids do not exist (other than because all of
the Outstanding shares of MAPS are the subject of Submitted Hold Orders),
that the next succeeding Dividend Period will be a Standard Dividend Period
and the Applicable Rate for the next succeeding Dividend Period shall be
equal to the Maximum Applicable Rate for a Standard Dividend Period
determined as of the Business Day immediately preceding such Auction; or
(C) if all of the Outstanding shares of MAPS are the subject of Submitted
Hold Orders, that the Applicable Rate for the next succeeding Dividend
Period shall be equal to 59% of the Applicable "AA" Composite Commercial
Paper Rate, in the case of MAPS with a Standard Dividend Period or a Short
Dividend Period of 183 days or less, 59% of the Applicable Treasury Bill
Rate in the case of MAPS with a Short Dividend Period of 184 to 364 days,
or 59% of the Applicable Treasury Note Rate in the case of MAPS with a Long
Dividend Period, in effect on the Auction Date.
SECTION (E). ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL
ORDERS AND ALLOCATION OF SHARES OF MAPS
Based on the determinations made pursuant to Subsection (d)(i), the Submitted
Bids and Submitted Sell Orders shall be accepted or rejected and the Auction
Agent shall take such other action as set forth below:
(i) If Sufficient Clearing Bids have been made, subject to the provisions
of Subsections (e)(iii) and (e)(iv), Submitted Bids and Submitted Sell
Orders shall be accepted or rejected in the following order of priority and
all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders shall be accepted
and the Submitted Bid of each of the Existing Holders specifying any
rate per annum that is higher than the Winning Bid Rate shall be
rejected, thus requiring each such Existing Holder to sell the
Outstanding shares of MAPS that are the subject of such Submitted Sell
Order or Submitted Bid;
(B) the Submitted Bid of each of the Existing Holders specifying any
rate per annum that is lower than the Winning Bid Rate shall be
accepted, thus entitling each such Existing Holder to continue to hold
the Outstanding shares of MAPS that are the subject of such Submitted
Bid;
(C) the Submitted Bid of each of the Potential Holders specifying any
rate per annum that is lower than the Winning Bid Rate shall be
accepted;
(D) the Submitted Bid of each of the Existing Holders specifying a
rate per annum that is equal to the Winning Bid Rate shall be accepted,
thus entitling each such Existing Holder to continue to hold the
Outstanding shares of MAPS that are the subject of such Submitted Bid,
unless the number of Outstanding shares of MAPS subject to all such
Submitted Bids shall be greater than the number of Outstanding shares
of MAPS ("Remaining Shares of MAPS") equal to the excess of the
Available Shares of MAPS over the number of Outstanding shares of MAPS
subject to Submitted Bids described in Subsections (e)(i)(B) and
(e)(i)(C), in which event the Submitted Bids of each such Existing
Holder shall be rejected, and each such Existing Holder shall be
required to sell Outstanding shares of MAPS, but only in an amount
equal to the difference between (1) the number of Outstanding shares of
MAPS then held by such Existing Holder subject to such Submitted Bid
and (2) the number of shares of MAPS obtained by multiplying (x) the
number of Remaining Shares of MAPS by (y) a fraction, the numerator of
which shall be the number of Outstanding shares of MAPS held by such
Existing Holder subject to such Submitted Bid and the denominator of
which shall be the aggregate number of Outstanding shares of MAPS
subject to such Submitted Bids made by all such Existing Holders that
specified a rate per annum equal to the Winning Bid Rate; and
(E) the Submitted Bid of each of the Potential Holders specifying a
rate per annum that is equal to the Winning Bid Rate shall be accepted,
but only in an amount equal to the number of Outstanding shares of MAPS
obtained by multiplying (x) the difference between the Available Shares
of MAPS and the number of Outstanding shares of MAPS subject to
Submitted Bids
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described in Subsections (e)(i)(B), (e)(i)(C) and (e)(i)(D) by (y) a
fraction, the numerator of which shall be the number of Outstanding
