<PAGE> 1
This filing is made pursuant
to Rule 424(b)(5) under
the Securities Act of
1933 in connection with
Registration No. 333-21901
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED FEBRUARY 24, 1997)
[LOGO OF INTERNATIONAL LEASE FINANCE CORPORATION]
$500,000,000
INTERNATIONAL LEASE FINANCE CORPORATION
MEDIUM-TERM NOTES, SERIES I
Due Nine Months or More from Date of Issue
------------------------
International Lease Finance Corporation (the "Company") may offer from time
to time $500,000,000 aggregate initial offering price of its Medium-Term Notes,
Series I (the "Notes"), due nine months or more from date of issue. The Notes
will be unsecured obligations of the Company. As specified in a pricing
supplement (a "Pricing Supplement") to this Prospectus Supplement, the Notes
will mature on any day nine months or more from the date of issue (the "Stated
Maturity"), which maturity date may be subject to extension as agreed upon by
the Company and the purchaser. The Notes may also be subject to redemption prior
to maturity as agreed upon by the Company and the purchaser, or to repayment at
the option of the Holder, as specified in the applicable Pricing Supplement. See
"Description of Medium-Term Notes, Series I -- Redemption and Repayment." The
authorized denominations of each Note will be $1,000 and integral multiples
thereof, unless otherwise specified in the applicable Pricing Supplement.
The interest rate on, or interest formula for, the Notes will be established
by the Company from time to time and will be set forth therein and specified in
the applicable Pricing Supplement. Unless otherwise specified in the applicable
Pricing Supplement, the Notes will bear interest at fixed rates (the "Fixed Rate
Notes"), which may be zero in the case of certain Original Issue Discount Notes,
or at floating rates (the "Floating Rate Notes"). The applicable Pricing
Supplement will specify whether a Floating Rate Note is a Regular Floating Rate
Note, a Floating Rate/Fixed Rate Note or an Inverse Floating Rate Note and the
rate of interest thereon as determined by reference to one or more of the CD
Rate, the CMT Rate, the Commercial Paper Rate, the Eleventh District Cost of
Funds Rate, the Federal Funds Rate, LIBOR, the Prime Rate, Treasury Rate (each,
an "Interest Rate Basis") or any other interest rate basis or formula as
selected by the purchasers and agreed to by the Company, and as adjusted by the
Spread or Spread Multiplier, if any, applicable to such Notes. Unless otherwise
specified in the applicable Pricing Supplement, interest on each Fixed Rate Note
will accrue from its date of issue and will be payable semiannually in arrears
on April 15 and October 15 of each year and at maturity. Unless otherwise
specified in the applicable Pricing Supplement, interest on each Floating Rate
Note will accrue from its date of issue and will be payable in arrears as
specified in the applicable Pricing Supplement. A Note may be issued as an
amortizing note (an "Amortizing Note") on which a portion or all of the
principal amount is payable prior to the Stated Maturity in accordance with a
schedule, by application of a formula or by reference to an index. A Note may be
issued as an indexed note (an "Indexed Note") on which the amount of any
interest payment, in the case of an Indexed Rate Note, and/or the principal
amount payable at maturity, in the case of an Indexed Principal Note, will be
determined by reference to the level of prices, or changes in prices, or
differences between prices, of securities, currencies, intangibles, goods,
articles or commodities or by application of a formula. See "Description of
Medium-Term Notes, Series I -- Indexed Notes."
Interest rates, interest rate formulae, the Spread or Spread Multiplier, if
any, applicable to such Notes, and such other variable terms are subject to
change by the Company, but no such change will affect any Note theretofore
issued or as to which an offer to purchase has been accepted by the Company.
Unless otherwise specified in the applicable Pricing Supplement, each Note
will be represented either by a global note ("Global Note") deposited with, or
on behalf of, The Depository Trust Company, New York, New York (the
"Depositary"), and registered in the name of a nominee of the Depositary (a
"Book-Entry Note"), or by a certificate issued in definitive form (a
"Certificated Note"), as set forth in the applicable Pricing Supplement.
Beneficial interests in Global Notes representing Book-Entry Notes will be shown
on, and transfers will be effected only through, records maintained by the
Depositary with respect to its participants' interests and by the Depositary's
participants. Book-Entry Notes will not be issuable as Certificated Notes except
under the circumstances described in the accompanying Prospectus or as otherwise
set forth on the applicable Pricing Supplement.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(L) AND COMMISSIONS(2) COMPANY(2)(3)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note......................................... 100% .125%-.750% 99.875%-99.250%
- ----------------------------------------------------------------------------------------------------------------------------------
Total............................................ $500,000,000 $625,000-$3,750,000 $499,375,000-$496,250,000
</TABLE>
- --------------------------------------------------------------------------------
(1) Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be issued at 100% of their principal amount.
(2) The Company will pay a commission to Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Lehman Brothers Inc., Morgan Stanley &
Co. Incorporated, Salomon Brothers Inc or Goldman, Sachs & Co., each as
Agent (collectively, the "Agents"), in the form of a discount, ranging from
.125% to .750% of the principal amount of any Note, depending upon maturity
up to and including 30 years, and as agreed upon at the time of sale for
Notes with Stated Maturities greater than 30 years, sold through such Agent,
and may sell Notes to any Agent at a discount for resale to investors or
other purchasers at varying prices related to prevailing market prices at
the time of resale to be determined by such Agent or, if so agreed, at a
fixed public offering price. See "Plan of Distribution." Unless otherwise
indicated in the applicable Pricing Supplement, any Note sold to an Agent as
principal will be purchased by such Agent at a price equal to 100% of the
principal amount thereof less a percentage equal to the commission
applicable to an agency sale of a Note of identical maturity and may be
resold by such Agent. No commission will be payable on any sales made
directly by the Company.
(3) Before deducting other expenses payable by the Company estimated at up to
$360,000 including reimbursement of certain expenses of the Agents.
------------------------
The Notes are being offered on a continuous basis by the Company through the
Agents, each of whom has agreed to use its best efforts to solicit purchases of
the Notes. The Company has reserved the right to sell the Notes directly on its
own behalf or to or through others for resale to the public. The Notes may also
be sold to any of the Agents acting as principal for its own account or for
resale to investors or other purchasers. See "Plan of Distribution." The Notes
will not be listed on any securities exchange, and there can be no assurance
that the Notes offered by this Prospectus Supplement will be sold or that there
will be a secondary market for the Notes. The Company reserves the right to
withdraw, cancel or modify the offer made hereby without notice. The Company or
any of the Agents may reject any offer in whole or in part. See "Plan of
Distribution."
------------------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
GOLDMAN, SACHS & CO.
------------------------
The date of this Prospectus Supplement is February 24, 1997
<PAGE> 2
IN CONNECTION WITH THE OFFERING OF THE NOTES, THE AGENTS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the nine months ended
September 30, 1996 is 1.54x. The ratio of earnings to fixed charges was computed
by dividing earnings by fixed charges. For this purpose, "earnings" consist of
income before income taxes plus fixed charges (excluding capitalized interest),
and "fixed charges" consist of interest expense and capitalized interest.
DESCRIPTION OF MEDIUM-TERM NOTES, SERIES I
The information herein concerning the Notes should be read in conjunction
with the statements under "Description of Debt Securities" in the Prospectus, to
which description reference is hereby made. The particular terms of any Note
offered will be described in the applicable Pricing Supplement. The terms and
conditions set forth in this Prospectus Supplement will apply to each Note
unless otherwise specified in the applicable Pricing Supplement and such Note.
Capitalized terms used herein and not defined have the meanings given to them in
the Indenture.
GENERAL
The Notes issuable pursuant to this Prospectus Supplement constitute a
series of Debt Securities under an Indenture (the "Indenture"), dated as of
November 1, 1991, between the Company and First Trust National Association
(successor to Continental Bank, National Association), as trustee (the
"Trustee"), which series is currently limited to $500,000,000 aggregate
principal amount. The Indenture authorizes the Company to reopen a series of
securities (including the Notes) for issuance of additional securities of that
series without the consent of the holders of that series.
The Notes will be unsecured obligations of the Company. The authorized
denominations of each Note will be $1,000 and integral multiples thereof, unless
otherwise specified in the applicable Pricing Supplement and will be issued in
fully registered form only. The Notes will not be subject to any sinking fund.
Each Note will be issued initially as either a Book-Entry Note or a Certificated
Note as specified in the applicable Pricing Supplement. The terms set forth
under "Description of Debt Securities -- Global Securities" in the Prospectus
are applicable to the Notes.
The Notes will be offered on a continuous basis and will mature on any day
nine months or more from the date of issue, as selected by the purchaser and
agreed to by the Company. Floating Rate Notes will mature on an Interest Payment
Date (as defined below) unless otherwise specified in the applicable Pricing
Supplement.
"Business Day" means any day that is not a Saturday or Sunday and that, in
The City of New York (and, with respect to LIBOR Notes, the City of London), is
not a day on which banking institutions are generally authorized or obligated by
law to close. "London Business Day" means any day on which dealings in deposits
in U.S. Dollars are transacted in the London interbank market. "Maturity" or
"Maturity Date" means the date on which the principal of a Note becomes due and
payable as provided in the Indenture, whether at the Stated Maturity or by
declaration of acceleration, redemption, repayment or otherwise. Unless
otherwise specified in the applicable Pricing Supplement, the Notes will be
denominated in United States dollars and payments of principal of, and premium,
if any, and interest on, the Notes will be made in United States dollars.
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PAYMENT OF PRINCIPAL AND INTEREST
Principal and interest will be payable, and Certificated Notes will be
transferable, at the office of the Trustee in St. Paul, Minnesota, which on the
date hereof is located at 180 East Fifth Street, St. Paul, Minnesota, and at the
agency maintained by the Trustee for that purpose in the Borough of Manhattan,
City of New York, State of New York, which on the date hereof is at the office
of First Trust of New York, N.A., 100 Wall Street, 20th Floor, New York, New
York, or at such other place or places as may be designated pursuant to the
Indenture, provided that the Company, at its option, may pay interest other than
interest due at Maturity, by check mailed to registered holders.
Each Note will bear interest from its date of issue at either (a) a fixed
rate (a "Fixed Rate Note"), which may be zero in the case of certain Original
Issue Discount Notes or (b) rates determined by reference to the interest rate
formula specified in the applicable Pricing Supplement (a "Floating Rate Note"),
until the principal thereof is paid or duly made available for payment. Interest
will be payable in arrears on each Interest Payment Date (as defined below).
Unless otherwise specified in the applicable Pricing Supplement, the first
payment of interest on any Note originally issued between a Record Date (as
defined below) and the related Interest Payment Date or on an Interest Payment
Date will be made on the Interest Payment Date immediately following the next
succeeding Record Date to the Holder on such next succeeding Record Date.
"Interest Payment Date" means the date on which interest on the Notes is due and
payable, which is (i) in the case of Fixed Rate Notes, April 15 and October 15
of each year, unless otherwise specified in the applicable Pricing Supplement,
and at Maturity, and (ii) in the case of Floating Rate Notes which reset: (i)
daily, weekly or monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as specified in
the applicable Pricing Supplement; (ii) quarterly, on the third Wednesday of
March, June, September and December of each year; (iii) semiannually, on the
third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; and (iv) annually, on the third Wednesday of the month
specified in the applicable Pricing Supplement; and, in each case, on the
Maturity Date, except as otherwise provided herein or in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement, a
"Record Date" shall be the fifteenth calendar day (whether or not a Business
Day) immediately preceding the related Interest Payment Date. Principal and
interest due at Maturity will be payable in immediately available funds upon
presentation of the Notes. Interest due other than at Maturity will be payable
by check; provided, however, that (i) the Depositary, as holder of Book-Entry
Notes shall be entitled to receive payments of interest by wire transfer of
immediately available funds, and (ii) Holders of ten million dollars or more in
aggregate principal amount of Certificated Notes having identical Interest
Payment Dates will be entitled to receive payments of interest, other than at
Maturity, by wire transfer of immediately available funds to a designated
account maintained in the United States upon receipt by the Trustee of written
instructions from such holder not later than the Regular Record Date for the
related Interest Payment Date. Such instructions shall remain in effect with
respect to payments of interest made to such holder on subsequent Interest
Payment Dates unless revoked or changed by written instructions received by the
Trustee from such holder, provided that any such written revocation or change
which is received by the Trustee after a Regular Record Date and before the
related Interest Payment Date shall not be effective with respect to the
interest payable on such Interest Payment Date. Unless otherwise specified in
the applicable Pricing Supplement, First Trust National Association shall be the
calculation agent (the "Calculation Agent") with respect to the Notes.
Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any Original Issue Discount Note is declared to be due and payable
immediately as described under "Description of Debt Securities -- Events of
Default" in the Prospectus, the amount of principal due and payable with respect
to such Note shall be limited to the aggregate principal amount (or face amount,
in the case of an Indexed Principal Note) of such Note multiplied by the sum of
its Issue Price (expressed as a percentage of the aggregate principal amount)
plus the original issue discount amortized from the date of issue to the date of
declaration, which amortization shall be calculated using the "interest method"
(computed in accordance with generally accepted accounting principles in effect
on the date of declaration).
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Fixed Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, each Fixed
Rate Note will bear interest from, and including, the date of issue, or the most
recent date to which interest has been paid or duly provided for, to, but
excluding, the Interest Payment Date or Maturity, as the case may be, at the
rate per annum stated on the face thereof until the principal amount thereof is
paid or made available for payment. Unless otherwise specified in the applicable
Pricing Supplement, interest on Fixed Rate Notes will be computed on the basis
of a 360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity of a Fixed Rate Note falls on
a day that is not a Business Day, the related payment of principal, premium, if
any, or interest will be made on the next succeeding Business Day as if made on
the date such payment was due, and no interest will accrue on the amount so
payable for the period from and after such Interest Payment Date or Maturity, as
the case may be.
