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Filed under Rule 424(b)(3)
File No. 333-31502
SUPPLEMENT NO. 1 TO PROSPECTUS DATED MARCH 22, 2000
(AS SUPPLEMENTED MARCH 22, 2000)
PACCAR FINANCIAL CORP.
MEDIUM-TERM NOTES, SERIES J
PRINCIPAL AMOUNT: $300,000,000.00
ORIGINAL ISSUE DATE: 4/28/2000
MATURITY DATE: 4/26/2002
INITIAL INTEREST RATE: To be Determined
INTEREST RATE INDEX: 3-Month LIBOR
SPREAD: Plus 10 Basis Points
INDEX SOURCE: Telerate page 3750
INDEX RESET FREQUENCY: Quarterly on the 26th
INTEREST PAYMENT PERIOD: Quarterly
INTEREST PAYMENT DATES: Quarterly on the 26th of January, April,
July and October Subject to Modified Business Day
Convention as Defined by ISDA
ISSUE PRICE: 99.80%
PROCEEDS TO COMPANY: $299,400,000.00
COMMISSION/DISCOUNT: 0.20%
DAY COUNT CONVENTION: Actual/360
FORM OF NOTE (CHECK ONE): Book-Entry [ X ]
Certificate [ ]
AGENT/UNDERWRITER: [X] Goldman, Sachs & Co.
[X] Merrill Lynch & Co.
[X] Morgan Stanley Dean Witter
[X] Banc of America Securities
[X] Salomon Smith Barney
DATED: APRIL 25, 2000
The Agents/Underwriters have purchased the Notes as principal and may resell
the Notes at prices to be determined by such Agents/Underwriters at the time of
resale.
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PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MARCH 22, 2000
[LOGO]
$2,500,000,000
PACCAR FINANCIAL CORP.
Medium-Term Notes, Series J
TERMS OF SALE
The following terms may apply to the notes which PACCAR Financial Corp. may
sell at one or more times. The final terms for each note will be included in a
Pricing Supplement. PACCAR Financial Corp. will receive between $2,497,500,000
and $2,483,750,000 of the proceeds from the sale of the notes, after paying the
agents commissions of between $2,500,000 and $16,250,000.
- - Mature 9 months or more from date of issue
- - Fixed or floating interest rate or indexed notes or zero-coupon or other
original issue discount notes. The floating interest rate may be based on:
/ / Commercial paper rate
/ / Prime rate
/ / CD rate
/ / Federal Funds rate
/ / LIBOR
/ / Treasury rate
/ / CMT rate
/ / Any other rate specified by us in the Pricing Supplement
/ / Any combination of rates specified in a Pricing Supplement
- - Certificated or book-entry form
- - Subject to redemption and repurchase at option of PACCAR Financial Corp. or
the holder
- - Not convertible or subject to a sinking fund
- - Interest paid on fixed rate notes semi-annually
- - Interest paid on floating rate notes daily, weekly, monthly, quarterly,
semi-annually or annually
- - Minimum denominations of $1,000 increased in multiples of $1,000
- - May be foreign currency denominated
- - Same day settlement and payment in immediately available funds
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PACCAR Financial Corp. may sell the notes directly or through one or more
agents or dealers, including the agents listed below. The agents are not
required to sell any specific number or amount of the notes. They will use their
reasonable efforts to sell the notes offered.
GOLDMAN, SACHS & CO.
BANC OF AMERICA SECURITIES LLC
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
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Prospectus Supplement dated March 22, 2000.
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References in this prospectus supplement to "PFC", "we", "us" and "our" are
to PACCAR Financial Corp.
RISK FACTORS
Your investment in the notes involves certain risks. In consultation with
your own financial and legal advisers, you should carefully consider, among
other matters, the following discussion of risks before deciding whether an
investment in the notes is suitable for you. The notes are not an appropriate
investment for you if you are unsophisticated with respect to the significant
components and their relationships.
STRUCTURE RISKS OF NOTES INDEXED TO INTEREST RATES, CURRENCIES OR OTHER INDICES
OR FORMULAS
If you invest in notes indexed to one or more interest rates, currencies or
other indices or formulas, there will be significant risks not associated with a
conventional fixed rate or floating rate debt security. These risks include
fluctuation of the indices or formulas that may cause you to receive a lower, or
no, amount of principal, premium or interest and to receive these amounts at
different times than you expected. We have no control over a number of matters,
including economic, financial and political events, that are important in
determining the existence, magnitude and longevity of these risks and their
results. In addition, if an index or formula used to determine any amounts
payable in respect of the notes contains a multiplier or leverage factor, the
effect of any change in that index or formula will be magnified. In recent
years, values of certain indices and formulas have been volatile and volatility
in those and other indices and formulas may be expected in the future. However,
past experience is not necessarily indicative of what may occur in the future.
