<PAGE> 1
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 23, 1994) Rule 424(b)(2)
File No. 33-52845
$400,000,000
GFC
GREYHOUND FINANCIAL CORPORATION
MEDIUM-TERM NOTES, SERIES B
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
------------------------
Greyhound Financial Corporation (the "Company") may offer from time to time
up to $400,000,000 aggregate principal amount, or the equivalent thereof in one
or more foreign or composite currencies, of its Medium-Term Notes, Series B (the
"Notes"). Such Notes are in addition to $250,000,000 aggregate principal amount
of Notes that were issued prior to the date hereof. The Notes will bear interest
at fixed or variable rates ("Fixed Rate Notes" and "Floating Rate Notes",
respectively). The interest rates on Fixed Rate Notes, the method of determining
the interest rates on Floating Rate Notes and the issue prices of Floating Rate
Notes will be established by the Company from time to time and will be set forth
in supplements hereto ("Pricing Supplements"). Interest rates, the methods of
determining interest rates and issue prices are subject to change by the
Company, but no such change will affect any Note theretofore issued or as to
which an offer to purchase has been accepted by the Company. The Notes will have
maturities of no less than nine months from the date of issue as selected by the
purchaser and agreed to by the Company. Unless otherwise specified in the
applicable Pricing Supplement, the Notes will be issued only in fully registered
form in denominations of $1,000 or any amount in excess thereof which is an
integral multiple of $1,000. Each Note will be represented by either a global
security (a "Global Note") registered in the name of a nominee of The Depository
Trust Company, as Depositary (each such Note represented by a Global Note being
referred to herein as a "Book-Entry Note") or a certificate issued in definitive
form (a "Definitive Note"), as set forth in the applicable Pricing Supplement.
Beneficial interests in Book-Entry Notes will be shown on, and transfers thereof
will be effected only through, records maintained by the Depositary (with
respect to participants' interests) and its participants. Except under certain
circumstances, Book-Entry Notes will not be issuable in definitive form. See
"Description of Notes".
Unless otherwise specified in the applicable Pricing Supplement, interest
on Fixed Rate Notes will accrue from their dates of issue and will be payable
semiannually on each March 15 and September 15 and at Maturity. The applicable
Pricing Supplement will specify whether a Floating Rate Note is a Floating
Rate/Fixed Rate Note or Inverse Floating Rate Note or whether its rate of
interest will be determined by reference to the "CD Rate", the "CMT Rate", the
"Commercial Paper Rate", the "Federal Funds Rate", "LIBOR", the "Prime Rate",
the "Treasury Rate", the "Eleventh District Cost of Funds Rate" or another
interest rate formula as may be specified in an applicable Pricing Supplement,
and may be adjusted by a "Spread" and/or "Spread Multiplier", as defined herein.
Interest on each Floating Rate Note will accrue from its date of issue and will
be payable as set forth in the applicable Pricing Supplement and at Maturity.
The Notes may be issued with original issue discount and such Notes may or may
not currently pay interest. The Notes may be subject to redemption or repayment
as described under "Description of Notes".
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, THE
PROSPECTUS OR ANY SUPPLEMENT HERETO. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<S> <C> <C> <C>
============================================================================================================================
PRICE TO AGENTS' DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2)(3) COMPANY(2)(4)
- ----------------------------------------------------------------------------------------------------------------------------
Per Note.......................... 100% .125% - .750% 99.875% - 99.250%
- ----------------------------------------------------------------------------------------------------------------------------
Total............................. $400,000,000 $500,000 - $3,000,000 $399,500,000 - $397,000,000
============================================================================================================================
</TABLE>
(1) Unless otherwise specified in a Pricing Supplement, Notes will be issued at
100% of principal amount.
(2) The Company will pay a commission ranging from .125% to .750% (or, with
respect to Notes for which the Stated Maturity is in excess of 30 years,
such commission as shall be agreed upon by the Company and the related Agent
at time of sale) of the principal amount of a Note, depending upon its
Stated Maturity, to Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Citicorp Securities, Inc., Goldman, Sachs & Co., Lehman
Brothers, Lehman Brothers Inc. (including its affiliate Lehman Special
Securities Inc.) and Salomon Brothers Inc (each an "Agent" and collectively,
the "Agents") and may sell Notes to an Agent, as principal, for resale to
investors and other purchasers at varying prices related to prevailing
markets at the time of resale as determined by such Agent or, if so
specified in the applicable Pricing Supplement, for resale at a fixed public
offering price.
(3) The Company has agreed to indemnify the Agents against, and to provide
contribution with respect to, certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Plan of Distribution".
(4) Before deducting expenses payable by the Company estimated at $390,000.
------------------------
The Notes are being offered on a continuing basis by the Company through
the Agents which have agreed to use their best efforts to solicit offers to
purchase the Notes. The Company may also sell Notes to an Agent, as principal,
for resale to investors and other purchasers and has reserved the right to sell
Notes to or through additional agents and directly to investors on its own
behalf. Unless otherwise specified in an applicable Pricing Supplement, the
Notes will not be listed on any securities exchange and there can be no
assurance that the Notes offered by this Prospectus Supplement will be sold or
that there will be a secondary market for the Notes. The Company reserves the
right to cancel or modify the offer made hereby without notice. The Company or
an Agent, if it solicits the offer, may reject any offer to purchase Notes in
whole or in part. See "Plan of Distribution".
------------------------
MERRILL LYNCH & CO.
CITICORP SECURITIES, INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
SALOMON BROTHERS INC
------------------------
The date of this Prospectus Supplement is May 23, 1994.
<PAGE> 2
GREYHOUND FINANCIAL CORPORATION
Greyhound Financial Corporation, a Delaware corporation (the "Company"), is
in the business of providing collateralized financing in focused market niches
primarily in the United States. The Company extends revolving credit facilities,
term loans and equipment and real estate financing to "middle-market" businesses
with financing needs falling generally between $500,000 and $35 million. The
Company also offers financing programs to manufacturers, distributors, vendors
and franchisors which facilitate the sale in the United States of their products
to end-users. The Company currently operates in 15 specific industry or market
niches in which its expertise in evaluating the creditworthiness of prospective
customers and its ability to provide value-added services enables the Company to
differentiate itself from its competitors and to command loan pricing which
provides a satisfactory spread over the Company's borrowing costs.
The Company seeks to maintain a high quality portfolio and to minimize
nonearning assets and write-offs by using clearly defined underwriting criteria,
stringent portfolio management techniques and by diversifying its lending
activities geographically and among a range of industries, customers and loan
products. Because of the diversity of the Company's portfolio, the Company
believes it is better able to manage competitive changes in its markets and to
withstand the impact of deteriorating economic conditions on a regional or
national basis.
The Company's activities include:
GFC BUSINESS SEGMENTS
- Corporate Finance. The Corporate Finance group provides financing,
generally in the range of $2 million to $25 million, focusing on middle
market businesses nationally, including distribution, wholesale, retail,
manufacturing and service industries. The group's lending is primarily in
the form of term loans secured by the assets of the borrower, with
significant emphasis on cash flow as the source of repayment of the
secured loan.
- Transportation Finance. The Transportation Finance group structures
secured financings for specialized areas of the transportation industry,
principally involving domestic and foreign used aircraft, as well as
domestic short-line railroads and used rail equipment. Typical
transactions involve financing up to 80% of the fair market value of used
equipment in the $3 million to $30 million range. Traditionally focused
on the domestic marketplace, Transportation Finance established a London,
England office in 1992, broadening its product line to include
international aircraft loans.
- Communications Finance. The Communications Finance group specializes in
radio and television. Other markets include cable television, print and
outdoor media services in the United States. The Company extends secured
loans to communications businesses requiring funds for recapitalization,
refinancing or acquisition. Loan sizes generally are from $3 million to
$35 million.
- Commercial Real Estate Finance. The Commercial Real Estate group
provides cash-flow-based financing primarily for acquisitions and
refinancings to experienced real estate developers and owner tenants of
income-producing properties in the United States. The Company
concentrates on secured financing opportunities, generally between $3
million and $30 million, involving senior mortgage term loans on
owner-occupied commercial real estate. The Company's portfolio of real
estate leveraged leases is also managed as part of the commercial real
estate portfolio.
- Resort Finance. The Resort Finance group focuses on successful,
experienced resort developers, primarily of timeshare resorts, second
home resort communities, golf resorts and resort hotels. Extending funds
through a variety of lending options, the Resort Finance group provides
loans and lines of credit ranging from $3 million to $30 million for
construction, acquisitions, receivables financing and purchases and other
uses. Through its subsidiary, GFC Portfolio Services, Inc., the Resort
Finance group offers expanded convenience and service to its customers.
Professional receivables collections and cash management gives developers
the ability of having loan-related administrative functions performed for
them by the Company.
- Asset Based Finance. Acquired in early 1993, the Asset Based Finance
group ("ABF") offers a full range of nationwide collateral-oriented
lending programs to middle-market businesses including
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manufacturers, wholesalers and distributors. The ABF group mainly
provides revolving lines of credit ranging between $2 million and $25
million, often partnering with the Corporate Finance group to offer
convenient "one-stop" financing to businesses.
- Consumer Rediscount Finance. The Consumer Rediscount Group offers $2
million to $25 million revolving credit lines to regional consumer
finance companies which in turn extend credit to consumers. The Company's
customers provide credit to consumers to finance home improvements,
automobile purchases, insurance premiums and for a variety of other
financial needs.
- Ambassador Factors. On February 14, 1994, the Company purchased
Ambassador Factors Corporation, formerly known as Fleet Factors Corp.
("Ambassador Factors"), from Fleet Financial Group, Inc. Ambassador
Factors provides accounts receivable factoring and asset-based lending in
amounts generally ranging from $500,000 to $3 million, principally to
small and medium-sized textile and apparel manufacturers and importers.
TRICON BUSINESS SEGMENTS
On April 30, 1994, the Company acquired TriCon Capital Corporation
("TriCon"), formerly an indirect wholly-owned subsidiary of Bell Atlantic
Corporation. TriCon is a niche oriented provider of commercial finance and
equipment leasing services to a segmented group of borrowers and lessees
throughout the United States. TriCon conducts its operations through seven
specialized business groups which provide financial products and services to
three specific market sectors of the commercial finance industry; the End-User
Sector, the Program Finance Sector and the Capital Services Sector.
END-USER SECTOR. The customers in the End-User Sector use the assets which
TriCon finances or leases for the ongoing operations of their businesses. The
equipment which TriCon leases to its customers is typically purchased from an
equipment manufacturer, vendor or dealer selected by the customer. The three
specialized business groups associated with this market sector and the services
provided by TriCon to customers of each business group include:
- Medical Finance. Equipment and real estate financing and asset
management services targeting the top 2,400 health care providers in the
United States.
- Commercial Equipment Finance. Direct finance leasing of, and lending
for, general business equipment to quality commercial business
enterprises which lack ready access to the public finance markets.
- Government Finance. Primarily tax-exempt financing to state and local
governments. Due to tax benefit limitations, TriCon sells a substantial
portion of the tax-exempt assets generated by the Government Finance
group through syndications or securitizations to third parties. In
addition, TriCon has generated fee income by arranging for the sale or
originations of such assets through public offerings.
PROGRAM FINANCE SECTOR. TriCon's business groups in the Program Finance
Sector provide financing programs to help manufacturers, distributors, vendors
and franchisors facilitate the sale of their products or services. The three
specialized business groups associated with this market sector and the services
provided by TriCon to customers of each business group include:
- Vendor Services. Point-of-sale financing programs and support services
for regional and national manufacturers, distributors and vendors of
equipment classified as "small ticket" in transaction size (generally
transactions with an equipment cost of less than $250,000). The equipment
which TriCon leases to the ultimate end-user is typically sold to TriCon
by the vendor participating in the financing program.
- Franchise Finance. Equipment and total facility financing programs for
the franchise-based food service industry. The equipment which TriCon
leases to the ultimate end-user is typically purchased by TriCon from an
equipment manufacturer, vendor or dealer selected by the end-user.
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- Commercial Credit Services. Accounts receivable and inventory lending
for manufacturers and major distributors, manufacturer-sponsored
inventory financing for office equipment dealers and telecommunications
receivables financing for regional providers of long distance operator
services.
CAPITAL SERVICES SECTOR. The Capital Services Sector has one business
group which focuses on the management and origination of highly structured
financing of "large ticket" commercial equipment (generally transactions
involving the sale or lease of equipment with a cost in excess of $15 million),
primarily leveraged leases for major corporations. The equipment which TriCon
leases to its customers is typically purchased from an equipment manufacturer,
vendor or dealer selected by the customer.
The Company has generally ceased writing new business in Europe and has
begun a managed liquidation of the commercial and consumer loan portfolios of
Greyhound European Financial Group ("GEFG"). In conjunction with the liquidation
of the GEFG portfolio, GEFG surrendered the banking license of its United
Kingdom bank, Greyhound Bank PLC. GEFG operates a finance group that was
primarily involved in lending to individuals in the United Kingdom secured by
second mortgages on residential real estate. GEFG ceased writing new consumer
finance business in the first quarter of 1991, but continues to administer and
collect loans previously made.
The Company was incorporated under the laws of Delaware in 1965 and is the
successor to a California corporation which commenced operations in 1954. The
principal executive offices of the Company are located at Dial Tower, 1850 N.
Central Avenue, Phoenix, Arizona 85004, and its telephone number is (602)
207-4900. All of the capital stock of the Company is owned by GFC Financial
Corporation ("GFC Financial"), the common stock of which is publicly traded on
the New York Stock Exchange. GFC Financial owns substantially all of the
financial services businesses (principally the Company) previously owned by its
former parent, The Dial Corp.
RATIO OF INCOME TO FIXED CHARGES
The following table sets forth the Company's ratios of income to fixed
charges ("ratio") for each of the past five years and the three months ended
March 31, 1994.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED ----------------------------------------
MARCH 31, 1994 1993 1992 1991 1990 1989
- ------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1.55 1.51 1.38 -- 1.24 1.23
==== ==== ==== ==== ==== ====
</TABLE>
Variations in interest rates generally do not have a substantial impact on
the ratio because the fixed-rate and floating-rate assets are generally matched
with liabilities of similar rate and term.