Floating Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. The applicable Pricing Supplement
will specify certain terms with respect to which each Floating Rate Note is
being delivered, including: whether such Floating Rate Note is a "Regular
Floating Rate Note," a "Floating Rate/Fixed Rate Note" or an "Inverse Floating
Rate Note," the Fixed Rate Commencement Date and Fixed Interest Rate, as
applicable, Interest Rate Basis or Bases, Initial Interest Rate, Interest Reset
Period and Dates, Record Dates, Interest Payment Period and Dates, Index
Maturity, Maximum Interest Rate and Minimum Interest Rate, if any, and Spread
and/or Spread Multiplier, if any, and if one or more of the applicable Interest
Rate Bases is LIBOR, the Designated LIBOR Page, all as defined below and as
described below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," an "Inverse Floating Rate Note" or as having an
Addendum attached, such Floating Rate Note will be designated as a "Regular
Floating Rate Note" and, except as described below or in the applicable
Pricing Supplement, bear interest at the rate determined by reference to
the applicable Interest Rate Basis or Bases (a) plus or minus the
applicable Spread, if any, and/or (b) multiplied by the applicable Spread
Multiplier, if any. Commencing on the first Interest Reset Date, the rate
at which interest on such Regular Floating Rate Note shall be payable shall
be reset as of each Interest Reset Date; provided, however, that the
interest rate in effect for the period from the date of issue to the first
Interest Reset Date will be the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," then, except as described below or in the applicable
Pricing Supplement, such Floating Rate/Fixed Rate Note will bear interest
at the rate determined by reference to the applicable Interest Rate Basis
or Bases (a) plus or minus the applicable Spread, if any, and/or (b)
multiplied by the applicable Spread Multiplier, if any. Commencing on the
first Interest Reset Date, the rate at which interest on such Floating
Rate/Fixed Rate Note shall be payable shall be reset as of each Interest
Reset Date; provided however, that the interest rate in effect for the
period from the date of issue to the first Interest Reset Date will be the
Initial Interest Rate and the interest rate in effect commencing on the
Fixed Rate Commencement Date to the Maturity Date shall be the Fixed
Interest Rate, if such rate is specified in the applicable Pricing
Supplement or, if no such Fixed Interest Rate is so specified, the interest
rate in effect thereon on the day immediately preceding the Fixed Rate
Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Inverse Floating Rate Note will bear interest equal to the
Fixed Interest Rate specified in the applicable Pricing Supplement minus
the rate determined by reference to the applicable Interest Rate Basis or
Bases (a) plus or minus the applicable Spread, if any and/or (b) multiplied
by the applicable Spread Multiplier, if any; provided, however that, unless
otherwise specified in the applicable Pricing Supplement, the interest rate
thereon during any
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Interest Reset Period (as defined below) will not be less than zero.
Commencing on the first Interest Reset Date, the rate at which interest on
such Inverse Floating Rate Note is payable shall be reset as of each
Interest Reset Date; provided, however, that the interest rate in effect
for the period from the date of issue to the first Interest Reset Date will
be the Initial Interest Rate.
The "Spread" is the number of basis points to be added to or subtracted
from the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest Rate
Basis or Bases will be multiplied to determine the applicable interest rate on
such Floating Rate Note. The "Index Maturity" is the period to maturity of the
instrument or obligation with respect to which the related Interest Rate Basis
or Bases will be calculated.
Notwithstanding the foregoing, if such Floating Rate Note is designated as
having an Addendum attached as specified on the face thereof, such Floating Rate
Note shall bear interest in accordance with the terms described in such Addendum
and the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Pricing Supplement, the interest rate in effect on each day shall
be (i) if such day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date (as defined below) immediately preceding such
Interest Reset Date or (ii) if such day is not an Interest Reset Date, the
interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date.
The applicable Pricing Supplement will designate one or more of the
following interest rate bases as applicable to each Floating Rate Note: (a) the
CD Rate (a "CD Rate Note"); (b) the CMT Rate (a "CMT Rate Note"); (c) the
Commercial Paper Rate (a "Commercial Paper Rate Note"); (d) the Eleventh
District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate Note");
(e) the Federal Funds Rate (a "Federal Funds Rate Note"); (f) LIBOR (a "LIBOR
Note"); (g) the Prime Rate (a "Prime Rate Note"); (h) the Treasury Rate (a
"Treasury Rate Note"); or (i) such other interest rate basis as is set forth in
such Pricing Supplement; provided, however, that with respect to a Floating
Rate/Fixed Rate Note, the interest rate commencing on the Fixed Rate
Commencement Date to the Maturity Date shall be the Fixed Interest Rate, if such
rate is specified in the applicable Pricing Supplement or, if no such Fixed
Interest Rate is so specified, the interest rate in effect thereon on the day
immediately preceding the Fixed Rate Commencement Date.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following (in each case expressed as a rate per
annum on a simple interest basis): (i) a maximum numerical interest rate
limitation, or ceiling, on the rate of interest which may accrue during any
interest period (a "Maximum Interest Rate"); and (ii) a minimum numerical
interest rate limitation, or floor, on the rate of interest which may accrue
during any interest period (a "Minimum Interest Rate"). The interest rate on the
Notes will in no event be higher than the maximum rate permitted by applicable
law as the same may be modified by United States law of general application.
The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually, annually or such other specified period (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Date will be, in the case of
Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Floating Rate Notes
as to which the Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month (with the exception of monthly reset Floating Rate
Notes as to which the Eleventh District Cost of Funds Rate is an applicable
Interest Rate Basis, which will reset on the first calendar day of the month);
(iv) quarterly, the third Wednesday of March, June, September and December of
each year; (v) semiannually, the third Wednesday of the two months specified in
the applicable Pricing Supplement; and (vi) annually, the third Wednesday of the
month specified in the
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applicable Pricing Supplement; provided, however, that, with respect to Floating
Rate/Fixed Rate Notes, the fixed rate of interest in effect for the period from
the Fixed Rate Commencement Date to the Maturity Date shall be the Fixed
Interest Rate or, if no such Fixed Interest Rate is specified, the interest rate
in effect on the day immediately preceding the Fixed Rate Commencement Date, as
specified in the applicable Pricing Supplement. If any Interest Reset Date for
any Floating Rate Note would otherwise be a day that is not a Business Day, such
Interest Reset Date will be postponed to the next succeeding day that is a
Business Day, except that in the case of a Floating Rate Note as to which LIBOR
is an applicable Interest Rate Basis, if such Business Day falls in the next
succeeding calendar month, such Interest Reset Date will be the immediately
preceding Business Day.
The interest rate applicable to each Interest Reset Period commencing on
the Interest Reset Date with respect to such Interest Reset Period will be the
rate determined as of the applicable Interest Determination Date on or prior to
the Calculation Date (as defined below). The "Interest Determination Date" with
respect to the CD Rate Notes, the CMT Rate Notes, the Commercial Paper Rate
Notes, the Federal Funds Rate Notes and the Prime Rate Notes will be the second
Business Day immediately preceding the applicable Interest Reset Date; the
"Interest Determination Date" with respect to the Eleventh District Cost of
Funds Rate Notes will be the last working day of the month immediately preceding
the applicable Interest Reset Date on which the Federal Home Loan Bank of San
Francisco publishes the Index (as defined below); and the "Interest
Determination Date" with respect to LIBOR Notes will be the second London
Business Day immediately preceding the applicable Interest Reset Date. With
respect to Treasury Rate Notes, the "Interest Determination Date" will be the
day in the week in which the applicable Interest Reset Date falls on which day
Treasury Bills (as defined below) are normally auctioned (Treasury Bills are
normally sold at an auction held on Monday of each week, unless that day is a
legal holiday, in which case the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday);
provided, however, that if an auction is held on the Friday of the week
preceding the applicable Interest Reset Date, the Interest Determination Date
will be such preceding Friday; and provided, further, that if an auction falls
on the applicable Interest Reset Date, then the Interest Reset Date will instead
be the first Business Day following such auction. The "Interest Determination
Date" pertaining to a Floating Rate Note, the interest rate of which is
determined by reference to two or more Interest Rate Bases, will be the second
Business Day prior to the applicable Interest Reset Date for such Floating Rate
Note on which each Interest Rate Basis is determinable. Each Interest Rate Basis
will be determined on such date, and the applicable interest rate will take
effect on the applicable Interest Reset Date.
If any Interest Payment Date for any Floating Rate Note (other than the
Maturity Date) would otherwise be a day that is not a Business Day, such
Interest Payment Date will be postponed to the next day that is a Business Day,
except that in the case of a Floating Rate Note which is a LIBOR Note, if such
Business Day falls in the next succeeding calendar month, such Interest Payment
Date shall be the immediately preceding Business Day. If a Maturity Date of a
Floating Rate Note falls on a date that is not a Business Day, the required
payment of interest and principal (and premium, if any) may be made on the next
succeeding Business Day, and no interest on such payment will accrue for the
period from and after the Maturity Date to the date of such payment on the next
succeeding Business Day.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes shall be the amount of interest accrued from
and including the date of issue or from and including the last date to which
interest has been paid to, but, excluding, the Interest Payment Date or Maturity
Date as the case may be. The interest rate in effect on any Interest Reset Date
will be the applicable rate as reset on such date. The interest rate applicable
to any other day is the interest rate from the immediately preceding Interest
Reset Date (or, if none, the Initial Interest Rate).
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the period for which accrued interest is being calculated. Unless
otherwise specified in the applicable Pricing Supplement, the interest factor
for each such day will be computed by dividing the interest rate applicable to
such day by 360, in the case of CD Rate Notes, Commercial Paper Rate Notes,
Eleventh District Cost of Funds Rate Notes, Federal Funds Rate Notes, LIBOR
Notes or Prime Rate Notes,
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<PAGE> 7
or by the actual number of days in the year in the case of CMT Rate Notes or the
Treasury Rate Notes. Unless otherwise specified in the applicable Pricing
Supplement, the interest factor for Notes for which the interest rate is
calculated with reference to two or more Interest Rate Bases will be calculated
in each period in the same manner as if only one of the applicable Interest Rate
Bases applied as specified in the applicable Pricing Supplement. All percentages
resulting from any calculation on Floating Rate Notes will be rounded to the
nearest one hundred-thousandth of a percentage point, with five one-millionths
of a percentage point rounded upwards (e.g. 9.876545% (or .09876545) would be
rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting
from such calculation on Floating Rate Notes will be rounded to the nearest
cent.
Upon request of the Holder of any Floating Rate Note, the Calculation Agent
will disclose the interest rate then in effect and, if determined, the interest
rate that will become effective as a result of a determination made for the next
succeeding Interest Reset Date with respect to such Floating Rate Note. Unless
otherwise specified in the applicable Pricing Supplement, the "Calculation
Date," if applicable, pertaining to any Interest Determination Date will be the
earlier of (i) the tenth calendar day after such Interest Determination Date,
or, if such day is not a Business Day, the next succeeding Business Day or (ii)
the Business Day immediately preceding the applicable Interest Payment Date or
the Maturity Date, as the case may be.
CD Rate Notes. CD Rate Notes will bear interest at the rates (calculated
with reference to the CD Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in such CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date relating to a CD Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CD Rate (a "CD Rate Interest Determination Date"), the rate on
such date for negotiable certificates of deposit having the Index Maturity
specified in the applicable Pricing Supplement as published by the Board of
Governors of the Federal Reserve System in "Statistical Release H.15(519),
Selected Interest Rates" or any successor publication ("H.15(519)") under the
heading "CDs (Secondary Market)," or, if not published by 3:00 P.M., New York
City time, on the related Calculation Date, the rate on such CD Rate Interest
Determination Date for negotiable certificates of deposit of the Index Maturity
specified in the applicable Pricing Supplement as published by the Federal
Reserve Bank of New York in its daily statistical release "Composite 3:30 P.M.
Quotations for U.S. Government Securities" or any successor publication
("Composite Quotations") under the heading "Certificates of Deposit." If such
rate is not yet published in either H.15(519) or Composite Quotations by 3:00
P.M., New York City time, on the related Calculation Date, then the CD Rate on
such CD Rate Interest Determination Date will be calculated by the Calculation
Agent and will be the arithmetic mean of the secondary market offered rates as
of 10:00 A.M., New York City time, on such CD Rate Interest Determination Date,
of three leading nonbank dealers in negotiable United States dollar certificates
of deposit in The City of New York (which may include one or more of the Agents
or their affiliates) selected by the Calculation Agent for negotiable
certificates of deposit of major United States money market banks for negotiable
certificates of deposit with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement in an amount that is
representative for a single transaction in that market at that time; provided,
however, that if the dealers so selected by the Calculation Agent are not
quoting as mentioned in this sentence, the CD Rate determined as of such CD Rate
Interest Determination Date will be the CD Rate in effect on such CD Rate
Interest Determination Date.
