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THIS FILING IS MADE PURSUANT
TO RULE 424(b)(5) UNDER
THE SECURITIES ACT OF
1933 IN CONNECTION WITH
REGISTRATION NO. 333-74095
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 26, 2000)
$1,075,000,000
[ILFC LOGO]
INTERNATIONAL LEASE FINANCE CORPORATION
MEDIUM-TERM NOTES, SERIES K
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Due Nine Months or More from Date of Issue
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We, International Lease Finance Corporation, may offer from time to time our
Medium-Term Notes, Series K. We will provide the specific terms of any notes
offered in a pricing supplement. Unless the pricing supplement provides
otherwise, the notes offered will have the following generic terms:
- The notes will mature more than 9 months from the date of issue.
- The notes will bear interest at either a fixed rate, which may be zero, at an
amortizing fixed rate or at a floating rate. Floating rate interest may be
based on one or more of the following rates:
- CD Rate
- CMT Rate
- Commercial Paper Rate
- Eleventh District Cost of Funds Rate
- Federal Funds Rate
- LIBOR
- Prime Rate
- Treasury Rate
- Any other rate specified in the applicable pricing supplement.
- Interest on fixed rate notes will be paid on April 15 and October 15.
- Interest payment dates for amortizing fixed rate notes will be provided in a
pricing supplement.
- Payments on notes issued as indexed notes will be determined by reference to
the index specified in the pricing supplement.
- Interest will be paid on floating rate notes on a monthly, quarterly,
semi-annual or annual basis as specified in a pricing supplement.
- The notes will be held in global form by or on behalf of The Depository Trust
Company, as Depositary, or issued in definitive form.
- Any redemption and repurchase provisions applicable to the notes will be
specified in the applicable pricing supplement.
- The notes will be in minimum denominations of $1,000, increased in multiples
of $1,000.
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We may offer the notes on a continuous basis through the agents listed
below, who have agreed to use their best efforts to sell the notes. We may also
sell the notes to the agents as principal for resale at terms agreed to by us.
If we sell all of the notes, we expect to receive proceeds therefrom of between
$1,066,937,500 and $1,073,656,250, after paying the agents' discounts and
commissions of between $8,062,500 and $1,343,750. However, the agents' discounts
and commissions may exceed these amounts with respect to sales of notes with
stated maturities in excess of 30 years.
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THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The notes will be unsecured obligations ranking equally with other debt
obligations. There will be no sinking fund established for the payment of the
notes. We do not intend to list the notes on any securities exchange and the
notes will not have an established trading market when issued.
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MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
MORGAN STANLEY DEAN WITTER
CHASE SECURITIES INC.
BANC OF AMERICA SECURITIES LLC
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
September 25, 2000
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE ARE
OFFERING TO SELL THE NOTES, AND SEEKING OFFERS TO BUY THE NOTES, ONLY IN
JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS ACCURATE ONLY AS
OF THE DATE OF THIS PROSPECTUS SUPPLEMENT AND THE DATE OF THE ACCOMPANYING
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR
ANY SALES OF THE NOTES.
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Description of Medium-Term Notes, Series K.................. S-3
Certain United States Federal Income Tax Considerations..... S-25
Plan of Distribution........................................ S-33
PROSPECTUS
Summary..................................................... 3
Where You Can Find More Information......................... 5
The Company................................................. 5
American International Group, Inc........................... 6
Use of Proceeds............................................. 6
Prospectus Supplement....................................... 6
Description of Debt Securities.............................. 6
Plan of Distribution........................................ 17
Experts..................................................... 18
Legal Matters............................................... 18
</TABLE>
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DESCRIPTION OF MEDIUM-TERM NOTES, SERIES K
The following description of the particular terms of our Medium Term Notes,
Series K (the "Notes") is in addition to, and if inconsistent replaces, the
description and general terms of the notes set forth under "Description of Debt
Securities" in the Prospectus. The particular terms of any Notes sold in
connection with a pricing supplement will be described in the pricing
supplement. The general terms and conditions for the Notes set forth in this
Prospectus Supplement will apply to the Notes, unless the applicable pricing
supplement provides otherwise. Any capitalized terms we use and do not define
have the meaning given to them in the Prospectus, the Notes or the Indenture, as
the case may be.
GENERAL
We will issue the Notes under the Indenture dated as of November 1, 1991
(the "Indenture"), between the Company and U.S. Bank Trust National Association
(successor to Continental Bank, National Association), as trustee (the
"Trustee"). The Notes will rank equally with all our other unsecured and
unsubordinated indebtedness. We may issue the Notes from time to time in an
aggregate principal amount of up to $1,075,000,000. The Indenture allows us to
reopen a series of securities, including the Notes, and issue additional
securities of that series without the consent of the holders of the series.
The Notes will mature on any day more than nine months from the date of
issue, as set forth in the applicable pricing supplement. Except as may be
provided in the applicable pricing supplement, the Notes will be issued only in
fully registered form in denominations of $1,000 each. There will not be any
sinking fund established for the payment of the Notes. Notes will be issued as
either book-entry securities or as a certificated Note, as specified in the
pricing supplement.
The Notes will be offered by us on a continuing basis. Except as set forth
in the Prospectus under "Description of Debt Securities -- Global Securities,"
book-entry Notes will not be issuable as certificated Notes. The laws of some
states may require that certain purchasers of securities take physical delivery
of the securities in definitive form. These limits and laws may impair the
ability to own, transfer or pledge beneficial interests in book-entry Notes. For
more information, see "Description of Debt Securities -- Global
Securities -- Book-Entry System" set forth in the Prospectus.
If Notes are issued in certificated form, you may present the Notes for
payment of principal and interest, or register the transfer and exchange of the
Notes only in the manner and to the extent set forth in the Prospectus under
"Description of Debt Securities -- Global Securities." The current agent for the
payment, transfer and exchange of the Notes is U.S. Bank Trust National
Association, acting through its corporate trust office at 180 East Fifth Street,
St. Paul, Minnesota, 55101 and the agency maintained by the Trustee in the
Borough of Manhattan, City of New York, State of New York at the following
address: 100 Wall Street, 20th Floor, New York, New York, 10005.
The applicable pricing supplement will specify:
- the price at which a Note is to be sold
- the interest rate or interest rate formula
- interest payment dates
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- maturity
- currency or composite currency
- principal amount
- any other terms of the Notes.
The Notes will be issued in United States dollars and payments of
principal, premium, if any, and interest on the Notes will also be in United
States dollars, unless the applicable pricing supplement states otherwise. In
the event we issue a Note denominated in a foreign currency, we will provide
additional information relating to particular risks from investment in foreign
currency Notes, and certain information regarding tax consequences to holders of
foreign currency Notes, in the applicable pricing supplement.
Floating rate Notes will mature on an Interest Payment Date (as defined
below), unless otherwise specified in the pricing supplement.
The following terms used in this Prospectus Supplement have the following
meanings:
"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.
"Interest Payment Date" means with respect to any Note, the date on which
regularly scheduled interest on the Note is due and payable. Interest Payment
Dates will be specified in the applicable pricing supplement.
"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.
"Record Date" means with respect to any Interest Payment Date, the date 15
calendar days prior to the Interest Payment Date, whether or not the date is a
Business Day.
PAYMENT OF PRINCIPAL AND INTEREST
We will pay interest to the person in whose name the Note is registered at
the close of business on the applicable Record Date; provided that the interest
payable upon maturity, redemption or repayment will be payable to the person to
whom principal is payable. We will make the initial interest payment on a Note
on the first Interest Payment Date falling after the date the Note is issued;
provided, however, that payments of interest (or, in the case of an Amortizing
Note, principal and interest) on a Note issued less than 15 calendar days before
an Interest Payment Date will be paid on the next succeeding Interest Payment
Date to the holder of record on the next succeeding Record Date, unless
otherwise specified in the applicable pricing supplement.
We will make payments of principal, premium, if any, and interest on the
Notes at the office of the Trustee in St. Paul, Minnesota, and also at the
agency maintained by the Trustee in the Borough of Manhattan, City of New York,
State of New York, or at the
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other place or places designated in the Indenture. We may choose to pay
interest, other than interest payable at maturity, by check mailed to registered
holders.
Unless otherwise specified in the applicable pricing supplement, if the
principal of any Note issued with original issue discount 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 the Note shall be limited to the aggregate principal
amount (or face amount, in the case of a Note with indexed principal) of the
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. The amortization is calculated using
the "interest method," computed in accordance with generally accepted accounting
principles in effect on the date of declaration.
Interest Payment Dates
A Note will bear interest from its date of issue at either (a) a fixed
rate, 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, until the principal is paid at maturity or
otherwise. Interest Payment Dates for fixed rate Notes will be April 15 and
October 15 of each year, unless otherwise specified in the applicable pricing
supplement, and at Maturity. Except as otherwise described in this Prospectus
Supplement or the applicable pricing supplement, floating rate Notes Interest
Payment Dates will be determined by the dates the floating rate Notes reset, as
provided below:
- For floating rate Notes that reset daily, weekly or monthly, Interest
Payment Dates will be 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;
- For floating rate Notes that reset quarterly, Interest Payment Dates will
be the third Wednesday of March, June, September and December of each
year;
- For floating rate Notes that reset semiannually, Interest Payment Dates
will be the third Wednesday of the two months of each year specified in
the applicable pricing supplement; and
- For floating rate Notes that reset annually, Interest Payment Dates will
be the third Wednesday of the month specified in the applicable pricing
supplement.
Interest will also be payable on the Maturity Date.
Unless otherwise specified in the applicable pricing supplement, we will
pay the principal and interest due at Maturity to holders in immediately
available funds upon presentation of the Notes. If certificated Notes are issued
to holders, we may choose to pay interest due, other than at Maturity, by check.
However, those holders of certificated Notes in an aggregate principal amount
equal to $10 million or more with identical Interest Payment Dates may at their
option receive payments of interest, other than at Maturity, by wire transfer.
Payment by wire transfer to those holders will be in immediately available funds
to a designated account in the United States. The Trustee must receive written
instructions from those holders electing the wire transfer interest payment
method by the regular Record Date for the related Interest Payment Date. Any
instructions provided to the Trustee will remain in effect with respect to
payments of
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interest made to those holders on subsequent Interest Payment Dates unless
revoked or changed by written instructions sent to, and received by, the
Trustee. Any written revocation or change by a holder must be received by the
Trustee before the Regular Record Date to be effective for a related Interest
Payment Date.
Fixed Rate Notes
Fixed rate Notes will bear interest from and including the date of issue or
from the most recent date to which interest has been paid or provided for, up to
but not including the Interest Payment Date or Maturity, unless the applicable
pricing supplement states otherwise. We will make interest payments at the rate
per annum stated on the face of the Note until the principal amount is paid or
made available for payment. We will pay interest on the fixed rate Notes on the
basis of a 360-day year of twelve 30-day months.
If any Interest Payment Date for any fixed rate Note falls on a day that is
not a Business Day, we will make the interest payment on the next day that is a
Business Day, and no interest on that payment will accrue for the period from
and after the Interest Payment Date. If the Maturity (or date of redemption or
repayment) of any fixed rate Note falls on a day that is not a Business Day, we
will make the payment of interest and principal on the next succeeding Business
Day, and no interest on that payment will accrue for the period from and after
the maturity date (or date of redemption or repayment).
Floating Rate Notes
Each Note bearing interest at a floating rate will bear interest at a rate
determined by reference to an interest rate basis or formula, which may be
adjusted by a Spread and/or Spread Multiplier (each as defined below). We will
pay interest on floating rate Notes from the date of issuance until we pay or
make available for payment the principal.
The pricing supplement will designate one or more of the following interest
rate basis or bases, applicable to each floating rate Note:
- 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
- the Treasury Rate
- any other interest rate basis set forth in the applicable pricing
supplement.