shares of MAPS subject to such Submitted Bid and the denominator of
which shall be the aggregate number of Outstanding shares of MAPS
subject to such Submitted Bids made by all such Potential Holders that
specified rates per annum equal to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than because
all of the Outstanding shares of MAPS are subject to Submitted Hold
Orders), subject to the provisions of Subsection (e)(iii), Submitted Orders
shall be accepted or rejected as follows in the following order of priority
and all other Submitted Bids of Potential Holders shall be rejected:
(A) the Submitted Bid of each Existing Holder specifying any rate per
annum that is equal to or lower than the Maximum Applicable Rate shall
be accepted, thus entitling such Existing Holder to continue to hold
the Outstanding shares of MAPS that are the subject of such Submitted
Bid;
(B) the Submitted Bid of each Potential Holder specifying any rate
per annum that is equal to or lower than the Maximum Applicable Rate
shall be accepted, thus requiring such Potential Holder to purchase the
Outstanding shares of MAPS that are the subject of such Submitted Bid;
and
(C) the Submitted Bids of each Existing Holder specifying any rate
per annum that is higher than the Maximum Applicable Rate shall be
rejected, thus requiring each such Existing Holder to sell the
Outstanding shares of MAPS that are the subject of such Submitted Bid,
and the Submitted Sell Orders of each Existing Holder shall be
accepted, in both cases only in an amount equal to the difference
between (1) the number of Outstanding shares of MAPS then held by such
Existing Holder subject to such Submitted Bid or Submitted Sell Order
and (2) the number of shares of MAPS obtained by multiplying (x) the
difference between the Available Shares of MAPS and the aggregate
number of Outstanding shares of MAPS subject to Submitted Bids
described in Subsections (e)(ii)(A) and (e)(ii)(B) by (y) a fraction,
the numerator of which shall be the number of Outstanding shares of
MAPS held by such Existing Holder subject to such Submitted Bid or
Submitted Sell Order and the denominator of which shall be the
aggregate number of Outstanding shares of MAPS subject to all such
Submitted Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in Subsections (e)(i)
or (e)(ii), any Existing Holder would be entitled or required to sell or
any Potential Holder would be entitled or required to purchase, a fraction
of a share of MAPS on any Auction Date, the Auction Agent shall, in such
manner as in its sole discretion it shall determine, round up or down the
number of shares of MAPS to be purchased or sold by any Existing Holder or
Potential Holder on such Auction Date so that only whole shares of MAPS
will be entitled or required to be sold or purchased.
(iv) If, as a result of the procedures described in Subsection (e)(i),
any Potential Holder would be entitled or required to purchase less than a
whole share of MAPS on any Auction Date, the Auction Agent shall, in such
manner as in its sole discretion it shall determine, allocate shares of
MAPS for purchase among Potential Holders so that only whole shares of MAPS
are purchased on such Auction Date by any Potential Holder, even if such
allocation results in one or more of such Potential Holders not purchasing
any shares of MAPS on such Auction Date.
(v) Based on the results of each Auction, the Auction Agent shall
determine, with respect to each Broker-Dealer that submitted Bids or Sell
Orders on behalf of Existing Holders or Potential Holders, the aggregate
number of Outstanding shares of MAPS to be purchased and the aggregate
number of Outstanding shares of MAPS to be sold by such Potential Holders
and Existing Holders and, to the extent that such aggregate number of
Outstanding shares of MAPS to be purchased and such aggregate number of
Outstanding shares of MAPS to be sold differ, the Auction Agent shall
determine to which other Broker-Dealer or Broker-Dealers acting for one or
more purchasers such Broker-Dealer shall deliver, or from which other
Broker-Dealer or Broker-Dealers acting for one or more sellers such Broker-
Dealer shall receive, as the case may be, Outstanding shares of MAPS.