Income available for fixed charges, for purposes of the computation of the
ratio of income to fixed charges, consists of the sum of income before income
taxes (adjusted for the effect of reduced tax rates on income from leveraged
leases) and fixed charges. Fixed charges include interest and related debt
expense and a portion of rental expense determined to be representative of
interest.
For the year ended December 31, 1991, income to cover fixed charges was
inadequate to cover fixed charges by $35,256,000. This inadequacy was due to
certain restructuring and other charges of $65,000,000 and transaction costs of
$13,000,000 recorded in the fourth quarter of 1991 in connection with the
transfer by The Dial Corp to GFC Financial of its financial services and
insurance businesses, including the Company.
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<PAGE> 5
DESCRIPTION OF NOTES
The following summaries of certain provisions of the Indenture referred to
in the Prospectus do not purport to be complete and are subject to and are
qualified in their entirety by reference to all provisions of the Indenture,
including the definition of certain terms therein. The terms and conditions set
forth below will apply to each Note unless otherwise specified in the applicable
Pricing Supplement and/or such Note.
GENERAL
The Notes will be issued under an Indenture (herein called the "Indenture")
dated as of September 1, 1992, as may be supplemented from time to time, between
the Company and The Chase Manhattan Bank, N.A., as Trustee (the "Trustee"). The
aggregate principal amount of Notes which may be issued under the Indenture is
not limited. Prior to the date of this Prospectus Supplement, the Company has
issued $250,000,000 aggregate principal amount of the Notes under the Indenture.
The Company may, from time to time, without the consent of the holders of the
Notes, provide for the issuance of Notes or other senior debt securities under
the Indenture in addition to the $400,000,000 aggregate principal amount of
Notes offered hereby and the Notes previously issued.
The Notes will be unsecured and will rank pari passu with all other
unsecured senior debt securities of the Company from time to time outstanding.
The Notes will be offered on a continuing basis and will mature nine months
or more from the date of issue, as selected by the purchaser and agreed to by
the Company. Unless otherwise specified in an applicable Pricing Supplement,
interest-bearing Notes will either be Fixed Rate Notes or Floating Rate Notes.
Notes may be issued at significant discounts from their principal amount payable
at Stated Maturity (or on any prior date on which the principal or an
installment of principal of a Note becomes due and payable, whether by the
declaration of acceleration, call for redemption at the option of the Company,
repayment at the option of the holder or otherwise) (each such date, a
"Maturity"), and some Notes may not bear interest.
Unless otherwise indicated in a Note or in a foreign currency supplement
hereto (a "Multi-Currency Supplement") or Indexed Note (as defined below)
supplement hereto (an "Indexed Note Supplement"), the Notes will be denominated
in United States dollars and payments of principal of, and premium, if any, and
interest on, the Notes will be made in United States dollars. If any of the
Notes are to be denominated other than in United States dollars or if the
principal of, and interest on, the Notes and any premium provided for in any
Note is to be payable in or by reference to a currency (or in composite currency
units or in amounts determined by reference to one or more currencies) other
than that in which such Note is denominated, provisions with respect thereto
will be set forth in such Note and in the applicable Multi-Currency Supplement
or Indexed Note Supplement. See "Indexed Notes" below.
Interest rates, interest rate formulae and other variable terms of the
Notes are subject to change by the Company from time to time, but no such change
will affect any Note already issued or as to which an offer to purchase has been
accepted by the Company.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or definitive form (a "Definitive Note") in denominations of $1,000 or
any amounts in excess thereof which is an integral multiple of $1,000.
Book-Entry Notes may be transferred or exchanged only through a participating
member of The Depository Trust Company (or such other depositary as is
identified in an applicable Pricing Supplement) (the "Depositary"). See
"Book-Entry System". Registration of transfer of Definitive Notes will be made
at the Principal Office of the Trustee. No service charge will be made by the
Company, the Trustee or the Security Registrar for any such transfer or exchange
of Notes, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charges that may be imposed in connection therewith.
The total amount of any principal, premium, if any, or interest due on any
global note (each, a "Global Note") representing one or more Book-Entry Notes on
any Interest Payment Date or at the Maturity will be made available to the
Trustee on such date. As soon as possible thereafter, the Trustee will make such
payments to the Depositary in accordance with existing arrangements between the
Trustee and the Depositary. The Depositary will allocate such payments to each
Book-Entry Note represented by such Global Note and
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make payments to the owners or holders thereof in accordance with its existing
operating procedures. NEITHER THE COMPANY NOR THE TRUSTEE SHALL HAVE ANY
RESPONSIBILITY OR LIABILITY FOR SUCH PAYMENTS BY THE DEPOSITARY. So long as the
Depositary or its nominee is the registered owner of any Global Note, the
Depositary or its nominee, as the case may be, will be considered the sole owner
or holder of the Book-Entry Note or Notes represented by such Global Note for
all purposes under the Indenture. See "Book-Entry System" below.
The Notes will not have a sinking fund. Floating Rate Notes and Fixed Rate
Notes will be subject to redemption by the Company on and after the dates, if
any, and on the terms, if any, fixed for their redemption at the time of sale
and set forth in the applicable Pricing Supplement and in the applicable Note
(the "Redemption Dates"). If no Redemption Date is indicated with respect to a
Note, such Note will not be redeemable prior to its Stated Maturity. On and
after the Redemption Date, if any, with respect to any Note, such Note will be
redeemable in whole or in part in increments of $1,000 (provided that any
remaining principal amount of such Note shall be at least $1,000) at the option
of the Company at a redemption price equal to 100% of the principal amount to be
redeemed, together with interest thereon payable to the Redemption Date, on
notice given not more than 60 nor less than 30 days prior to the Redemption
Date.
If provided in an applicable Pricing Supplement, Notes will be subject to
repayment at the option of the holders thereof in accordance with the terms of
such Notes on their respective optional repayment dates, if any, as agreed upon
by the Company and the purchasers at the time of sale. If no optional repayment
date is indicated with respect to a Note, such Note will not be repayable at the
option of the holder thereof prior to its Stated Maturity.
TRANSACTION AMOUNTS
Interest rates offered by the Company with respect to the Notes may differ
depending upon the aggregate principal amount of Notes purchased in any single
transaction. The Company expects generally to distinguish, with respect to such
offered rates, between purchases which are for less than, and purchases which
are equal to or greater than, $250,000. Such different rates may be offered
concurrently at any time. The Company may also concurrently offer Notes having
different variable terms (as are described herein or in the applicable Pricing
Supplement) to different investors, and such different offers may depend upon
whether an offered purchase is for an aggregate principal amount of Notes at
least equal to or for an amount less than $250,000.
FIXED RATE NOTES
Fixed Rate Notes will bear interest from the date of issue at the annual
interest rate or rates specified on the face thereof and in the applicable
Pricing Supplement. Unless otherwise specified in the applicable Pricing
Supplement, interest on Fixed Rate Notes will be computed on the basis of a
360-day year of twelve 30-day months.
Interest on Fixed Rate Notes will be payable semiannually on March 15 and
September 15 of each year, unless otherwise specified in an applicable Pricing
Supplement, and at Maturity. If any Interest Payment Date or the Maturity of a
Fixed Rate Note falls on a day that is not a Business day, the related payment
of principal, premium, if any, or interest will be made on the next succeeding
Business day as if made on the date such payment was due, and no interest will
accrue on the amount so payable for the period from and after such Interest
Payment Date or Maturity, as the case may be.
FLOATING RATE NOTES
Each applicable Pricing Supplement will specify certain terms with respect
to which a Floating Rate Note is being delivered, including: whether such
Floating Rate Note is a "Regular Floating Rate Note", an "Inverse Floating Rate
Note" or a "Floating Rate/Fixed Rate Note", all as defined below, and the
interest rate basis or bases, "Initial Interest Rate", "Interest Reset Date",
"Record Date", "Interest Payment Date", "Index Maturity", maximum interest rate
and minimum interest rate, if any, and the "Spread" and/or "Spread Multiplier",
if any, as described under the discussion of "Interest Rate" below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as "Floating
Rate/Fixed Rate Note", an "Inverse Floating Rate Note" or as having an
Addendum attached, such Floating Rate Note will be designated a
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<PAGE> 7
"Regular Floating Rate Note" and, except as described below or in an
applicable Pricing Supplement, bear interest at the rate determined by
reference to the applicable interest rate basis (i) plus or minus the
applicable Spread, if any, and/or (ii) multiplied by the applicable Spread
Multiplier, if any. Commencing on the first Interest Reset Date, the rate
at which interest on such Regular Floating Rate Note shall be payable shall
be reset as of each Interest Reset Date; provided, however, that the
interest rate in effect for the period from the original issue date to the
first Interest Reset Date will be the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note", then, except as described below or in an applicable
Pricing Supplement, such Floating Rate Note will bear interest at a rate
determined by reference to the applicable interest rate basis (i) plus or
minus the applicable Spread, if any, and/or (ii) multiplied by the
applicable Spread Multiplier, if any. Commencing on the first Interest
Reset Date, the rate at which interest on such Floating Rate/Fixed Rate
Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that the interest rate in effect for the period from the
original issue date to the first Interest Reset Date will be the Initial
Interest Rate.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note", then, except as described below or in an applicable Pricing
Supplement, such Floating Rate Note will bear interest equal to the Fixed
Interest Rate specified in the related Pricing Supplement minus the rate
determined by reference to the interest rate basis (i) plus or minus the
applicable Spread, if any, and/or (ii) multiplied by the applicable Spread
Multiplier, if any; provided, however, that the interest rate thereon will
not be less than zero. Commencing on the first Interest Reset Date, the
rate at which interest on such Inverse Floating Rate Note is payable shall
be reset as of each Interest Reset Date; provided, however, that the
interest rate in effect for the period from the original issue date to the
first Interest Reset Date will be the Initial Interest Rate.
Notwithstanding the foregoing, if such Floating Rate Note is designated as
having an Addendum attached as specified on the face thereof, such Floating Rate
Note shall bear interest in accordance with the terms described in such Addendum
and the applicable Pricing Supplement.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded if necessary to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)), and all
dollar amounts used in or resulting from such calculation on Floating Rate Notes
will be rounded to the nearest cent (with one-half cent being rounded upward).
INTEREST RATE
Each Note will bear interest from the date of issue at the fixed rate per
annum stated, or floating rate calculated pursuant to the interest rate formula
(plus or minus the Spread, if any, and/or multiplied by the Spread Multiplier,
if any) set forth therein and in the applicable Pricing Supplement until the
principal thereof is paid or made available for payment. Interest will be
payable on each date specified in the Note on which an installment of interest
is due and payable (an "Interest Payment Date") and at Maturity. The Calculation
Agent with respect to a Floating Rate Note will be set forth in the applicable
Pricing Supplement.
The applicable Pricing Supplement will designate one of the following
interest rate bases as applicable to each Floating Rate Note: (a) the CD Rate,
(b) the CMT Rate, (c) the Commercial Paper Rate, (d) the Federal Funds Rate, (e)
LIBOR, (f) the Prime Rate, (g) the Treasury Note Rate (h) the Eleventh District
Cost of Funds Rate or (i) such other interest rate basis or formula as is set
forth in such Pricing Supplement; provided, however, that with respect to a
Floating Rate/Fixed Rate Note, the interest rate commencing on the Fixed Rate
Commencement Date and continuing, unless otherwise specified in the applicable
Pricing Supplement, until Maturity shall be the Fixed Interest Rate, if such
rate is specified in the applicable Pricing Supplement, or if no such Fixed
Interest Rate is so specified, the interest rate in effect thereon on the day
immediately preceding the Fixed Rate Commencement Date. In addition, a Floating
Rate Note may bear interest in respect of the lowest of two or more interest
rate bases. References herein to "Index Maturity" means the period to maturity
of the instrument or obligation with respect to which the interest rate basis or
bases will be calculated.
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The "Spread" is the number of basis points specified in the applicable
Pricing Supplement as being applicable to such Note, and the "Spread Multiplier"
is the percentage specified in the applicable Pricing Supplement as being
applicable to such Note. Any Floating Rate Note may also have either or both of
the following: (i) a maximum numerical interest rate limitation, or ceiling, on
the rate of interest which may accrue during any interest period and (ii) a
minimum numerical interest rate limitation, or floor, on the rate of interest
which may accrue during any interest period.
Except as provided below, and unless otherwise provided in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable, in the case
of Notes with a daily, weekly or monthly Interest Reset Date (as defined below),
on the third Wednesday of each month or on the third Wednesday of March, June,
September and December, as specified in the applicable Pricing Supplement; in
the case of Notes with a quarterly Interest Reset Date, on the third Wednesday
of March, June, September and December; in the case of Notes with a semiannual
Interest Reset Date, on the third Wednesday of the two months specified in the
applicable Pricing Supplement; and in the case of Notes with an annual Interest
Reset Date, on the third Wednesday of the month specified in the applicable
Pricing Supplement, and, in each case, at Maturity. If any Interest Payment Date
for any Floating Rate Note would fall on a day that is not a Business day, such
Interest Payment Date shall be postponed to the next day that is a Business day,
except that in the case of a LIBOR Note, if such Business day is in the next
succeeding calendar month, such Interest Payment Date shall be the immediately
preceding Business day. If the Maturity of a Floating Rate Note falls on a day
that is not a Business day, the payment of principal, premium, if any, and
interest will be made on the next succeeding Business day, and no interest on
such payment shall accrue for the period from and after such Maturity.
Interest payable on any Interest Payment Date for Fixed Rate Notes and
Floating Rate Notes will be payable to the person in whose name such Note is
registered at the close of business on the fifteenth calendar day prior to such
Interest Payment Date (the "Record Date"). Notwithstanding the foregoing, the
first payment of interest on any Note originally issued between a Record Date
and an Interest Payment Date or on an Interest Payment Date will be made on the
Interest Payment Date following the next succeeding Record Date to the
registered owner thereof on such next Record Date, unless otherwise specified in
the applicable Pricing Supplement. Special considerations applicable to any
Notes described in the preceding sentence, including the possibility that such
Notes may be treated as having been issued with original issue discount for
federal income tax purposes, will be described in the Pricing Supplement
relating thereto. See "Certain Federal Income Tax Consequences".