Floating rate Notes will be issued with the general terms described below
unless the applicable pricing supplement states otherwise. The applicable
pricing supplement will specify whether the floating rate Note being delivered
will be a "Regular Floating Rate Note," a "Floating Rate/Fixed Rate Note" or an
"Inverse Floating Rate Note." The applicable pricing supplement will also
provide the additional specific terms with respect to
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floating rate Notes. The specific terms, defined and described in full below,
include the following:
- Fixed Rate Commencement Date
- Fixed Interest Rate
- interest rate basis or bases
- Initial Interest Rate
- Interest Reset Period
- Interest Reset Dates
- Record Dates
- Interest Payment Period
- Interest Payment Dates
- Index Maturity
- Maximum Interest Rate, if any
- Minimum Interest Rate, if any
- Spread
- Spread Multiplier, if any
- Designated LIBOR Page, if the interest rate basis is LIBOR
Unless otherwise specified in the applicable pricing supplement, the
interest rate on each floating rate Note will be calculated by reference to the
specified interest rate basis or bases (1) plus or minus the Spread, if any,
and/or (2) multiplied by the Spread Multiplier, if any. The "Spread" is the
number of basis points (one one-hundredth of a percentage point) specified in
the applicable pricing supplement to be added to or subtracted from the interest
rate basis or bases for the floating rate Note, and the "Spread Multiplier" is
the percentage specified in the applicable pricing supplement to be applied to
the interest rate basis or bases for the floating rate Note.
As specified in the applicable pricing supplement, a floating rate Note may
also have either or both of the following: (1) a maximum limitation, or ceiling,
on the rate of interest which may accrue during any interest period ("Maximum
Interest Rate"); and (2) a minimum limitation, or floor, on the rate of interest
which may accrue during any interest period ("Minimum Interest Rate"). In
addition to any Maximum Interest Rate that may be applicable to any floating
rate Note under the above provisions, the interest rate on a floating rate Note
will in no event be higher than the maximum rate permitted by any applicable
law.
Floating rate Notes will bear interest as follows:
(1) Unless the floating rate Note is designated as a "Floating
Rate/Fixed Rate Note," an "Inverse Floating Rate Note" or as having an
Addendum attached, the 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
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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 the Regular Floating Rate Note
will be payable will 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.
(2) Floating rate Notes designated as a "Floating Rate/Fixed Rate
Note," will bear interest at a rate determined by the applicable interest
rate basis or bases, (a) plus or minus the applicable Spread, and (b)
multiplied by any applicable Spread Multiplier, unless stated otherwise
below or in the applicable pricing supplement. The rate at which interest
on a Floating Rate/Fixed Rate Note will be paid will be reset each Interest
Reset Date, beginning with the first Interest Reset Date. However, the
interest rate for the period from the date of issue to the first Interest
Reset Date will be the Initial Interest Rate and the interest rate
commencing on the Fixed Rate Commencement Date to the Maturity Date will be
the Fixed Interest Rate specified in the applicable pricing supplement. If
there is no Fixed Interest Rate specified in the applicable pricing
supplement the interest rate will be that in effect preceding the Fixed
Rate Commencement Date.
(3) Floating rate Notes designated as "Inverse Floating Rate Notes,"
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 any applicable
Spread and (b) multiplied by any applicable Spread Multiplier, unless
stated otherwise in the applicable pricing supplement. However, unless
otherwise specified in the applicable pricing supplement, the interest rate
during any 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 the Inverse Floating Rate Note is payable will be reset as of
each Interest Reset Date, however, 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.
Any floating rate Note designated as having an Addendum attached to it,
which will be specified on the face of the Note, will bear interest in
accordance with the terms described in the Addendum and the applicable pricing
supplement, rather than as stated above.
The interest rate with respect to each interest rate basis will be
determined as provided below, unless the applicable pricing supplement states
otherwise. The interest rate in effect on each day will be (1) for Interest
Reset Dates, the interest rate determined as of the Interest Determination Date
(as defined below) immediately preceding the Interest Reset Date or (2) if the
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, unless it provides otherwise, will
specify whether the rate of interest on each floating rate Note will be reset
daily, weekly, monthly, quarterly, semiannually or annually or other specified
period (the period being the "Interest Reset Period" for the Note, and the first
day of each Interest Reset Period being an "Interest Reset Date").
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Unless otherwise specified in the pricing supplement, the Interest Reset
Date will be:
- in the case of floating rate Notes that reset daily, each Business Day;
- in the case of floating rate Notes that reset weekly (other than floating
rate Notes using the Treasury Rate as an interest rate basis which reset
Tuesday of each week, except as provided below) the Wednesday of each
week;
- in the case of floating rate Notes that reset monthly, the third
Wednesday of each month (except for floating rate Notes using the
Eleventh District Cost of Funds Rate as an interest rate basis which
reset the first day of each month);
- in the case of floating rate Notes that reset quarterly, the third
Wednesday of March, June, September and December;
- in the case of floating rate Notes that reset semiannually, the third
Wednesday of two months of each year, as specified in the applicable
pricing supplement; and
- in the case of floating rate Notes that reset annually, the third
Wednesday of one month of each year, as specified in the applicable
pricing supplement.
For Floating Rate/Fixed Rate Notes, the fixed rate of interest for the
period from the Fixed Rate Commencement Date to the Maturity Date will be the
Fixed Interest Rate. If no Fixed Interest Rate is specified, the interest rate
in effect on the day immediately preceding the Fixed Rate Commencement Date will
be used, 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, the Interest Reset Date will be postponed to the next succeeding
Business Day, except that if LIBOR is used as the applicable interest rate
basis, if the next Business Day would fall in the next succeeding calendar
month, the Interest Reset Date will be the immediately preceding Business Day.
The interest rate for the floating rate Notes applicable to each Interest
Reset Period, beginning with the Interest Reset Date for the 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). 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 the auction
may be held on the preceding Friday), provided, however, if an auction is held
on the Friday of the week preceding the applicable Interest Reset Date, the
Interest Determination Date will be the preceding Friday, except that if an
auction falls on the applicable Interest Reset Date, then the Interest Reset
Date will instead be the first Business Day following the auction. The "Interest
Determination Date" for a floating rate
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Note with an interest rate determined by reference to two or more Interest Rate
bases will be the second Business Day prior to the Interest Reset Date on which
each applicable interest rate basis is determinable. Each interest rate basis
will accordingly be determined on that date, and the determined interest rate
will be effective on the applicable Interest Reset Date.
If an Interest Payment Date for a floating rate Note (other than the
Maturity Date) would be a day that is not a Business Day, the Interest Payment
Date will be postponed to the next day that is a Business Day. However, for
floating rate Notes which are LIBOR Notes, if the next Business Day would fall
in the next succeeding calendar month, the Interest Payment Date will be the
immediately preceding Business Day. For floating rate Notes with a Maturity Date
that is not a Business Day, interest, principal and premium, if any, will be
paid on the next succeeding Business Day, and no interest on that payment will
accrue for the period from and after the Maturity Date to the date of that
payment on the next succeeding Business Day.
Interest payments for floating rate Notes will be equal to the interest
accrued from and including the date of issue or from and including the last date
to which interest has been paid, but excluding the Interest Payment Date or
Maturity Date, unless otherwise stated in the applicable pricing supplement. The
interest rate for an Interest Reset Date will be the rate as reset on the date.
The interest rate applicable to any other day is the interest rate for the
immediately preceding Interest Reset Date (or, if none, the Initial Interest
Rate).
With respect to a floating rate Note, accrued interest is calculated by
multiplying the principal amount of the Note by an accrued interest factor. The
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 the day will be computed by dividing the interest rate applicable to
that 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, or by the actual number of days in the year in the
case of CMT Rate Notes or the Treasury Rate Notes. 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, unless stated otherwise 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)). All
dollar amounts used or resulting from calculations on floating rate Notes will
be rounded to the nearest cent.
U.S. Bank Trust National Association will initially act as calculation
agent. The Calculation Agent will disclose the interest rate then in effect for
a floating rate Note if a holder requests and, if available, the interest rate
that will become effective on the next succeeding Interest Reset Date with
respect to that floating rate Note. The "Calculation Date" for any Interest
Determination Date, if applicable, will be the earlier of (1) the tenth calendar
day after the Interest Determination Date, or, if the day is not a Business Day,
the next succeeding Business Day or (2) the Business Day immediately preceding
the applicable Interest Payment Date or Maturity Date, as the case may be.
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CD RATE NOTES
CD Rate Notes will bear interest at the rates specified in the Notes and in
the applicable pricing supplement. Interest on the Notes will be calculated with
reference to the CD Rate and any Spread or Spread Multiplier, and subject to any
Minimum Interest Rate and any Maximum Interest Rate. The CD Rate will be
determined as set forth below unless the applicable pricing supplement provides
otherwise.
"CD Rate" means the rate on the 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 "H.15(519)"
(as defined below), under the heading "CDs (Secondary Market)."
The 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 is referred to herein as a "CD Rate Interest Determination Date."
The following procedures will be followed if the CD Rate cannot be
determined as described above:
- If the rate is not published by 3:00 P.M., New York City time, on the
related Calculation Date, the rate on the CD Rate Interest Determination
Date for negotiable certificates of deposit of the Index Maturity
specified in the applicable pricing supplement as published in H.15 Daily
Update (as later defined) or the other recognized electronic source used
for the purpose of displaying the rate under the caption "CDs (secondary
market)" will apply.
- If the rate is not yet published in either H.15(519), H.15 Daily Update
or other recognized electronic source by 3:00 p.m., New York City time,
on the related Calculation Date, the CD Rate for the CD 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 the 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). The secondary market offered rates will be selected by the
Calculation Agent for negotiable certificates of deposit of major United
States money center banks for negotiable certificates of deposit with a
remaining maturity closest to the Index Maturity designated in the
applicable pricing supplement and be in an amount that is representative
for a single transaction in that market at that time.
- If the dealers so selected by the Calculation Agent are not quoting as
set forth above, the CD Rate for the CD Rate Interest Determination Date
will be that CD Rate in effect on the CD Rate Interest Determination
Date.
"Index Maturity" means the period to maturity of the instrument or
obligation with respect to which the related interest rate basis or bases will
be calculated.
"H.15(519)" means the designated weekly statistical release, or any
successor publication, published by the Board of Governors of the Federal
Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available through
the world-wide-web site of the Board of Governors of the Federal Reserve System
at http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
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CMT RATE NOTES
CMT Rate Notes will bear interest at the rates specified in the Notes and
in the applicable pricing supplement. Interest on the Notes will be calculated
with reference to the CMT Rate and any Spread or Spread Multiplier, and subject
to any Minimum Interest Rate and any Maximum Interest Rate. The CMT Rate will be
determined as set forth below unless the applicable pricing supplement provides
otherwise.
"CMT Rate" means, with respect to any rate displayed on the Designated CMT
Telerate Page (as defined below) under the caption ". . .Treasury 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 (1) if the Designated CMT Telerate Page is 7051, the rate on the date
and (2) 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 or the month, as applicable, in which the date occurs.
The 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 will be referred to herein as the "CMT Rate Interest Determination Date."
The following procedures will be followed if the CMT Rate cannot be
determined as described above:
- If the 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 the CMT Rate Interest Determination Date will
be the treasury constant maturity rate for the Designated CMT Maturity
Index as published in the relevant H.15(519).
- If that 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 the CMT Rate Interest Determination Date will be the 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 the 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, which 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 the above 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 offered rates 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 (which may include one or more of
the Agents or their affiliates) (each, a "Reference Dealer") in the City
of New York.
- The quotations selected above by the Calculation Agent (from the five
Reference Dealers selected by the Calculation Agent and eliminating the
highest quotation
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(or, in the event of equality, one of the highest) and the lowest
quotation (or, in the event of equality, one of the lowest)), will be
chosen 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 the Designated CMT Maturity
Index minus one year.
- If the Calculation Agent cannot obtain three Treasury Note quotations,
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 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 the five 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 the 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
the quotes will be eliminated.
- 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 that CMT Rate Interest Determination Date.
- If two Treasury Notes with an original maturity as described above 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 Bridge Telerate,
Inc. (or any successor page) on the page designated in the applicable pricing
supplement (or any other page as may replace the page on that service) for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
the pricing supplement does not specify a page, the page used will be 7052.
"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) with
respect to which the CMT Rate will be calculated, as specified in the applicable
pricing supplement. If the pricing supplement does not specify a maturity, then
the Designated CMT Maturity Index will be 2 years.
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rates
specified in the Notes and in the applicable pricing supplement. Interest will
be calculated with reference to the Commercial Paper Rate and any Spread or
Spread Multiplier, and subject to any Minimum Interest Rate and any Maximum
Interest Rate. The Commercial Paper Rate will be determined as set forth below
unless the applicable pricing supplement provides otherwise.