CMT Rate Notes. CMT Rate Notes will bear interest at the rates (calculated
with reference to the CMT Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in such CMT Rate Notes and any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date relating to a CMT Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CMT Rate (a "CMT Rate Interest Determination Date"), the rate
displayed on the Designated CMT Telerate Page (as defined below) under the
caption ". . .Treasury
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Constant Maturities . . . Federal Reserve Board Release H.15 . . . Monday's
Approximately 3:45 P.M.," under the column for the Designated CMT Maturity Index
(as defined below) for (i) if the Designated CMT Telerate Page is 7055, the rate
on such CMT Rate Interest Determination Date and (ii) if the Designated CMT
Telerate Page is 7052, the week, or the month, as specified in the applicable
Pricing Supplement, ended immediately preceding the week in which the related
CMT Rate Interest Determination Date occurs. If such rate is no longer displayed
on the relevant page, or if not displayed by 3:00 P.M., New York City time, on
the related Calculation Date, then the CMT Rate for such CMT Rate Interest
Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index as published in the relevant H.15(519). If such
rate is no longer published, or if not published by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate for such CMT Rate
Interest Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the CMT Rate Interest Determination Date with
respect to such Interest Reset Date as may then be published by either the Board
of Governors of the Federal Reserve System or the United States Department of
the Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate for the CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be a yield to maturity, based on the arithmetic mean of the secondary market
closing offer side prices as of approximately 3:30 P.M., New York City time, on
the CMT Rate Interest Determination Date reported, according to their written
records, by three leading primary United States government securities dealers
(each, a "Reference Dealer") in The City of New York (which may include one or
more of the Agents or their affiliates) selected by the Calculation Agent (from
five such Reference Dealers selected by the Calculation Agent and eliminating
the highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for the
most recently issued direct noncallable fixed rate obligations of the United
States ("Treasury Notes") with an original maturity of approximately the
Designated CMT Maturity Index and a remaining term to maturity of not less than
such Designated CMT Maturity Index minus one year. If the Calculation Agent
cannot obtain three such Treasury Note quotations, the CMT Rate for such CMT
Rate Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity based on the arithmetic mean of the secondary market
offer side prices as of approximately 3:30 P.M., New York City time, on the CMT
Rate Interest Determination Date of three Reference Dealers in The City of New
York (from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for Treasury Notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an amount
of at least $100 million. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided, however, that if fewer than
three Reference Dealers selected by the Calculation Agent are quoting as
described herein, the CMT Rate will be the CMT Rate in effect on such CMT Rate
Interest Determination Date. If two Treasury Notes with an original maturity as
described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the quotes for the Treasury
Note with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on that service) for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519). If no such
page is specified in the applicable Pricing Supplement, the Designated CMT
Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be 2 years.
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Commercial Paper Rate Notes. Commercial Paper Rate Notes will bear interest
at the interest rates (calculated with reference to the Commercial Paper Rate
and the Spread and/or Spread Multiplier, if any, and subject to the Minimum
Interest Rate and the Maximum Interest Rate, if any) specified in the Commercial
Paper Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means with respect to any Interest Determination Date
relating to a Commercial Paper Rate Note or any Floating Rate Note for which the
interest rate is determined with reference to the Commercial Paper Rate (a
"Commercial Paper Rate Interest Determination Date"), the Money Market Yield (as
defined below) on such date of the rate for commercial paper having the Index
Maturity specified in the applicable Pricing Supplement as published in
H.15(519) under the heading "Commercial Paper." In the event that such rate is
not published by 3:00 p.m., New York City time, on the related Calculation Date
then the Commercial Paper Rate will be the Money Market Yield (as defined below)
on such Commercial Paper Rate Interest Determination Date of the rate for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement as published in Composite Quotations under the heading "Commercial
Paper" (with an Index Maturity of one month or three months being deemed to be
equivalent to an Index Maturity of 30 days or 90 days, respectively). If by 3:00
p.m., New York City time, on the related Calculation Date such rate is not yet
published in H.15(519) or Composite Quotations, then the Commercial Paper Rate
on such Interest Determination Date will be calculated by the Calculation Agent
and will be the Money Market Yield of the arithmetic mean of the offered rates
at approximately 11:00 A.M., New York City time, on such Commercial Paper Rate
Interest Determination Date of three leading dealers of commercial paper in The
City of New York (which may include one or more of the Agents or their
affiliates) selected by the Calculation Agent for commercial paper having the
Index Maturity designated in the applicable Pricing Supplement placed for an
industrial issuer whose bond rating is "AA," or the equivalent, from a
nationally recognized rating agency; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the Commercial Paper Rate will be the Commercial Paper Rate in
effect on such Commercial Paper Rate Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage rounded to
the nearest one-hundredth of a percent, with five one-thousandths of a percent
rounded upwards) calculated in accordance with the following formula:
D X 360
Money Market Yield = ------------- X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
Eleventh District Cost of Funds Rate Notes. Eleventh District Cost of Funds
Rate Notes will bear interest at the rates (calculated with reference to the
Eleventh District Cost of Funds Rate and the Spread and/or Spread Multiplier, if
any, and subject to the Minimum Interest Rate and the Maximum Interest Rate, if
any) specified in such Eleventh District Cost of Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" means, with respect to any Interest Determination
Date relating to an Eleventh District Cost of Funds Rate Note or any Floating
Rate Note for which the interest rate is determined with reference to the
Eleventh District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate
Interest Determination Date"), the rate equal to the monthly weighted average
cost of funds for the calendar month immediately preceding the month in which
such Eleventh District Cost of Funds Rate Interest Determination Date falls, as
set forth under the caption "11th District" on Telerate Page 7058 as of 11:00
A.M. San Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on any
related Eleventh District Cost of Funds Rate Interest Determination Date, the
Eleventh District Cost of Funds Rate for such Eleventh District Cost of Funds
Rate Interest Determination Date shall be the monthly weighted average costs of
funds paid by member institutions of the Eleventh Federal Home
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Loan Bank District that was most recently announced (the "Index") by the Federal
Home Loan Bank of San Francisco as such cost of funds for the calendar month
immediately preceding the date of such announcement. If the Federal Home Loan
Bank of San Francisco fails to announce such rate for the calendar month
immediately preceding such Eleventh District Cost of Funds Rate Interest
Determination Date, then the Eleventh District Cost of Funds Rate determined as
of such Eleventh District Cost of Funds Rate Interest Determination Date will be
the Eleventh District Cost of Funds Rate in effect on such Eleventh District
Cost of Funds Rate Interest Determination Date.
Federal Funds Rate Notes. Federal Funds Rate Notes will bear interest at
the rates (calculated with reference to the Federal Funds Rate and the Spread
and/or Spread Multiplier, if any, and subject to the Minimum Interest Rate and
the Maximum Interest Rate, if any) specified in such Federal Funds Rate Notes
and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to a
Federal Funds Rate Note or any Floating Rate Note for which the interest rate is
determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for federal funds as
published in H.15(519) under the heading "Federal Funds (Effective)" or, if not
published by 3:00 P.M. New York City time, on the related Calculation Date, the
rate on such Federal Funds Rate Interest Determination Date as published in
Composite Quotations under the column "Effective Rate" under the heading
"Federal Funds." If by 3:00 P.M., New York City time, on the related Calculation
Date such rate is not published in either H.15(519) or Composite Quotations,
then the Federal Funds Rate on such Federal Funds Rate Interest Determination
Date will be calculated by the Calculation Agent and will be the arithmetic mean
of the rates for the last transaction in overnight United States dollar federal
funds arranged by three leading brokers of federal funds transactions in The
City of New York (which may include one or more of the Agents or their
affiliates) selected by the Calculation Agent prior to 9:00 A.M., New York City
time, on such Federal Funds Rate Interest Determination Date; provided, however,
that if the brokers so selected by the Calculation Agent are not quoting as
mentioned in this sentence, the Federal Funds Rate determined as of such Federal
Funds Rate Interest Determination Date will be the Federal Funds Rate in effect
on such Federal Funds Rate Interest Determination Date.
LIBOR Notes. LIBOR Notes will bear interest at the interest rates
(calculated with reference to LIBOR and the Spread and/or Spread Multiplier, if
any, and subject to the Minimum Interest Rate and the Maximum Interest Rate, if
any) specified in the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "LIBOR"
will be determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to a LIBOR Interest Determination Date relating to a
LIBOR Note or any Floating Rate Note for which the interest is determined
with reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will
be, as specified in the applicable Pricing Supplement, either: (a) the
arithmetic mean of the offered rates for deposits in U.S. dollars having
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Business Day immediately following that
LIBOR Interest Determination Date, that appear on the Reuters Screen LIBO
Page as of 11:00 A.M., London time, on that LIBOR Interest Determination
Date, if at least two such offered rates appear on the Reuters Screen LIBO
Page ("LIBOR Reuters"), or (b) the rate for deposits in U.S. dollars having
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Business Day immediately following that
LIBOR Interest Determination Date, that appears on the Telerate Page 3750
as of 11:00 A.M., London time, on that LIBOR Interest Determination Date
("LIBOR Telerate"). "Reuters Screen LIBO Page" means the display designated
as page "LIBO" on the Reuters Monitor Money Rates Service (or such other
page as may replace the LIBO page on that service for the purpose of
displaying London interbank offered rates of major banks). "Telerate Page
3750" means the display designated as page "3750" on the Telerate Service
(or such other page as may replace the 3750 page on that service or such
other service or services as may be nominated by the British Bankers'
Association for the purpose of displaying London interbank offered
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rates for U.S. dollar deposits). If neither LIBOR Reuters nor LIBOR
Telerate is specified in the applicable Pricing Supplement, LIBOR will be
determined as if LIBOR Telerate had been specified. If fewer than two
offered rates appear on the Reuters Screen LIBO Page, or if no rate appears
on the Telerate Page 3750, as applicable, LIBOR in respect of that LIBOR
Interest Determination Date will be determined as if the parties had
specified the rate described in (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear on the Reuters Screen LIBO Page, as
specified in (i)(a) above, or on which no rate appears on Telerate Page
3750, as specified in (i)(b) above, as applicable, LIBOR will be determined
on the basis of the rates at which deposits in U.S. dollars having the
Index Maturity designated in the applicable Pricing Supplement are offered
at approximately 11:00 A.M., London time, on that LIBOR Interest
Determination Date by four major banks in the London interbank market
selected by the Calculation Agent ("Reference Banks") to prime banks in the
London interbank market commencing on the second London Business Day
immediately following that LIBOR Interest Determination Date and in a
principal amount equal to an amount of not less than $1,000,000 that is
representative for a single transaction in such market at such time. The
Calculation Agent will request the principal London office of each of the
Reference Banks to provide a quotation of its rate. If at least two such
quotations are provided, LIBOR in respect of that LIBOR Interest
Determination Date will be the arithmetic mean of such quotations. If fewer
than two quotations are provided, LIBOR in respect of that LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 A.M., New York City time, on the LIBOR Interest
Determination Date by three major banks in The City of New York selected by
the Calculation Agent for loans in U.S. dollars to leading European banks
having the Index Maturity designated in the applicable Pricing Supplement
commencing on the second London Business Day immediately following that
LIBOR Interest Determination Date and in a principal amount equal to an
amount of not less than $1,000,000 that is representative for a single
transaction in such market at such time; provided, however, that if the
banks selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, LIBOR with respect to such LIBOR Interest
Determination Date will be the rate of LIBOR in effect on such date.
Prime Rate Notes. Prime Rate Notes will bear interest at the rates
(calculated with reference to the Prime Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in such Prime Rate Notes and the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date relating to a Prime
Rate Note or any Floating Rate Note for which the interest rate is determined
with reference to the Prime Rate (a "Prime Rate Interest Determination Date"),
the rate on such date as such rate is published in H.15(519) under the heading
"Bank Prime Loan." If such rate is not published prior to 3:00 P.M., New York
City time, on the related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen US PRIME 1 (as defined below) as such bank's prime
rate or base lending rate as in effect for such Prime Rate Interest
Determination Date. If fewer than four such rates but more than one such rate
appear on the Reuters Screen US PRIME 1 for such Prime Rate Interest
Determination Date, the Prime Rate shall be the arithmetic mean of the prime
rates quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date by four major money center banks in The City of New York
selected by the Calculation Agent. If fewer than two such rates appear on the
Reuters Screen US PRIME 1, the Prime Rate will be determined by the Calculation
Agent on the basis of the rates furnished in The City of New York by three
substitute banks or trust companies organized and doing business under the laws
of the United States, or any State thereof, having total equity capital of at
least $500 million and being subject to supervision or examination by Federal or
State authority, selected by the Calculation Agent to provide such rate or
rates; provided, however, that if the banks or trust companies selected as
aforesaid are not quoting as mentioned in this sentence, the Prime Rate
determined as of such Prime Rate Interest Determination Date will be the Prime
Rate in effect on such Prime Rate Interest Determination Date.
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"Reuters Screen US PRIME 1" means the display designated as page "US PRIME
1" on the Reuters Monitor Money Rates Service (or such other page as may replace
the US PRIME 1 page on that service for the purpose of displaying prime rates or
base lending rates of major United States banks).
Treasury Rate Notes. Treasury Rate Notes will bear interest at the interest
rates (calculated with reference to the Treasury Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Treasury Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Rate Note or any Floating Rate Note for which the interest rate is
determined by reference in the Treasury Rate (a "Treasury Rate Interest
Determination Date"), the rate applicable to the most recent auction of direct
obligations of the United States ("Treasury Bills") having the Index Maturity
designated in the applicable Pricing Supplement as published in H.15(519) under
the heading "Treasury Bills -- auction average (investment)" or, if not so
published by 3:00 P.M., New York City time, on the related Calculation Date
pertaining to such Treasury Rate Interest Determination Date, the auction
average rate (expressed as a bond equivalent on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) as otherwise announced by
the United States Department of the Treasury. In the event that the results of
the auction of Treasury Bills having the Index Maturity designated in the
applicable Pricing Supplement are not published or reported as provided above by
3:00 P.M., New York City time, on such Calculation Date or if no such auction is
held on such Treasury Rate Interest Determination Date, then the Treasury Rate
shall be calculated by the Calculation Agent and shall be a yield to maturity
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 P.M., New York City time,
on such Treasury Rate Interest Determination Date, of three leading primary
United States government securities dealers (which may include one or more of
the Agents or their affiliates) selected by the Calculation Agent for the issue
of Treasury Bills with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement; provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Treasury Rate will be the Treasury Rate in
effect on such Treasury Rate Interest Determination Date.
SUBSEQUENT INTEREST PERIODS
The applicable Pricing Supplement relating to each Note will indicate
whether the Company has the option to reset the interest rate in the case of a
Fixed Rate Note, or the Spread or Spread Multiplier in the case of a Floating
Rate Note, and, if so, the date or dates on which such interest rate or such
Spread or Spread Multiplier, as the case may be, may be reset (each an "Optional
Reset Date").