Interest payments for Fixed Rate Notes and Floating Rate Notes will include
accrued interest from the original issue date or from and including the last
date in respect of which interest has been paid, as the case may be, to, but
excluding, the Interest Payment Date or the date of Maturity. Accrued interest
on Floating Rate Notes will be calculated by multiplying the principal amount of
such Note by an accrued interest factor, which accrued interest factor will be
computed by adding the interest factors calculated for each day in the period
for which accrued interest is being calculated. Unless otherwise specified in
the applicable Pricing Supplement, the interest factor for each such day will be
computed by dividing the interest rate applicable to such day by 360, in the
case of Floating Rate Notes for which the interest rate basis is the CD Rate,
Commercial Paper Rate, Federal Funds Rate, Eleventh District Cost of Funds Rate,
LIBOR and Prime Rate or by the actual number of days in the year, in the case of
the Treasury Rate or the CMT Rate. Except as set forth above or otherwise
specified in the applicable Pricing Supplement, the interest rate in effect on
each day will be (a) if such day is an Interest Reset Date, the interest rate
with respect to the Interest Determination Date (as defined below) pertaining to
such Interest Reset Date, or (b) if such day is not an Interest Reset Date, the
interest rate with respect to the Interest Determination Date pertaining to the
next preceding Interest Reset Date, subject in either case to any maximum or
minimum interest rate limitation referred to above.
Unless otherwise specified in the applicable Pricing Supplement, the rate
of interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually (each an "Interest Reset Date"), as
specified in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, the Interest Reset Date will be, in the case
of Floating Rate Notes (other than Treasury Rate Notes) which reset daily, each
Business day; in the case of Floating Rate Notes which reset weekly,
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Wednesday of each week; in the case of Treasury Rate Notes which reset weekly,
Tuesday of each week (except as specified below); in the case of Floating Rate
Notes which reset monthly, the third Wednesday of each month (with the exception
of Eleventh District Cost of Funds Rate Notes, all of which reset monthly, which
will reset on the first calendar day of the month); in the case of Floating Rate
Notes which reset quarterly, the third Wednesday of March, June, September and
December; in the case of Floating Rate Notes which reset semiannually, the third
Wednesday of the two months specified in the applicable Pricing Supplement; and
in the case of Floating Rate Notes which reset annually, the third Wednesday of
the month specified in the applicable Pricing Supplement; provided, however,
that with respect to Floating Rate/Fixed Rate Notes, unless otherwise specified
in the applicable Pricing Supplement, the fixed rate of interest in effect for
the period from the Fixed Rate Commencement Date until Maturity shall be the
Fixed Interest Rate or the interest rate in effect on the day immediately
preceding the Fixed Rate Commencement Date, as specified in the applicable
Pricing Supplement. If any Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Business day, such Interest Reset Date shall be
postponed to the next day that is a Business day, except that in the case of a
Note for which LIBOR is the applicable interest rate basis, if such Business day
is in the next succeeding calendar month, such Interest Reset Date shall be the
immediately preceding Business day. As used herein, "Business day" means, unless
otherwise specified in the applicable Pricing Supplement, any day other than a
Saturday or Sunday or any other day on which banking institutions in The City of
New York are generally authorized or obligated by law, regulation or executive
order to close and, with respect to Notes as to which LIBOR is an applicable
interest rate basis, is also a London Business day. As used herein, a "London
Business day" means any day on which dealings in deposits in United States
dollars are transacted in the London interbank market.
The interest rate applicable to each Interest Reset Period commencing on
the Interest Reset Date with respect to such Interest Reset Period will be the
rate determined on the applicable "Interest Determination Date". The "Interest
Determination Date" pertaining to an Interest Reset Date for the CD Rate, the
CMT Rate, the Commercial Paper Rate, the Federal Funds Rate and the Prime Rate
will be the second Business day next preceding such Interest Reset Date. The
Interest Determination Date pertaining to an Interest Reset Date for LIBOR will
be the second London Business day preceding such Interest Reset Date. The
Interest Determination Date pertaining to an Interest Reset Date for the
Treasury Rate will be the day of the week in which such Interest Reset Date
falls on which Treasury bills would normally be auctioned. Treasury bills are
normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the result
of a legal holiday, an auction is so held on the preceding Friday, such Friday
will be the Interest Determination Date pertaining to the Interest Reset Date
occurring in the next succeeding week. If an auction falls on a day that is an
Interest Reset Date, such Interest Reset Date will be the next following
Business day. The Interest Determination Date with respect to the Eleventh
District Cost of Funds Rate will be the last working day of the month
immediately preceding each Interest Reset Date on which the Federal Home Loan
Bank of San Francisco (the "FHLB of San Francisco") publishes the Index (as
defined below under "Eleventh District Cost of Funds Rate").
Unless otherwise provided in the applicable Pricing Supplement, The Chase
Manhattan Bank, N.A. will be the "Calculation Agent." Upon request of the holder
of any Floating Rate Note, the Calculation Agent will provide the interest rate
then in effect and, if determined, the interest rate which will become effective
as a result of a determination made for the next Interest Reset Date with
respect to such Floating Rate Note. Unless otherwise specified in the applicable
Pricing Supplement, the "Calculation Date", if applicable, pertaining to any
Interest Determination Date will be the earlier of (i) the tenth calendar day
after such Interest Determination Date, or, if any such day is not a Business
day, the next succeeding Business day or (ii) the Business day preceding the
applicable Interest Payment Date or Maturity, as the case may be.
The applicable Pricing Supplement will specify the interest rate basis and
the Spread and/or Spread Multiplier, if any, and the maximum or minimum interest
rate limitation, if any, applicable to each Floating Rate Note. The interest
rate on the Notes will in no event be higher than the maximum rate permitted by
New York law as the same may be modified by United States law of general
application. In addition, such Pricing Supplement will define or particularize
for each Floating Rate Note the following terms, if applicable:
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"Index Maturity", "Initial Interest Rate", "Interest Payment Dates" and
"Interest Reset Dates" with respect to such Note.
Notes may be issued as discounted securities (bearing no interest or
interest at a rate which at the time of issuance is below market rates), to be
sold at an issue price below their stated principal amount, which provide that
upon redemption, repayment or acceleration of the maturity thereof an amount
less than the principal amount thereof shall become due and payable, or which
for United States federal income tax purposes would be considered original issue
discount notes. Certain special considerations applicable to any such discounted
Notes are described under "Certain Federal Income Tax Consequences" herein.
CD Rate. CD Rate Notes will bear interest at the interest rates
(calculated with reference to the CD Rate and the Spread and/or Spread
Multiplier, if any) specified in the CD Rate Notes and in the applicable Pricing
Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates", or any successor publication of the Board of Governors of the Federal
Reserve System ("H.15(519)") under the heading "CDs (Secondary Market)", or, if
not so published by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate will be the rate on
such Interest Determination Date for negotiable certificates of deposit of the
Index Maturity designated in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical release "Composite
3:30 P.M. Quotations for U.S. Government Securities" (the "Composite Quotation")
under the heading "Certificates of Deposit". If such rate is not yet published
by 3:00 P.M., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, then the CD Rate on such Interest Determination
Date will be calculated by the Calculation Agent and will be the arithmetic mean
of the secondary market offered rates as of 10:00 A.M., New York City time, on
such Interest Determination Date, of three leading nonbank dealers in negotiable
U.S. dollar certificates of deposit in The City of New York selected by the
Calculation Agent for negotiable certificates of deposit of major United States
money center banks of the highest credit standing in the market for negotiable
certificates of deposit with a remaining maturity closest to the Index Maturity
designated in the Pricing Supplement in an amount that is representative for a
single transaction in that market at that time, provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting as set
forth above, the CD Rate will be the CD Rate in effect on such Interest
Determination Date.
CMT Rate. CMT Rate Notes will bear interest at the rates (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in such CMT Rate Notes and any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date, the rate displayed on
the Designated CMT Telerate Page under the caption "Treasury Constant Maturities
. . . Federal Reserve Board Release H.15 . . . Mondays Approximately 3:45 P.M.",
under the column for the Designated CMT Maturity Index for (i) if the Designated
CMT Telerate Page is 7055, the rate on such Interest Determination Date and (ii)
if the Designated CMT Telerate Page is 7052, the week, or the month, as
applicable, ended immediately preceding the week in which the related Interest
Determination Date occurs. If such rate is no longer displayed on the relevant
page, or if not displayed by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for such Interest Determination Date will be
such Treasury Constant Maturity rate for the Designated CMT Maturity Index as
published in the relevant H.15(519). If such rate is no longer published, or if
not published by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate for such Interest Determination Date will be such Treasury
Constant Maturity rate for the Designated CMT Maturity Index (or other United
States Treasury rate for the Designated CMT Maturity Index) for the Interest
Determination Date with respect to such Interest Reset Date as may then be
published by either the Board of Governors of the Federal Reserve System or the
United States Department of the Treasury that the Calculation Agent determines
to be comparable to the rate formerly displayed on the Designated CMT Telerate
Page and
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published in the relevant H.15(519). If such information is not provided by 3:00
P.M., New York City time, on the related Calculation Date, then the CMT Rate for
the Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity, based on the arithmetic mean of the secondary
market closing offer side prices as of approximately 3:30 P.M. (New York City
time) on the Interest Determination Date reported, according to their written
records, by three leading primary United States government securities dealers
(each, a "Reference Dealer") in The City of New York selected by the Calculation
Agent (from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for the most recently issued direct noncallable fixed rate obligations
of the United States ("Treasury Note") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to maturity
of not less than such Designated CMT Maturity Index minus one year. If the
Calculation Agent cannot obtain three such Treasury Note quotations, the CMT
Rate for such 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 Interest Determination Date of three Reference Dealers in The City
of New York (from five such Reference Dealers selected by the Calculation Agent
and eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for Treasury Notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an amount
of at least $100 million. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor lowest
of such quotes will be eliminated; provided however, that if fewer than three
Reference Dealers selected by the Calculation Agent are quoting as described
herein, the CMT Rate will be the CMT Rate in effect on such Interest
Determination Date. If two Treasury Notes with an original maturity as described
in the third preceding sentence, have remaining terms to maturity equally close
to the Designated CMT Maturity Index, the quotes for the CMT Rate Note with the
shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no such page is specified in the applicable Pricing Supplement, the Designated
CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20, or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be 2 years.
Commercial Paper Rate. Commercial Paper Rate Notes will bear interest at
the interest rates (calculated with reference to the Commercial Paper Rate and
the Spread and/or Spread Multiplier, if any) specified in the Commercial Paper
Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date,
the Money Market Yield (as defined below) of the rate on such Interest
Determination Date for commercial paper having the Index Maturity designated in
the applicable Pricing Supplement as published in H.15(519) under the heading
"Commercial Paper". In the event that such rate is not published by 3:00 P.M.,
New York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Commercial Paper Rate shall be the Money Market
Yield of the rate on such Interest Determination Date for commercial paper
having the Index Maturity designated in the applicable Pricing Supplement as
published in the Composite Quotations under the heading "Commercial Paper" (with
an Index Maturity of one month or three months being deemed equivalent to an
Index Maturity of 30 days or 90 days, respectively). If by 3:00 P.M., New York
City time, on the Calculation Date pertaining to such Interest Determination
Date, such rate is not yet published in the Composite Quotations, the Commercial
Paper Rate for such Interest Determination Date shall be calculated by the
Calculation Agent and shall be the Money Market Yield of the arithmetic mean of
the offered rates, as of 11:00 A.M., New York
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City time, on such Interest Determination Date, of three leading dealers of
commercial paper in The City of New York selected by the Calculation Agent for
commercial paper having the Index Maturity designated in the applicable Pricing
Supplement placed for an industrial issuer whose bond rating is "AA", or the
equivalent, from a nationally recognized rating agency, provided, however, that
if the dealers selected as aforesaid by the Calculation Agent are not quoting as
set forth above, the Commercial Paper Rate will be the Commercial Paper Rate in
effect on such Interest Determination Date.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
<TABLE>
<S> <C> <C>
D x 360
_____________
Money Market Yield = 360 - (D x M) x 100
</TABLE>
where "D" refers to the per annum rate for commercial paper, quoted on a bank
discount basis and expressed as a decimal, and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
Federal Funds Rate. Federal Funds Rate Notes will bear interest at the
interest rates (calculated with reference to the Federal Funds Rate and the
Spread and/or Spread Multiplier, if any) specified in the Federal Funds Rate
Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date, the rate on
such date for Federal Funds as published in H.15(519) under the heading "Federal
Funds (Effective)", or, if not so published by 3:00 P.M., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, the Federal
Funds Rate will be the rate on such Interest Determination Date as published in
the Composite Quotations under the heading "Federal Funds/Effective Rate". If
such rate is not yet published in the Composite Quotations by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Federal Funds Rate for such 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 Federal Funds, as of 9:00 A.M.,
New York City time, on such Interest Determination Date, arranged by three
leading brokers of Federal Funds transactions in The City of New York selected
by the Calculation Agent, provided, however, that if the brokers selected as
aforesaid by the Calculation Agent are not quoting as set forth above, the
Federal Funds Rate will be the Federal Funds Rate in effect on such Interest
Determination Date.
LIBOR. LIBOR Notes will bear interest at the interest rates (calculated
with reference to LIBOR and the Spread and/or Spread Multiplier, if any)
specified in the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "LIBOR"
will be determined by the Calculation Agent in accordance with the following
provisions:
(i) With respect to a LIBOR Interest Determination Date, LIBOR will
be, as specified in the applicable Pricing Supplement, either: (a) the
arithmetic mean of the offered rates for deposits in U.S. dollars having
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Business day immediately following such
Interest Determination Date, that appear on the Reuters Screen LIBO Page as
of 11:00 a.m., London time, on such Interest Determination Date, if at
least two such offered rates appear on the Reuters Screen LIBO Page ("LIBOR
Reuters"), or (b) the rate for deposits in U.S. dollars having the Index
Maturity designated in the applicable Pricing Supplement commencing on the
second London Business day immediately following such Interest
Determination Date, that appears on Telerate Page 3750 as of 11:00 a.m.,
London time, on such Interest Determination Date ("LIBOR Telerate").