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"Commercial Paper Rate" means the Money Market Yield (as defined below) on
the date of the rate for commercial paper having the Index Maturity specified in
the applicable pricing supplement as published in H.15(519) under the caption
"Commercial Paper -- Non-Financial."
The 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 will be referred to herein as the "Commercial Paper
Rate Interest Determination Date."
The following procedures will be followed if the Commercial Paper Rate
cannot be determined as described above:
- In the event the 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 the 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 H.15 Daily Update, or the other recognized electronic source
used for the purpose of displaying the rate under the caption "Commercial
Paper -- Non-Financial." An Index Maturity of one month will be deemed
equivalent to an Index Maturity of 30 days and an Index Maturity of three
months will be deemed to be equivalent to an Index Maturity of 90 days.
- If by 3:00 P.M., New York City time, on the related Calculation Date, the
rate is not yet published in H.15(519), H15 Daily Update or another other
recognized electronic source, then the Commercial Paper Rate on the
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 the Commercial
Paper Rate Interest Determination Date of three leading dealers United
States dollar commercial paper in The City of New York (which may include
one or more of the Agents or their affiliates). The quotations will be
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.
- If the dealers selected by the Calculation Agent are not quoting as
provided above, the Commercial Paper Rate will be that Commercial Paper
Rate in effect on the 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 by the following formula:
<TABLE>
<C> <C> <C> <S>
D X 360
Money Market = ------------- X 100
Yield 360 X (D X M)
</TABLE>
where "D" is the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to
the actual number of days in the applicable Interest Reset Period.
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ELEVENTH DISTRICT COST OF FUNDS RATE NOTES
Eleventh District Cost of Funds Rate Notes will bear interest at the rates
specified in the Notes and in the applicable pricing supplement. Interest will
be calculated with reference to the Eleventh District Cost of Funds Rate and any
Spread or Spread Multiplier, and subject to any Minimum Interest Rate and any
Maximum Interest Rate. The Eleventh District Cost of Funds Rate will be
calculated as set forth below unless the applicable pricing supplement provides
otherwise.
"Eleventh District Cost of Funds Rate" means the rate equal to the monthly
weighted average cost of funds for the calendar month immediately preceding the
month in which the Eleventh District Cost of Funds Rate Interest Determination
Date falls, as set forth under the caption "11th District" on Bridge Telerate,
Inc. (or any successor service) on page 7058 ("Telerate Page 7058") as of 11:00
A.M. San Francisco time, on the date.
An 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 will be
referred to herein as an "Eleventh District Cost of Funds Rate Interest
Determination Date."
The following procedures will be followed if the Eleventh District Cost of
Funds Rate cannot be determined as described above:
- If the 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 the Eleventh District Cost of Funds Rate
Interest Determination Date will be the monthly weighted average costs of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the Federal
Home Loan Bank of San Francisco as the cost of funds for the calendar
month immediately preceding the date of the announcement.
- If the Federal Home Loan Bank of San Francisco fails to announce the rate
for the calendar month immediately preceding the Eleventh District Cost
of Funds Rate Interest Determination Date, then the Eleventh District
Cost of Funds Rate determined as of the Eleventh District Cost of Funds
Rate Interest Determination Date will be the Eleventh District Cost of
Funds Rate in effect on the Eleventh District Cost of Funds Rate Interest
Determination Date.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the rates specified in the
Federal Funds Rate Notes and in the applicable pricing supplement. Interest will
be calculated with reference to the Federal Funds Rate and any Spread or Spread
Multiplier, and subject to any Minimum Interest Rate and any Maximum Interest
Rate. The Federal Funds Rate will be calculated as set forth below unless the
applicable pricing supplement provides otherwise.
"Federal Funds Rate" means the rate on the date for federal funds as
published in H.15(519) under the heading "Federal Funds (Effective)", as the
rate is displayed on Bridge Telerate, Inc. (or any successor service) on page
120 (or any other page as may replace the page on the service) ("Telerate 120").
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An 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 will be referred to herein as a "Federal Funds Rate
Interest Determination Date."
The following procedures will be followed if the Federal Funds Rate cannot
be determined as described above:
- If the rate does not appear on Telerate Page 120 or is not so published
by 3:00 P.M. New York City time, on the related Calculation Date, the
rate on the Federal Funds Rate Interest Determination Date as published
in H.15 Daily Update, or the other recognized electronic source used for
the purpose of displaying the rate, under the caption "Federal Funds
(Effective)" will be used.
- If by 3:00 P.M., New York City time, on the related Calculation Date the
rate does not appear on Telerate Page 120 or is not yet published in
H.15(519), H.15 Daily Update or other recognized electronic source, then
the Federal Funds Rate on the Federal Funds Rate Interest Determination
Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the rates for the last transaction in overnight United
States dollar federal funds arranged by three leading brokers of United
States dollar federal funds transactions in the City of New York (which
may include 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 that
Federal Funds Rate Interest Determination Date.
- If the brokers selected by the Calculation Agent are not quoting as
provided above, the Federal Funds Rate determined as of the Federal Funds
Rate Interest Determination Date will be the Federal Funds Rate in effect
on that Federal Funds Rate Interest Determination Date.
LIBOR NOTES
LIBOR Notes will bear interest at the interest rates specified in the Notes
and in the applicable pricing supplement. Interest will be calculated with
reference to LIBOR and any Spread or Spread multiplier, and subject to any
Minimum Interest Rate and any Maximum Interest Rate. Interest payable on LIBOR
Notes shall be calculated as set forth below unless the pricing supplement
provides otherwise.
An Interest Determination Date relating to a LIBOR Note or any floating
rate Note for which the interest rate is determined with reference to LIBOR will
be referred to herein as a "LIBOR Interest Determination Date".
"LIBOR" will be determined by the Calculation Agent in accordance with the
following provisions unless the pricing supplement states otherwise:
(a) Upon a LIBOR Interest Determination Date, the LIBOR rate will be
either:
- if "LIBOR Telerate" is specified in the applicable pricing supplement
or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable pricing supplement as the method for calculating LIBOR, the
rate for deposits in the Designated LIBOR Currency having the Index
Maturity specified in the pricing supplement, commencing on the
Interest Reset Date, that appears on the Designated LIBOR Page as of
11:00 A.M., London time, on the LIBOR Interest Determination Date; or
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- if "LIBOR Reuters" is specified in the applicable pricing supplement,
the arithmetic mean of the offered rates (unless the Designated LIBOR
Page by its terms provides only for a single rate, in which case that
single rate shall be used) for deposits in the Designated LIBOR
Currency having the Index Maturity specified in the pricing
supplement, commencing on the applicable Interest Reset Date, that
appear (or, if only a single rate is required as aforesaid, appears)
on the Designated LIBOR Page as of 11:00 A.M., London time, on the
LIBOR Interest Determination Date. If fewer than two offered rates so
appear, or if no rate so appears, as applicable, LIBOR on the LIBOR
Interest Determination Date will be determined in accordance with the
provisions described in paragraph (b) set forth below.
(b) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may be, on
the Designated LIBOR Page as specified in (a) above, LIBOR will be
determined according to the procedures described below:
- The Calculation Agent will request the principal London offices of
each of four major reference banks (which may include affiliates of
the Agents) in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Designated LIBOR Currency for the period
of the Index Maturity specified in the applicable pricing supplement,
commencing on the applicable Interest Reset Date, to prime banks in
the London interbank market at approximately 11:00 A.M., London time,
on the LIBOR Interest Determination Date and in a principal amount
that is representative for a single transaction in the Designated
LIBOR Currency in the market at the time.
- If at least two quotations are so provided, then LIBOR on the LIBOR
Interest Determination Date will be the arithmetic mean of the
quotations.
- If fewer than two quotations are so provided, then LIBOR on the LIBOR
Interest Determination Date will be the arithmetic mean of the rates
quoted at approximately 11:00 A.M., in the applicable principal
financial center, on the LIBOR Interest Determination Date by three
major banks (which may include affiliates of the Agents) in the
principal financial center selected by the Calculation Agent for loans
in the Designated LIBOR Currency to leading European banks, having the
Index Maturity specified in the applicable pricing supplement and in a
principal amount that is representative for a single transaction in
the Designated LIBOR Currency in the market at the time.
- If the banks so selected by the Calculation Agent are not quoting as
provided above, LIBOR determined as of the LIBOR Interest
Determination Date will be LIBOR in effect on that LIBOR Interest
Determination Date.
"Designated LIBOR Currency" means the currency specified in the applicable
pricing supplement as to which LIBOR shall be calculated or, if no currency is
specified in the applicable pricing supplement, United States dollars.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable pricing supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) on the page specified in the pricing
supplement (or any other page as may replace the page on the service) for the
purpose of displaying the London
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interbank rates of major banks for the Designated LIBOR Currency, or (b) if
"LIBOR Telerate" is specified in the applicable pricing supplement or neither
"LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable pricing
supplement as the method for calculating LIBOR, the display on Bridge Telerate,
Inc. (or any successor service) on the page specified in the pricing supplement
(or any other page as may replace the page on the service) for the purpose of
displaying the London interbank rates of major banks for the Designated LIBOR
Currency.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the rates specified in the Notes and
the applicable pricing supplement. Interest will be calculated with reference to
the Prime Rate and any Spread or Spread Multiplier, and subject to any Minimum
Interest Rate and any Maximum Interest Rate. Interest with respect to Prime Rate
Notes will be calculated as set forth below unless the pricing supplement
provides otherwise.
"Prime Rate" means the rate on the date as published in H.15(519) under the
heading "Bank Prime Loan."
An 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 will be referred to herein as a "Prime Rate Interest
Determination Date."
The following procedures will be followed if the Prime Rate cannot be
determined as described above:
- If the rate is not published in H.15(519) prior to 3:00 P.M., New York
City time, on the related Calculation Date, the rate on the Prime Rate
Interest Determination Date as published in H.15 Daily Update, or other
recognized electronic source used for the purpose of displaying the rate,
under the caption "Bank Prime Loan" will be used.
- If the rate is not published prior to 3:00 P.M., New York City time, on
the related Calculation Date, in H.15(519), or H.15 Daily Update or
another recognized electronic source, then the Prime Rate will 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 the
bank's prime rate or base lending rate as in effect for that Prime Rate
Interest Determination Date, as determined by the Calculation Agent.
- If fewer than four the rates appear on the Reuters Screen US PRIME 1 for
the Prime Rate Interest Determination Date, the Prime Rate will be
calculated by the Calculation Agent and will be the arithmetic mean of
the prime rates or base lending rates quoted on the basis of the actual
number of days in the year divided by a 360-day year as of the close of
business on the Prime Rate Interest Determination Date by three major
banks in The City of New York (which may include affiliates of the
Agents) selected by the Calculation Agent.
- If the banks or trust companies selected are not quoting as provided
above, the Prime Rate determined for the Prime Rate Interest
Determination Date will be that Prime Rate in effect on the 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 any 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 specified in
the Notes and in the applicable pricing supplement. Interest will be calculated
with reference to the Treasury Rate and any Spread or Spread Multiplier, and
subject to any Minimum Interest Rate and any Maximum Interest Rate. Interest
payable on Treasury Rate Notes shall be calculated as set forth below unless the
pricing supplement provides otherwise.
"Treasury Rate" means the rate from the auction (the "Auction") of direct
obligations of the United States ("Treasury Bills") having the Index Maturity
designated in the applicable pricing supplement as published under the caption
"AVGE INVEST YIELD" on the display on the Bridge Telerate, Inc. (or any
successor service) on page 56 (or any other page which may replace the page on
the service) ("Telerate Page 56") or page 57 (or any other page which may
replace the page on the service) ("Telerate Page 57").
An 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 shall be referred to herein as a "Treasury Rate Interest
Determination Date."
The following procedures will be followed if the Treasury Rate cannot be
determined as described above:
- If not published by 3:00 P.M., New York City time, on the related
Calculation Date pertaining to the 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 will be used.
- If 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 the
Calculation Date or if no auction is held on the Treasury Rate Interest
Determination Date, then the Treasury Rate will be calculated by the
Calculation Agent and will 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 the
Treasury Rate Interest Determination Date, of Treasury Bills having the
Index Maturity specified in the applicable pricing supplement as
published in H.15(519), under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market."