If the Company elects to reset the interest rate, Spread or Spread
Multiplier of a Note as described above, the Holder of such Note will have the
option to elect repayment of such Note by the Company on any Optional Reset Date
at a price equal to the aggregate principal amount thereof outstanding on, plus
any interest accrued to, such Optional Reset Date. In order for a Note to be so
repaid on an Optional Reset Date, the Holder thereof must follow the procedures
set forth below under "Redemption and Repayment" for optional repayment, except
that (i) the period for delivery of such Note or notification to the Trustee
will be at least 25 but not more than 35 days prior to such Optional Reset Date
and (ii) a holder who has tendered a Note for repayment pursuant to a Reset
Notice may, by written notice to the Trustee, revoke any such tender until the
close of business on the tenth day prior to such Optional Reset Date.
The Company may exercise such option with respect to a Note by notifying
the Trustee of such exercise at least 45 but not more than 60 days prior to an
Optional Reset Date for such Note. Not later than 40 days prior to such Optional
Reset Date, the Trustee for such Note will mail to the Holder of such Note a
notice (the "Reset Notice"), first class, postage prepaid. The Reset Notice will
indicate whether the Company has elected to reset the interest rate (in the case
of a Fixed Rate Note) or the Spread or Spread Multiplier (in the case of a
Floating Rate Note) and if so, (i) such new interest rate or such new Spread or
Spread Multiplier, as the case may be; and (ii) the provisions, if any, for
redemption during the period from such Optional Reset
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Date to the next Optional Reset Date or, if there is no such next Optional Reset
Date, to the Stated Maturity of such Note (each such period a "Subsequent
Interest Period"), including the date or dates on which or the period or periods
during which and the price or prices at which such redemption may occur during
such Subsequent Interest Period.
Notwithstanding the foregoing, the Company may, at its option, revoke the
interest rate (in the case of a Fixed Rate Note) or the Spread or Spread
Multiplier (in the case of a Floating Rate Note) as provided for in the Reset
Notice, and establish an interest rate, Spread or Spread Multiplier that is
higher (or lower if the Note is an Inverse Floating Rate Note) than the interest
rate, Spread or Spread Multiplier provided for in the relevant Reset Notice for
the Subsequent Interest Period commencing on such Optional Reset Date, by
causing the Trustee to mail, not later than 20 days prior to an Optional Reset
Date for a Note (or, if such day is not a Business Day, on the immediately
succeeding Business Day), notice of such higher interest rate, or new Spread or
Spread Multiplier to the Holder of such Note. Such notice will be irrevocable.
The Company must notify the Trustee of its intentions to revoke such Reset
Notice at least 25 days prior to such Optional Reset Date. Each Note with
respect to which the interest rate, Spread or Spread Multiplier is reset on an
Optional Reset Date and with respect to which the holder of such Note has not
tendered such Note for repayment (or has validly revoked any such tender)
pursuant to the next succeeding paragraph will bear such higher interest rate,
or new Spread or Spread Multiplier for the Subsequent Interest Period.
EXTENSION OF MATURITY
Unless otherwise stated in the applicable Pricing Supplement, each Note
will finally mature at the Stated Maturity of such Note. The applicable Pricing
Supplement relating to any Note (other than an Amortizing Note) may indicate
whether the Company has the option to extend the Stated Maturity of such Note
for one or more periods of whole years from one to five (each an "Extension
Period") up to but not beyond the date (the "Final Maturity") set forth in such
Pricing Supplement.
The Company may exercise such option with respect to a Note by notifying
the Trustee of such exercise at least 45 but not more than 60 days prior to the
old Stated Maturity for such Note. Not later than 40 days prior to the old
Stated Maturity of such Note, the Trustee for such Note will mail to the Holder
of such Note a notice (the "Extension Notice"), first class, postage prepaid.
The Extension Notice will set forth (i) the election of the Company to extend
the Stated Maturity of such Note; (ii) the new Stated Maturity; (iii) in the
case of a Fixed Rate Note, the interest rate applicable to the Extension Period
or, in the case of a Floating Rate Note, the Spread or Spread Multiplier
applicable to the Extension Period; and (iv) the provisions, if any, for
redemption during the Extension Period, including the date or dates on which or
the period or periods during which and the price or prices at which such
redemption may occur during the Extension Period. Upon the mailing by such
Trustee of an Extension Notice to the Holder of a Note, the Stated Maturity of
such Note shall be extended automatically, and, except as modified by the
Extension Notice and as described in the next paragraph, such Note will have the
same terms as prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 20 days prior to the old
Stated Maturity of such Note (or, if such day is not a Business Day, on the
immediately succeeding Business Day), the Company may, at its option, revoke the
interest rate (in the case of a Fixed Rate Note) or the Spread or Spread
Multiplier (in the case of a Floating Rate Note) provided for in the Extension
Notice for such Note and establish a higher interest rate (in the case of a
Fixed Rate Note) or a higher Spread or Spread Multiplier (in the case of a
Floating Rate Note, or a lower Spread or Spread Multiplier in the case of an
Inverse Floating Rate Note) for the Extension Period, by causing the Trustee for
such Note to mail notice of such higher interest rate or new Spread or Spread
Multiplier, as the case may be, first class, postage prepaid, to the Holder of
such Note. Such notice will be irrevocable. All Notes with respect to which the
Stated Maturity is extended will bear such higher interest rate (in the case of
Fixed Rate Notes) or new Spread or Spread Multiplier (in the case of Floating
Rate Notes) for the Extension Period, whether or not tendered for repayment.
If the Company extends the Stated Maturity of a Note, the Holder of such
Note will have the option to elect repayment of such Note by the Company on the
old Stated Maturity at a price equal to the principal amount thereof, plus
interest accrued to such date. In order for a Note to be repaid on the old
Stated Maturity
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once the Company has extended the Stated Maturity thereof, the Holder thereof
must follow the procedures set forth below under "Redemption and Repayment" for
optional repayment, except that (i) the period for delivery of such Note or
notification to the Trustee for such Note will be at least 25 but not more than
35 days prior to the old Stated Maturity and (ii) a Holder who has tendered a
Note for repayment pursuant to an Extension Notice may, by written notice to the
Trustee, revoke any such tender for repayment until the close of business on the
tenth day before the old Stated Maturity.
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes. Unless otherwise
specified in the applicable Pricing Supplement, interest on each Amortizing Note
will be computed on the basis of a 360-day year of twelve 30-day months.
Payments with respect to Amortizing Notes will be applied first to interest due
and payable thereon and then to the reduction of the unpaid principal amount
thereof. Further information concerning additional terms and provisions of
Amortizing Notes will be specified in the applicable Pricing Supplement. A table
setting forth repayment information in respect of each Amortizing Note will be
included in the applicable Pricing Supplement and set forth in each such Note.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may offer Original Issue Discount Notes from time to time. Such
Original Issue Discount Notes may currently pay no interest or interest at a
rate which at the time of issuance is below market rates. In the event of
redemption, repayment or acceleration of maturity in respect of an Original
Issue Discount Note, the amount payable to the holder of such Original Issue
Discount Note will be equal to (i) the Amortized Face Amount (as defined below)
as of the date of such event, plus (ii) with respect to any redemption of an
Original Issue Discount Note, the Initial Redemption Percentage specified in the
applicable Pricing Supplement (as adjusted by the Annual Redemption Percentage
Reduction, if applicable) minus 100% multiplied by the Issue Price specified in
such Pricing Supplement (the "Issue Price"), net of any portion of such Issue
Price which has been paid prior to the date of redemption, or the portion of the
Issue Price (or the net amount) proportionate to the portion of the unpaid
principal amount to be redeemed, plus (iii) any accrued interest to the date of
such event the payment of which would constitute qualified stated interest
payments within the meaning of Treasury Regulation Section 1.1273-1(c) under the
Internal Revenue Code of 1986, as amended (the "Code"). Such interest will be
computed on the basis of a 360-day year of twelve 30-day months, compounded
semiannually.
If any Maturity of an Original Issue Discount Note which bears no interest
falls on a day that is not a Business Day with respect to such Original Issue
Discount Note, the payment due at such Maturity will be made on the following
day that is a Business Day as if it were made on the date such payment was due
and no interest shall accrue on the amount so payable for the period from and
after such Maturity.
The "Amortized Face Amount" of an Original Issue Discount Note means an
amount equal to (i) the Issue Price thereof plus (ii) the aggregate portions of
the original issue discount (the excess of the amounts considered as part of the
"stated redemption price at maturity" of such Original Issue Discount Note
within the meaning of Section 1273(a)(2) of the Internal Revenue Code of 1986,
as amended, (the "Code"), whether denominated as principal or interest, over the
Issue Price) which shall theretofore have accrued pursuant to Section 1272 of
the Code (without regard to Section 1272(a)(7) of the Code) from the date of
issue of such Original Issue Discount Note to the date of determination, minus
(iii) any amount considered as part of the "stated redemption price at maturity"
of such Original Issue Discount Note which has been paid from the date of issue
to the date of determination. Certain additional considerations relating to the
offering of any Original Issue Discount Notes may be set forth in the applicable
Pricing Supplement.
If a bankruptcy case is commenced by or against the Company under the
United States Bankruptcy Code (the "Bankruptcy Code"), it is possible that a
portion of the face amount of an Original Issue Discount Note would be treated
as interest and the unamortized portion thereof would be treated as unmatured
interest under Section 502(b)(2) of the Bankruptcy Code. Unmatured interest is
not allowable as part of a claim under Section 502(b)(2) of the Bankruptcy Code.
Although it is impossible to predict what portion, if any, of the
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face amount of a Discount Note would be treated as unmatured interest, one
possible result is that the bankruptcy court might determine the amount of
unmatured interest on such Note by reference to the amount of amortized original
issue discount of such Note for tax purposes or the unamortized debt discount of
such Note for financial accounting purposes. Each method may yield a
substantially different result.
Holders of Notes with original issue discount will be required to include
the amount of original issue discount in income in accordance with applicable
provisions of the Code, and the Treasury Regulations promulgated thereunder. See
"Certain United States Federal Income Tax Considerations -- U.S. Holders --
Original Issue Discount."
INDEXED NOTES
Notes may be issued with the amount of principal, premium and/or interest
payable in respect thereof to be determined with reference to the price or
prices of specified commodities or stocks, the exchange rate of one or more
specified currencies (including a composite currency such as the European
Currency Unit ("ECU")) relative to an indexed currency or such other price or
exchange rate ("Indexed Notes"), as set forth in the applicable Pricing
Supplement. In certain cases, Holders of Indexed Notes may receive a principal
amount on the Maturity Date that is greater than or less than the face amount of
the Notes depending upon the relative value on the Maturity Date of the
specified indexed item. Information as to the method for determining the amount
of principal, premium, if any, and/or interest payable in respect of Indexed
Notes, certain historical information with respect to the specified indexed item
and tax and other investment considerations associated with an investment in
such Indexed Notes will be set forth in the applicable Pricing Supplement.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the Notes, including the determination of an
Interest Rate Basis, the calculation of the interest rate applicable to a
Floating Rate Note, and the specification of one or more Interest Rate Bases,
the Interest Payment Dates, the Maturity Date or any other variable term
relating thereto, may be modified as specified under "Other Provisions" on the
face of the Note or in an Addendum relating thereto, if so specified on the face
thereof and in the applicable Pricing Supplement.
BOOK-ENTRY SYSTEM
Upon issuance, all Fixed Rate Book-Entry Notes having the same original
issue date, interest rate, if any, amortization schedule, if any, Stated
Maturity and other terms, if any, will be represented by a single Global Note
and all Floating Rate Book-Entry Notes having the same original issue date,
Initial Interest Rate, Base Rate, Interest Payment Period, Interest Payment
Dates, Index Maturity, Spread or Spread Multiplier, if any, Minimum Interest
Rate, if any, Maximum Interest Rate, if any, Stated Maturity and other terms, if
any, will be represented by a single Global Note. Each Global Note representing
Book-Entry Notes will be deposited with, or on behalf of, the Depositary, and
registered in the name of a nominee of the Depositary. Certificated Notes will
not be exchangeable for Book-Entry Notes and, except under the circumstances
described in the Prospectus under "Description of Debt Securities -- Global
Securities," Book-Entry Notes will not be exchangeable for Certificated Notes
and will not otherwise be issuable as Certificated Notes.
A further description of the Depositary and its procedures with respect to
Global Notes representing Book-Entry Notes is set forth in the Prospectus under
"Description of Debt Securities -- Global Securities." The Depositary has
confirmed to the Company, the Agents and the Trustee that it intends to follow
such procedures.
REDEMPTION AND REPAYMENT
The Notes are not subject to redemption by the Company prior to the
Redemption Dates fixed at the time of sale and set forth in Pricing Supplements
hereto. If no Redemption Date is indicated with respect to a Note, such Note is
not redeemable prior to the Stated Maturity. On and after the indicated
Redemption Date, the related Note will be redeemable in whole or in part in
increments of $1,000 at the option of the Company
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at a redemption price equal to 100% of the principal amount to be redeemed,
together with interest thereon payable to the date of redemption, on notice
given not more than 60 nor less than 30 days prior to the date of redemption.
With respect to the redemption of Global Notes, the Depositary advises that if
less than all of the Notes with like tenor and terms are to be redeemed, the
particular interests (in integral multiples of $1,000) in the Global Note
representing the Notes to be redeemed shall be selected by the Depositary's
impartial lottery procedures.
The Notes will be subject to repayment at the option of the holders thereof
in accordance with the terms of the Notes on their respective optional repayment
date or dates, if any, fixed at the time of sale and set forth in the applicable
Pricing Supplement and in the applicable Note (the "Optional Repayment Date").