"Reuters Screen LIBO Page" means the display designated as page "LIBO" on
the Reuters Monitor Money Rates Service (or such other page as may replace
the LIBO page on that service for the purpose of displaying London
interbank offered rates of major banks). "Telerate Page 3750" means the
display designated as page "3750" on the Telerate Service (or such other
page as may replace the 3750 page on that service or such other service or
services as may be nominated by the British Bankers' Association for the
purpose of displaying London interbank offered rates for U.S. dollar
deposits). If neither LIBOR Reuters nor LIBOR Telerate is specified in the
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applicable Pricing Supplement, LIBOR will be determined as if LIBOR
Telerate had been specified. If fewer than two offered rates appear on the
Reuters Screen LIBO Page, or if no rate appears on the Telerate Page 3750,
as applicable, LIBOR in respect of such Interest Determination Date will be
determined as if the parties had specified the rate described in (ii)
below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear on the Reuters Screen LIBO Page, as
specified in (i)(a) above, or on which no rate appears on Telerate Page
3750, as specified in (i)(b) above, as applicable, LIBOR will be determined
on the basis of the rates at which deposits in U.S. dollars, commencing on
the second London Business day immediately following such Interest
Determination Date, having the Index Maturity designated in the Pricing
Supplement and in a principal amount that is representative for a single
transaction in such market at such time, are offered at approximately 11:00
A.M., London time, on such Interest Determination Date by four major banks
in the London interbank market selected by the Calculation Agent to prime
banks in the London interbank market. The Calculation Agent will request
the principal London office of each of such banks to provide a quotation of
its rate. If at least two such quotations are provided, LIBOR in respect of
such Interest Determination Date will be the arithmetic mean of such
quotations. If fewer than two quotations are provided, LIBOR in respect of
such Interest Determination Date will be the arithmetic mean of the rates
at which loans in U.S. dollars to leading European banks, commencing on the
second London Business day immediately following such Interest
Determination Date, having the Index Maturity designated in the applicable
Pricing Supplement and in a principal amount that is representative for a
single transaction in such market at such time, are quoted at approximately
11:00 A.M., New York City time, on such Interest Determination Date by
three major banks in The City of New York selected by the Calculation
Agent, provided, however, that if the banks selected as aforesaid by the
Calculation Agent are not quoting as set forth above, LIBOR will be LIBOR
in effect on such Interest Determination Date.
Prime Rate. Prime Rate Notes will bear interest at the interest rates
(calculated with reference to the Prime Rate and the Spread and/or Spread
Multiplier, if any) specified in the Prime Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date, the rate on such
date as such rate is published in H.15(519) under the heading "Bank Prime Loan."
If such rate is not published prior to 3:00 P.M., New York City time, on the
related Calculation Date, then the Prime Rate shall be the arithmetic mean of
the rates of interest publicly announced by each bank that appears on the
Reuters Screen NYMF Page as such bank's prime rate or base lending rate as in
effect for that Interest Determination Date. If fewer than four such rates but
more than one such rate appear on the Reuters Screen NYMF Page for such Interest
Determination Date, the Prime Rate shall be the arithmetic mean of the prime
rates quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Interest Determination Date by
four major money center banks in The City of New York selected by the
Calculation Agent. If fewer than two such rates appear on the Reuters Screen
NYMF Page, the Prime Rate will be determined by the Calculation Agent on the
basis of the rates furnished in The City of New York by three substitute banks
or trust companies organized and doing business under the laws of the United
States, or any state thereof, having total equity capital of at least $500
million and being subject to supervision or examination by Federal or state
authority, selected by the Calculation Agent to provide such rate or rates;
provided, however, that if the banks or trust companies selected as aforesaid
are not quoting as mentioned in this sentence, the Prime Rate for such Interest
Determination Date will be the Prime Rate in effect on such Interest
Determination Date.
"Reuters Screen NYMF Page" means the display designated as page "NYMF" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
NYMF page on that service for the purpose of displaying prime rates or base
lending rates of major United States banks).
Treasury Rate. Treasury Rate Notes will bear interest at the interest
rates (calculated with reference to the Treasury Rate and the Spread and/or
Spread Multiplier, if any) specified in the Treasury Rate Notes and in the
applicable Pricing Supplement.
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Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date, the rate for the
auction held on such Interest Determination Date of direct obligations of the
United States ("Treasury bills") having the Index Maturity designated in the
applicable Pricing Supplement as published in H.15(519) under the heading
"Treasury bills -- auction average (investment)", or, if not so published by
3:00 P.M., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, the auction average rate (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and applied
on a daily basis) as otherwise announced by the United States Department of the
Treasury. In the event that the results of the auction of Treasury bills having
the Index Maturity designated in the applicable Pricing Supplement are not
published or reported as provided above by 3:00 P.M., New York City time, on
such Calculation Date or if no such auction is held on such Interest
Determination Date, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and applied
on a daily basis) of the arithmetic mean of the secondary market bid rates, as
of approximately 3:30 P.M. New York City time, on such Interest Determination
Date, of three leading primary United States government securities dealers
(which may include one or more of the Agents) selected by the Calculation Agent
for the issue of Treasury bills with a remaining maturity closest to the Index
Maturity designated in the applicable Pricing Supplement, provided, however,
that if the dealers selected as aforesaid by the Calculation Agent are not
quoting as set forth above, the Treasury Rate will be the Treasury Rate in
effect on such Interest Determination Date.
Eleventh District Cost of Funds Rate. Eleventh District Cost of Funds Rate
Notes will bear interest at the rates (calculated with reference to the Eleventh
District Cost of Funds Rate and the Spread and/or Spread Multiplier, if any)
specified in the Eleventh District Cost of Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" means, with respect to any Interest Determination
Date, the rate equal to the monthly weighted average cost of funds for the
calendar month preceding such Interest Determination Date as set forth under the
caption "11th District" on Telerate Page 7058 as of 11:00 A.M., San Francisco
time, on such Interest Determination Date. If such rate does not appear on
Telerate Page 7058 on any Interest Determination Date, the Eleventh District
Cost of Funds Rate for such Interest Determination Date shall be the monthly
weighted average cost of funds paid by member institutions of the Eleventh
Federal Home Loan Bank District that was most recently announced (the "Index")
by the FHLB of San Francisco as such cost of funds for the calendar month
preceding the date of such announcement. If the FHLB of San Francisco fails to
announce such rate for the calendar month next preceding such Interest
Determination Date, then the Eleventh District Cost of Funds Rate for such
Interest Determination Date will be the Eleventh District Cost of Funds Rate in
effect on such Interest Determination Date. "Telerate Page 7058" means the
display on the Dow Jones Telerate Service on such page (or such other page as
may replace such page on that service for the purpose of displaying the Eleventh
District Cost of Funds Rate) for the purpose of displaying the monthly average
cost of funds paid by member institutions of the Eleventh Federal Home Loan Bank
District.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the determination of an interest rate basis,
the specification of interest rate basis, calculation of the interest rate
applicable to a Note, its Interest Payment Dates or any other matter relating
thereto may be modified by the terms as specified under "Other Provisions" on
the face thereof or in an Addendum relating thereto, if so specified on the face
thereof and in the applicable Pricing Supplement.
INDEXED NOTES
Notes also may be issued with the principal amount payable at Maturity
and/or interest to be paid thereon to be determined with reference to the price
or prices of specified commodities or stocks, the exchange rate of one or more
specified currencies (including a composite currency such as the European
Currency Unit) relative to an indexed currency, or such other price or exchange
rate as may be specified in such Note ("Indexed Notes"), as set forth in an
Indexed Note Supplement. Holders of such Notes may receive a
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principal amount at Maturity that is greater than or less than the face amount
of the Notes depending upon the relative value at Maturity of the specified
indexed item. Information as to the method for determining the principal amount
payable at Maturity, if any, and where applicable, certain historical
information with respect to the specified indexed item or items and special tax
considerations associated with investment in Indexed Notes will be set forth in
the applicable Indexed Note Supplement.
An investment in Notes indexed, as to principal or interest or both, to one
or more values of currencies including exchange rates between currencies),
commodities or interest rate indices entails significant risks that are not
associated with similar investments in a conventional fixed-rate debt security.
If the interest rate of such a Note is so indexed, it may result in an interest
rate that is less than that payable on a conventional fixed-rate debt security
issued at the same time, including the possibility that no interest will be
paid, and, if the principal amount of such a Note is so indexed, the principal
amount payable at Maturity may be less than the original purchase price of such
Note if allowed pursuant to the terms of such Note, including the possibility
that no principal will be paid. The secondary market for such Notes will be
affected by a number of factors, independent of the creditworthiness of the
Company and the value of the applicable currency, commodity or interest rate
index, including the volatility of the applicable currency, commodity or
interest rate index, the time remaining to the maturity of such Notes, the
amount outstanding of such Notes and market interest rates. The value of the
applicable currency, commodity or interest rate index depends on a number of
interrelated factors, including economic, financial and political events, over
which the Company has no control. Additionally, if the formula used to determine
the principal amount or interest payable with respect to such Notes contains a
multiple or leverage factor, the effect of any change in the applicable
currency, commodity or interest rate index may be increased. The historical
experience of the relevant currencies, commodities or interest rate indices
should not be taken as an indication of future performance of such currencies,
commodities or interest rate indices during the term of any Note. The credit
ratings assigned to the Company's Medium-Term Note program are reflective of the
Company's credit status, and, in no way are reflective of the potential impact
of the factors discussed above, or any other factors, on the market for the
Notes. Accordingly, prospective investors should consult their own financial and
legal advisors as to the risks entailed by an investment in such Notes and the
suitability of such Notes in light of their particular circumstances.
BOOK-ENTRY SYSTEM
So long as The Depository Trust Company, as depository (the "Depositary")
or its nominee is the registered owner of a Global Security, the Depositary or
its nominee, as the case may be, will be the sole holder of the Book-Entry Notes
represented thereby for all purposes under the Indenture. Except as otherwise
provided in this section, the Beneficial Owners of the Global Security or
Securities representing Book-Entry Notes will not be entitled to receive
physical delivery of Certificated Notes and will not be considered the holders
thereof for any purpose under the Indenture, and no Global Security representing
Book-Entry Notes shall be exchangeable or transferrable. Accordingly, each
person owning a beneficial interest in a Global Security must rely on the
procedures of the Depositary and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest in
order to exercise any rights of a holder under the Indenture. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Security
representing Book-Entry Notes.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Book-Entry Notes.
The Book-Entry Notes will be issued as fully registered securities registered in
the name of Cede & Co. (the Depositary's partnership nominee). One fully
registered Global Security will be issued for each issue of Book-Entry Notes,
each in the aggregate principal amount of such issue, and will be deposited with
the Depositary. If, however, the aggregate principal amount of any issue exceeds
$150,000,000, one Global Security will be issued with respect to each
$150,000,000 of principal amount and an additional Global Security will be
issued with respect to any remaining principal amount of such issue.
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The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of Securities
Exchange Act of 1934, as amended. The Depositary holds securities that its
participants ("Participants") deposit with the Depositary. The Depositary also
facilitates the settlement among Participants of securities transactions, such
as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. The Depositary is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the Depositary's system is also available to others such
as securities brokers and dealers, banks and trust companies that clear through
or maintain a custodial relationship with a Direct Participant, either directly
or indirectly ("Indirect Participant"). The rules applicable to the Depositary
and its Participants are on file with the Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be made by
or through Direct Participants, which will receive a credit for such Book-Entry
Notes on the Depositary's records. The ownership interest of each actual
purchaser of each Book-Entry Note represented by a Global Security ("Beneficial
Owner") is in turn to be recorded on the Direct and Indirect Participants'
records. Beneficial Owners will not receive written confirmation from the
Depositary of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which such Beneficial Owner entered into the transaction. Transfers of ownership
interests in a Global Security representing Book-Entry Notes are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners of a Global Security representing
Book-Entry Notes will not receive Definitive Notes representing their ownership
interests therein, except in the event that use of the book-entry system for
such Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Securities representing
Book-Entry Notes which are deposited with the Depositary are registered in the
name of the Depositary's nominee, Cede & Co. The deposit of Global Securities
with the Depositary and their registration in the name of Cede & Co. effect no
change in beneficial ownership. The Depositary has no knowledge of the actual
Beneficial Owners of the Global Securities representing the Book-Entry Notes;
the Depositary's records reflect only the identity of the Direct Participants to
whose accounts such Book-Entry Notes are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants to Indirect Participants, and by Direct Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Book-Entry Notes within an issue are being redeemed, the Depositary's practice
is to determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.
Neither the Depositary nor Cede & Co. will consent or vote with respect to
the Global Securities representing the Book-Entry Notes. Under its usual
procedures, the Depositary mails an Omnibus Proxy to the Company as soon as
possible after the applicable record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose accounts
the Book-Entry Notes are credited on the applicable record date (identified in a
listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the Global Securities
representing the Book-Entry Notes will be made to the Depositary. The
Depositary's practice is to credit Direct Participants' accounts on the
applicable payment date in accordance with their respective holdings shown on
the Depositary's records
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unless the Depositary has reason to believe that it will not receive payment on
such date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such Participant and not of the
Depositary, the Trustee or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal,
premium, if any, and interest to the Depositary is the responsibility of the
Company or the Trustee, disbursement of such payments to Direct Participants
shall be the responsibility of the Depositary, and disbursement of such payments
to the Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
A Beneficial Owner shall give notice to elect to have its Book-Entry Notes
repaid by the Company, through its Participant, to the Trustee, and shall effect
delivery of such Book-Entry Notes by causing the Direct Participant to transfer
the Participant's interest in the Global Security or Securities representing
such Book-Entry Notes, on the Depositary's records, to the Trustee. The
requirement for physical delivery of Book-Entry Notes in connection with a
demand for repayment will be deemed satisfied when the ownership rights in the
Global Security or Securities representing such Book-Entry Notes are transferred
by Direct Participants on the Depositary's records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving reasonable
notice to the Company, or the Trustee. Under such circumstances, in the event
that a successor securities depository is not obtained, Definitive Notes are
required to be printed and delivered.