- If the rate is not published in H.15(519) by 3:00 P.M., New York City
time, on the Calculation Date, then the Treasury Rate will be the rate on
the Treasury Rate Interest Determination Date of the Treasury Bills as
published in H.15 Daily Update or another recognized electronic source
used for the purpose of displaying the rate, under the caption "U.S.
Government Securities/Treasury Bills/Secondary Market."
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- If the rate is not published in H.15(519), H.15 Daily Update or another
recognized electronic source by 3:00 P.M., New York City time, on the
Calculation Date, then the Treasury Rate will be calculated by the
Calculation Agent and will 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., on the 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). The bid rates will be 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.
- If the dealers selected by the Calculation Agent are not quoting as
provided above, the Treasury Rate will be the Treasury Rate in effect on
that Treasury Rate Interest Determination Date.
SUBSEQUENT INTEREST PERIODS
We will provide in the applicable pricing supplement for the Notes whether
we will have the option to reset the interest rate for fixed rate Notes, or the
Spread or Spread Multiplier for floating rate Notes, and, if so, the date or
dates on which the interest rate or the Spread or Spread Multiplier may be reset
(each an "Optional Reset Date").
We may exercise our reset option with respect to a Note by notifying the
Trustee at least 45 but not more than 60 days before an Optional Reset Date for
the Note. The Trustee will then mail to the holder of the Note a notice (the
"Reset Notice"), first class, postage prepaid at least 40 days before the
Optional Reset Date. The Reset Notice will provide whether we have elected to
reset the interest rate (for fixed rate Notes) or the Spread or Spread
Multiplier (for floating rate Notes). We will also provide in the Reset Notice
the new interest rate or new Spread or Spread Multiplier, as the case may be;
and any provisions for redemption during the period from the Optional Reset Date
to the next Optional Reset Date or, if there is no next Optional Reset Date, to
the Stated Maturity of the Note. Each of the periods above will be a "Subsequent
Interest Period" and will include the date or dates, the period or periods, and
the price or prices at which redemption may occur during the Subsequent Interest
Period.
If we elect to reset the interest rate, Spread or Spread Multiplier of a
Note, the holder of the Note will have the option to elect for us to repay the
Note on any Optional Reset Date at a price equal to the outstanding aggregate
principal amount, plus any interest accrued to the Optional Reset Date. In order
for a Note to be repaid on an Optional Reset Date, the holder must follow the
procedures set forth below under "Redemption and Repayment" for optional
repayment. However, a holder electing for optional repayment in connection with
a Reset Notice will be required to deliver any Note to be repaid or notification
of request for optional repayment to the Trustee at least 25 (and not more than
35) days before the Optional Reset Date. A holder who has tendered a Note for
repayment pursuant to a Reset Notice may revoke their tender until the close of
business on the tenth day prior to the Optional Reset Date by written notice to
the Trustee.
We may also, at our option, revoke the interest rate (for fixed rate Notes)
or the Spread or Spread Multiplier (for floating rate Notes) as provided for in
the Reset Notice, and establish an interest rate, Spread or Spread Multiplier
that is higher (or lower if the
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Note is an Inverse Floating Rate Note) than the interest rate, Spread or Spread
Multiplier provided for in the relevant Reset Notice. Any interest rate, Spread
or Spread Multiplier so established will be for the Subsequent Interest Period
commencing on the Optional Reset Date. Upon the revocation and reset, the
Trustee will mail, at least 20 days prior to an Optional Reset Date for a Note
(or, if the day is not a Business Day, on the immediately succeeding Business
Day), a notice of the new higher interest rate, or new Spread or Spread
Multiplier to the holder of the Note. Such notice will be irrevocable. We must
notify the Trustee of any intentions to revoke the Reset Notice at least 25 days
before the Optional Reset Date. Any Note with respect to which the interest
rate, Spread or Spread Multiplier is reset on an Optional Reset Date and which
the holder has not tendered for repayment will bear the new higher interest
rate, Spread, or Spread Multiplier for the Subsequent Interest Period.
EXTENSION OF MATURITY
Each Note will mature at its Stated Maturity unless the applicable pricing
supplement provides otherwise. The pricing supplement relating to a Note (other
than an Amortizing Note) will indicate whether we have the option to extend the
Stated Maturity for the Note for one or more periods from one to five whole
years (each an "Extension Period"). Any Extension Period(s) may be up to but not
beyond the date for Final Maturity set forth in the pricing supplement.
We may exercise our option for an Extension Period for a Note by notifying
the Trustee at least 45 but not more than 60 days before the old Stated Maturity
of the Note. The Trustee will then mail a notice, the "Extension Notice," first
class, postage prepaid. The Extension Notice will set forth each of the
following:
- an election to extend the Stated Maturity of the Note;
- the new Stated Maturity for the Note;
- For fixed rate Notes, the interest rate applicable to the Extension
Period, or for floating rate Notes, the Spread or Spread Multiplier
applicable to the Extension Period; and
- any provisions for redemption during the Extension Period, including any
date or dates, period or periods during which, and any price or prices at
which the redemption may occur during the Extension Period.
Upon the Trustee's mailing of an Extension Notice to the holder of a Note,
the Stated Maturity of the Note will be extended automatically, and, except as
modified by the Extension Notice and as described in the next paragraph, will
have the same terms as prior to the mailing of the Extension Notice.
Notwithstanding the foregoing, we may, at our option, revoke the interest
rate (for fixed rate Notes), or the Spread or Spread Multiplier (for floating
rate Notes) provided in the Extension Notice and establish a higher interest
rate (for fixed rate Notes) or a higher Spread or Spread Multiplier (in the case
of a floating rate Note, or a lower Spread or Spread Multiplier for an Inverse
Floating Rate Note), for the Extension Period, provided, however, that at least
20 days prior to the stated maturity of the old note (or, if the day is not a
Business Day, on the immediately succeeding Business Day), we cause the Trustee
to send notice of the higher interest rate or new Spread or Spread Multiplier to
the holder of the Note by first class mail, postage prepaid. Such notice will be
irrevocable. All Notes
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with respect to which the Stated Maturity is extended will bear the new higher
interest rate (for fixed rate Notes), or new Spread or Spread Multiplier (for
floating rate Notes), for the Extension Period, whether or not tendered for
repayment.
If we elect to extend the Stated Maturity of a Note, the holder of the Note
will have the option to require us to repay the Note on the old Maturity Date at
a price equal to the principal amount of the Note plus any accrued and unpaid
interest to that date. In order for a Note to be repaid on the Maturity Date,
the holder must follow the procedures set forth below under "Redemption and
Repayment" for optional repayment, except that the period for delivery of the
Note or notification to the Trustee shall be at least 25 but not more than 35
days before the old Stated Maturity. A holder who has tendered a Note for
repayment pursuant to an Extension Notice may, by written notice to the Paying
Agent, revoke the tender of his or her Note for repayment until the close of
business on the tenth day before the old Stated Maturity.
AMORTIZING NOTES
We may from time to time offer Amortizing Notes. Interest on Amortizing
Notes will be computed on the basis of a 360-day year of twelve 30-day months
unless the pricing supplement states otherwise. Payments on Amortizing Notes
will be applied first to interest due and payable and then to the reduction of
the unpaid principal amount of the Note. We will provide additional information
concerning terms and provisions of Amortizing Notes in the applicable pricing
supplement. A table setting forth repayment information for each Amortizing Note
will also be included in the applicable pricing supplement and set forth in each
Amortizing Note.
ORIGINAL ISSUE DISCOUNT NOTES
We may offer Original Issue Discount Notes from time to time. The Original
Issue Discount Notes may at the time offered 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 of an Original Issue Discount
Note, the amount payable to the holder will be equal to:
(1) the Amortized Face Amount as of the date of the event; plus
(2) if an Original Issue Discount Note is being redeemed, 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 the pricing
supplement and net of any portion of the Issue Price already paid prior to
the date of redemption, or the portion of the Issue Price (or net amount)
proportionate to the portion of the unpaid principal amount to be redeemed;
plus
(3) any accrued interest to the date of redemption constituting
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"), computed on the basis of a 360-day year of twelve
30-day months, compounded semiannually.
If a Maturity of a non-interest bearing Original Issue Discount Note is a
day that is not a Business Day, the payment due at Maturity will be made on the
following day that is
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a Business Day as if it were made on the date the payment was due and no
interest will accrue on the payment amount after the Maturity.
The "Amortized Face Amount" of an Original Issue Discount Note equals:
(1) the Issue Price; plus
(2) the aggregate portions of the original issue discount (consisting
of the excess of the amounts considered as part of the "stated redemption
price at maturity" of the Original Issue Discount Note within the meaning
of Section 1273(a)(2) of the Code, whether denominated as principal or
interest, over the Issue Price), which have accrued pursuant to Section
1272 of the Code (without regard to Section 1272(a)(7) of the Internal
Revenue Code) from the date of issuance of the Original Issue Discount Note
to the date of determination; and minus
(3) any amount paid from the date of issuance up to the date of
determination which is considered part of the "stated redemption price at
maturity" of the Original Issue Discount Note.
Certain additional considerations relating to our offering of Original
Issue Discount Notes may be set forth in the applicable pricing supplement.
If a bankruptcy case is commenced by us or against us under the United
States Bankruptcy Code, it is possible that a portion of the face amount of an
Original Issue Discount Note would be treated as interest, and that the
unamortized portion 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 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 the Note by
reference to the amount of amortized original issue discount of the Note for tax
purposes or by the unamortized debt discount of the Note for financial
accounting purposes. The results to a holder of the Note could be substantially
different depending on the valuation method chosen by the bankruptcy court.
Holders of Notes with original issue discount will be required to include
the amount of original issue discount in stated income under the applicable Code
provisions and Treasury Regulations. For more information, see "Certain United
States Federal Income Tax Considerations -- U.S. Holders -- Original Issue
Discount."
INDEXED NOTES
We may issue Notes with a principal amount, and premium, if any, and/or
interest, payable on the Notes which is determined by reference to the price or
prices of certain specified commodities or stocks, by reference to the exchange
rate of one or more specified currencies, including composite currencies, or by
reference to an indexed currency or other price or exchange rate ("Indexed
Notes"), as indicated in the applicable pricing supplement. Holders of Indexed
Notes may receive a principal amount at maturity that is greater than or less
than the face amount of the Notes depending upon the fluctuation of the relative
value, rate or price at maturity of the specified index. In the applicable
pricing supplement, we will describe specific information pertaining to the
method for determining the principal amount, premium, if any, and/or interest,
payable at Maturity and certain
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historical information as to the specified index and tax and other investment
considerations associated with an investment in the Notes.
OTHER PROVISIONS; ADDENDA
Our modification of any provisions with respect to the Notes, including the
determination of an interest rate basis, provisions as to the calculation of the
interest rate applicable to a floating rate Note, and provisions for the
specifications of one or more interest rate bases, and provisions for the
Interest Payment Dates and the Maturity Date for the Notes or related variable
terms will be specified under "Other Provisions" on the face of the Note or in
an Addendum 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.
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
also 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. Book-Entry Notes will not be
exchangeable for, and issuable for certificated Notes, except as described in
the Prospectus under "Description of Debt Securities -- Global Securities."
We have provided a description of the Depositary and its procedures for
Global Notes representing Book-Entry Notes in the Prospectus under the heading
"Description of Debt Securities -- Global Securities." We have confirmed with
the Depositary that it intends to follow those procedures.
REDEMPTION AND REPAYMENT
We may not redeem the Notes prior to the redemption dates fixed at the time
of sale and provided in the applicable pricing supplement. If a redemption date
is not provided for within a Note, the Note is not redeemable prior to the
Stated Maturity. For Notes with an indicated redemption date, we may redeem at
our option the Note on any redemption date in whole or in part in increments of
$1,000, at a redemption price equal to 100% of the principal amount to be
redeemed, together with interest payable to the date of redemption. We must give
notice of the redemption at least 30, but not more than 60 days before the date
of redemption. We have been informed by the Depositary that with redemption of
Global Notes, if less than all of the Notes with like terms are to be redeemed,
the particular interests in the Global Note representing the Notes to be
redeemed (in integral multiples of $1,000) will be selected by the Depositary's
impartial lottery procedures. We may specify other terms applicable to
redemptions, or vary the terms described above in the applicable pricing
supplement or Note.
Holders of the Notes may require us to repay Notes on the terms set forth
in the Notes or the applicable pricing supplement on the optional repayment date
or dates, if any, fixed at the time of sale (the "Optional Repayment Date").