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SECTION (F). MISCELLANEOUS
An Existing Holder (A) may sell, transfer or otherwise dispose of shares of
MAPS only pursuant to a Bid or Sell Order in accordance with the procedures
described in these Auction Procedures or to or through a Broker-Dealer or to a
Person that has delivered a signed copy of a Master Purchaser's Letter to a
Broker-Dealer, provided that in the case of all transfers other than pursuant
to Auctions such Existing Holder, its Broker-Dealer or its Agent Member advises
the Auction Agent of such transfer and (B) unless otherwise required by law,
shall have the beneficial ownership of the shares of MAPS held by it maintained
in book-entry form by the Securities Depositary in the account of its Agent
Member, which in turn will maintain records of such Existing Holder's
beneficial ownership. The Company and its Affiliate shall not submit any Order
in any Auction except as set forth in the next sentence. Any Broker-Dealer that
is an Affiliate of the Company may submit Orders in Auctions but only if such
Orders are not for its own account, except that if such affiliated Broker-
Dealer holds shares of MAPS for its own account, it must submit a Sell Order in
the next Auction with respect to such shares of MAPS. All of the Outstanding
shares of MAPS of each Series shall be represented by a single certificate for
each Series registered in the name of the nominee of the Securities Depositary
unless otherwise required by law or unless there is no Securities Depositary.
If there is no Securities Depositary, shares of MAPS shall be registered in the
register of the Company in the name of the Existing Holder thereof and such
Existing Holder thereupon will be entitled to receive a certificate therefor
and be required to deliver a certificate therefor upon transfer or exchange
thereof.
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APPENDIX C
TO BE SUBMITTED TO YOUR BROKER-DEALER
MASTER PURCHASER'S LETTER
RELATING TO
SECURITIES INVOLVING RATE SETTINGS
THROUGH AUCTIONS
To: The Company
A Broker-Dealer
An Agent Member
Other Persons
1. This letter is designed to apply to auctions for publicly or privately
offered debt or equity securities ("Securities") of any issuer ("Company") that
are described in any final prospectus or other offering materials relating to
such Securities as the same may be amended or supplemented (collectively, with
respect to the particular Securities concerned, the "Prospectus") and that
involve periodic rate settings through auctions ("Auctions"). This letter shall
be for the benefit of any Company and of any auction agent, broker-dealer,
agent member, securities depository or other interested person in connection
with any Securities and related Auctions (it being understood that such persons
may be required to execute specified agreements and nothing herein shall alter
such requirements). The terminology used herein is intended to be general in
its application and not to exclude any Securities in respect of which (in the
Prospectus or otherwise) alternative terminology is used.
2. We may from time to time offer to purchase, purchase, offer to sell and/or
sell Securities of any Company as described in the Prospectus relating thereto.
We agree that this letter shall apply to all such purchases, sales and offers
and to Securities owned by us. We understand that the dividend/interest rate on
Securities may be based from time to time on the results of Auctions as set
forth in the Prospectus.
3. We agree that any bid or sell order placed by us shall constitute an
irrevocable offer by us to purchase or sell Securities subject to such bid or
sell order, or such lesser amount of Securities as we shall be required to sell
or purchase as a result of such Auction, at the applicable price, all as set
forth in the Prospectus, and that if we fail to place a bid or sell order with
respect to Securities owned by us with a broker-dealer on any auction date, or
a broker-dealer to which we communicate a bid or sell order fails to submit
such bid or sell order to the auction agent concerned, we shall be deemed to
have placed a hold order with respect to such Securities as described in the
Prospectus. We authorize any broker-dealer that submits a bid or sell order as
our agent in Auctions to execute contracts for the sale of Securities covered
by such bid or sell order. We recognize that the payment by such broker-dealer
for Securities purchased on our behalf shall not relieve us of any liability to
such broker-dealer for payment for such Securities.
4. We agree that, during the applicable period as described in the
Prospectus, dispositions of Securities can be made only in the denominations
set forth in the Prospectus and we will sell, transfer or otherwise dispose of
any Securities held by us from time to time only pursuant to a bid or sell
order placed in an Auction, to or through a broker-dealer or, when permitted in
the Prospectus, to a person that has signed and delivered, or caused to be
delivered on its behalf, to a broker-dealer a letter substantially in the form
of this letter (or other applicable purchaser's letter), provided that in the
case of all transfers other than pursuant to Auctions we or our broker-dealer
or our agent member shall advise such auction agent of such transfer. We
understand that a restrictive legend will be placed on certificates
representing the Securities and stop-transfer instructions will be issued to
the transfer agent and/or registrar, all as set forth in the Prospectus. We
agree to comply with any other transfer restrictions or other related
procedures as described in the Prospectus.