The Company may decide to discontinue use of system of book-entry transfers
through the Depositary (or a successor securities depository). In that event,
Definitive Notes will be printed and delivered.
If the Depositary is at any time unwilling or unable to continue as
Depositary and a successor Depositary is not appointed within 90 days, the
Company will issue Definitive Notes in exchange for the Notes represented by the
Global Note or Notes. In addition, the Company may at any time and in its sole
discretion determine to discontinue use of the Global Note or Notes and, in such
event, will issue Definitive Notes in exchange for the Notes represented by the
Global Note or Notes. Notes so issued will be issued in denominations of $1,000
and integral multiples of $1,000 in excess thereof and will be issued in
registered form only, without coupons.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal with
holders other than original purchasers (except where otherwise specifically
noted). Persons considering the purchase of the Notes should consult their own
tax advisors concerning the application of United States Federal income tax laws
to their particular situations as well as any consequences of the purchase,
ownership and disposition of the Notes arising under the laws of any other
taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any other
person whose income or gain in respect of a Note is effectively connected with
the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a holder of a Note that is not a U.S. Holder.
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U.S. HOLDERS
Payments of Interest. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular method
of tax accounting).
Original Issue Discount. The following summary is a general discussion of
the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of Notes issued with original issue discount
("Discount Notes"). The following summary is based upon final Treasury
regulations (the "OID Regulations") issued by the Internal Revenue Service
("IRS") on January 27, 1994 under the original issue discount provisions of the
Internal Revenue Code of 1986, as amended (the "Code"). The OID Regulations,
which replaced certain proposed original issue discount regulations that were
issued on December 21, 1992, generally apply to debt instruments issued on or
after April 4, 1994. In addition, taxpayers may rely on the OID Regulations for
debt instruments issued after December 21, 1992.
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of 1%
of the Note's stated redemption price at maturity multiplied by the number of
complete years to its maturity from its issue date). The issue price of an issue
of Notes equals the first price at which a substantial amount of such Notes has
been sold. The stated redemption price at maturity of a Note is the sum of all
payments provided by the Note other than "qualified stated interest" payments.
The term "qualified stated interest" generally means stated interest that is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually at a single fixed rate. In addition, under the OID
Regulations, if a Note bears interest for one or more accrual periods at a rate
below the rate applicable for the remaining term of such Note (e.g., Notes with
teaser rates or interest holidays), and if the greater of either the resulting
foregone interest on such Note or any "true" discount on such Note (i.e., the
excess of the Note's stated principal amount over its issue price) equals or
exceeds a specified de minimis amount, then the stated interest on the Note
would be treated as original issue discount rather than qualified stated
interest.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of such U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the initial U.S. Holder of a Discount Note is the
sum of the daily portions of original issue discount with respect to such
Discount Note for each day during the taxable year (or portion of the taxable
year) on which such U.S. Holder held such Discount Note. The "daily portion" of
original issue discount on any Discount Note is determined by allocating to each
day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Discount Note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day of an accrual
period or on the first day of an accrual period. The amount of original issue
discount allocable to each accrual period is generally equal to the difference
between (i) the product of the Discount Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and appropriately
adjusted to take into account the length of the particular accrual period) and
(ii) the amount of any qualified stated interest payments allocable to such
accrual period. The "adjusted issue price" of a Discount Note at the beginning
of any accrual period is the sum of the issue price of the Discount Note plus
the amount of original issue discount allocable to all prior accrual periods
minus the amount of any prior payments on the Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
its stated redemption price at maturity will be considered to
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have purchased the Discount Note at an "acquisition premium." Under the
acquisition premium rules, the amount of original issue discount which such U.S.
Holder must include in its gross income with respect to such Discount Note for
any taxable year (or portion thereof in which the U.S. Holder holds the Discount
Note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the total
noncontingent principal payments due under the Variable Note by more than a
specified de minimis amount and (b) it provides for stated interest, paid or
compounded at least annually, at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than zero 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 zero 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 Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable Note's
issue date) will be treated as a single qualified floating rate. Notwithstanding
the foregoing, a variable rate that would otherwise constitute a qualified
floating rate but which is subject to one or more restrictions such as a maximum
numerical limitation (i.e., a cap) or a minimum numerical limitation (i.e., a
floor) may, under certain circumstances, fail to be treated as a qualified
floating rate under the OID Regulations. An "objective rate" is a rate that is
not itself a qualified floating rate but which is determined using a single
fixed formula and which is based upon (i) one or more qualified floating rates,
(ii) one or more rates where each rate would be a qualified floating rate for a
debt instrument denominated in a currency other than the currency in which the
Variable Note is denominated, (iii) either the yield or changes in the price of
one or more items of actively traded personal property or (iv) a combination of
objective rates. The OID Regulations also provide that other variable interest
rates may be treated as objective rates if so designated by the IRS in the
future. Despite the foregoing, a variable rate of interest on a Variable Note
will not constitute an objective rate if it is reasonably expected that the
average value of such rate during the first half of the Variable Note's term
will be either significantly less than or significantly greater than the average
value of the rate during the final half of the Variable Note's term. A
"qualified inverse floating rate" is any objective rate where such rate is equal
to a fixed rate minus a qualified floating rate, as long as variations in the
rate can reasonably be expected to inversely reflect contemporaneous variations
in the cost of newly borrowed funds. The OID Regulations also provide that if a
Variable Note provides for stated interest at a fixed rate for an initial period
of less than one year followed by a variable rate that is either a qualified
floating rate or an objective rate and if the variable rate on the Variable
Note's issue date is intended to approximate the fixed rate (e.g., the value of
the variable rate on the issue date does not differ from the value of the fixed
rate by more than 25 basis points), then the fixed rate and the variable rate
together will constitute either a single qualified floating rate or objective
rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Note which is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually will
constitute qualified stated interest and will be taxed accordingly. Thus, a
Variable Note that provides for stated interest at either a single qualified
floating rate or a single objective rate throughout the term thereof and that
qualifies as a "variable rate debt instrument" under the OID Regulations will
generally not be treated as having been issued with original issue discount
unless the
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Variable Note is issued at a "true" discount (i.e., at a price below the Note's
stated principal amount) in excess of a specified de minimis amount. Original
issue discount on such a Variable Note arising from "true" discount is allocated
to an accrual period using the constant yield method described above.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed rate
that reflects the yield that is reasonably expected for the Variable Note. In
the case of a Variable Note that qualifies as a "variable rate debt instrument"
and provides for stated interest at a fixed rate in addition to either one or
more qualified floating rates or a qualified inverse floating rate, the fixed
rate is initially converted into a qualified floating rate (or a qualified
inverse floating rate, if the Variable Note provides for a qualified inverse
floating rate). Under such circumstances, the qualified floating rate or
qualified inverse floating rate that replaces the fixed rate must be such that
the fair market value of the Variable Note as of the Variable Note's issue date
is approximately the same as the fair market value of an otherwise identical
debt instrument that provides for either the qualified floating rate or
qualified inverse floating rate rather than the fixed rate. Subsequent to
converting the fixed rate into either a qualified floating rate or a qualified
inverse floating rate, the Variable Note is then converted into an "equivalent"
fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and qualified
stated interest as if the U.S. Holder held the "equivalent" fixed rate debt
instrument. Each accrual period appropriate adjustments will be made to the
amount of qualified stated interest or original issue discount assumed to have
been accrued or paid with respect to the "equivalent" fixed rate debt instrument
in the event that such amounts differ from the actual amount of interest accrued
or paid on the Variable Note during the accrual period.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. It is not entirely clear under current law
how a Variable Note would be taxed if such Note were treated as a contingent
payment debt obligation. The proper United States Federal income tax treatment
of Variable Notes that are treated as contingent payment debt obligations will
be more fully described in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity (a "call option") and/or (ii) may be repayable at
the option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions. This election is only available for debt instruments
issued on or after April 4, 1994.
Short-Term Notes. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects to
do so. If such an
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election is not made, any gain recognized by the U.S. Holder on the sale,
exchange or maturity of the Short-Term Note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis, or upon
election under the constant yield method (based on daily compounding), through
the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States Federal income tax
purposes under the accrual method, and certain other holders including banks and
dealers in securities, are required to accrue original issue discount on a
Short-Term Note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
Market Discount. If a U.S. Holder purchases a Note, other than a Discount
Note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of a Discount Note, for an amount that is less than its adjusted issue price as
of the purchase date, the amount of the difference will be treated as "market
discount," unless such difference is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment (or, in the case of a Discount Note, any payment
that does not constitute qualified stated interest) on, or any gain realized on
the sale, exchange, retirement or other disposition of, a Note as ordinary
income to the extent of the lesser of (i) the amount of such payment or realized
gain or (ii) the market discount which has not previously been included in
income and is treated as having accrued on such Note at the time of such payment
or disposition. Market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the Note, unless the
U.S. Holder elects to accrue market discount on the basis of semiannual
compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
its earlier disposition in a taxable transaction, because a current deduction is
only allowed to the extent the interest expense exceeds an allocable portion of
market discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon the receipt of certain
cash payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States Federal income tax purposes.
Premium. If a U.S. Holder purchases a Note for an amount that is greater
than its stated redemption price at maturity, such U.S. Holder will be
considered to have purchased the Note with "amortizable bond premium" equal in
amount to such excess. A U.S. Holder may elect to amortize such premium using a
constant yield method over the remaining term of the Note and may offset
interest otherwise required to be included in respect of the Note during any
taxable year by the amortized amount of such excess for the taxable year.
However, if the Note may be optionally redeemed after the U.S. Holder acquires
it at a price in excess of its stated redemption price at maturity, special
rules would apply which could result in a deferral of the amortization of some
bond premium until later in the term of the Note.
Disposition of a Note. Except as discussed above, upon the sale, exchange
or retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. A U.S.
Holder's adjusted tax basis in a Note generally will equal such U.S. Holder's
initial investment in the Note increased by any original issue discount included
in income (and accrued market discount, if any, if the U.S. Holder has included
such market discount in income) and decreased by the amount of any payments,
other than qualified stated interest payments, received and amortizable bond
premium taken with respect to such Note. Such gain or loss generally will be
long-term capital gain or loss if the Note were held for more than one year.
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NOTES DENOMINATED OR ON WHICH INTEREST IS PAYABLE IN A FOREIGN CURRENCY
As used herein, "Foreign Currency" means a currency or currency unit other
than U.S. dollars.
PAYMENTS OF INTEREST IN A FOREIGN CURRENCY.
Cash Method. A U.S. Holder who uses the cash method of accounting for
United States Federal income tax purposes and who receives a payment of interest
on a Note (other than original issue discount or market discount) will be
required to include in income the U.S. dollar value of the Foreign Currency
payment (determined on the date such payment is received) regardless of whether
the payment is in fact converted to U.S. dollars at that time, and such U.S.
dollar value will be the U.S. Holder's tax basis in such Foreign Currency.
Accrual Method. A U.S. Holder who uses the accrual method of accounting
for United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the U.S.
dollar value of the amount of interest income (including original issue discount
or market discount and reduced by amortizable bond premium to the extent
applicable) that has accrued and is otherwise required to be taken into account
with respect to a Note during an accrual period. The U.S. dollar value of such
accrued income will be determined by translating such income at the average rate
of exchange for the accrual period or, with respect to an accrual period that
spans two taxable years, at the average rate for the partial period within the
taxable year. A U.S. Holder may elect, however, to translate such accrued
interest income using the rate of exchange on the last day of the accrual period
or, with respect to an accrual period that spans two taxable years, using the
rate of exchange on the last day of the taxable year. If the last day of an
accrual period is within five business days of the date of receipt of the
accrued interest, a U.S. Holder may translate such interest using the rate of
exchange on the date of receipt. The above election will apply to other debt
obligations held by the U.S. Holder and may not be changed without the consent
of the IRS. A U.S. Holder should consult a tax advisor before making the above
election. A U.S. Holder will recognize exchange gain or loss (which will be
treated as ordinary income or loss) with respect to accrued interest income on
the date such income is received. The amount of ordinary income or loss
recognized will equal the difference, if any, between the U.S. dollar value of
the Foreign Currency payment received (determined on the date such payment is
received) in respect of such accrual period and the U.S. dollar value of
interest income that has accrued during such accrual period (as determined
above).
Purchase, Sale and Retirement of Notes. A U.S. Holder who purchases a Note
with previously owned Foreign Currency will recognize ordinary income or loss in
an amount equal to the difference, if any, between such U.S. Holder's tax basis
in the Foreign Currency and the U.S. dollar fair market value of the Foreign
Currency used to purchase the Note, determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss generally will be capital gain or loss (except to the extent of any
accrued market discount not previously included in the U.S. Holder's income) and
will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by such U.S. Holder for more than one year. To
the extent the amount realized represents accrued but unpaid interest, however,
such amounts must be taken into account as interest income, with exchange gain
or loss computed as described in "Payments of Interest in a Foreign Currency"
above. If a U.S. Holder receives Foreign Currency on such a sale, exchange or
retirement the amount realized will be based on the U.S. dollar value of the
Foreign Currency on (i) the date of receipt of such Foreign Currency in the case
of a cash basis U.S. Holder and (ii) the date of disposition in the case of an
accrual basis U.S. Holder. In the case of a Note that is denominated in Foreign
Currency and is traded on an established securities market, a cash basis U.S.
Holder (or, upon election, an accrual basis U.S. Holder) will determine the U.S.
dollar value of the amount realized by translating the Foreign Currency payment
at the spot rate of exchange on the settlement date of the sale. A U.S. Holder's
adjusted tax basis in a Note will equal the cost of the Note to such holder,
increased by the amounts of any market discount or original issue discount
previously included in income by the holder with respect to such Note and
reduced by any amortized
S-22
<PAGE> 23
acquisition or other premium and any principal payments received by the holder.