Notes for which an Optional
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Repayment Date is not indicated in the Note and the applicable pricing
supplement will not be repayable at the option of the holder prior to the Stated
Maturity. A Note will be repayable in whole or in part in increments of $1,000
on an Optional Repayment Date, at the option of the holder, at a price equal to
100% of the principal amount to be repaid, together with interest payable to the
Optional Repayment Date, unless the applicable pricing supplement provides
otherwise. In order for a Note to be repaid, we must receive at either our
office or an agency maintained for that purpose in New York, New York at least
30, but not more than 60 days before the Optional Repayment Date for a Note,
either the Note with the form entitled "Option to Elect Repayment" on the
reverse of the Note duly completed or 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 stating 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, 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 us within five Business
Days after the date of the telegram, telex, facsimile transmission or letter,
and the Note and form duly completed are so received by us. Any notice to this
effect received by us will be irrevocable. The final and binding determination
of all questions as to the validity, eligibility (including time of receipt) and
acceptance of any Note for repayment will be made by us.
CERTAIN UNITED STATES
FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain United States federal income tax
consequences from the purchase, ownership and disposition of the Notes. Except
where otherwise specifically noted, this summary only applies to original
purchasers of the Notes. This summary is based on the Internal Revenue Code of
1986, as amended, administrative pronouncements, judicial decisions and existing
and proposed Treasury Regulations, including regulations concerning the
treatment of debt instruments issued with original issue discount (the "OID
Regulations"), changes to any of which (including changes in effective dates)
subsequent to the date of this Prospectus Supplement may affect the tax
consequences described herein. This summary discusses only Notes held as capital
assets, within the meaning of Section 1221 of the Code. It does not discuss all
of the tax consequences that may be relevant to a holder in light of his
particular circumstances or to holders subject to special rules, such as certain
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 holders
whose functional currency (as defined in Code Section 985) is not the United
States dollar. Persons considering the purchase of Notes should consult their
tax advisors with regard to the application of the United States federal income
tax laws to their particular situations as well as any tax consequences arising
under the laws of any state, local or foreign taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is:
(1) a citizen or resident of the United States,
(2) a corporation, partnership or other entity created or organized in or
under the laws of the United States or of any political subdivision
thereof,
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(3) an estate whose income is includable in gross income for United States
federal income tax purposes regardless of its source,
(4) a trust, if a United States court is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions
of the trust, or
(5) any other holder 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.
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 it accrues or is 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 from the purchase, ownership and
disposition of Notes which are issued with original issue discount ("OID"). The
following summary is based on the OID Regulations.
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 the excess is equivalent to or greater than 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 will be the first offering price at
which a substantial amount of the Notes are sold to the public. 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 unconditionally payable in cash or property (other than debt
instruments of the issuer) in at least annual installments and which is paid at
a single fixed rate that appropriately accounts for the length of the interval
between payments. In addition, if a Note bears interest for one or more accrual
periods at a rate below the rate applicable for the remaining term of the Note
(e.g., Notes with teaser rates or interest holidays), and if the greater of
either the foregone interest on the Note or any "true" discount on the 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 it accrues or is received in
accordance with the U.S. Holder's regular method of tax accounting. A U.S.
Holder of a Note issued with OID which has a maturity of more than one year must
include OID in the holder's income as ordinary income over the term of the Note,
regardless of the 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
accruing on the Note for each day during the taxable year (or
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portion of the taxable year) on which the U.S. Holder held the Note.
Accordingly, a U.S. Holder of a Note issued with OID will include in the
holder's income amounts which are attributable to OID before actually receiving
cash attributable to that income.
To determine the "daily portion" of OID, the OID accruing during an accrual
period (which will generally be that period between dates on which interest is
paid) is divided by the number of days in the period. An "accrual period" may be
of any length and may also vary in length over the term of the Note. However,
each accrual period may not be longer than one year and each scheduled payment
of principal or interest must occur 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:
(1) the Note's adjusted issue price at the beginning of the accrual
period multiplied by its yield to maturity (the yield to maturity is
determined on the basis of compounding at the close of each accrual period
and appropriately adjusted to take into account the length of the
particular accrual period); over
(2) the sum of the 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 and the aggregate amount
of OID accrued on the Note in all prior accrual periods, minus 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.
Floating Rate Notes
Floating rate Notes are treated as either variable rate debt instruments or
contingent payment debt obligations. Special rules are applied for determining
the amount and accrual of qualified stated interest and OID on a floating rate
note. A Note is considered a "variable rate debt instrument" if:
(1) its issue price does not exceed the total noncontingent principal
payments due under the Note by more than a specified de minimis amount;
(2) it provides for stated interest, paid or compounded at least
annually, at current values of
- one or more qualified floating rates,
- a single fixed rate and one or more qualified floating rates,
- a single objective rate, or
- a single fixed rate and a single objective rate that is a
qualified inverse floating rate;
(3) it provides that a qualified floating rate or objective rate in
effect at any time during its term is set at a current value of that rate;
and
(4) except as provided under (1) above, it does not provide for any
contingent principal payments.
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A "qualified floating rate" is any floating rate where variations in the
value of the 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.
An otherwise qualified floating rate having restrictions will not be a
qualified floating rate unless the restrictions fall into one of the following
categories:
- restrictions consisting of a cap, a floor or a periodic adjustment
restriction (a "governor") that is fixed throughout the term of the note,
or
- restrictions consisting of a cap or similar restriction that is not
reasonably expected as of the issue date to decrease significantly the
yield on the note, or
- restrictions consisting of a floor or similar restriction that is not
reasonably expected as of the issue date to significantly increase the
yield on the note, or
- restrictions consisting of a governor or similar restriction that is not
reasonably expected as of the issue date to increase or decrease
significantly the yield on the note.
Any 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, and is
determined by a single fixed formula and 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 in the future as
objective rates by the Internal Revenue Service. However, 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 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 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
and disregarding those permissible restrictions discussed above in the
definition of a qualified floating rate.
If a variable rate debt instrument provides for stated interest at a fixed
rate for an initial period of less than one year and is followed by a variable
rate intended at the issuance date to approximate the fixed rate that is either
a qualified floating rate or an objective rate, then the fixed rate and the
variable rate together will constitute either a single qualified floating rate
or an objective rate, as the case may be. A fixed rate and a
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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.
For floating rate Notes that provide for stated interest at either a single
qualified floating rate or a single objective rate throughout their term and
qualify as a "variable rate debt instrument" under the OID Regulations, any
stated interest on the floating rate Note unconditionally payable at least
annually in cash or property (other than debt instruments of the issuer) will
constitute qualified stated interest and will be taxed accordingly. As such, 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 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 in excess of a
specified de minimis amount (i.e., at a price below the floating rate Note's
stated principal amount).
OID on a floating rate Note which arises from a "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 (1) for qualified
floating rates or qualified inverse floating rates, the value as of the issue
date of the qualified floating rate or qualified inverse floating rate, or (2)
for objective rates (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 "fixed
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. For a floating rate Note that
qualifies as a "variable rate debt instrument" and provides for stated interest
at a fixed rate in addition to one or more qualified floating rates, or, in
addition to a qualified inverse floating rate, the stated interest at 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). However, 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 its issue date is approximately the
same as the fair market value of an otherwise identical debt instrument
providing by its terms for either the qualified floating rate or the qualified
inverse floating rate. After 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, 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 the OID and qualified stated interest
as if the U.S. Holder held the "equivalent" fixed rate debt instrument. An
appropriate adjustment will be made in each accrual period for the amount of
qualified stated interest or OID deemed accrued or paid
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with respect to the "equivalent" fixed rate debt instrument if different from
the actual amount of interest accrued or paid on the floating rate Note during
the accrual period.
A floating rate Note not qualifying as a "variable rate debt instrument"
under the OID Regulations will be treated as a contingent payment debt
obligation. For a floating rate Note treated as a contingent payment debt
obligation, interest payments will generally be treated as "contingent interest"
payments. Under the OID Regulations, contingent interest payments on floating
rate Notes are includible in a holder's income for a taxable year whether or not
any payment amount is fixed or determinable in that year. As such, the amount of
interest included in income for any particular accrual period would be
determined by constructing a projected payment schedule, under applicable 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).
However, if an actual amount of contingent interest payments is not equal to the
projected amount, an adjustment to income must be made at the time of payment to
reflect the difference. A more comprehensive description of United States
Federal income tax treatment of floating rate Notes treated as contingent
payment debt obligations will be in the applicable pricing supplement.
Notes with Put and/or Call Options
We may redeem at our option certain of the Notes prior to their Stated
Maturity (a "call option") and, additionally, certain or the same Notes may
allow the holders to require us to repurchase the Notes prior to their Stated
Maturity (a "put option"). Notes containing the features may be subject to rules
that differ from the general tax rules discussed above. Any investors intending
to purchase Notes with a put or call option should consult their own tax
advisors, since OID consequences depend in part on particular terms and features
of purchased Notes.
Subsequent Interest Periods and Extension of Maturity
The pricing supplement for an issue of Notes will specify whether we have
the option to reset or extend the interest rate or Stated Maturity of the Notes.
For more information, see "Description of Medium-Term Notes, Series
K -- Subsequent Interest Periods" and "Description of Medium-Term Notes, Series
K -- Extension of Maturity." If the option for reset or extension is exercised,
the treatment for holders of Notes who do not elect for repayment of the Notes
on the applicable Optional Reset Date or "old" Stated Maturity Date depends on
the terms we establish for the Notes upon the exercise of the reset or extension
option ("revised terms"). Depending on the particular circumstances, the holders
may be treated as having surrendered the Notes for new Notes with the revised
terms in a taxable exchange. Any purchasers of Notes with the reset or extension
options should carefully examine the applicable pricing supplement and consult
with their tax advisors since tax consequences depend, in part, on particular
terms and features of the Notes.
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 acquisition discount. U.S. holders
not using the accrual method of accounting for tax purposes generally will not
be required to recognize acquisition discount on Short-Term Notes until they
receive payment on the Notes. However, U.S. holders on the accrual method and
certain other holders, including banks
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and dealers in securities, must accrue acquisition discount on Short-Term Notes
on a straight-line basis unless they elect to accrue the acquisition discount on
a constant yield basis with daily compounding. 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. Any gain recognized on the sale or exchange of a
Short-Term Note by a U.S. Holder is treated as ordinary income if the U.S.
Holder has not accrued acquisition discount on the Short-Term Note to the extent
attributable to the accrued interest and acquisition discount. The U.S. Holder
also must defer deductions 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 acquisition discount on the Note.
Amortizable Bond Premium
U.S. Holders purchasing Notes for amounts greater than the sum of all
amounts payable on the Note, other than payments of qualified stated interest,
will be considered to have purchased the Note with "amortizable bond premium"
equal to the excess. A U.S. Holder may elect to amortize the premium using a
constant yield method over the remaining term of the Note and accordingly 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 in the future 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 a U.S. Holder's basis in
the Note. Any election by a U.S. Holder to amortize bond premium will apply to
all taxable debt instruments then owned or after acquired by that holder, and
may not be revoked without the consent of the IRS.
Election to Treat All Interest and Premium as OID
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 which accrues on a debt
instrument by using the constant yield method applicable to OID, subject to
certain limitations and exceptions.
Disposition of a Note
A U.S. Holder generally will recognize taxable gain or loss equal to the
difference between any amount realized on the sale, exchange or retirement of a
Note and that holder's adjusted tax basis in the Note, subject to the exceptions
discussed above and except to any extent that gain or loss is attributable to
accrued but unpaid interest or accrued market discount. A U.S. Holder's adjusted
tax basis in a Note will generally equal that holder's initial investment in the
Note, as increased by any OID included in income and any accrued market discount
or any acquisition discount if the U.S. Holder has included the market discount
or acquisition discount in income, and will be decreased by the amount of any
payments previously received, other than qualified stated interest payments, and
by any amortized bond premium with respect to the Note. The gain or loss
generally will be capital gain and will be long term capital gain if the Note
was held by the holder for more than twelve months.