FOREIGN CURRENCY RISKS
If you invest in notes that are denominated or provide for payments in a
currency (including the Euro) other than United States dollars, there will be
significant risks that are not associated with a similar investment in a debt
security denominated in United States dollars. These risks include the
possibility of significant changes in the rate of exchange between the United
States dollar and the specified currency and the possibility of the imposition
or modification of foreign exchange controls by either the United States or
foreign governments. We have no control over these risks, which depend on
economic, financial and political events and the supply and demand for the
relevant currencies. In addition, if the formula used to determine any amount
payable with respect to foreign currency notes contains a multiplier or leverage
factor, the effect of any change in the relevant currencies will be magnified.
In recent years, rates of exchange between the United States dollar and certain
foreign currencies have been highly volatile and such volatility may be expected
to continue in the future. However, past experience in the fluctuation of
exchange rates are not necessarily indicative of fluctuations in the rates that
may occur during the term of any foreign currency note.
Governments may impose or revise exchange controls which could affect the
availability of the specified currency at the maturity of a foreign currency
note. Even if there are no exchange controls, it is possible that the specified
currency for any particular foreign currency note would not be available at
maturity due to other circumstances beyond our control. In that event, we will
pay any amounts due under the note in United States dollars based on the most
recently available exchange rate.
REDEMPTION MAY ADVERSELY AFFECT YOUR RETURN ON THE NOTES
If your notes are redeemable at our option or are otherwise subject to
mandatory redemption, we may, in the case of optional redemption, or must, in
the case of mandatory redemption, choose
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to redeem your notes at times when prevailing interest rates may be relatively
low. Accordingly, you generally will not be able to reinvest the redemption
proceeds in a comparable security at an effective interest rate as high as that
of the notes.
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR YOUR NOTES; MANY FACTORS AFFECT THE
TRADING VALUE OF YOUR NOTES
We cannot assure you a trading market for your notes will ever develop or be
maintained. Many factors independent of our creditworthiness may affect the
trading market for your notes. These factors include:
- the complexity and volatility of the index or formula applicable to the
notes,
- the method of calculating the principal, premium and interest in respect
of the notes,
- the time remaining to the maturity of the notes,
- the outstanding amount of the notes,
- the redemption features of the notes,
- the amount of other securities linked to the index or formula applicable
to the notes, and
- the level, direction and volatility of market interest rates generally.
In addition, because some notes were designed for specific investment
objectives or strategies, these notes may have a more limited trading market and
may experience more price volatility. There may be a limited number of buyers
for these notes. This may affect the price you receive for these notes or your
ability to sell these notes at all. You should not purchase notes unless you
understand and know you can bear the related investment risks.
OUR CREDIT RATINGS MAY NOT REFLECT ALL RISKS OF AN INVESTMENT IN THE NOTES
Our credit ratings are an assessment of our ability to pay our obligations.
Consequently, real or anticipated changes in our credit ratings will generally
affect the market value of your notes. Our credit ratings, however, may not
reflect the potential impact of risks related to structure, market or other
factors discussed above on the value of your notes.
DESCRIPTION OF THE NOTES
The notes will be issued as a single series of debt securities under an
indenture, dated as of December 1, 1983, as amended by the first supplemental
indenture dated as of June 19, 1989, between PFC and Citibank, N.A., as trustee.
The term "senior debt securities," as used in this prospectus supplement, refers
to all securities issued and issuable from time to time under the Indenture and
includes the notes. The senior debt securities and the Indenture are more fully
described in the accompanying prospectus. The following summary of the material
provisions of the notes and of the Indenture is not complete and is qualified in
its entirety by reference to the Indenture, a copy of which has been filed as an
exhibit to the registration statement of which this prospectus supplement and
the accompanying prospectus are a part.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement, the accompanying prospectus and any
pricing supplement. Neither we nor the agents have authorized any other person
to provide you with different or additional information. If anyone provides you
with different or additional information, you should not rely on it. Neither we
nor the agents are making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that the information
contained or incorporated by reference in
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this prospectus supplement, the accompanying prospectus and any pricing
supplement is accurate only as of the date on the front cover of the applicable
pricing supplement.