A U.S. Holder's tax basis in a Note, and the amount of any subsequent
adjustments to such holder's tax basis, will be the U.S. dollar value of the
Foreign Currency amount paid for such Note, or of the Foreign Currency amount of
the adjustment, determined on the date of such purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that
is attributable to fluctuations in currency exchange rates will be ordinary
income or loss which will not be treated as interest income or expense. Gain or
loss attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date such payment is received or the Note is disposed
of, and the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date the U.S. Holder acquired the Note. Such Foreign
Currency gain or loss will be recognized only to the extent of the total gain or
loss realized by the U.S. Holder on the sale, exchange or retirement of the
Note.
Original Issue Discount. In the case of a Discount Note or Short-Term
Note, (i) original issue discount is determined in units of the Foreign
Currency, (ii) accrued original issue discount is translated into U.S. dollars
as described in "Payments of Interest in a Foreign Currency--Accrual Method"
above and (iii) the amount of Foreign Currency gain or loss on the accrued
original issue discount is determined by comparing the amount of income received
attributable to the discount (either upon payment, maturity or an earlier
disposition), as translated into U.S. dollars at the rate of exchange on the
date of such receipt, with the amount of original issue discount accrued, as
translated above.
Premium and Market Discount. In the case of a Note with market discount,
(i) market discount is determined in units of the Foreign Currency, (ii) accrued
market discount taken into account upon the receipt of any partial principal
payment or upon the sale, exchange, retirement or other disposition of the Note
(other than accrued market discount required to be taken into account currently)
is translated into U.S. dollars at the exchange rate on such disposition date
(and no part of such accrued market discount is treated as exchange gain or
loss) and (iii) accrued market discount currently includible in income by a U.S.
Holder for any accrual period is translated into U.S. dollars on the basis of
the average exchange rate in effect during such accrual period, and the exchange
gain or loss is determined upon the receipt of any partial principal payment or
upon the sale, exchange, retirement or other disposition of the Note in the
manner described in "Payments of Interest in a Foreign Currency -- Accrual
Method" above with respect to computation of exchange gain or loss on accrued
interest.
With respect to a Note issued with amortizable bond premium, such premium
is determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. Although not entirely clear, a U.S. Holder should
recognize exchange gain or loss equal to the difference between the U.S. dollar
value of the bond premium amortized with respect to a period, determined on the
date the interest attributable to such period is received, and the U.S. dollar
value of the bond premium determined on the date of the acquisition of the Note.
Exchange of Foreign Currencies. A U.S. Holder will have a tax basis in any
Foreign Currency received as interest or on the sale, exchange or retirement of
a Note equal to the U.S. dollar value of such Foreign Currency, determined at
the time the interest is received or at the time of the sale, exchange or
retirement. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of Foreign Currency (including its exchange for U.S. dollars or its
use to purchase Notes) will be ordinary income or loss.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount, if any) on a Note, unless such non-U.S. Holder is a direct or indirect
10% or greater shareholder of the Company, a controlled foreign corporation
related to the Company or a bank receiving interest described in section
881(c)(3)(A) of the Code. To qualify for the exemption from taxation, the last
United States payor in the chain of payment prior to payment to a non-U.S.
Holder (the "Withholding Agent") must have received in the year in which a
payment of interest or principal occurs, or in either of the two preceding
calendar years, a statement that (i) is signed by
S-23
<PAGE> 24
the beneficial owner of the Note under penalties of perjury, (ii) certifies that
such owner is not a U.S. Holder and (iii) provides the name and address of the
beneficial owner. The statement may be made on an IRS Form W-8 or a
substantially similar form, and the beneficial owner must inform the Withholding
Agent of any change in the information on the statement within 30 days of such
change. If a Note is held through a securities clearing organization or certain
other financial institutions, the organization or institution may provide a
signed statement to the Withholding Agent. However, in such case, the signed
statement must be accompanied by a copy of the IRS Form W-8 or the substitute
form provided by the beneficial owner to the organization or institution. The
Treasury Department is considering implementation of further certification
requirements aimed at determining whether the issuer of a debt obligation is
related to holders thereof.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, 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. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the Company
or, at the time of such individual's death, payments in respect of the Notes
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would establish
an exemption from backup withholding for those non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the IRS, unless either (i) the broker determines that the
seller is an exempt recipient or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
S-24
<PAGE> 25
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis for sale by the Company
through the Agents, who have agreed to use their best efforts to solicit offers
to purchase the Notes, and the Company may also sell Notes to an Agent, as
principal, for resale to investors and other purchasers at varying prices
related to prevailing market prices at the time of resale, as to be determined
by such Agent, or, if so agreed, at a fixed initial offering price. The Company
also reserves the right to sell Notes directly on its own behalf or through
additional agents, acting either as agent or principal, on substantially
identical terms as those applicable to the Agents. The Company reserves the
right to withdraw, cancel or modify the offer made hereby without notice and may
reject orders in whole or in part whether placed directly with the Company or
through one of the Agents. The Agents will have the right, in their discretion
reasonably exercised, to reject in whole or in part any offer to purchase Notes
received by them. The Company will pay the Agents, in the form of a discount or
otherwise, a commission to be specified in the applicable Pricing Supplement,
ranging from .125% to .750% (or, with respect to Notes for which the Stated
Maturity is in excess of 30 years, such commission as shall be agreed upon by
the Company and the related Agent at the time of sale), depending on the Stated
Maturity of the Note, of the principal amount of any Note sold through the
Agents. The Company will not receive any commission on a direct sale.
In addition, the Agents may offer the Notes they have purchased as
principal to other dealers for resale to investors and other purchasers, and may
allow any position of the discount received in connection with such purchase
from the Company to such dealers. Unless otherwise indicated in the applicable
Pricing Supplement, any Note sold to an Agent as principal will be purchased by
such Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to any agency sale of a Note of
identical maturity, and may be resold by the Agent to investors and other
purchasers from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale or may be resold to certain dealers as described above.
After the initial public offering of Notes to be resold to investors and other
purchasers, the public offering price (in the case of Notes to be resold at a
fixed public offering price), concession and discount may be changed.
Unless otherwise specified in an applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in New York City on the date of settlement.
No Note will have an established trading market when issued. The Notes will
not be listed on any securities exchange. Each of the Agents may from time to
time purchase and sell Notes in the secondary market, but no Agent is obligated
to do so, and there can be no assurance that there will be a secondary market
for the Notes or liquidity in the secondary market if one develops. From time to
time, each of the Agents may make a market in the Notes.
Each Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company has
agreed to indemnify the Agents against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments the Agents
may be required to make in respect thereof. The Company has agreed to reimburse
each of the Agents for certain expenses.
S-25
<PAGE> 26
PROSPECTUS
GREYHOUND FINANCIAL CORPORATION
SENIOR DEBT SECURITIES
Greyhound Financial Corporation ("Company" or "GFC") may offer from time to
time up to $1 billion aggregate principal amount of its senior debt securities
("Securities") on terms to be determined at the time of sale. The Securities may
be issued in one or more series with the same or various maturities at or above
par or with an original issue discount and may be issued in fully registered
form or in the form of one or more global securities (each a "Global Security").
The specific designation, the aggregate principal amount, the maturity, the
purchase price, the rate (which may be fixed or variable) and time of payment of
any interest, any sinking fund, any terms of redemption at the option of the
Company or the holder, and other specific terms of the Securities in respect of
which this Prospectus is being delivered ("Offered Securities") are set forth in
an accompanying prospectus supplement ("Prospectus Supplement"), together with
the terms of offering of the Offered Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Offered Securities may be offered through underwriters, agents or
dealers. If underwriters are used, it is expected that the managing underwriters
will include Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Citicorp Securities, Inc., Goldman, Sachs & Co., Lehman Brothers,
Lehman Brothers Inc. and Salomon Brothers Inc. If an underwriter, agent or
dealer is involved in the offering of any Offered Securities, the underwriter's
discount, agent's commission or dealer's purchase price will be set forth in, or
may be calculated from, the Prospectus Supplement, and the net proceeds to the
Company from such offering will be the public offering price of the Offered
Securities less such discount in the case of an underwriter, the purchase price
of the Offered Securities less such commission in the case of an agent or the
purchase price of the Offered Securities in the case of a dealer, and less, in
each case, the other expenses of the Company associated with the issuance and
distribution of the Offered Securities. See "Plan of Distribution."
The date of this Prospectus is May 23, 1994.
<PAGE> 27
IN CONNECTION WITH AN OFFERING, THE UNDERWRITERS FOR SUCH OFFERING MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE OFFERED SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
------------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information can be
inspected and copied at Room 1024 at the public reference facilities maintained
by the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as
the Regional Offices of the Commission at Northwestern Atrium Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661-2511 and 7 World Trade
Center, New York, New York 10048, and copies can be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at the prescribed rates. Reports and other information
concerning the Company can also be inspected at the office of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated herein by reference are the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993, Quarterly Report on Forms 10-Q
and 10-Q/A for the quarter ended March 31, 1994, and Current Report on Form 8-K
dated January 21, 1994, Current Reports on Forms 8-K, 8-K/A and 8-K/A-1 dated
February 14, 1994, and Current Reports on Form 8-K dated April 18, 1994 and May
2, 1994, filed pursuant to Section 13 of the Exchange Act, with the Commission.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of the Securities shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge upon written or oral request by any
person to whom this Prospectus is delivered a copy of any or all of the
documents described above which have been incorporated by reference in this
Prospectus, other than exhibits to such documents. Such request should be
directed to Robert J. Fitzsimmons, Vice President-Treasurer, Greyhound Financial
Corporation, Dial Tower, Phoenix, Arizona 85077, telephone number (602)
207-4900.
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<PAGE> 28
GREYHOUND FINANCIAL CORPORATION
Greyhound Financial Corporation, a Delaware corporation (the "Company"), is
in the business of providing collateralized financing in focused market niches
primarily in the United States. The Company extends revolving credit facilities,
term loans and equipment and real estate financing to "middle-market" businesses
with financing needs falling generally between $500,000 and $35 million. The
Company also offers financing programs to manufacturers, distributors, vendors
and franchisors which facilitate the sale in the United States of their products
to end-users. The Company currently operates in 15 specific industry or market
niches in which its expertise in evaluating the creditworthiness of prospective
customers and its ability to provide value-added services enables the Company to
differentiate itself from its competitors and to command loan pricing which
provides a satisfactory spread over the Company's borrowing costs.
The Company seeks to maintain a high quality portfolio and to minimize
nonearning assets and write-offs by using clearly defined underwriting criteria,
stringent portfolio management techniques and by diversifying its lending
activities geographically and among a range of industries, customers and loan
products. Because of the diversity of the Company's portfolio, the Company
believes it is better able to manage competitive changes in its markets and to
withstand the impact of deteriorating economic conditions on a regional or
national basis.
The Company's activities include:
GFC BUSINESS SEGMENTS
- Corporate Finance. The Corporate Finance group provides financing,
generally in the range of $2 million to $25 million, focusing on middle
market businesses nationally, including distribution, wholesale, retail,
manufacturing and service industries. The group's lending is primarily in
the form of term loans secured by the assets of the borrower, with
significant emphasis on cash flow as the source of repayment of the
secured loan.
- Transportation Finance. The Transportation Finance group structures
secured financings for specialized areas of the transportation industry,
principally involving domestic and foreign used aircraft, as well as
domestic short-line railroads and used rail equipment. Typical
transactions involve financing up to 80% of the fair market value of used
equipment in the $3 million to $30 million range. Traditionally focused
on the domestic marketplace, Transportation Finance established a London,
England office in 1992, broadening its product line to include
international aircraft loans.
- Communications Finance. The Communications Finance group specializes in
radio and television. Other markets include cable television, print and
outdoor media services in the United States. The Company extends secured
loans to communications businesses requiring funds for recapitalization,
refinancing or acquisition. Loan sizes generally are from $3 million to
$35 million.
- Commercial Real Estate Finance. The Commercial Real Estate group
provides cash-flow-based financing primarily for acquisitions and
refinancings to experienced real estate developers and owner tenants of
income-producing properties in the United States. The Company
concentrates on secured financing opportunities, generally between $3
million and $30 million, involving senior mortgage term loans on
owner-occupied commercial real estate. The Company's portfolio of real
estate leveraged leases is also managed as part of the commercial real
estate portfolio.
- Resort Finance. The Resort Finance group focuses on successful,
experienced resort developers, primarily of timeshare resorts, second
home resort communities, golf resorts and resort hotels. Extending funds
through a variety of lending options, the Resort Finance group provides
loans and lines of credit ranging from $3 million to $30 million for
construction, acquisitions, receivables financing and purchases and other
uses. Through its subsidiary, GFC Portfolio Services, Inc., the Resort
Finance group offers expanded convenience and service to its customers.
Professional receivables collections and cash management gives developers
the ability of having loan-related administrative functions performed for
them by the Company.
- Asset Based Finance. Acquired in early 1993, the Asset Based Finance
group ("ABF") offers a full range of nationwide collateral-oriented
lending programs to middle-market businesses including
3
<PAGE> 29
manufacturers, wholesalers and distributors. The ABF group mainly
provides revolving lines of credit ranging between $2 million and $25
million, often partnering with the Corporate Finance group to offer
convenient "one-stop" financing to businesses.
- Consumer Rediscount Finance. The Consumer Rediscount Group offers $2
million to $25 million revolving credit lines to regional consumer
finance companies which in turn extend credit to consumers. The Company's
customers provide credit to consumers to finance home improvements,
automobile purchases, insurance premiums and for a variety of other
financial needs.
- Ambassador Factors. On February 14, 1994, the Company purchased
Ambassador Factors Corporation, formerly known as Fleet Factors Corp.,
("Ambassador Factors"), from Fleet Financial Group, Inc. Ambassador
Factors provides accounts receivable factoring and asset-based lending in
amounts generally ranging from $500,000 to $3 million, principally to
small and medium-sized textile and apparel manufacturers and importers.