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NON-U.S. HOLDERS
In general, our payments of principal, premium, if any, and any interest or
OID, to a Holder will not be subject to United States federal income or
withholding tax if the payment is not effectively connected with the conduct of
a trade or business within the United States by the non-U.S. Holder and the
non-U.S. Holder meets the following requirements:
(1) the non-U.S. Holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the
Company;
(2) the non-U.S. Holder is not a controlled foreign corporation with
respect to which the Company is a "related person" within the meaning of
the Code; and
(3) the non-U.S. Holder provides a statement prior to payment on Form
W-8 (or a permitted substitute term) that the Holder is not a United States
person.
However, if the requirements listed above are not met with respect to a
non-U.S. Holder, then amounts paid by the Company to the holder that are not
effectively connected with the conduct by the holder of a United States trade or
business will be subject to United States federal withholding tax at a rate of
30% (or the lower tax rate as may be specified by an applicable tax treaty) of
the amount paid. If a non-U.S. Holder is engaged in a United States trade or
business and amounts paid by the Company to the holder are effectively connected
with the conduct of the trade or business, the holder may be subject to United
States federal income taxation on the amounts at the same graduated rates
applicable to United States persons.
Generally, non-U.S. Holders will not be subject to United States federal
income taxes on amounts which constitute 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.
However, non-U.S. Holders who are non-resident alien individuals, 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 gain realized on the
disposition if certain other conditions are met. In these circumstances, the
capital gain is generally subject to United States federal withholding tax at a
rate of 30% (or the lower rate as may be specified by an applicable treaty).
Other exceptions may be applicable in addition to those exceptions discussed
above, and a non-U.S. Holder should consult his or her tax advisor in this
regard.
The estates of individuals who are not citizens or residents of the United
States (as defined for United States federal estate tax purposes) are not
subject to United States federal estate tax on Notes upon death of the
individual holder, if at the time of death an individual did not directly or
indirectly own 10% or more of the total combined voting power of the Company's
stock, and provided that the individual did not hold the Note in connection with
the conduct of a United States trade or business.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Where required, we will report to the holders of Notes and the IRS the
amount of any interest paid on the Notes in each calendar year and the amounts
of tax withheld, if any, with respect to the payments.
S-32
<PAGE> 33
U.S. Holders
U.S. holders of Notes may be subject to backup withholding of tax with
respect to interest payments and gross proceeds from the sale of Notes. The
backup withholding will be applied at a rate of 31% unless (1) the U.S. Holder
is a corporation or comes within certain other exempt categories or (2) if a
U.S. Holder provides a correct taxpayer identification number, certifies as to
no loss of exemption from backup withholding and otherwise complies with the
applicable requirements of the backup withholding rules. Any U.S. Holder of
Notes who does not provide the Company with the holder's correct taxpayer
identification number may be subject to penalties imposed by the IRS.
Non-U.S. Holder
Non-U.S. Holders generally will not be subject to backup withholding at a
rate of 31% and information reporting requirements if a non-U.S. Holder
certifies on Form W-8 (or a permitted substitute form) as to the holder's status
as a foreign person and the payor does not have actual knowledge or a reason to
know that any information or certification stated in such certificate is
unreliable. If a non-U.S. Holder fails to provide the certification, the holder
may be subject to the 31% backup withholding tax and certain information
reporting requirements.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the holder's U.S.
federal income tax liability, provided that the required information is
furnished to the IRS.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Distribution Agreement
between us and the Agents, the Notes are being offered on a continuous basis by
us through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Salomon Smith Barney Inc., Morgan Stanley & Co. Incorporated,
Chase Securities Inc., NationsBanc Montgomery Securities LLC, Goldman, Sachs &
Co. and Lehman Brothers Inc. (individually, an "Agent" and collectively, the
"Agents"), who have agreed to use their best efforts to solicit offers to
purchase Notes. We will have the sole right to accept offers to purchase Notes
and may reject any offer to purchase Notes in whole or in part. An Agent will
have the right, in its discretion reasonably exercised, to reject any offer to
purchase Notes solicited by it in whole or in part. Payment of the purchase
price of the Notes will be required to be made in immediately available funds.
We will pay an Agent, in connection with sales of Notes resulting from a
solicitation made or an order to purchase received by the Agent, a commission
ranging from .125% to .750% of the principal amount of Notes to be sold;
provided, however, that commissions with respect to Notes maturing more than
thirty years from the date of issuance will be negotiated. We have agreed to
reimburse the Agents for certain expenses.
We may sell Notes directly to investors or indirectly through others for
resale to the public. In this case, no underwriters or agents would be involved.
No commission will be payable on Notes we sell directly to investors.
We may also sell Notes to one or more Agents as principal who will purchase
the Notes for their own account at a discount for resale to investors or other
purchasers on terms agreed upon by us and the Agents. Notes sold to Agents as
principal will be sold at
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<PAGE> 34
a price equal to 100% of the principal amount less a percentage equal to the
commission which would be applicable to any agency sale of a Note of identical
maturity, unless the applicable pricing supplement provides otherwise. The
Agents may resell the Notes in one or more transactions, including at varying
prices determined at the time of sale or at a fixed public offering price. 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 the
discount allowed to any dealer will not be in excess of the discount to be
received by the Agent from us unless the applicable pricing supplement provides
otherwise. 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 and any concessions and discounts may be changed.
The Agents may engage in transactions that stabilize, maintain or otherwise
affect the price of the Notes. Specifically, the Agents may overallot in
connection with the offering, creating a short position in the Notes for their
own account. In addition, to cover overallotments or to stabilize the price of
the Notes, the Agents may bid for, and purchase, the Notes in the open market.
Any of these activities may stabilize or maintain the market price of the Notes
above independent market levels. The Agents are not required to engage in these
activities, and may end any of these activities at any time.
Underwriters, dealers, and agents that participate in the distribution of
the Notes may be underwriters as defined in the Securities Act of 1933, as
amended (the "Act"), and any discounts or commissions received by them from us
and any profit on the resale of the Notes by them may be treated as underwriting
discounts and commissions under the Act. We have agreements with the Agents to
indemnify them against certain liabilities, including liabilities under the Act,
or to contribute with respect to payments which the Agents may be required to
make.
The Agents and their affiliates may engage in transactions with, or perform
services for, us or our subsidiaries or affiliates in the ordinary course of
their businesses.
We do not intend to list the Notes on any securities exchange. The Agents
may make a market in the Notes; however, the Notes will not have an established
trading market when issued and although the Agents may from time to time
purchase and sell Notes in the secondary market, they are not obligated to do
so. There can be no assurances that there will be a secondary market for the
Notes or liquidity in any secondary market.
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<PAGE> 35
PROSPECTUS
(ILFC LOGO)
INTERNATIONAL LEASE FINANCE CORPORATION
By this prospectus, we may offer:
DEBT SECURITIES
These securities will have an aggregate offering price of up to
$2,000,000,000 or an equivalent amount in U.S. dollars if any securities are
denominated in a currency other than U.S. dollars. We may offer these securities
in one or more series, with the same or different maturity dates, and at par or
with an original issue discount.
We will provide the specific terms of these securities in supplements to
this prospectus. You should read this prospectus and the prospectus supplement
carefully before you invest.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR THE
PROSPECTUS SUPPLEMENT THAT WE HAVE REFERRED YOU TO. NO ONE IS AUTHORIZED TO
PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE
SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME
THAT THE INFORMATION IN THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT IS ACCURATE
AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS DOCUMENT.
-------------------------
The date of this prospectus is April 26, 2000
<PAGE> 36
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................................... 3
Where You Can Find More Information......................... 5
The Company................................................. 5
American International Group, Inc........................... 6
Use of Proceeds............................................. 6
Prospectus Supplement....................................... 6
Description of Debt Securities.............................. 6
Plan of Distribution........................................ 17
Experts..................................................... 18
Legal Matters............................................... 18
</TABLE>
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<PAGE> 37
SUMMARY
This summary highlights selected information from this prospectus and may
not contain all of the information that is important to you. To understand the
terms of the debt securities we are offering by this prospectus, you should
carefully read this prospectus and the prospectus supplement that gives the
specific terms of the securities we are offering. You should also read the
documents we have referred you to in "Where You Can Find More Information" on
page 4 for information on us and our financial statements.
INTERNATIONAL LEASE FINANCE CORPORATION
Our primary business is acquiring new and used commercial jet aircraft and
leasing and selling those aircraft to domestic and foreign airlines. We also
sell commercial jet aircraft for our own account, for the account of airlines
and for the account of financial institutions.
We are an indirect wholly owned subsidiary of American International Group,
Inc. We are incorporated in the State of California and maintain our principal
executive offices at 1999 Avenue of the Stars, 39th Floor, Los Angeles,
California 90067. Our telephone number is (310) 788-1999 and our telecopier
number is (310) 788-1990.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for the periods indicated are set
forth below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1996 1997 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C>
1.48x 1.53x 1.63x 1.65x 1.82x
</TABLE>
We computed the ratios of earnings to fixed charges 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.
THE DEBT SECURITIES WE MAY OFFER
We may offer up to $2,000,000,000 in debt securities. We may sell the debt
securities through underwriters or dealers, directly to purchasers or through
agents. The prospectus supplement and the pricing supplement, if one is used,
will describe the specific amounts, prices and terms of the debt securities.
THE DEBT SECURITIES
We may from time to time offer debt securities which are unsecured and
unsubordinated obligations of our Company. These debt securities will rank
equally with all of our other unsecured and unsubordinated debt.
We have summarized the general features of the debt securities below. We
encourage you to read the indenture which governs the debt. A copy of the
indenture is incorporated by reference as Exhibit 4 to this Registration
Statement and is available to the public. See "Where You Can Find More
Information."
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<PAGE> 38
The following are general indenture provisions that relate to the debt
securities offered by this prospectus.
- The indenture does not limit the amount of debt that we may issue or
provide a holder of debt securities offered by this prospectus with any
protection from the consequences of a highly leveraged transaction
involving us.
- The indenture allows us to merge or consolidate with another company, or
sell all or substantially all of our assets to another company, subject
to certain conditions. If these events occur, the other company will be
required to assume our responsibilities on the debt and, in a merger or
consolidation where we are not the surviving corporation, we will have no
further liabilities or obligations with respect to the debt securities.
- Upon our request to change an obligation created by the indenture, the
holders of a majority of the total principal amount of the debt
outstanding in any series may vote to change our obligations or your
rights concerning the debt in that series. We may also amend or
supplement the indenture for certain purposes without the consent of any
holder of debt securities. However, to change any term relating to the
payment of principal or interest for a series of debt securities, every
holder in the affected series must consent.
- Under certain conditions, we may discharge the indenture at any time by
depositing sufficient funds with the trustee to pay the obligations when
due. All amounts due to you on the debt would be paid by the trustee from
the deposited funds.
The following are events of default under the indenture:
- Our failure to pay interest for 30 days.
- Our failure to pay principal and any premium when due.
- Our failure to make any sinking fund payment when due.
- Our failure to perform covenants for 60 days after receipt of notice to
cure.
- Our failure to pay our debt under any mortgage or indenture of at least
$20,000,000 when due and payable other than as a result of acceleration,
or which becomes due upon acceleration which is not rescinded or such
debt discharged, each within 30 days after written notice to us.
- Certain events in bankruptcy, insolvency or reorganization.
- Any other events of default relating to a specific series of debt
securities and set forth in the prospectus supplement for those debt
securities.
If there is an event of default, the trustee of holders of at least 25% of
the principal amount outstanding of a series may declare the principal
immediately payable for that series. However, holders of a majority in principal
amount of that series may cancel this declaration.
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<PAGE> 39
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports with the Securities and
Exchange Commission (the "SEC"). You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-732-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
on the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information that we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus and supplements to this prospectus. We
incorporate by reference our Annual Report on Form 10-K for the fiscal year
ended December 31, 1999. The information filed by us with the SEC in the future
will update and supercede this information.
We also incorporate by reference any future filings we may make with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") until our offering is completed.
You may request a copy of these filings, at no cost, by writing or calling
us at the following address or telephone number:
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
THE COMPANY
We acquire new and used commercial jet aircraft for the purpose of leasing
and selling such aircraft to domestic and foreign airlines. In terms of the
number and value of transactions completed, we are a major owner-lessor of
commercial jet aircraft. In addition, we resell commercial jet aircraft for our
own account, for the account of airlines and for the account of financial
institutions. At December 31, 1999, we had committed to purchase 331 aircraft
deliverable through 2007 at an estimated aggregate purchase price of $16.4
billion.
We are an indirect wholly owned subsidiary of American International Group,
Inc. ("AIG").