If no Optional Repayment Date is indicated in such Pricing Supplement and such
Note with respect to a Note, such Note will not be repayable at the option of
the holder prior to the Stated Maturity. Unless otherwise specified in an
applicable Pricing Supplement, on any Optional Repayment Date with respect to
any Note, such Note will be repayable in whole or in part in increments of
$1,000 at the option of the holder thereof at a price equal to 100% of the
principal amount to be repaid, together with interest thereon payable to the
Optional Repayment Date. In order for a Note to be repaid, the Company must
receive at its office or agency for that purpose in New York, New York not more
than 60 nor less than 30 days prior to the Optional Repayment Date, (i) the Note
with the form entitled "Option to Elect Repayment" on the reverse of the Note
duly completed, or (ii) a telegram, telex, facsimile transmission or letter from
a member of a national securities exchange or the National Association of
Securities Dealers, Inc. or a commercial bank or a trust company in the United
States of America setting forth the name of the holder of the Note, the
principal amount of the Note, the amount of the Note to be repaid, a statement
that the option to elect repayment is being exercised thereby and a guarantee
that the Note to be repaid with the form entitled "Option to Elect Repayment" on
the reverse of the Note duly completed will be received by the Company not later
than five Business Days after the date of such telegram, telex, facsimile
transmission or letter and such Note and form duly completed are received by the
Company by such fifth Business Day. Any such notice received by the Company
during such period shall be irrevocable. All questions as to the validity,
eligibility (including time of receipt) and acceptance of any Note for repayment
will be determined by the Company, whose determination will be final and
binding.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) and possible differing
interpretations. This discussion deals only with Notes held as capital assets
and does not purport to deal with persons in special tax situations, such as
financial institutions, insurance companies, regulated investment companies,
dealers in securities or currencies, persons holding Notes as a hedge against
currency risks or as a position in a "straddle" for tax purposes, or persons
whose functional currency is not the United States dollar. This discussion also
does not deal with holders other than original purchasers (except where
otherwise specifically noted). Persons considering the purchase of the Notes
should consult their own tax advisors concerning the application of United
States Federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the Notes arising
under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any other
person whose income or gain in respect of a Note is effectively connected with
the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a holder of a Note that is not a U.S. Holder.
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U.S. HOLDERS
Payments of Interest
Payments of interest on a Note generally will be taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting).
Original Issue Discount
The following summary is a general discussion of the United States Federal
income tax consequences to U.S. Holders of the purchase, ownership and
disposition of Notes issued with original issue discount ("OID"). The following
summary is based on the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and on regulations (the "OID Regulations") promulgated by
the U.S. Department of Treasury (the "Treasury") under the OID provisions of the
Code.
For United States Federal income tax purposes, a Note will have OID to the
extent that the Note's stated redemption price at maturity exceeds its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of 1%
of the Note's stated redemption price at maturity multiplied by the number of
complete years to its maturity from its issue date). The issue price of an
issuance of Notes equals the first offering price at which a substantial amount
of such Notes has been sold (ignoring sales to bond houses, brokers, or similar
persons or organizations acting in the capacity of underwriters, placement
agents, or wholesalers). The stated redemption price at maturity of a Note is
the sum of all payments due on the Note other than qualified stated interest
payments. "Qualified stated interest" is stated interest that is unconditionally
payable in cash or property (other than debt instruments of the issuer) at least
annually at a single fixed rate that appropriately accounts for the length of
the interval between payments. In addition, under the OID Regulations, if a Note
bears interest for one or more accrual periods at a rate below the rate
applicable for the remaining term of such Note (e.g., Notes with teaser rates or
interest holidays), and if the greater of either the resulting foregone interest
on such Note or any "true" discount on such Note (i.e., the excess of the Note's
stated principal amount over its issue price) equals or exceeds a specified de
minimis amount, then the stated interest on the Note would be treated as OID
rather than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Note issued with OID and a maturity of more than
one year must include OID in income as ordinary income over the term of the
Note, regardless of such U.S. Holder's regular method of tax accounting. In
general, a U.S. Holder must include in gross income the sum of the daily
portions of OID that accrue on the Note for each day during the taxable year (or
portion of the taxable year) on which such U.S. Holder held the Note.
Accordingly, a U.S. Holder of a Note issued with OID will include in income
amounts attributable to OID before receiving cash attributable to that income.
To determine the "daily portion" of OID on any Note with OID, OID accruing
during an accrual period (generally, the period between dates on which interest
is paid) is divided by the number of days in the accrual period. An "accrual
period" may be of any length and the accrual periods may vary in length over the
term of the Note, provided that each accrual period is no longer than one year
and each scheduled payment of principal or interest occurs either on the final
day of an accrual period or on the first day of an accrual period. The amount of
OID accruing during an accrual period is generally determined by using a
constant yield to maturity method, and is equal to the excess of (i) the product
of the Note's adjusted issue price at the beginning of the accrual period and
its yield to maturity (determined on the basis of compounding at the close of
each accrual period and approximately adjusted to take into account the length
of the particular accrual period) over (ii) the amount of any qualified stated
interest payments allocable to the accrual period. The Note's "adjusted issue
price" at the beginning of any accrual period generally equals the sum of the
issue price of the Note plus the aggregate amount of OID accrued on the Note in
all prior accrual periods, reduced by the amount of payments on the Note in
prior accrual periods that were not qualified stated interest payments. Under
these rules, U.S. Holders generally will have to include in income increasingly
greater amounts of OID in successive accrual periods.
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A U.S. Holder of a Note with OID that purchases the Note for an amount that
is greater than the Note's adjusted issue price as of the purchase date but less
than or equal to the sum of all amounts payable on the Note after the purchase
date other than payments of qualified stated interest, will be considered to
have purchased the Note at an "acquisition premium." Under the acquisition
premium rules, the amount of OID which such U.S. Holder must include in its
gross income with respect to such Note for any taxable year (or portion thereof
in which the U.S. Holder holds the Note) will be reduced (but not below zero) by
the portion of the acquisition premium properly allocable to the period.
Under the OID Regulations, Floating Rate Notes are either treated as
variable rate debt instruments or contingent payment debt obligations and are
subject to special rules. A Note is a "variable rate debt instrument" if (a) its
issue price does not exceed the total noncontingent principal payments due under
the Note by more than a specified de minimis amount, (b) it provides for stated
interest, paid or compounded at least annually, at current values of (i) one or
more qualified floating rates, (ii) a single fixed rate and one or more
qualified floating rates, (iii) a single objective rate, or (iv) a single fixed
rate and a single objective rate that is a qualified inverse floating rate, and
(c) except as provided under (a) above, it does not provide for any contingent
principal payments.
A "qualified floating rate" is any floating rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the note
is denominated (for example, LIBOR). Although a multiple of a qualified floating
rate will generally not constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than 0.65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than 0.65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the note together will constitute a single qualified floating rate. Two
or more qualified floating rates will be conclusively presumed to meet the
requirements of the preceding sentence if the value of all rates on the issue
date are within 25 basis points of each other.
The OID Regulations provide that an otherwise qualified floating rate that
has restrictions will not be a qualified floating rate unless the restrictions
fall into one of the following categories: (a) a cap, a floor or a periodic
adjustment restriction (a "governor") that is fixed throughout the term of the
note, (b) a cap or similar restriction that is not reasonably expected as of the
issue date significantly to decrease the yield on the note, (c) a floor or
similar restriction that is not reasonably expected as of the issue date to
significantly increase the yield on the note, or (d) a governor or similar
restriction that is not reasonably expected as of the issue date significantly
to increase or decrease the yield on the note. Floating Rate Notes subject to
caps, floors, or governors that do not meet the above requirements could be
treated as debt instruments providing for contingent payments.
An "objective rate" is a rate other than a qualified floating rate, that is
determined by a single fixed formula and that is based on objective financial or
economic information outside of the issuer's control. The OID Regulations also
provide that other variable interest rates may be designated as objective rates
from time to time by the Internal Revenue Service (the "IRS") in the future.
Despite the foregoing, a variable rate of interest on a Floating Rate Note will
not constitute an objective rate if it is reasonably expected that the average
value of the rate during the first half of the Floating Rate Note's term will be
either significantly less than or significantly greater than the average value
of the rate during the final half of the Note's term. A "qualified inverse
floating rate" is any objective rate that is equal to a fixed rate minus a
qualified floating rate, and that reasonably can be expected to inversely
reflect contemporaneous variations in the cost of newly borrowed funds
disregarding permissible restrictions discussed above in the definition of a
qualified floating rate.
The OID Regulations also provide that if a variable rate debt instrument
provides for stated interest at a fixed rate for an initial period of less than
one year followed by a variable rate that is either a qualified floating rate or
an objective rate and if the variable rate on such instrument's issue date is
intended to approximate the fixed rate, then the fixed rate and the variable
rate together will constitute either a single qualified floating rate
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or an objective rate, as the case may be. A fixed rate and a variable rate will
be conclusively presumed to meet the requirements of the preceding sentence if
the value of the variable rate on the issue date does not differ from the value
of the fixed rate by more than 25 basis points.
If a Floating Rate Note that provides for stated interest at either a
single qualified floating rate or a single objective rate throughout the term
thereof qualifies as a "variable rate debt instrument" under the OID
Regulations, then any stated interest on the Floating Rate Note which is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually will constitute qualified stated interest and will be
taxed accordingly. Thus, a Floating Rate Note that provides for stated interest
at either a single qualified floating rate or a single objective rate throughout
the term of the Floating Rate Note and that qualifies as a "variable rate debt
instrument" under the OID Regulations will generally not be treated as having
been issued with OID unless the Floating Rate Note is issued at a "true"
discount (i.e., at a price below the Floating Rate Note's stated principal
amount) in excess of a specified de minimis amount. OID on such a Floating Rate
Note arising from "true" discount is allocated to an accrual period using the
constant yield method described above by assuming that the variable rate is a
fixed rate equal to (i) in the case of a qualified floating rate or qualified
inverse floating rate, the value as of the issue date, of the qualified floating
rate or qualified inverse floating rate, or (ii) in the case of an objective
rate (other than a qualified inverse floating rate), a fixed rate that reflects
the yield that is reasonably expected for the Floating Rate Note.
To determine the amount and accrual of OID and qualified stated interest on
any other Floating Rate Note that qualifies as a "variable rate debt
instrument," the OID Regulations provide that the Floating Rate Note is to be
converted into a hypothetical "equivalent" fixed rate debt instrument that has
terms identical to the Floating Rate Note, except that the hypothetical Floating
Rate Note has a fixed rate substituted for the qualified floating rate or
objective rate provided under the Floating Rate Note. Any objective rate (other
than a qualified inverse floating rate) provided for under the terms of the
Floating Rate Note is converted into a fixed rate that reflects the yield that
is reasonably expected for the Floating Rate Note. In the case of a Floating
Rate Note that qualifies as a "variable rate debt instrument" and provides for
stated interest at a fixed rate in addition to either one or more qualified
floating rates or a qualified inverse floating rate, the fixed rate is initially
converted into a qualified floating rate (or a qualified inverse floating rate,
if the Floating Rate Note provides for a qualified inverse floating rate). Under
such circumstances, the qualified floating rate or qualified inverse floating
rate that replaces the fixed rate must be such that the fair market value of the
Floating Rate Note as of the Floating Rate Note's issue date is approximately
the same as the fair market value of an otherwise identical debt instrument that
provides for either the qualified floating rate or qualified inverse floating
rate rather than the fixed rate. Subsequent to converting the fixed rate into
either a qualified floating rate or a qualified inverse floating rate, the
Floating Rate Note is then converted into an "equivalent" fixed rate debt
instrument in the manner described above.
Once the Floating Rate Note is converted into an "equivalent" fixed rate
debt instrument pursuant to the foregoing rules, the amount of OID and qualified
stated interest, if any, are determined for the "equivalent" fixed rate debt
instrument by applying the general OID rules to the "equivalent" fixed rate debt
instrument. A U.S. Holder of the Floating Rate Note will account for such OID
and qualified stated interest as if the U.S. Holder held the "equivalent" fixed
rate debt instrument. Appropriate adjustments will be made in each accrual
period in the amount of qualified stated interest or OID assumed to have been
accrued or paid with respect to the "equivalent" fixed rate debt instrument in
the event that such amounts differ from the actual amount of interest accrued or
paid on the Floating Rate Note during the accrual period.
If a Floating Rate Note does not qualify as a "variable rate debt
instrument" under the OID Regulations, then the Floating Rate Note would be
treated as a contingent payment debt obligation. Generally, if a Floating Rate
Note were treated as a contingent payment debt obligation, interest thereon
would be treated as "contingent interest" payments. Under the OID Regulations,
any contingent interest payments on a Floating Rate Note would be includible in
income in a taxable year whether or not the amount of any payment is fixed or
determinable in that year. The amount of interest included in income in any
particular accrual period would be determined by constructing a projected
payment schedule (as determined under the OID Regulations) for the Floating Rate
Note and applying daily accrual rules similar to those for accruing OID on Notes
issued with OID (as discussed above). If the actual amount of contingent
interest payments is not equal to the
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projected amount, an adjustment to income at the time of payment must be made to
reflect the difference. The proper United States Federal income tax treatment of
Floating Rate Notes that are treated as contingent payment debt obligations will
be more fully described in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity (a "call option") and/or (ii) may be repayable at
the option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the OID consequences will depend,
in part, on the particular terms and features of the purchased Notes.
Under the OID Regulations, the IRS can apply or depart from the OID
Regulations as necessary or appropriate to achieve a reasonable result where a
principal purpose in structuring a Note or applying the regulations described
above is to achieve a result that is unreasonable in light of the purpose of the
applicable statutes (which generally are intended to achieve the clear
reflection of income for both borrowers and lenders).
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, OID, de minimis OID, market
discount, de minimis market discount, and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium) that accrues on a debt
instrument by using the constant yield method applicable to OID, subject to
certain limitations and exceptions.
The Treasury Department has recently issued temporary regulations relating
to the treatment of "inflation-indexed debt instruments." The proper United
States Federal income tax treatment of any Notes that are inflation-indexed debt
instruments will be described in the applicable Pricing Supplement.
Subsequent Interest Periods and Extension of Maturity
If so specified in the Pricing Supplement relating to an issue of Notes,
the interest rate or Stated Maturity of such Notes may be reset or extended, at
the option of the Company. See "Description of Medium-Term Notes, Series
I--Subsequent Interest Periods" and "Description of Medium-Term Notes, Series
I-- Extension of Maturity." The treatment of a holder of Notes with respect to
which such an option has been exercised and who does not elect to have the
Company repay such Notes on the applicable Optional Reset Date or "old" Stated
Maturity Date will depend on the terms established for such Notes by the Company
pursuant to the exercise of such option ("revised terms"). Depending on the
particular circumstances, such holder may be treated as having surrendered such
Notes for new Notes with the revised terms in a taxable exchange. Purchasers of
such Notes should carefully examine the applicable Pricing Supplement and should
consult with their tax advisers with respect to such a feature since the tax
consequences will depend, in part, on the particular terms and features of the
Note.