TRICON BUSINESS SEGMENTS
On April 30, 1994, the Company acquired TriCon Capital Corporation
("TriCon"), formerly an indirect wholly-owned subsidiary of Bell Atlantic
Corporation. TriCon is a niche oriented provider of commercial finance and
equipment leasing services to a segmented group of borrowers and lessees
throughout the United States. TriCon conducts its operations through seven
specialized business groups which provide financial products and services to
three specific market sectors of the commercial finance industry; the End-User
Sector, the Program Finance Sector and the Capital Services Sector.
END-USER SECTOR. The customers in the End-User Sector use the assets which
TriCon finances or leases for the ongoing operations of their businesses. The
equipment which TriCon leases to its customers is typically purchased from an
equipment manufacturer, vendor or dealer selected by the customer. The three
specialized business groups associated with this market sector and the services
provided by TriCon to customers of each business group include:
- Medical Finance. Equipment and real estate financing and asset
management services targeting the top 2,400 health care providers in the
United States.
- Commercial Equipment Finance. Direct finance leasing of, and lending
for, general business equipment to quality commercial business
enterprises which lack ready access to the public finance markets.
- Government Finance. Primarily tax-exempt financing to state and local
governments. Due to tax benefit limitations, TriCon sells a substantial
portion of the tax-exempt assets generated by the Government Finance
group through syndications or securitizations to third parties. In
addition, TriCon has generated fee income by arranging for the sale or
originations of such assets through public offerings.
PROGRAM FINANCE SECTOR. TriCon's business groups in the Program Finance
Sector provide financing programs to help manufacturers, distributors, vendors
and franchisors facilitate the sale of their products or services. The three
specialized business groups associated with this market sector and the services
provided by TriCon to customers of each business group include:
- Vendor Services. Point-of-sale financing programs and support services
for regional and national manufacturers, distributors and vendors of
equipment classified as "small ticket" in transaction size (generally
transactions with an equipment cost of less than $250,000). The equipment
which TriCon leases to the ultimate end-user is typically sold to TriCon
by the vendor participating in the financing program.
4
<PAGE> 30
- Franchise Finance. Equipment and total facility financing programs for
the franchise-based food service industry. The equipment which TriCon
leases to the ultimate end-user is typically purchased by TriCon from an
equipment manufacturer, vendor or dealer selected by the end-user.
- Commercial Credit Services. Accounts receivable and inventory lending
for manufacturers and major distributors, manufacturer-sponsored
inventory financing for office equipment dealers and telecommunications
receivables financing for regional providers of long distance operator
services.
CAPITAL SERVICES SECTOR. The Capital Services Sector has one business
group which focuses on the management and origination of highly structured
financing of "large ticket" commercial equipment (generally transactions
involving the sale or lease of equipment with a cost in excess of $15 million),
primarily leveraged leases for major corporations. The equipment which TriCon
leases to its customers is typically purchased from an equipment manufacturer,
vendor or dealer selected by the customer.
The Company has generally ceased writing new business in Europe and has
begun a managed liquidation of the commercial and consumer loan portfolios of
Greyhound European Financial Group ("GEFG"). In conjunction with the liquidation
of the GEFG portfolio, GEFG surrendered the banking license of its United
Kingdom bank, Greyhound Bank PLC. GEFG operates a finance group that was
primarily involved in lending to individuals in the United Kingdom secured by
second mortgages on residential real estate. GEFG ceased writing new consumer
finance business in the first quarter of 1991, but continues to administer and
collect loans previously made.
The Company was incorporated under the laws of Delaware in 1965 and is the
successor to a California corporation which commenced operations in 1954. The
principal executive offices of the Company are located at Dial Tower, 1850 N.
Central Avenue, Phoenix, Arizona 85004, and its telephone number is (602)
207-4900. All of the capital stock of the Company is owned by GFC Financial
Corporation ("GFC Financial"), the common stock of which is publicly traded on
the New York Stock Exchange. GFC Financial owns substantially all of the
financial services businesses (principally the Company) previously owned by its
former parent, The Dial Corp.
RATIO OF INCOME TO FIXED CHARGES
The following table sets forth the Company's ratios of income to fixed
charges ("ratio") for each of the past five years and the three months ended
March 31, 1994.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED ----------------------------------------
MARCH 31, 1994 1993 1992 1991 1990 1989
- ------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1.55 1.51 1.38 -- 1.24 1.23
==== ==== ==== ==== ==== ====
</TABLE>
Variations in interest rates generally do not have a substantial impact on
the ratio because the fixed-rate and floating-rate assets are generally matched
with liabilities of similar rate and term.
Income available for fixed charges, for purposes of the computation of the
ratio of income to fixed charges, consists of the sum of income before income
taxes (adjusted for the effect of reduced tax rates on income from leveraged
leases) and fixed charges. Fixed charges include interest and related debt
expense and a portion of rental expense determined to be representative of
interest.
For the year ended December 31, 1991, income to cover fixed charges was
inadequate to cover fixed charges by $35,256,000. This inadequacy was due to
certain restructuring and other charges of $65,000,000 and transaction costs of
$13,000,000 recorded in the fourth quarter of 1991 in connection with the
transfer by The Dial Corp to GFC Financial of its financial services and
insurance businesses, including the Company.
USE OF PROCEEDS
Unless otherwise indicated in a Prospectus Supplement with respect to the
proceeds from the sale of the particular Offered Securities to which such
Prospectus Supplement relates, the net proceeds to be received by
5
<PAGE> 31
the Company from the sale of the Securities will be added to the Company's
general funds and are intended to be used for general corporate purposes, which
may include without limitation, the reduction of short-term debt or the
refinancing of long-term debt.
DESCRIPTION OF SECURITIES
The Securities will be issued under an Indenture, dated as of September 1,
1992, as supplemented and amended from time to time (hereinafter called the
"Indenture"), between the Company and The Chase Manhattan Bank, N.A., as Trustee
(the "Trustee"). A copy of the Indenture is filed as an exhibit to the
Registration Statement. The following statements do not purport to be complete
and are subject to the detailed provisions of the Indenture, to which reference
is hereby made, including the definition of certain terms used herein without
definition.
GENERAL
The Securities offered by this Prospectus will be limited to $1,000,000,000
aggregate principal amount. Prior to the date of this Prospectus, the Company
issued $100,000,000 aggregate principal amount of such Securities. The Indenture
does not limit the aggregate principal amount of Securities which may be offered
thereunder and provides that Securities may be issued in one or more series, in
each case as authorized from time to time by the Company. The Securities will be
unsecured general obligations of the Company and will not be subordinated to any
other general indebtedness of the Company. Reference is made to the Prospectus
Supplement together with any pricing supplement thereto relating to the Offered
Securities for the following terms thereof:
(1) the title of the Offered Securities;
(2) any limit upon the aggregate principal amount of the Offered
Securities;
(3) the date or dates on which the principal of the Offered Securities
shall be payable;
(4) the rate or rates (which may be fixed or variable) at which the
Offered Securities shall bear interest, or the method by which such rate or
rates shall be determined;
(5) the date or dates from which such interest shall accrue, or the
method by which such date or dates shall be determined, the dates on which
such interest shall be payable and any record dates therefor;
(6) the place or places where the principal of, premium, if any, and
interest on the Offered Securities shall be payable;
(7) the period or periods within which, the price or prices at which
and the terms and conditions upon which the Offered Securities may be
redeemed, in whole or in part, at the option of the Company;
(8) the obligation, if any, of the Company to redeem, purchase or
repay the Offered Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions
upon which the Offered Securities shall be redeemed, purchased or repaid
pursuant to such obligation;
(9) if other than the principal amount thereof, the percentage of the
principal amount of the Offered Securities payable upon declaration of
acceleration of the maturity of the Offered Securities;
(10) whether the Offered Securities are to be issued in whole or in
part in global form ("Global Securities") and, if so, the identity of the
Depositary for such Global Securities, and the terms and conditions, if
any, upon which interests in such Global Securities may be exchanged, in
whole or in part, for the individual Securities represented thereby;
(11) any deletions from, modifications of, or additions to the events
of default or covenants of the Company with respect to any of the Offered
Securities; and
(12) any other terms of the Offered Securities none of which shall be
inconsistent with the provisions of the Indenture (Section 2.02).
6
<PAGE> 32
The Company may authorize the issuance and provide for the terms of a
series of Securities pursuant to a resolution of its Board of Directors or any
duly authorized committee thereof or pursuant to a supplemental indenture.
The Securities may be issued in registered form. Securities of a series may
be issued in whole or in part in the form of one or more Global Securities, as
described below under "Global Securities." Unless the Prospectus Supplement
relating thereto specifies otherwise, Securities will be issued only in
denominations of $1,000 or any integral multiple thereof (Section 2.01). One or
more Global Securities will be issued in a denomination or denominations equal
to the aggregate principal amount of Outstanding Securities of the series to be
represented by such Global Security or Securities (Section 3.01).
Securities (other than a Global Security) may be presented for exchange and
registration of transfer (with the form of transfer endorsed thereon duly
executed) at the office of the Company designated for such purpose or at the
office of any transfer agent or at the office of any Security Registrar, without
service charge and upon payment of any taxes and other governmental charges as
described in the Indenture. Securities may initially be presented for
registration of transfer or exchange at the Company's principal business office,
Dial Tower, 1850 N. Central Avenue, Phoenix, Arizona 85004 and at the Principal
Office of the Trustee at 4 Chase MetroTech Center, 3rd Floor, Brooklyn, New York
11245. Securities (other than a Global Security) in the several denominations
will be interchangeable without service charge, but the Company may require
payment to cover taxes or other governmental charges. The Trustee initially will
act as authenticating agent under the Indenture (Sections 1.02, 2.05 and 5.02).
PAYMENT AND PAYING AGENTS
Payment of principal of and premium, if any, on Securities (other than a
Global Security) will be made against surrender of such Securities at the
Principal Office of the Trustee in The City of New York. Payment of any
installment of interest on Securities will be made to the person in whose name
such Security is registered at the close of business on the record date for such
interest. Unless otherwise indicated in the Prospectus Supplement, payments of
such interest will be made at the Principal Office of the Trustee in The City of
New York, or, at the option of the Company, by check mailed by first class mail
to registered holders of a Security at such holder's registered address
(Sections 2.01 and 5.02).
All moneys paid by the Company to a paying agent for the payment of
principal of or premium, if any, or interest on any Security that remain
unclaimed at the end of three years after such principal, premium or interest
shall have become due and payable will be repaid to the Company and the holder
of such Security entitled to receive such payment will thereafter look only to
the Company for payment therefor (Section 11.03).
GLOBAL SECURITIES
The Securities of a series may be issued in whole or in part in global
form. A Security in global form will be deposited with, or on behalf of, a
Depositary, which will be identified in an applicable Prospectus Supplement. A
Global Security may be issued in either registered or bearer form and in either
temporary or permanent form. A Security in global form may not be transferred
except as a whole by the Depositary for such Global Security to a nominee of
such Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor (Section 2.05).
If a Depositary for Securities of a series is at any time unwilling or
unable to continue as Depositary and a successor depositary is not appointed by
the Company within ninety days, the Company will issue Securities of such series
in definitive form in exchange for the Global Security or Securities
representing Securities of such series. In addition, the Company may at any time
and in its sole discretion determine not to have any Securities of a series
represented by one or more Global Securities and, in such event, will issue
Securities of such series in definitive form in exchange for the Global Security
or Securities representing Securities. Further, if the Company so specifies with
respect to the Securities of a series, each Person specified by the Depositary
of the Global Security representing Securities of such series may, on terms
acceptable to the
7
<PAGE> 33
Company and the Depositary for such Global Security, receive Securities of such
series in definitive form. In any such instance, each Person so specified by the
Depositary of the Global Security will be entitled to physical delivery in
definitive form of Securities of the series represented by such Global Security
equal in principal amount to such Person's beneficial interest in the Global
Security (Section 2.05).
If any Securities of a series are issuable in global form, the applicable
Prospectus Supplement will describe the additional circumstances, if any, under
which beneficial owners of interests in any such Global Security may exchange
such interests for definitive Securities of such series and of like tenor and
principal amount in any authorized form and denomination, the manner of payment
of principal of, premium and interest, if any, on any such Global Security and
the material terms of the depositary arrangement with respect to any such Global
Security.
CERTAIN DEFINITIONS
The following terms are defined substantially as follows in Section 1.02 of
the Indenture and are used herein as so defined. For the purposes of the
following terms, all items shall be determined in accordance with generally
accepted accounting principles, unless otherwise indicated.
"Consolidated Net Tangible Assets" means the total of all assets reflected
on a consolidated balance sheet of the Company and its consolidated
Subsidiaries, at their net book values (after deducting related depreciation,
depletion, amortization and all other valuation reserves which, in accordance
with generally accepted accounting principles, should be set aside in connection
with the business conducted), but excluding goodwill, unamortized debt discount
and all other like intangible assets, less the aggregate of the current
liabilities of the Company and its consolidated Subsidiaries reflected on such
balance sheet. For purposes of this definition, "current liabilities" include
all indebtedness for money borrowed, incurred, issued, assumed or guaranteed by
the Company and its consolidated Subsidiaries, and other payables and accruals,
in each case payable on demand or due within one year of the date of
determination of Consolidated Net Tangible Assets, but shall exclude any portion
of long-term debt maturing within one year of the date of such determination,
all as reflected on such consolidated balance sheet of the Company and its
consolidated Subsidiaries.
"Lien" means any lien, charge, security interest, right of another under
any conditional sale or other title retention agreement or any other encumbrance
affecting title to property, including any lease under a sale and leaseback
arrangement.
"Subsidiary" means any corporation a majority of the Voting Stock of which
is owned, directly or indirectly, by the Company or by one or more Subsidiaries
or by the Company and one or more Subsidiaries. "Restricted Subsidiary" is any
Subsidiary a majority of the Voting Stock of which is owned, directly, by the
Company or by one or more Restricted Subsidiaries or by the Company and one or
more Restricted Subsidiaries and which is designated as such by resolution of
the Board of Directors of the Company. "Unrestricted Subsidiary" means any
Subsidiary other than a Restricted Subsidiary.
"Voting Stock" means stock of any class or classes (however designated)
having ordinary voting power for the election of a majority of the members of
the board of directors (or any governing body) of such corporation, other than
stock having such power only by reason of the happening of a contingency.