We are incorporated in the State of California. We maintain our principal
executive offices at 1999 Avenue of the Stars, 39th Floor, Los Angeles,
California 90067. Our telephone number is (310) 788-1999 and our telecopier
number is (310) 788-1990.
5
<PAGE> 40
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 and
financial services in the United States and abroad. AIG's primary activities
include both general and life insurance operations. Their 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 and General Insurance Company, American International
Reinsurance Company, Ltd. and United Guaranty Residential Insurance Company. The
Common Stock of AIG is listed on the New York Stock Exchange, among others.
AIG IS NOT A CO-OBLIGOR OR A GUARANTOR FOR THE DEBT SECURITIES.
USE OF PROCEEDS
We will use proceeds that we receive from the sale of the debt securities,
together with internally generated funds, for general corporate purposes unless
the prospectus supplement states otherwise. General corporate purposes will
include our purchases of aircraft. We will invest any proceeds from the sale of
the debt securities not immediately used in marketable securities until spent.
PROSPECTUS SUPPLEMENT
The prospectus supplement provides the specific terms of the debt
securities and may differ from the general information provided in this
prospectus. You should rely on the prospectus supplement if the information we
provide in it is different from the information contained in this prospectus.
DESCRIPTION OF DEBT SECURITIES
We may offer unsecured and unsubordinated debt securities (the "Debt
Securities") under an indenture dated as of November 1, 1991 (the "Indenture"),
between us and U.S. Bank Trust National Association (successor to Continental
Bank, National Association), as trustee (the "Trustee"). The following is a
summary of certain provisions of the Debt Securities and of the Indenture and
does not contain all of the information which may be important to you. You
should read all provisions of the Indenture carefully, including the definitions
of certain terms, before you decide to invest in the Debt Securities. If we
refer to particular sections or defined terms of the Indenture, we mean to
incorporate by reference those sections or defined terms of the Indenture. A
copy of the Indenture is incorporated by reference as an Exhibit to this
Registration Statement. See "Where You Can Find More Information."
GENERAL
The Debt Securities will rank equally with our other unsecured and
unsubordinated indebtedness. The Indenture does not limit the amount of Debt
Securities that we may issue. We may issue Debt Securities in one or more
series, with the same or various maturities, at par, or with original issue
discount. The prospectus supplement will describe
6
<PAGE> 41
any Federal income tax consequences and other special considerations applicable
to any Debt Securities issued with original issue discount.
The prospectus supplement will set forth the initial offering price, the
aggregate principal amount and the following terms of the Debt Securities:
(1) the title;
(2) any limit on the aggregate principal amount of a particular series;
(3) to whom interest on the Debt Securities should be paid if other than
the registered owner;
(4) the date or dates on which we agree to pay principal;
(5) the rate or rates of interest for the Debt Securities (which may be
fixed or variable) and, if applicable, the method used to determine the
rate or rates of interest, the date or dates from which interest will
accrue, the dates that interest shall be payable and the record date
for the payment of the interest;
(6) the place or places where principal and interest will be payable, or
the method of such payment;
(7) the period or periods within which, the price or prices at which, and
the terms and conditions upon which the Debt Securities may be
redeemed, in whole or in part, at our option;
(8) any mandatory or optional sinking fund or analogous provisions and our
obligation, if any, to redeem or repurchase the Debt Securities
pursuant to any sinking fund or similar provisions or at the option of
a holder thereof, and the period, price and terms and conditions for
the redemption or repurchase;
(9) the currency or currencies in which we agree to make payments on Debt
Securities;
(10) the method of determining amounts of principal, any premium and
interest payable on the Debt Securities if these amounts are
calculated in reference to an index;
(11) the amount of principal that we will pay upon acceleration, if other
than the entire principal amount;
(12) whether we will issue the debt securities in certificates or
book-entry form (see "Certificated Securities" and "Global Securities"
below);
(13) any additional Events of Default, if any; and
(14) any additional terms.
PAYMENT OF INTEREST AND EXCHANGE
We will issue the Debt Securities of each series either in the form of one
or more global securities (a "Global Security") registered in the name of Cede &
Co. as the nominee of The Depository Trust Company (the "Depositary"), or as a
certificate issued in definitive registered form (a "Certificated Security"), as
set forth in the prospectus supplement. If we do not state the form of a series
of Debt Securities in a prospectus
7
<PAGE> 42
supplement, we are issuing the series as a Global Security. Principal, premium,
if any, and interest, if any, is to be paid to registered holders at the office
of the Trustee in the Borough of Manhattan City and State of New York or at any
paying agency maintained by the Company for that purpose as described under
"Global Securities" below. We may provide at our option for payment of interest
to registered holders of Certificated Securities by check mailed to the address
of the holder as it appears on the register for the Certificated Securities.
CERTIFICATED SECURITIES
A holder may present Certificated Securities for transfer or exchange at
the Trustee's office or paying agencies in accordance with the terms of the
Indenture unless the prospectus supplement states otherwise. There will not be a
service charge for any transfer or exchange of Certificated Securities, but the
transfer or exchange is subject to other limitations set forth in the Indenture.
GLOBAL SECURITIES
Unless we tell you otherwise in a prospectus supplement, we will register
each Global Security representing Debt Securities in the name of Cede & Co., as
nominee of the Depositary. Cede & Co. may not transfer any Global Security, in
whole or in part, to anyone except the Depositary or a nominee of the Depositary
unless it is exchanged first for a Certificated Security.
The information under the headings "The Depositary," "Book-Entry System"
and "Year 2000" in this section concerning the Depositary and the Depositary's
book-entry system has been obtained from sources we believe to be reliable, but
we take no responsibility for the accuracy thereof.
The Depositary
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 under the provisions of Section 17A of the Exchange Act. The
Depositary holds securities deposited by persons that have accounts with the
Depositary ("Direct Participants"). The Depositary also facilitates the
settlement among Direct Participants and Indirect Participants (as defined
below), of securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in Direct
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates.
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. Indirect Participants in the
Depositary's book-entry system include securities brokers and dealers, banks and
trust companies. Indirect Participants access the Depositary's system by
clearing through or maintaining custodial relationships with a Direct
Participant. The rules applicable to the Depositary and its Participants are on
file with the SEC.
8
<PAGE> 43
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in definitive form (certificated
securities). Such laws may impair the ability to transfer beneficial interests
in Debt Securities represented by Global Securities.
Book-Entry System
We anticipate that the following provisions will apply to all depositary
arrangements unless the prospectus supplement states otherwise.
Ownership of beneficial interests in Securities will be limited to Direct
Participants or persons that may hold interest through Direct Participants such
as securities brokers and dealers, banks and trust companies ("Indirect
Participants").
Upon the issuance of a Global Security, 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 Participants' 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 Participant 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, they will be
considered the sole owner or holder of the Debt Securities represented by such
Global Security for all purposes under the Indenture. Beneficial Owners will not
be entitled to have the Debt Securities represented by a Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Debt Securities in definitive form and will not be considered the
owners or holders thereof under the Indenture.
We will make payments of principal, premium, if any, and interest on
Book-Entry Securities to the Depositary or its nominee, as the case may be, as
the registered owner of the Global Security. Neither we, nor the Trustee or any
of our agents 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 with respect to maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.
We expect that the Depositary, upon receipt of any principal, premium or
interest payment, will immediately credit Direct Participants' accounts with
payments in amounts proportionate to the respective beneficial interests in the
Global Security, as shown on the records of the Depositary. We also expect that
payments by Direct Participants to Indirect Participants and by Direct
Participant and Indirect Participants to Beneficial Owners will be governed by
standing instructions and customary practices, and accordingly will be the
responsibility of the Participants.
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<PAGE> 44
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 us, all payments of principal and interest on the Debt Securities
will be made in immediately available funds. We are 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. However, we expect 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. We do not make any
assurances as to any possible effect the requirement for settlement in
immediately available funds could have on trading activity in the Debt
Securities.
We expect that the forwarding 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 themselves, subject to any
statutory or regulatory requirements which may be in effect. Neither the
Depositary nor Cede & Co. will consent or vote with respect to the Debt
Securities. We are advised that the Depositary's usual procedure is to mail an
omnibus proxy to us as soon as possible after the record date with respect to
any such consent or vote. The omnibus proxy would assign Cede & Co.'s consenting
or voting rights to the Direct Participants to whose accounts the Debt
Securities are credited on the applicable record date (which would be identified
in a listing attached to the omnibus proxy).
In the event the Depositary is unwilling or unable to continue as
Depositary for a series of Debt Securities and we do not appoint a successor
Depositary within 90 days, we will issue such Debt Securities in certificated
form in exchange for such Global Security.
We may decide at any time not to have Debt Securities of a particular
series represented by one or more Global Securities and, accordingly will issue
Debt Securities representing such series in certificated form in exchange for
all of the Global Security or Securities representing such Debt Securities.
Year 2000
The Depositary has informed us that its management is aware that some
computer applications, systems and the like for processing data ("Systems") that
are dependent upon calendar dates, including dates before, on and after January
1, 2000, may encounter "Year 2000 problems." The Depositary has informed its
Participants and other members of the financial community (the "Industry") that
it has developed and is implementing a program so that its Systems, as the same
relate to the timely payment of distributions (including principal and interest
payments) to security holders, book-entry deliveries, and settlement of trades
within the Depositary, continue to function appropriately. This program includes
a technical assessment and an remediation plan, each of which is complete.
Additionally, the Depositary's plan includes a testing phase, which is expected
to be completed within appropriate time frames.
However, the Depositary's ability to perform properly its services is also
dependent upon other parties, including but not limited to issuers and their
agents, as well as third-
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<PAGE> 45
party vendors from whom the Depositary licenses software and hardware, and
third-party vendors on whom the Depositary relies for information or the
provision of services, including telecommunication and electrical utility
service providers, among others. The Depositary has informed the Industry that
it is contacting (and will continue to contact) third-party vendors from whom
the Depositary acquires services to: (i) impress upon them the importance of
such services being Year 2000 compliant; and (ii) determine the extent of their
efforts for Year 2000 remediation (and, as appropriate, testing) of their
services. In addition, the Depositary is in the process of developing such
contingency plans as it deems appropriate.
According to the Depositary, the foregoing information with respect to the
Depositary has been provided to the industry for informational purposes only and
is not intended to serve as a representation, warranty or contract modification
of any kind. Detailed information concerning the Depositary's progress,
including a series of periodic reports, can be accessed electronically by means
of its home page on the internet (http://www.dtc.org).
CERTAIN COVENANTS OF THE COMPANY
Restrictions on Liens. We will not, and will not permit any Restricted
Subsidiary to, issue, assume or guarantee any indebtedness for borrowed money
secured by any Mortgage (as defined in "Certain Definitions"), upon any property
of ours or any Restricted Subsidiary (as defined in "Certain Definitions"), or
on any shares of stock of any Restricted Subsidiary, without ensuring that the
Debt Securities (together with any other indebtedness of ours or such Restricted
Subsidiary ranking equally with the Debt Securities if we so determine) is
equally and ratably secured. The foregoing restrictions do not apply to:
(1) mortgages existing on November 1, 1991;
(2) certain mortgages securing all or a part of the purchase price of
property (other than property acquired for lease to another person);
(3) mortgages on the property of a Restricted Subsidiary existing at the
time it became a Restricted Subsidiary;
(4) mortgages securing indebtedness for borrowed money owed by a Restricted
Subsidiary to us or another Restricted Subsidiary;
(5) mortgages on property of another corporation that are in existence at
the time we or a Restricted Subsidiary acquire the property of that
corporation as an entirety or substantially as an entirety (including
acquisition by merger or consolidation);
(6) any 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 is not extended and is limited to the
same property subject to the mortgage replaced or property substituted
therefor, as a result of any destruction, condemnation or damage of
such property;
(7) liens in connection with certain legal proceedings;
(8) liens for certain taxes or assessments, landlord's liens and charges
incidental to the conduct of our business or the ownership of property
and assets by ourselves
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or a Restricted Subsidiary, which liens are not incurred in connection
with the borrowing of money and do not, in our opinion, materially
impair the use of such property in our business operations or the
business operations of a Restricted Subsidiary or the value to the
business of such property; and
(9) mortgages not otherwise excepted above which, when aggregated with all
other outstanding indebtedness for borrowed money of ours and of
Restricted Subsidiaries secured by mortgages and not listed in clauses
(1) through (8) above, does not exceed 12.5% of our Consolidated Net
Tangible Assets (as defined in "Certain Definitions").