Short-Term Notes
Notes that have a fixed maturity of one year or less ("Short-Term Notes")
will be treated as having been issued with OID. U.S. Holders that do not use the
accrual method of accounting for tax purposes generally will not be required to
recognize OID on Short-Term Notes until they receive payment on such Notes. U.S.
Holders on the accrual method and certain other holders including banks and
dealers in securities, however, must accrue OID on Short-Term Notes on a
straight-line basis unless they elect to accrue the OID on a constant yield
basis with daily compounding. For this purpose, OID on a Short-Term Note is the
amount by which the total principal and interest payments on such Note exceed
its issue price. U.S. Holders may elect to include OID on Short-Term notes into
income based on acquisition discount rather than OID. Acquisition discount is
the excess of a Short-Term Note's stated redemption price at maturity over the
U.S. Holder's basis in the Note. Gain recognized on the sale or exchange of a
Short-Term Note by a U.S. Holder that has not accrued OID or acquisition
discount on the Short-Term Note to the extent attributable to accrued interest
and OID (or acquisition discount), is treated as ordinary income. Such a U.S.
Holder also must defer deductions
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for net interest expense on any borrowing attributable to the Short-Term Note to
the extent that the expense does not exceed accrued but unrecognized interest
and OID (or acquisition discount) on the Note.
Market Discount
If a U.S. Holder purchases a Note, other than a Note issued with OID, for
an amount that is less than its stated redemption price at maturity or purchases
a Note issued with OID for an amount that is less than the Note's adjusted issue
price as of the purchase date, the amount of the difference will be treated as
"market discount." A Note is not treated as purchased at a market discount,
however, if the market discount is less than 1/4 of 1 percent of the stated
redemption price at maturity (or the revised issue price in the case of a Note
issued with OID) multiplied by the number of complete years remaining to
maturity ("de minimis market discount"). The revised issue price of a Note
issued with OID is the Note's initial issue price increased by the amount of OID
includible in the gross income of previous holders.
A U.S. Holder of a Note purchased at a market discount (other than a de
minimis market discount) will be required to treat any partial principal payment
(or, in the case of a Note issued with OID, any payment that does not constitute
qualified stated interest) on, or any gain realized on the sale, exchange,
retirement or other disposition of, a Note as ordinary income to the extent of
the lesser of (i) the amount of such payment or realized gain or (ii) the market
discount which has not previously been included in income and is treated as
having accrued on such Note at the time of such payment or disposition. Market
discount will be considered to accrue ratably during the period from the date of
acquisition to the maturity date of the Note, unless the U.S. Holder elects to
accrue market discount on an economic accrual basis.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to the
extent the interest expense exceeds an allocable portion of market discount. A
U.S. Holder may elect to include market discount in income currently as it
accrues (on either a ratable or semiannual compounding basis), in which case the
rules described above regarding the treatment as ordinary income of gain upon
the disposition of the Note and upon the receipt of certain cash payments and
regarding the deferral of interest deductions will not apply. Generally, such
currently included market discount is treated as ordinary interest for United
States Federal income tax purposes. This election to include market discount in
income currently, once made, applies to all market discount obligations acquired
in or after the first taxable year to which the election applies, and may not be
revoked without the consent of the IRS.
Amortizable Bond Premium
If a U.S. Holder purchases a Note for an amount that is greater than the
sum of all amounts payable on the Note after the purchase date other than
payments of qualified stated interest, such U.S. Holder will be considered to
have purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the Note and may reduce interest on the Note
otherwise required to be included in income during any taxable year by the
amortizable premium allocable to the taxable year. However, if the Note may be
optionally redeemed after the U.S. Holder acquires it at a price in excess of
its stated redemption price at maturity, special rules would apply which could
result in a deferral of the amortization of some bond premium until later in the
term of the Note. Amortized bond premium will reduce the U.S. Holder's basis in
the Note. An election to amortize bond premium will apply to all taxable debt
instruments then owned and thereafter acquired by the U.S. Holder, and may not
be revoked without the consent of the IRS.
Disposition of a Note
Except as discussed above and except to the extent that gain or loss is
attributable to accrued but unpaid interest or accrued market discount, upon the
sale, exchange or retirement of a Note, a U.S. Holder generally will recognize
taxable gain or loss equal to the difference between the amount realized on the
sale, exchange or retirement of the Note and such U.S. Holder's adjusted tax
basis in the Note. A U.S. Holder's adjusted tax
S-21
<PAGE> 22
basis in a Note generally will equal such U.S. Holder's initial investment in
the Note increased by any OID included in income (and accrued market discount or
acquisition discount, if any, if the U.S. Holder has included such market
discount or acquisition discount in income) and decreased by the amount of any
payments previously received, other than qualified stated interest payments, and
by any amortized bond premium with respect to such Note. Such gain or loss
generally will be long term if the Note were held for more than one year.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income tax
on payment of principal, premium (if any) or interest (including OID, if any) on
a Note, unless such non-U.S. Holder directly or indirectly owns at least 10% of
the voting power in the Company's stock, or is a controlled foreign corporation
related to the Company or a bank receiving interest described in section
881(c)(3)(A) of the Code, if the non-U.S. Holder certifies, on IRS Form W-8 or
other substantially similar form, that the Holder is not a U.S. person. To
qualify for the exemption from taxation, the last United States payor in the
chain of payment prior to payment to a non-U.S. Holder (the "Withholding Agent")
must have received in the year in which a payment of interest or principal
occurs, or in either of the two preceding calendar years, a statement that (i)
is signed by the beneficial owner of the Note under penalties of perjury, (ii)
certifies that such owner is not a U.S. Holder and (iii) provides the name and
address of the beneficial owner. The statement may be made on an IRS Form W-8 or
a substantially similar form, and the beneficial owner must inform the
Withholding Agent of any change in the information on the statement within 30
days of such change. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However, in
such case, the signed statement must be accompanied by a copy of the IRS Form
W-8 or the substitute form provided by the beneficial owner to the organization
or institution. The Treasury Department has recently issued proposed regulations
regarding the withholding and information reporting rules discussed above. In
general, the proposed regulations do not alter the substantive withholding and
information reporting requirements but unify current certification procedures
and forms and clarify reliance standards. If finalized in their current form,
the proposed regulations would generally be effective for payments made after
December 31, 1997, subject to certain transition rules.
Generally, a non-U.S. Holder will not be subject to United States Federal
income taxes on any amount which constitutes capital gain upon retirement or
disposition of a Note, provided the gain is not effectively connected with the
conduct of a trade or business in the United States by the non-U.S. Holder.
Additionally, a non-U.S. Holder who is a non-resident alien individual who is
present in the U.S. for 183 days or more during the taxable year when the sale
or exchange occurs may be subject to federal income taxation on the gain
realized on the disposition if certain other conditions are met. In that case,
the capital gain is generally subject to a 30% tax. Certain other exceptions may
be applicable, and a non-U.S. Holder should consult its tax advisor in this
regard.
A Note held by an individual who is not a citizen or resident of the United
States (as defined for United States federal estate tax purposes) will not be
subject to United States federal estate tax as a result of such individual's
death, if at the time of death the individual did not directly or indirectly own
10% or more of the total combined voting power of the Company's stock, unless
such individual held such Note in connection with the conduct of a United States
trade or business.
BACKUP WITHHOLDING
Backup withholding of the United States Federal income tax at a rate of 31%
may apply to payments made in respect of Notes to registered owners who are not
"exempt recipients" or who fail to comply with certain procedures for providing
certain identifying information (such as the registered owner's taxpayer
identification number) in the required manner.
Upon the sale of a Note to (or through) certain brokers, the broker must
withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is an exempt recipient or (ii) the seller provides,
in the required manner, certain identifying information and, in the case of a
non-U.S. Holder,
S-22
<PAGE> 23
certifies that such seller is a non-U.S. Holder (and certain other conditions
are met). Certification of the registered owner's non-U.S. status would be made
normally on an IRS Form W-8 under penalties of perjury, although in certain
cases it may be possible to submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis by the Company through
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman
Brothers Inc., Morgan Stanley & Co. Incorporated, Salomon Brothers Inc and
Goldman, Sachs & Co., as Agents, each of whom has agreed to use its best efforts
to solicit purchases of the Notes. The Company will pay each Agent a commission,
in the form of a discount ranging from .125% to .750% of the principal amount of
any Note, depending upon maturity up to and including 30 years, and as agreed
upon at the time of sale for Notes with Stated Maturities greater than 30 years,
sold through such Agent. The Company also may sell the Notes to one or more of
the Agents as principal at a discount for resale to investors or other
purchasers at varying prices related to prevailing market prices at the time of
resale, to be determined by such Agent or, if so agreed, at a fixed public
offering price. In addition, the Company has reserved the right to sell the
Notes directly to investors on its own behalf in those jurisdictions where it is
authorized to do so or to or through others for resale to the public. In the
case of sales made directly by the Company, no commission will be payable. The
Company has agreed to reimburse the Agents for certain expenses.
In addition, the Agents may offer the Notes they have purchased as
principal to other dealers. The Agents may sell Notes to any dealer at a
discount and, unless otherwise specified in the applicable Pricing Supplement,
such discount allowed to any dealer will not be in excess of the discount to be
received by such Agent from the Company. Unless otherwise indicated in the
applicable Pricing Supplement, any Note sold to an Agent as principal will be
purchased by such Agent at a price equal to 100% of the principal amount thereof
less a percentage equal to the commission applicable to any agency sale of a
Note of identical maturity, and may be resold by the Agent to investors and
other purchasers as described above. After the initial public offering of Notes
to be resold to investors and other purchasers on a fixed public offering price
basis, the public offering price (in the case of Notes to be sold at a fixed
public offering price), the concession and the discount may be changed.
The Company will have the sole right to accept offers to purchase Notes and
may reject any proposed purchase of Notes in whole or in part. Each Agent will
have the right, in its discretion reasonably exercised, to reject any offer to
purchase Notes received by it in whole or in part.
The Company has agreed to indemnify each Agent against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the "Act"),
or to contribute to payments such Agent may be required to make in respect
thereof. Each Agent may be deemed to be an underwriter within the meaning of the
Act.
Each Agent in the ordinary course of its business engages from time to time
in securities transactions with and performs investment banking services for the
Company.
Payment of the purchase price of the Notes will be required to be made in
immediately available funds on the date of settlement.
No Note will have an established trading market when issued. The Notes will
not be listed on any securities exchange. Each of the Agents may from time to
time purchase and sell Notes in the secondary market, but it is not obligated to
do so, and there can be no assurance that there will be a secondary market for
the Notes or liquidity in the secondary market if one develops. From time to
time, each of the Agents may make a market in the Notes.
S-23
<PAGE> 24
PROSPECTUS
(LOGO)
INTERNATIONAL LEASE FINANCE CORPORATION
DEBT SECURITIES
International Lease Finance Corporation (the "Company") intends to issue
from time to time debt securities (the "Debt Securities") with an aggregate
offering price of up to $2,090,000,000, which will be offered to the public on
terms determined by market conditions at the time of sale. The Debt Securities
shall be issued in U.S. dollar denominations or, at the option of the Company,
if so specified in the applicable Prospectus Supplement (the "Prospectus
Supplement"), in any other currency, including composite currencies such as the
European Currency Unit. The Debt Securities may be issued in one or more series
with the same or various maturities at par or with an original issue discount.
The specific designation, aggregate principal amount, purchase price, maturity,
interest rate (which may be fixed or variable), time of payment of interest, any
terms for redemption, any other specific terms, and any listing on a securities
exchange of Debt Securities in respect of which this Prospectus is being
delivered (the "Offered Debt Securities") are set forth in the accompanying
Prospectus Supplement together with the terms of offering of the Offered Debt
Securities. Unless otherwise specified in the accompanying Prospectus
Supplement, the Debt Securities of each series will be issued in the form of one
or more Global Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The Debt Securities will be sold directly through agents designated from
time to time or through underwriters or dealers. If any agents of the Company or
any underwriters are involved in the sale of the Offered Debt Securities, the
names of such agents or underwriters and any applicable commissions or discounts
are set forth in the accompanying Prospectus Supplement. The net proceeds to the
Company from such sale are also set forth in the accompanying Prospectus
Supplement.
------------------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY 24, 1997
<PAGE> 25
AVAILABLE INFORMATION
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 Section of the
Commission, Room 1024, at 450 Fifth Street, N.W., Washington, D.C., 20549 and at
the Commission's regional offices at 7 World Trade Center, Suite 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 Section of the Commission, Room 1024,
at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a
Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's Web site is http://www.sec.gov.
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 and the accompanying Prospectus Supplement do 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 Section 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. In addition, the
Registration Statement may be examined by accessing the Commission's Web site at
http://www.sec.gov.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1995, its Quarterly Report on Form 10-Q, as amended by Form 10-Q/A, for the
quarter ended March 31, 1996, its Quarterly Reports on Form 10-Q for the
quarters ended June 30, 1996 and September 30, 1996 and its Current Reports on
Form 8-K, event dates January 4, 1996, June 14, 1996, August 1, 1996, October 4,
1996, October 18, 1996, January 13, 1997, January 31, 1997, February 10, 1997,
February 14, 1997 and February 24, 1997, filed by the Company with the
Commission are incorporated herein by reference.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date hereof and prior to the termination of
the offering of the Offered Debt Securities shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of filing of such
documents. Any statement contained herein, in a Prospectus Supplement 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, in a Prospectus Supplement 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, INCLUDING ANY
BENEFICIAL OWNER, 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:
ALAN H. LUND, EXECUTIVE VICE PRESIDENT, CO-CHIEF OPERATING OFFICER AND CHIEF
FINANCIAL OFFICER, INTERNATIONAL LEASE FINANCE CORPORATION, 1999 AVENUE OF THE
STARS, 39TH FLOOR, LOS ANGELES, CALIFORNIA 90067 (TELEPHONE: (310) 788-1999).