LIMITATION ON LIENS
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, create, assume, incur or suffer to be created, assumed
or incurred or to exist any Lien upon any of the properties of any character of
the Company or any Restricted Subsidiary without making effective provision for
securing the Securities equally and ratably with any other obligation or
indebtedness so secured, other than: (i) leases of property in the ordinary
course of business or in the event that such property is not needed in the
operation of the business; (ii) Liens securing indebtedness incurred to finance
the acquisition of the property subject to the Lien, and in respect of which the
creditor has no recourse against the Company or any Restricted Subsidiary except
recourse to such property, or to the proceeds of any sale or lease of such
property or both; (iii) deposits with or security given to a governmental agency
as a condition to the transaction of
8
<PAGE> 34
business or the exercise of a privilege, or made to enable the Company or a
Restricted Subsidiary to maintain self-insurance or participate in any fund in
connection with worker's compensation, unemployment insurance, old age pensions,
or other social security, or as collateral in connection with any bond on appeal
by the Company or any Restricted Subsidiary from any judgment or in connection
with any other judicial proceedings by or against the Company or any Restricted
Subsidiary; (iv) Liens for taxes or assessments which are not yet due or are
payable without penalty or are being contested in good faith and against which
reserves deemed adequate by the Company or a Restricted Subsidiary have been
established, provided that foreclosure or similar proceedings have not been
commenced; (v) Liens of any judgment, if such judgment shall not have remained
undischarged, or unstayed on appeal or otherwise, for more than six months; (vi)
undetermined Liens or charges incident to construction, mechanics' and other
like Liens arising in the ordinary course of business in respect of obligations
which are not overdue or which are being contested by the Company or any
Restricted Subsidiary in good faith, or deposits to obtain the release of such
Liens; (vii) immaterial encumbrances consisting of zoning restrictions,
licenses, easements and restrictions on the use of real property and minor
defects and irregularities in the title thereto; (viii) other immaterial (in the
aggregate) Liens incidental to the conduct of the Company's or any Restricted
Subsidiary's business or the ownership of its property other than for
indebtedness; (ix) banker's liens and rights of offset in the holders of
indebtedness such as commercial paper in the ordinary course of business; (x)
leasehold or purchase rights, exercisable for a fair consideration, in favor of
any Person which arise in transactions entered into in the ordinary course of
business; (xi) Liens on property or shares of stock of a corporation at the time
the corporation becomes a Restricted Subsidiary or merges into or consolidates
with the Company or a Restricted Subsidiary provided any such Lien is not
incurred in anticipation of such corporation becoming a Restricted Subsidiary or
the related merger or consolidation; (xii) Liens on property at the time the
Company or a Restricted Subsidiary acquires the property; (xiii) Liens in an
amount not to exceed in the aggregate $15,000,000 at any one time outstanding,
excluding Liens covered by clauses (i) through (xii) above; and (xiv) Liens
securing the indebtedness of the Company or a Restricted Subsidiary and the sum
of the following does not exceed 10% of Consolidated Net Tangible Assets: (a)
such indebtedness plus (b) other indebtedness of the Company and its Restricted
Subsidiaries secured by Liens on property of the Company and its Restricted
Subsidiaries, excluding indebtedness secured by a Lien existing as of the date
specified in the Indenture and excluding indebtedness secured by a Lien
permitted by one of clauses (i) through (xiii) above. (Section 5.04).
CONSOLIDATION, MERGER, AND SALE OF ASSETS
The Indenture provides that the Company will not consolidate with, sell or
lease all or substantially all its assets to, or merge with or into any other
corporation, or purchase all or substantially all the assets of another
corporation, unless (i) the Company shall be the continuing corporation, or the
successor, transferee or lessee corporation is organized under the laws of the
United States of America or any state thereof and assumes the Company's
obligations under the Securities and the Indenture and (ii) immediately after
giving effect to such transaction, no default will have occurred and be
continuing. A purchase by a Subsidiary of all or substantially all of the assets
of another corporation shall not be deemed to be a purchase of such assets by
the Company (Section 5.06). Notwithstanding the foregoing, if, upon any such
consolidation or merger of the Company with or into any other corporation, or
upon any conveyance of the property of the Company as an entirety or
substantially as an entirety to any other corporation, any properties of any
character owned by the Company immediately prior thereto would thereupon become
subject to any Lien, simultaneously with such consolidation, merger or
conveyance, effective provision will be made to secure the Securities
outstanding equally and ratably with the debt secured by such Lien (Section
14.01).
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
without the consent of the holders of the Securities, to, among other things,
establish the form and terms of any series of the Securities issuable thereunder
by one or more supplemental indentures, and, with the consent of the holders of
not less than 66 2/3% in the aggregate principal amount of the Securities then
outstanding which are affected thereby, to modify and alter the terms of the
Indenture or any supplemental indenture or the rights of the holders of the
9
<PAGE> 35
Securities of such series to be affected, except that no such modification or
alteration may be made which will (i) extend the fixed maturity of any
Securities, or reduce the rate or extend the time of payment of interest
thereon, or reduce the amount of the principal thereof, or reduce any premium
payable upon the redemption thereof, or make the principal thereof or interest
or premium thereon payable in any coin or currency other than that provided in
the Securities, or impair the right to institute suit for the enforcement of any
such payment on or after the maturity thereof, without the consent of the holder
of each Indenture Security so affected, or (ii) reduce the percentage of
Securities of any series, the holders of which are required to consent to any
such supplemental indenture, without the consent of the holders of all the
Securities then outstanding, or (iii) modify, without the written consent of the
Trustee, the rights, duties or immunities of the Trustee (Sections 13.01 and
13.02).
DEFAULTS
The Indenture provides that events of default with respect to any series of
Securities will be (i) default for 30 days in payment of interest upon any
Indenture Security of such series; (ii) default in payment of principal (other
than on sinking fund redemption) or premium, if any, on any Indenture Security
of such series; (iii) default for 30 days in payment of any sinking fund
instalment when due by the terms of the Securities of such series; (iv) default,
for 90 days after written notice to the Company by the Trustee or the holders of
at least 25% in aggregate principal amount of the Securities of such series then
outstanding, in performance of any other covenant in the Indenture (other than a
covenant included in the Indenture solely for the benefit of a series of
Securities other than such series); (v) default under another instrument or in
respect of another series of Securities resulting in acceleration of maturity of
indebtedness of the Company in an amount exceeding $5,000,000 if such
acceleration is not rescinded or annulled, or such indebtedness shall not have
been discharged, within 10 days after written notice by the Trustee or the
holders of at least 10% in principal amount of the Securities of such series;
(vi) certain events in bankruptcy or insolvency; and (vii) the incurrence of any
other event of default with respect to Securities of such series (Section 6.01).
If an event of default with respect to Securities of any series should occur and
be continuing, either the Trustee or the holders of 25% of the principal amount
of outstanding Securities of such series may declare each Indenture Security of
that series due and payable (Section 6.02). The Company will be required to file
annually with the Trustee a statement of an officer as to the fulfillment by the
Company of its obligations under the Indenture during the preceding year
(Section 5.07).
Holders of a majority in principal amount of the outstanding Securities of
any series will be entitled to control certain actions of the Trustee under the
Indenture and to waive past defaults with respect to such series (Sections 6.02
and 6.06). Subject to the provisions of the Indenture relating to the duties of
the Trustee, the Trustee will not be under any obligation to exercise any of the
rights or powers vested in it by the Indenture at the request, order or
direction of any of the holders of Securities, unless one or more of such
holders of Securities shall have offered to the Trustee reasonable indemnity
(Section 10.01).
If an event of default occurs and is continuing with respect to a series of
Securities, any sums held or received by the Trustee under the Indenture may be
applied to reimburse the Trustee for its reasonable compensation and expenses
incurred prior to any payments to holders of Securities of such series (Section
6.05).
The right of any holder of Securities of any series to institute action for
any remedy is subject to certain conditions precedent, including a request to
the Trustee by the holders of not less than 25% in principal amount of the
Securities of that series outstanding to take action, and an offer to the
Trustee of reasonable indemnity against liabilities incurred by it in so doing
(Section 6.07).
DEFEASANCE
The Indenture provides that if, any time after the date of the Indenture,
the Company shall deposit with the Trustee, in trust for the benefit of the
holders thereof, (i) funds sufficient to pay, or (ii) such amount of direct
obligations of the United States of America as will or will together with the
income thereon without consideration of any reinvestment thereof be sufficient
to pay, all sums due for principal of, premium, if any,
10
<PAGE> 36
and interest on the Securities of a particular series, as they shall become due
from time to time, and certain other conditions are met, the Trustee shall
cancel and satisfy the Indenture with respect to such series to the extent
provided therein. Such defeasance is conditioned upon the Company's delivery of
an opinion of counsel that the holders of the Securities of such series will
have no federal income tax consequences as a result of such deposit (Section
11.02).
CONCERNING THE TRUSTEE
The Trustee is one of the banks participating in one revolving credit
agreement with the Company. In addition, the Trustee acts as trustee with
respect to an Indenture dated as of June 1, 1985 (with respect to certain other
of the Company's Medium-Term Notes).
PLAN OF DISTRIBUTION
The Company may offer the Securities directly or through underwriters,
dealers or agents.
If underwriters are used in the offering of Offered Securities, the names
of the managing underwriter or underwriters (expected to be or include Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citicorp
Securities, Inc., Goldman, Sachs & Co., Lehman Brothers, Lehman Brothers Inc.
and Salomon Brothers Inc) and any other underwriters, and the terms of the
transaction, including compensation of the underwriters and dealers, if any,
will be set forth in the Prospectus Supplement relating to such offering. Firms
not so named will have no direct or indirect participation in the underwriting
of such Offered Securities, although such a firm may participate in the
distribution of such Offered Securities under circumstances entitling it to a
dealer's allowance or agent's commission. It is anticipated that any
underwriting agreement pertaining to any Offered Securities will (1) entitle the
underwriters to indemnification by the Company against certain civil liabilities
under the Securities Act of 1933, as amended ("Securities Act"), (2) provide
that the obligations of the underwriters will be subject to certain conditions
precedent, and (3) provide that the underwriters generally will be obligated to
purchase all such Offered Securities if any are purchased.
The Company also may sell Offered Securities to a dealer, as principal. In
such event, the dealer may then resell such Offered Securities to the public at
varying prices to be determined by such dealer at the time of resale. The name
of the dealer and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
Offered Securities also may be offered through agents designated by the
Company from time to time. Any such agent will be named and the terms of any
such agency will be set forth, in the Prospectus Supplement or Pricing
Supplement relating thereto. Unless otherwise indicated in such Prospectus
Supplement or Pricing Supplement, any such agent will act on a best efforts
basis for the period of its appointment.
Dealers and agents named in a Prospectus Supplement may be deemed to be
underwriters (within the meaning of the Securities Act) of the Offered
Securities described therein and, under agreements which may be entered into
with the Company, may be entitled to indemnification by the Company against
certain civil liabilities under the Securities Act. Underwriters, dealers and
agents may engage in transactions with, or perform services for, the Company in
the ordinary course of business.
If so indicated in a Prospectus Supplement, the Company will authorize
underwriters or other agents of the Company to solicit offers by certain
institutions to purchase the Offered Securities from the Company pursuant to
contracts providing for payment and delivery at a future date. Institutions with
which such contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases such institutions must be approved by
the Company. The obligations of any purchaser under any such contract will not
be subject to any conditions except that (1) the purchase of the Offered
Securities shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject and (2) if the Offered
Securities are also being sold to underwriters, the Company shall have sold to
such underwriters the Offered Securities not subject to delayed delivery.
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<PAGE> 37
The anticipated date of delivery of Offered Securities will be set forth in
the Prospectus Supplement relating to the Offering of such Securities.
LEGAL MATTERS
The legality of the Securities being offered hereby will be passed upon for
the Company by William J. Hallinan, Esq., General Counsel to the Company. Brown
& Wood will act as counsel for any underwriters or agents.
EXPERTS
The financial statements of the Company incorporated in this Prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1993 have been audited by Deloitte & Touche, independent auditors,
as stated in their report, which is incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated balance sheets as of December 31, 1993 and 1992 and the
consolidated statements of income and cash flows for each of the three years in
the period ended December 31, 1993 of TriCon Capital Corporation-Predecessor
Business incorporated by reference in this prospectus, have been incorporated
herein in reliance on the report, which includes an explanatory paragraph for
certain accounting changes, of Coopers & Lybrand, independent certified public
accountants, given on the authority of that firm as experts in accounting and
auditing.
The financial statements of Fleet Factors Corporation (a wholly-owned
subsidiary of Fleet Financial Group, Inc. at the time of their report) appearing
in the Company's Current Report on Form 8-K dated February 14, 1994 have been
audited by KPMG Peat Marwick, independent auditors, as of the dates and for the
periods indicated in their report thereon included therein and incorporated
herein by reference. Such financial statements are incorporated herein in
reliance on such report of KPMG Peat Marwick, independent auditors, given upon
the authority of said firm as experts in accounting and auditing.
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<PAGE> 38
====================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE AGENTS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Greyhound Financial Corporation..... S-2
Ratio of Income to Fixed Charges.... S-4
Description of Notes................ S-5
Certain Federal Income Tax
Consequences...................... S-17
Plan of Distribution................ S-25
PROSPECTUS
Available Information............... 2
Incorporation of Certain Documents
by
Reference......................... 2
Greyhound Financial Corporation..... 3
Ratio of Income to Fixed Charges.... 5
Use of Proceeds..................... 5
Description of Securities........... 6
Plan of Distribution................ 11
Legal Matters....................... 12
Experts............................. 12
</TABLE>
====================================================
====================================================
$400,000,000
GFC
GREYHOUND FINANCIAL
CORPORATION
MEDIUM-TERM NOTES,
SERIES B
----------------------
PROSPECTUS SUPPLEMENT
----------------------
MERRILL LYNCH & CO.
CITICORP SECURITIES, INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
SALOMON BROTHERS INC
MAY 23, 1994
====================================================