Restrictions as to Dividends and Certain Other Payments. We may not pay or
declare any dividend or make any distributions on any of our capital stock
(except in shares of, or warrants or rights to subscribe for or purchase shares
of our capital stock), or make any payment ourselves or through 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 because:
(1) we have failed to pay interest on the Debt Securities of that series
when due and continue not to pay for 30 days;
(2) we have failed to pay the principal and premium, if any, on the Debt
Securities of that series when due either at maturity, when due upon
redemption, or when due by declaration or otherwise; or
(3) we have failed to deposit any sinking fund payment with respect to Debt
Securities of that series when and as due.
Restrictions on Investments in Non-Restricted Subsidiaries. We will not,
nor will we permit any Restricted Subsidiary, to invest in or transfer assets to
a Non-Restricted Subsidiary if immediately thereafter we would be in breach of
or in default in the performance of any of our covenants or warranties contained
in the Indenture.
Limited Covenants in the Event of a Highly Leveraged Transaction. Other
than our covenants included in the Indenture described above and as described
below in "Merger and Sale of Assets," there are no covenants or provisions in
the Indenture that afford holders protection should we participate in a highly
leveraged transaction, leveraged buyout, reorganization, restructuring, merger
or similar transaction.
CERTAIN DEFINITIONS
Certain significant terms which are defined in the Indenture are set forth
below:
"Consolidated Net Tangible Assets" means the total amount of assets (less
depreciation and valuation reserves and other reserves and items deductible from
the 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 for us together with our Restricted
Subsidiaries, after deducting:
(1) 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 a manner where it could become
payable more than one year from the date of creation thereof,
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(2) deducting shareholder's equity and reserves for deferred income taxes,
(3) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles, which in each case,
would be included on such balance sheet, and
(4) investments and equity in the net assets of Non-Restricted
Subsidiaries.
"Mortgages" means any mortgage, pledge, lien or other encumbrance of any
nature upon any property of ours or any Restricted Subsidiary.
"Non-Restricted Subsidiaries" means (1) any Subsidiary designated as
non-restricted by the Board of Directors of the Company in accordance with the
Indenture, and (2) any other Subsidiary of which one or more Non-Restricted
Subsidiaries owns, directly or indirectly, the majority of the voting stock, if
a corporation; or, if a limited partnership, in which the Non-Restricted
Subsidiary is a general partner.
"Restricted Subsidiaries" means all Subsidiaries other than Non-Restricted
Subsidiaries. Our Board of Directors may change the designations of Restricted
Subsidiaries and Non-Restricted Subsidiaries, subject to specified conditions in
the Indenture.
"Subsidiary" means any corporation, partnership, or trust of which we or a
Subsidiary own, or we together with one or more Subsidiary own, directly or
indirectly, more than 50% of the Voting Stock.
MERGER AND SALE OF ASSETS
We may consolidate with or merge into any other Person or convey, transfer
or lease our properties and assets substantially as an entirety to any Person,
and another Person may consolidate or merge with us or convey, transfer or lease
its properties and assets to us substantially as an entirety on the following
conditions:
(1) the entity formed by consolidation or 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 our obligations under the Indenture;
(2) 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 Event of Default, has happened and is continuing; and
(3) if our property or assets become subject to a mortgage, pledge, lien,
security interest or other encumbrance not permitted by the Indenture,
each of ourselves and such entity 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 entity shall be substituted for us under the Indenture and, except in
the case of such a lease, we will be relieved of all obligations under the
Indenture.
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AMENDMENT, SUPPLEMENT AND WAIVER OF THE INDENTURE
We, together with the Trustee, may amend or supplement the Indenture with
the consent of the holders of a majority in principal amount of the outstanding
Debt Securities of each series affected by such amendment or supplement. Any
past default by ourselves and its consequences may be waived with the consent of
the holders of a majority in principal amount of the outstanding Debt Securities
of each series affected by such default. However, we may not enter into any
amendment, supplement or waiver without the consent of the holders of all
affected Debt Securities if the amendment, supplement or waiver would:
(1) cause a change in the stated maturity of principal or any installment
of principal or interest on any Debt Security;
(2) reduce the principal amount payable or the rate of interest thereon or
any premium payable upon the redemption of the Debt Security;
(3) change the stated maturity of any Debt Security (or reduce the amount
payable upon a declaration of acceleration);
(4) change the time for payment of any interest on any Debt Security;
(5) make any Debt Security payable in a currency other than that stated in
the Debt Security; or
(6) reduce the stated percentage of principal amount of Debt Securities
whose holders must consent to such amendment, supplement or waiver.
We, together with the Trustee, may, without the consent of any holder of
Debt Securities, amend or supplement the Indenture for purposes including:
(1) to evidence our succession by another corporation;
(2) to add covenants or additional Events of Default for the benefit of the
holders of all or any series of Debt Securities;
(3) to cure any ambiguity;
(4) to correct any provision of the Indenture inconsistent with other
provisions or make any other provision which does not adversely
materially affect the interests of the holders of Debt Securities; or
(5) to change or eliminate any provision of the Indenture if such change or
elimination is effective only when there are no Debt Securities
outstanding 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
occurrences:
(1) our failure to pay interest on the Debt Securities of that series when
due and the continuation of our failure to pay for 30 days;
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(2) our failure to pay the principal and premium, if any, on the Debt
Securities of that series when due at maturity, when due upon
redemption, or when due by declaration or otherwise;
(3) our failure to deposit of any sinking fund payment for that series of
Debt Securities when and as due;
(4) our default in the performance of any other covenant contained in the
Indenture (except as to covenants included in the Indenture not for the
benefit of that particular series of Debt Securities) continued for 60
days after written notice;
(5) our default under any mortgage, indenture (including the Indenture) or
instrument under which indebtedness for borrowed money is issued or is
secured or evidenced, 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 its terms, and such
acceleration is not rescinded or annulled, or such indebtedness for
borrowed money is not discharged within 30 days after written notice to
us by the Trustee, or notice to each of ourselves and the Trustee by
the holders of at least 25% in principal amount of the outstanding Debt
Securities of that series;
(6) certain events in bankruptcy, insolvency or reorganization; or
(7) any other events of default provided with respect to the 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 affected
series 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
affected series.
The holder of any Debt Security of a series will not have any right to
institute any proceeding with respect to the Indenture or remedies thereunder,
unless
(1) the holder previously gives the Trustee written notice of an Event of
Default,
(2) the holders of not less than 25% in principal amount of the outstanding
Debt Securities of that series shall have also made such written
request to the Trustee and offered the Trustee satisfactory indemnity
to institute such proceeding as Trustee, and
(3) the Trustee for 60 days shall have failed to institute such proceeding.
However, the right of any holder of any Debt Security to institute suit for
enforcement of any payment of principal, premium, if any, and interest on such
Debt Security on or after the applicable due date, may not be impaired or
affected without such holder's consent.
The holders of a majority in principal amount of outstanding Debt
Securities of any series may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or for 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 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
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be entitled to receive reasonable security or indemnity from such Holders
against the costs, expenses and liabilities which could be incurred 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.
We are 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.
DEFEASANCE AND COVENANT DEFEASANCE
We may discharge our obligations (a "defeasance") with respect to the
outstanding Debt Securities of a series of Debt Securities other than with
respect to certain obligations to the Trustee and our obligations with respect
to: (1) the registration, transfer and exchange of certificated Debt Securities,
(2) mutilated, destroyed, lost or stolen certificated Debt Securities, and (3)
the maintenance of an office or agency in the place of payment and the treatment
of funds held by paying agents. We may also be released from the restrictions
described under "Certain Covenants of the Company" above and any other
provisions identified in the prospectus supplement ("covenant defeasance") under
certain conditions. The conditions which we must satisfy for defeasance or
covenant defeasance include those set forth below:
(A) we will have irrevocably deposited or caused to be deposited with the
Trustee (or other satisfactory trustee), trust funds for the payment of
such Debt Securities, consisting of money, U.S. Government Obligations
(as defined below) which in accordance with the scheduled payment of
principal and interest thereon will provide money, or a combination of
money and U.S. Government Obligations, which will be 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;
(B) 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
has occurred and is continuing on the date of such deposit and, for
certain purposes, has not occurred during the period ending on the
123rd day after the date of deposit, or any longer preference period;
(C) the defeasance or covenant defeasance shall not cause the Trustee to
have a conflicting interest as referred to in the Indenture; and
(D) the defeasance or covenant defeasance will not result in a breach or
violation of the Indenture or other material agreements or instruments
or cause the Debt Securities, if listed on a national securities
exchange, to be delisted.
In the case of defeasance, we are also required to deliver to the Trustee
an opinion of counsel stating that we have received a direct ruling from the
Internal Revenue Service, or such a ruling has been published, or since the date
of the Indenture there has been a change in the applicable Federal income tax
law, such 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. The ruling will provide that the
holders of the outstanding Debt Securities to be defeased will be subject to
Federal
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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, we are 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 (a) direct obligations of the United States of America for the payment
of which its full faith and credit is pledged, or (b) 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. In either
case, such U.S. Governmental Obligations are not callable or redeemable at the
option of the issuer thereof, and shall also include a Depositary receipt issued
by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as
amended (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 Depositary receipt.
THE TRUSTEE
The Trustee has functioned as an unsecured lender to us from time to time.
In addition, we may maintain deposit accounts and conduct other banking
transactions with the Trustee in the ordinary course of business.
PLAN OF DISTRIBUTION
We may sell the Debt Securities either: (1) through underwriters or
dealers; (2) directly to one or more purchasers; or (3) through agents.
If underwriters or dealers are used in the sale, the underwriters or
dealers will acquire the Debt Securities for their own account and may later
resell the Debt Securities. Resale transactions for the Debt Securities may
include negotiated transactions, the resale at a fixed public offering price or
resale 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 underwriting firms may purchase and
sell the Debt Securities in the secondary market, but they are not obligated to
do so. There are no assurances that there will be a secondary market for the
Debt Securities. The obligations of the underwriters to purchase the Debt
Securities will be subject to certain conditions. The underwriters will be
obligated to purchase all the Debt Securities of a series 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.
We may also sell the Debt Securities directly or through agents designated
by us. We will name any agent involved in the offer or sale of the Debt
Securities and state any commissions paid by us to that agent in the prospectus
supplement. We will set forth in the prospectus supplement the net proceeds we
will receive from the sale of the Debt Securities. Unless indicated in the
prospectus supplement, any agent is acting on a best
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efforts basis for the period of its appointment. Any agent will also be deemed
to be an underwriter as that term is defined in the Securities Act.
We may authorize agents, underwriters or dealers to solicit offers by
certain institutional investors to purchase Debt Securities at the public
offering price provided in the prospectus supplement and provide for payment and
delivery on a future date specified in the prospectus supplement. Contracts for
those delayed purchases will be subject only to the conditions contained in the
prospectus supplement and the prospectus supplement will set forth the
commission to be paid for solicitation of those contracts.
We may indemnify any underwriters, dealers and agents who participate in
the distribution of the Debt Securities against certain civil liabilities,
including liabilities under the Securities Act. We also may agree to make
contributions with respect to payments which the agents or underwriters may be
required to make. Those underwriters, dealers and agents may be customers of,
engage in transactions with, or perform services for us in the ordinary course
of business.
EXPERTS
Our consolidated financial statements and schedule as of and for the three
years ended December 31, 1999, which are incorporated by reference in this
prospectus from our Annual Report on Form 10-K, have been incorporated in
reliance on the audited report of PricewaterhouseCoopers LLP, independent
auditors, given on the authority of said firm as experts in auditing and
accounting.
LEGAL MATTERS
The validity of the issuance of the Debt Securities we are offering will be
passed upon for us by O'Melveny & Myers LLP. Morgan, Lewis & Bockius LLP, Los
Angeles, California will pass upon certain legal matters for the underwriters or
agents.
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[ILFC LOGO]
INTERNATIONAL LEASE FINANCE CORPORATION
$1,075,000,000
MEDIUM-TERM NOTES, SERIES K
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
MORGAN STANLEY DEAN WITTER
CHASE SECURITIES INC.
BANC OF AMERICA SECURITIES LLC
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
September 25, 2000
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