THE FOLLOWING DESCRIPTION OF NOTES WILL APPLY UNLESS OTHERWISE SPECIFIED IN
AN APPLICABLE PRICING SUPPLEMENT.
TERMS OF THE NOTES
All senior debt securities, including the notes, issued and to be issued
under the Indenture will be unsecured general obligations of PFC and will rank
equally with all other unsecured and unsubordinated indebtedness of PFC from
time to time outstanding.
The notes are limited to an aggregate principal amount of $2,500,000,000 or
the equivalent in one or more foreign currencies. PFC 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
$2,500,000,000 aggregate principal amount of notes offered by this prospectus
supplement. The aggregate principal amount of notes which may be offered and
sold by this prospectus supplement may be reduced by the sale by PFC of other
securities under the registration statement of which this prospectus supplement
and the accompanying prospectus are a part.
The notes will be offered on a continuing basis and will mature on a day
nine months or more from the date of issue, as selected by the purchaser and
agreed to by PFC. Interest-bearing notes will bear interest at either fixed or
floating rates as specified in the applicable pricing supplement. Notes may be
issued at significant discounts from their principal amount payable at stated
maturity, or on any date before the stated maturity 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 PFC, repayment
at the option of the holder or otherwise (the stated maturity date or such prior
date, as the case may be, is referred to as, a "Maturity"). Some notes may not
bear interest.
Unless otherwise indicated in a note and in the applicable pricing
supplement, the notes will be denominated in, and payments of principal,
premium, if any, and/or interest on such notes will be made in, United States
dollars. PFC may also issue notes ("foreign currency notes") that are
denominated in, and payments of principal, premium, if any, and/or interest on
such notes will be made in, a currency other than United States dollars (a
"specified currency"). The terms of and any considerations relating to any
foreign currency notes will be described in the applicable notes and in the
applicable pricing supplement. See "Special Provisions Relating to Foreign
Currency Denominated Notes."
The terms of the notes provide that PFC may at any time, including more than
one year prior to the stated maturity of the notes, be discharged from its
obligations on the notes by providing for payment when due of the principal of,
and interest on, the notes and by satisfying certain other conditions, all as
described under "Description of Securities -- Provisions of the Indenture --
Satisfaction and Discharge" in the accompanying prospectus.
Until the notes are paid or payment of the notes is provided for, PFC will,
at all times maintain a paying agent in The City of New York capable of
performing the duties described in this prospectus supplement to be performed by
the paying agent. PFC has initially appointed Citibank, N.A., as paying agent,
acting through its corporate trust office at 111 Wall Street, New York, New York
10043. The notes may be presented for registration of transfer or exchange at
the corporate trust office of the paying agent, provided that notes in
book-entry form will be exchangeable only in the manner and to the extent set
forth in "Description of the Notes -- Book-Entry Notes" in this prospectus
supplement and "Description of Securities -- Global Securities" in the
accompanying
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prospectus. PFC will notify the holders of the notes in accordance with the
Indenture of any change in the paying agent or its address. There will be no
service charge for any registration of transfer or exchange of notes, but PFC
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection with any transfer or exchange, other than exchanges
pursuant to the Indenture not involving any transfer.
Interest rates, interest rate formulae and other variable terms of the notes
are subject to change by PFC from time to time, but no change will affect any
note already issued or as to which PFC has accepted an offer to purchase.
Each note will be issued in fully registered book-entry form or certificated
form, in denominations of $1,000 and integral multiples of $1,000. The
authorized denominations of foreign currency notes will be indicated in the
applicable pricing supplement.
In the case of notes in certificated form, PFC will make United States
dollar payments of interest, other than interest payable at Maturity, by check
mailed to the address of the person entitled to such interest payment as shown
on the note register. Notwithstanding the immediately preceding sentence, a
holder of $1,000,000, or the equivalent amount in a specified currency, or more
in aggregate principal amount of notes in certificated form, whether having
identical or different terms and provisions, will be entitled to receive
interest payments, if any, other than interest payable at Maturity, by wire
transfer of immediately available funds if appropriate wire transfer
instructions have been received in writing by the paying agent not less than
fifteen days before the applicable interest payment date. Any wire transfer
instructions received by the paying agent shall remain in effect until revoked
by the holder. United States dollar payments of principal and interest at
Maturity will be made in immediately available funds against presentation and
surrender of the note at the office or agency of the paying agent designated for
such purpose, provided the note is presented in time for the paying agent to
make the payment in such funds in accordance with its normal procedures. In the
case of notes in book-entry form, United States dollar payments of principal,
premium and interest, if any, will be made to the depository, as holder of the
notes in book-entry form, in immediately available funds. For special payment
terms applicable to foreign currency notes, see "Special Provisions Relating to
Foreign Currency Denominated Notes."