2
<PAGE> 26
THE COMPANY
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. In
addition, the Company is engaged in the remarketing of commercial jet aircraft
for its own account, for airlines and for financial institutions. At December
31, 1996, the Company had committed to purchase 243 aircraft deliverable through
2004 at an estimated aggregate purchase price of $13.3 billion. It also had
options to purchase an additional 35 aircraft deliverable through 2005 at an
estimated aggregate purchase price of $2.8 billion.
The Company is a wholly owned subsidiary of American International Group,
Inc. ("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 a telephone and telecopier number of (310)
788-1999 and (310) 788-1990, respectively.
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 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 are
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 DEBT SECURITIES WILL NOT BE OBLIGATIONS OF, OR GUARANTEED BY, AIG.
USE OF PROCEEDS
Unless otherwise stated in the accompanying Prospectus Supplement, proceeds
to be received from the sale of the Debt Securities offered hereby will be used,
together with internally generated funds, for general corporate purposes,
including the acquisition of aircraft. Pending ultimate application, the
proceeds from the sale of the Debt Securities will be invested in marketable
securities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to fixed
charges for the periods shown.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
- --------------------------------------------------------------
1991 1992 1993 1994 1995
- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
1.44x 1.75x 1.70x 1.63x 1.48x
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, "earnings" consist of income before income
taxes plus fixed charges (excluding capitalized interest), and "fixed charges"
consist of interest expense and capitalized interest.
3
<PAGE> 27
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be unsecured obligations issued under an indenture
dated as of November 1, 1991 (the "Indenture"), between the Company and First
Trust National Association (successor to Continental Bank, National
Association), as trustee (the "Trustee"). The following summaries of certain
provisions of the Debt Securities and the Indenture do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Indenture (a copy of which is filed as an
exhibit to the Registration Statement), including the definitions therein of
certain terms and the provisions of certain terms which are made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended.
Capitalized terms used in the following summaries and not otherwise defined
herein shall have the meanings ascribed to them in the Indenture.
The particular terms of the Offered Debt Securities and the extent, if any,
to which such general provisions may apply to the Offered Debt Securities will
be described in the Prospectus Supplement relating to such Offered Debt
Securities.
GENERAL
The Debt Securities will rank equally with all other unsecured and
unsubordinated debt of the Company. The Indenture does not limit the amount of
debt which may be issued by the Company under the Indenture or otherwise. The
Debt Securities may be issued in one or more series with the same or various
maturities, at par or with an original issue discount. Federal income tax
consequences and other special considerations applicable to any Debt Securities
issued with an original issue discount will be described in the Prospectus
Supplement relating thereto.
Reference is made to the accompanying Prospectus Supplement for the
following terms of the Offered Debt Securities: (i) the title of the Offered
Debt Securities; (ii) any limit upon the aggregate principal amount of the
Offered Debt Securities; (iii) the Person to whom any interest on an Offered
Debt Security shall be payable if other than the Person in whose name that
Offered Debt Security (or one or more Predecessor Securities) is registered at
the close of business on the relevant Regular Record Date; (iv) the date or
dates on which the principal of the Offered Debt Securities is payable; (v) the
rate or rates (which may be fixed or variable), or the formula pursuant to which
such rate or rates will be determined, at which the Offered Debt Securities will
bear interest, if any, and the date or dates from which such interest will
accrue, the Interest Payment Dates on which such interest, if any, will be
payable and the Regular Record Dates for such Interest Payment Dates; (vi) the
place or places where the principal of (and premium, if any) and interest, if
any, on the Offered Debt Securities will be payable; (vii) any mandatory or
optional sinking fund or analogous provisions, the periods during which and the
price or prices at which the Offered Debt Securities may, pursuant to such
funds, provisions or otherwise, be redeemed at the option of the Company or of
any Holder thereof and the other terms and provisions thereof, (viii) the
currency or currencies in which the Offered Debt Securities are payable; (ix) if
applicable, the manner of determining the amount of principal of or premium or
interest on the Offered Debt Securities if such amount is determined with
reference to an index; (x) the principal amount of the Offered Debt Securities
which will be payable upon declaration of acceleration of the Maturity thereof;
(xi) whether the Offered Debt Securities which will be issued in whole or in
part in the form of one or more Global Securities; (xii) any additional Events
of Default provided with respect to the Offered Debt Securities; and (xiii) any
other terms of the Offered Debt Securities.
DENOMINATION AND EXCHANGE
Unless otherwise indicated in the accompanying Prospectus Supplement for a
particular issue, the Debt Securities of each series will be issued in the form
of one or more Global Securities registered in the name of Cede & Co., as
nominee of the Depositary (as hereinafter defined). See "Global Securities"
below. Unless otherwise indicated in the accompanying Prospectus Supplement for
a particular issue of Debt Securities in the form of Global Securities,
principal, premium, if any, and interest, if any, is to be payable as described
under "Global Securities" below. Unless otherwise indicated in the accompanying
Prospectus Supplement for a particular issue of Debt Securities not in the form
of Global Securities but in the form of definitive
4
<PAGE> 28
certificates ("Certificated Securities"), principal, premium, if any, and
interest, if any, is to be payable to registered Holders of such Certificated
Securities at the office of the Trustee maintained for that purpose in the
Borough of Manhattan, City and State of New York, or at any paying agency
maintained at the time by the Company for such purpose. At the option of the
Company, payment of interest to registered Holders of Certificated Securities
may be made by check mailed to the address of the person entitled thereto as it
appears on the register for such Certificated Securities. Unless otherwise
indicated in the accompanying Prospectus Supplement for a particular issue,
Certificated Securities may be presented for registration of transfer or
exchange at such office of the Trustee in New York, New York, or at such other
location or locations as may be established pursuant to the Indenture without
any service charge but subject to the limitations provided in the Indenture.
CERTAIN COVENANTS OF THE COMPANY
Restrictions on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, issue, assume or guarantee any indebtedness for
borrowed money secured by any mortgage, pledge, lien or other encumbrance of any
nature (herein collectively referred to as a "mortgage" or "mortgages") upon any
property of the Company or any Restricted Subsidiary, or on any shares of stock
of any Restricted Subsidiary, without in any such case effectively providing
that the Debt Securities (together with, if the Company shall so determine, any
other indebtedness of the Company or such Restricted Subsidiary ranking equally
with the Debt Securities) shall be secured equally and ratably with such
indebtedness for borrowed money, except that the foregoing restrictions shall
not apply to: (a) mortgages existing on November 1, 1991; (b) certain mortgages
securing all or a part of the purchase price of property (other than property
acquired for lease to a Person other than the Company or a Restricted
Subsidiary); (c) mortgages on the property of a Restricted Subsidiary existing
at the time it became a Restricted Subsidiary; (d) mortgages securing
indebtedness for borrowed money of a Restricted Subsidiary owing to the Company
or another Restricted Subsidiary; (e) mortgages on property of a corporation
existing at the time such corporation is merged into or consolidated with the
Company or a Restricted Subsidiary or at the time the Company or a Restricted
Subsidiary purchases, leases or otherwise acquires the properties of such other
corporation as an entirety or substantially as an entirety; (f) the replacement
of any of the foregoing, provided that the principal amount of the indebtedness
for borrowed money secured by the mortgage shall not be increased and the
principal repayment schedule and maturity of such indebtedness shall not be
extended and the mortgage shall be limited to the property or part thereof which
secured the mortgage so replaced or property substituted therefor as a result of
the destruction, condemnation or damage of such property; (g) liens in
connection with certain legal proceedings; (h) liens for certain taxes or
assessments, landlord's liens and charges incidental to the conduct of the
business, or the ownership of the property and assets, of the Company or a
Restricted Subsidiary, which are not incurred in connection with the borrowing
of money and which do not, in the opinion of the Company, materially impair the
use of such property in the operation of the business of the Company or a
Restricted Subsidiary or the value of such property for the purpose of such
business; and (i) mortgages which would otherwise be subject to the foregoing
restrictions which, when the indebtedness for borrowed money relating to those
mortgages is added to all other then outstanding indebtedness for borrowed money
of the Company and the Restricted Subsidiaries secured by mortgages and not
listed in clauses (a) through (h) above, does not exceed 12.5% of the
Consolidated Net Tangible Assets of the Company.
Restrictions as to Dividends and Certain Other Payments. No dividend shall
be paid or declared nor shall any distributions be made on any capital stock of
the Company (except in shares of, or warrants or rights to subscribe for or
purchase shares of, capital stock of the Company), nor shall any payment be made
by the Company or any Restricted Subsidiary to acquire or retire shares of such
stock, at a time when an Event of Default has occurred and is continuing under
the Indenture constituting a (i) default in the payment of interest on the Debt
Securities of that series when due, continued for 30 days; (ii) default in the
payment of the principal and premium, if any, on the Debt Securities of that
series when due either at maturity, upon redemption, by declaration or
otherwise; or (iii) default in the deposit of any sinking fund payment with
respect to Debt Securities of that series when and as due.
5
<PAGE> 29
Restrictions on Investments in Non-Restricted Subsidiaries. The Company
will not, nor will it permit any Restricted Subsidiary to, make any investment
in, or transfer any assets to, a Non-Restricted Subsidiary if immediately
thereafter the Company would be in breach of or in default in the performance of
any covenant or warranty of the Company contained in the Indenture.
Limited Covenants in the Event of a Highly Leveraged Transaction. Other
than the covenants of the Company included in the Indenture as described above
and as described under "Description of Debt Securities -- Merger and Sale of
Assets", there are no covenants or provisions in the Indenture that may afford
Holders protection in the event of a highly leveraged transaction, leveraged
buyout, reorganization, restructuring, merger or similar transaction involving
the Company.
CERTAIN DEFINITIONS
Set forth below are certain significant terms which are defined in the
Indenture:
"Consolidated Net Tangible Assets" means the total amount of assets (less
depreciation and valuation reserves and other reserves and items deductible from
gross book value of specific asset accounts under generally accepted accounting
principles) which under generally accepted accounting principles would be
included on a balance sheet of the Company and its Restricted Subsidiaries,
after deducting therefrom (a) all liability items except indebtedness (whether
incurred, assumed or guaranteed) for borrowed money maturing by its terms more
than one year from the date of creation thereof or which is extendible or
renewable at the sole option of the obligor in such manner that it may become
payable more than one year from the date of creation thereof, shareholder's
equity and reserves for deferred income taxes, (b) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, which in each case would be so included on such balance sheet, and
(c) amounts invested in, or equity in the net assets of, Non-Restricted
Subsidiaries.
"Restricted Subsidiaries" means all Subsidiaries other than Non-Restricted
Subsidiaries. "Non-Restricted Subsidiaries" means (a) any Subsidiary so
designated by the Board of Directors of the Company in accordance with the
Indenture, and (b) any other Subsidiary of which the majority of the voting
stock is owned directly or indirectly by one or more Non-Restricted
Subsidiaries, if such other Subsidiary is a corporation, or in which the
Non-Restricted Subsidiary is a general partner, if such other Subsidiary is a
limited partnership. Pursuant to specified conditions in the Indenture, the
Company's Board of Directors may change the designations of Restricted
Subsidiaries and Non-Restricted Subsidiaries.
"Subsidiary" means any corporation, partnership, or trust more than 50% of
the Voting Stock of which is owned, directly or indirectly, by the Company or by
one or more other Subsidiaries, or by the Company and one or more other
Subsidiaries.
AMENDMENT, SUPPLEMENT AND WAIVER
The Indenture may be amended or supplemented with the consent of the
Holders of not less than a majority in principal amount of the Debt Securities
at the time outstanding of each series affected by such amendment or supplement,
and any past default and its consequences may be waived with the consent of the
Holders of a majority in principal amount of the Debt Securities at the time
outstanding of each series affected by such default; provided that, without the
consent of the Holders of all of the Debt Securities affected thereby, no such
amendment, supplement or waiver may change the Stated Maturity of the principal
of, or any installment of principal of or interest on, any Debt Security, or
reduce the principal amount thereof or the rate of interest thereon or any
premium payable upon the redemption thereof, or change the stated maturity of
any Debt Security (or reduce the amount payable upon a declaration of
acceleration of the Debt Security), or change the time for payment of any
interest on any Debt Securities, or make any Debt Security payable in money
other than that stated in the Debt Security, or reduce the aforesaid percentage
of principal amount of Debt Securities whose Holders must consent to an
amendment, supplement or waiver. Without the consent of any Holder of Debt
Securities, the Company may amend or supplement the Indenture to, among other
things, evidence succession of another corporation to the Company, to add
covenants or additional Events of Default for the benefit of the Holders of all
or any series of Debt Securities, to cure any ambiguity, correct any
6
<PAGE> 30
provision of the Indenture inconsistent with other provisions thereof or make
any other provision which does not adversely affect the interests of the Holders
of Debt Securities in any material respect, or to change or eliminate any
provision of the Indenture if such change or elimination is effective only when
there are no Debt Securities outstanding which were issued prior to such change
or elimination and entitled to the benefit of such provision.