5. We agree that, during the applicable period as described in the
Prospectus, ownership of Securities shall be represented by a global
certificate registered in the name of the applicable securities depository or
its nominees, that we will not be entitled to receive any certificate
representing the Securities and that our ownership of any Securities will be
maintained in book entry form by the securities depository for the account
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of our agent member, which in turn will maintain records of our beneficial
ownership. We authorize and instruct our agent member to disclose to the
applicable auction agent such information concerning our beneficial ownership
of Securities as such auction agent shall request.
6. The Broker-Dealers or their successors (including any successor appointed
by the Company to replace the Broker-Dealers or their successors) or any
assignee thereof to whom the Company consents, shall have an option,
exercisable on not less than three Business Days' notice and only with the
Company's consent, to purchase, on any Final Dividend Date with respect to the
Securities to be so purchased, all or a portion of the Securities owned by it
at a purchase price, after payment by the Company on such Final Dividend Date
of any accumulated but unpaid dividends on the Securities and any redemption
premium (that may have been established by the Company in respect of a Long
Dividend Period) that may be payable by the Company with respect thereto, of
$ per Security, and it, by its ownership of such Securities and its
execution of the Master Purchaser's Letter, will be deemed to have consented
irrevocably to such purchase.
7. We acknowledge that partial deliveries of Securities purchased in Auctions
may be made to us and such deliveries shall constitute good delivery as set
forth in the Prospectus.
8. This letter is not a commitment by us to purchase any Securities.
9. This letter supersedes any prior-dated version of this master purchaser's
letter, and supplements any prior or post-dated purchaser's letter specific to
particular Securities; any recipient of this letter may rely upon it until such
recipient has received a signed writing amending or revoking this letter.
10. The descriptions of Auction procedures set forth in each applicable
Prospectus are incorporated by reference herein and, in case of any conflict
between this letter and any such description, such description shall control.
11. Any xerographic or other copy of this letter shall be deemed of equal
effect as a signed original.
12. Our agent member of the securities depository currently is
.
13. Our personnel authorized to place orders with broker-dealers for the
purposes set forth in the Prospectus in Auctions currently is
, telephone number ( ) .
14. Our taxpayer identification number is .
15. In the case of each offer to purchase, offer to sell or sale by us of
Securities not registered under the Securities Act of 1933, as amended (the
"Act"), we represent and agree as follows:
A. We understand and expressly acknowledge that the Securities have not
been and will not be registered under the Act and, accordingly, that the
Securities may not be reoffered, resold or otherwise pledged, hypothecated
or transferred unless an applicable exemption from the registration
requirements of the Act is available.
B. We hereby confirm that any purchase of Securities made by us will be
for our own account, or for the account of one or more parties for which we
are acting as trustee or agent with complete investment discretion and with
authority to bind such parties, and not with a view to any public resale or
distribution thereof. We and each other party for which we are acting which
will acquire Securities will be "accredited investors" within the meaning
of Regulation D under the Act with respect to the Securities to be
purchased by us or such party, as the case may be, will have previously
invested in similar types of instruments and will be able and prepared to
bear the economic risk of investing in and holding such Securities.
C. We acknowledge that prior to purchasing any Securities we shall have
received a Prospectus (private placement memorandum) with respect thereto
and acknowledge that we will have had access to such financial and other
information and have been afforded the opportunity to ask such questions of
representatives of the Company and receive answers thereto, as we deem
necessary in connection with our decision to purchase Securities.
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D. We recognize that the Company and broker-dealers will rely upon the
truth and accuracy of the foregoing investment representations and
agreements, and we agree that each of our purchases of Securities now or in
the future shall be deemed to constitute our concurrence in all of the
foregoing that shall be binding on us and each party for which we are
acting as set forth in Subparagraph B above.
Dated: ______________________________ _____________________________________
Mailing Address of Purchaser:
_____________________________________ By: _________________________________
_____________________________________ Printed Name: _______________________
_____________________________________ Title: ______________________________
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