EVENTS OF DEFAULT
The Indenture defines an Event of Default as being any one of the following
events: (a) default in the payment of any interest on the Debt Securities of
that series when due, continued for 30 days; (b) default in the payment of the
principal and premium, if any, on the Debt Securities of that series when due
either at maturity, upon redemption, by declaration or otherwise; (c) default in
the deposit of any sinking fund payment of the Debt Securities of that series
when and as due; (d) default in the performance of any other of the Company's
covenants in the Indenture (other than a covenant included in the Indenture
solely for the benefit of a series of Debt Securities other than that series)
continued for 60 days after written notice; (e) default under any mortgage,
indenture (including the Indenture) or instrument under which is issued or which
secures or evidences indebtedness for borrowed money of the Company or any
Restricted Subsidiary which default constitutes a failure to pay principal of
such indebtedness in an amount exceeding $20,000,000 when due and payable (other
than as a result of acceleration) or results in indebtedness for borrowed money
in the aggregate of $20,000,000 or more becoming or being declared due and
payable before it would otherwise become due and payable, and such acceleration
is not rescinded or annulled, or such indebtedness for borrowed money is not
discharged, within 30 days after written notice to the Company by the Trustee,
or to the Company and the Trustee by the Holders of at least 25% in principal
amount of the Debt Securities of that series at the time outstanding; (f)
certain events in bankruptcy, insolvency or reorganization; and (g) any other
events of default provided with respect to the Offered Debt Securities. If an
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the Debt Securities of each series affected
thereby may declare the Debt Securities of that series to be due and payable
immediately, but under certain conditions such acceleration may be rescinded by
the Holders of a majority in principal amount of the Debt Securities of each
series affected thereby.
No Holder of any Debt Security of a series will have any right to institute
any proceeding with respect to the Indenture or for any remedy thereunder,
unless such Holder previously shall have given to the Trustee written notice of
an Event of Default and unless also the holders of not less than 25% in
principal amount of the outstanding Debt Securities of that series shall have
made written request upon the Trustee, and have offered indemnity satisfactory
to the Trustee to institute such proceeding as Trustee, and the Trustee for 60
days shall have failed to institute such proceedings. However, the right of any
Holder of any Debt Security to institute suit for enforcement of any payment of
principal of, and premium, if any, and interest on, such Debt Security on or
after the due date expressed in such Debt Security, may not be impaired or
affected without such Holder's consent.
The Holders of a majority in principal amount of Debt Securities of any
series at the time outstanding may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee with respect to Debt Securities of
that series. However, the Trustee may refuse to follow any such direction that
conflicts with any rule of law or the Indenture. Before proceeding to exercise
any right or power under the Indenture at the direction of such Holders, the
Trustee shall be entitled to receive from such Holders reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred by
it in compliance with any such direction. The Trustee may withhold from Holders
of Debt Securities notice of any continuing default (except a default in payment
of principal, premium, if any, or interest) if it determines that withholding
notice is in their interests.
The Company will be required to furnish to the Trustee within 120 days
after the end of each fiscal year, a statement as to whether any default under
the Indenture occurred during the fiscal year.
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<PAGE> 31
DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the accompanying Prospectus Supplement, the
Company may discharge (a "defeasance") its obligations with respect to the
outstanding Debt Securities of such series (other than certain obligations to
the Trustee and the Company's obligations with respect to the registration,
transfer and exchange of certificated Debt Securities, mutilated, destroyed,
lost and stolen certificated Debt Securities, the maintenance of an office or
agency in the Place of Payment and the treatment of funds held by Paying
Agents), or may be released from the restrictions described under "Certain
Covenants of the Company" above and any other provisions identified in the
accompanying Prospectus Supplement ("covenant defeasance") if, among other
things, (i) the Company has irrevocably deposited or caused to be deposited with
the Trustee (or other satisfactory trustee), as trust funds for the payment of
such Debt Securities, money, U.S. Government Obligations (as defined below)
which through the scheduled payment of principal and interest will provide
money, or a combination thereof, in an amount sufficient, without reinvestment,
to pay and discharge at maturity or redemption the entire amount of principal of
(and premium, if any) and interest on such Debt Securities; (ii) no Event of
Default or event which with notice or lapse of time or both would become an
Event of Default with respect to such Debt Securities shall have occurred or be
continuing on the date of such deposit and, for certain purposes, at any time
during the period ending on the 123rd day after the date of deposit, or any
longer preference period; (iii) such defeasance or covenant defeasance shall not
cause the Trustee to have a conflicting interest as referred to in the
Indenture; and (iv) such defeasance or covenant defeasance will not result in a
breach or violation of the Indenture or other material agreements or instruments
of the Company or cause the Debt Securities, if listed on a national securities
exchange, to be delisted.
In addition, in the case of defeasance, the Company is required to deliver
to the Trustee an opinion of counsel stating that (i) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling, or
(ii) since the date of the Indenture there has been a change in the applicable
Federal income tax law, in either case to the effect that the Holders of the
outstanding Debt Securities of the series to be defeased will not recognize
income, gain or loss for Federal income tax purposes as a result of such
defeasance and will be subject to Federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such defeasance
had not occurred. In the case of a covenant defeasance, the Company is required
to deliver to the Trustee an opinion of counsel to the effect that the Holders
of the outstanding Debt Securities of the series for which covenant defeasance
is proposed will not recognize income, gain or loss for Federal income tax
purposes as a result of such covenant defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if the covenant defeasance had not occurred.
"U.S. Government Obligations" is defined in the Indenture as securities
that are (i) direct obligations of the United States of America for the payment
of which its full faith and credit is pledged or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America the payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America, which, in
either case, are not callable or redeemable at the option of the issuer thereof,
and shall also include a depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act) as custodian with respect to any such
U.S. Government Obligation or a specific payment of principal of or interest on
any such U.S. Government Obligation held by such custodian for the account of
the holder of such depository receipt.
MERGER AND SALE OF ASSETS
The Company may consolidate with or merge into any other Person or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person, and another Person may consolidate with and merge into the Company or
convey, transfer or lease its properties and assets substantially as an entirety
to the Company only if (i) the Person formed by such consolidation or surviving
such merger or to which such assets or properties are conveyed, transferred or
leased is a corporation, partnership or trust organized and validly existing
under the laws of the United States, any State or the District of Columbia and
such Person expressly assumes the Company's obligations under the Indenture;
(ii) immediately after giving effect to such transaction, no Event of Default,
and no event which, after notice or lapse of time or both, would become an
8
<PAGE> 32
Event of Default, has happened and is continuing; and (iii) if property or
assets of the Company have become subject to a mortgage, pledge, lien, security
interest or other encumbrance not permitted by the Indenture, the Company and
such Person have taken appropriate steps to secure any of the Debt Securities
equally and ratably with the securities secured thereby.
Upon such consolidation, merger or conveyance, transfer or lease, the
successor Person shall be substituted for the Company under the Indenture and,
except in the case of such a lease, the Company shall be relieved of all
obligations under the Indenture.
GLOBAL SECURITIES
Unless otherwise specified in the accompanying Prospectus Supplement, the
Debt Securities of a series will be issued in the form of one or more fully
registered Global Securities registered in the name of Cede & Co., as nominee of
The Depository Trust Company, which will act as the Depositary for the Debt
Securities (the "Depositary"). Unless and until it is exchanged in whole or in
part for Debt Securities in definitive registered form, a Global Security may
not be transferred except as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor of the Depositary or a nominee of such successor.
The Depositary has advised the Company as follows: the Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. The Depositary holds
securities that its participants ("Participants") deposit with the Depositary.
The Depositary also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. "Direct
Participants" include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. The Depositary is owned
by a number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the Depositary's system is also available to others,
such as securities brokers and dealers, banks and trust companies, that clear
through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to the
Depositary and its Participants are on file with the Securities and Exchange
Commission.
Unless otherwise specified in the accompanying Prospectus Supplement, the
Company anticipates that the following provisions will apply to all depositary
arrangements.
Upon the issuance of a Global Security, the Company expects that the
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of the applicable Direct Participants. The accounts to
be credited shall be designated by any underwriters or agents participating in
the distribution of such Debt Securities. Purchases of Debt Securities under the
Depositary's system must be made by or through Direct Participants, which will
receive a credit for the Debt Securities on the Depositary's records. The
ownership interest of each actual purchaser of Debt Securities (a "Beneficial
Owner") will be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from the Depositary of
their purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Debt Securities are expected to be effected by entries made on
the books of Participants acting on behalf of Beneficial Owners. So long as the
Depositary or its nominee is the registered owner of a Global Security, the
Depositary or such nominee, as the case may be, will be considered the sole
owner or Holder of the Debt Securities represented by such Global Security for
all purposes under the Indenture. Except as set forth below, Beneficial Owners
will not be entitled to have the Debt Securities represented by a Global
Security registered
9
<PAGE> 33
in their names, will not receive or be entitled to receive physical delivery of
such Debt Securities in definitive form and will not be considered the owners or
Holders thereof under the Indenture.
Principal, premium, if any, and interest payments on Debt Securities
represented by a Global Security registered in the name of the Depositary or its
nominee will be made to the Depositary or its nominee, as the case may be, as
the registered owner of such Global Security. None of the Company, the Trustee
or any paying agent for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in such Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that, upon receipt of any payment of principal, premium
or interest, the Depositary will immediately credit Direct Participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Security as shown on the
records of the Depositary. The Company also expects that payments by Direct
Participants to Indirect Participants and by Direct and Indirect Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is now the case with the securities held for the accounts of
customers registered in "street names" and will be the responsibility of the
Participants.
As long as the Debt Securities are held by the Depositary or its nominee
and the Depositary continues to make its same day funds settlement system
available to the Company, all payments of principal and interest on the Debt
Securities will be made by the Company in immediately available funds. The
Company has been advised that the Depositary's practice is to credit Direct
Participants' accounts on the applicable payment date unless the Depositary has
reason to believe that it will not receive payment on such date.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing house or next-day funds. In contrast, it is
anticipated that the Debt Securities will trade in the Depositary's Same-Day
Funds Settlement system. Accordingly, the Depositary will require that secondary
trading activity in the Debt Securities settle in immediately available funds.
No assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in the Debt Securities.
The Company expects that conveyance of notices and other communications by
the Depositary to Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time. In addition,
neither the Depositary nor Cede & Co. will consent or vote with respect to the
Debt Securities; the Company has been advised that the Depositary's usual
procedure is to mail an omnibus proxy to the Company as soon as possible after
the record date with respect to such consent or vote. The omnibus proxy would
assign Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the Debt Securities are credited on such record date (identified
in a listing attached to the omnibus proxy).
If the Depositary is at any time unwilling or unable to continue as
Depositary for a series of Debt Securities and a successor Depositary is not
appointed by the Company within 90 days, the Company will issue such Debt
Securities in definitive form in exchange for such Global Security. In addition,
the Company may at any time and in its sole discretion determine not to have any
of the Debt Securities of a series represented by one or more Global Securities
and, in such event, will issue Debt Securities of such series in definitive form
in exchange for all of the Global Security or Securities representing such Debt
Securities.
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in Debt Securities represented by
Global Securities.
THE TRUSTEE
The Trustee has been and from time to time is an unsecured lender to the
Company. The Company may maintain deposit accounts and conduct other banking
transactions with the Trustee in the ordinary course of business.
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<PAGE> 34
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities in any of three ways: (i) through
underwriters or dealers; (ii) directly to purchasers or to a single purchaser;
or (iii) through agents. The accompanying Prospectus Supplement with respect to
the Offered Debt Securities sets forth the terms of the offering of the Offered
Debt Securities, including the name or names of any underwriters or agents, the
purchase price of the Offered Debt Securities and the proceeds to the Company
from such sale, any underwriting discounts, agents' commissions and other items
constituting underwriters' compensation, any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers and any
securities exchanges on which the Offered Debt Securities may be listed.
If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The Debt
Securities may be offered to the public through underwriting syndicates which
may be represented by managing underwriters. Such firms may from time to time
purchase and sell Debt Securities in the secondary market, but they are not
obligated to do so. No assurance can be given that there will be a secondary
market for the Debt Securities. Unless otherwise set forth in the accompanying
Prospectus Supplement, the obligations of the underwriters to purchase the
Offered Debt Securities will be subject to certain conditions precedent and the
underwriters will be obligated to purchase all the Offered Debt Securities if
any are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
Offered Debt Securities may be sold directly by the Company or through
agents designated by the Company from time to time. Any agent involved in the
offer or sale of the Offered Debt Securities in respect of which this Prospectus
is delivered will be named, and any commissions payable by the Company to such
agent will be set forth, in the accompanying Prospectus Supplement. Unless
otherwise indicated in the accompanying Prospectus Supplement, any such agent
will be acting on a best efforts basis for the period of its appointment. Any
such agent may be deemed to be an underwriter as that term is defined in the
Securities Act.
If so indicated in the accompanying Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Offered Debt Securities from the Company at the public
offering price set forth in the accompanying Prospectus Supplement pursuant to
delayed delivery contracts providing for payment and delivery on a specified
date in the future. Such contracts will be subject only to those conditions set
forth in the accompanying Prospectus Supplement and the accompanying Prospectus
Supplement will set forth the commission payable for solicitation of such
contracts.
Agents and underwriters may be entitled under agreements to be entered into
with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which the agents or underwriters may be required to
make in respect thereof. Agents and underwriters may be customers of, engage in
transactions with, or perform services for the Company in the ordinary course of
business.
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<PAGE> 35
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, 1995,
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 Debt Securities offered hereby is being
passed upon for the Company by O'Melveny & Myers LLP. Milbank, Tweed, Hadley &
McCloy, Los Angeles, California will pass upon certain legal matters for the
underwriters or agents.
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======================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY AGENT. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Ratio of Earnings to Fixed Charges.... S-2
Description of Medium-Term Notes,
Series I............................ S-2
Certain United States Federal Income
Tax Considerations.................. S-16
Plan of Distribution.................. S-23
PROSPECTUS
Available Information................. 2
Documents Incorporated by Reference... 2
The Company........................... 3
American International Group, Inc. ... 3
Use of Proceeds....................... 3
Ratio of Earnings to Fixed Charges.... 3
Description of Debt Securities........ 4
Plan of Distribution.................. 11
Experts............................... 12
Legal Matters......................... 12
</TABLE>
======================================================
======================================================
$500,000,000
[LOGO OF INTERNATIONAL LEASE FINANCE CORPORATION]
INTERNATIONAL LEASE FINANCE CORPORATION
MEDIUM-TERM NOTES, SERIES I
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
GOLDMAN, SACHS & CO.
FEBRUARY 24, 1997
======================================================