Each note will be denominated in the currency that is specified on the face
of the applicable note and in the applicable pricing supplement. Purchasers will
be required to pay for foreign currency notes in the specified currency. At the
present time, there are limited facilities in the United States for the
conversion of United States dollars into foreign currencies and vice versa, and
commercial banks do not generally offer non-United States dollar checking or
savings account facilities in the United States. If requested on or before the
fifth Business Day, as defined below, preceding the date of delivery of the
notes, or by such other day as determined by the agent who presented the offer
to purchase notes to PFC, such agent may be prepared to arrange for the
conversion of United States dollars into the specified currency to enable the
purchasers to pay for the notes. If agreed to by the agent, each conversion will
be made by the agent on terms and subject to conditions, limitations and charges
as the agent may from time to time establish in accordance with its regular
foreign exchange practices. All costs of exchange will be borne by the
purchasers of the applicable foreign currency notes.
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which commercial banks are authorized or
required by law, regulation or executive order to close in The City of New York;
provided, however, that, with respect to foreign currency notes, the day is also
not a day on which commercial banks are authorized or required by law,
regulation or executive order to close in the Principal Financial Center, as
defined below, of the country issuing the specified currency or, if the
specified currency is Euro, the day is also a day on which the Trans-European
Automated Real-time Gross Settlement Express Transfer (TARGET)
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System is open; provided, further, that, with respect to notes as to which LIBOR
is an applicable Interest Rate Basis, the day is also a London Banking Day.
"London Banking Day" means a day on which commercial banks are open for
business, including dealings in the LIBOR Currency, as defined below, in London.
"Principal Financial Center" means, unless otherwise specified in the
applicable pricing supplement,
(1) the capital city of the country issuing the specified currency, except
that with respect to United States dollars, Australian dollars, Canadian
dollars, Deutsche marks, Dutch guilders, Italian lire, South African rand
and Swiss francs, the "Principal Financial Center" will be The City of
New York, Sydney and Melbourne, Toronto, Frankfurt, Amsterdam, Milan,
Johannesburg and Zurich, respectively, or
(2) the capital city of the country to which the LIBOR Currency relates,
except that with respect to United States dollars, Australian dollars,
Canadian dollars, Deutsche marks, Dutch guilders, Portuguese escudos,
South African rand and Swiss francs, the "Principal Financial Center"
will be The City of New York, Sydney, Toronto, Frankfurt, Amsterdam,
London, Johannesburg and Zurich, respectively.
TRANSACTION AMOUNT
Interest rates offered by PFC with respect to the notes may differ depending
upon, among other things, the aggregate principal amount of notes purchased in
any transaction. PFC may offer notes with similar variable terms but different
interest rates concurrently at any time. PFC may also concurrently offer notes
having different variable terms to different investors.
REDEMPTION AT THE OPTION OF PFC
The notes will not be subject to any sinking fund. PFC may redeem the notes
at its option before their stated maturity only if an initial redemption date is
specified in the applicable notes and in the applicable pricing supplement. If
so indicated in the applicable notes and the applicable pricing supplement, PFC
may redeem the notes at its option on any date on and after the applicable
initial redemption date specified in the applicable notes and the applicable
pricing supplement. On and after the initial redemption date, if any, PFC may
redeem the related note at any time in whole or from time to time in part at its
option at the applicable redemption price referred to below together with
interest on the principal of the applicable note payable to the redemption date,
on written notice given not more than 60 nor less than 30 days before the
redemption date. PFC will redeem the notes in increments of $1,000 or any other
integral multiple of the authorized denomination of the applicable note,
provided that any remaining principal amount will be at least $1,000 or the
minimum authorized denomination of the note. The redemption price with respect
to a note will initially mean a percentage, the initial redemption percentage,
of the principal amount of the note specified in the applicable note and the
applicable pricing supplement. The redemption price shall decline at each
anniversary of the initial redemption date by the percentage of the principal
amount of the note to be redeemed specified in the applicable note and the
applicable pricing supplement until the redemption price is 100% of the
principal amount.
REPAYMENT AT THE OPTION OF THE HOLDER
If so indicated in the applicable notes and the applicable pricing
supplement, PFC will repay the notes in whole or in part at the option of the
holders of the notes on any optional repayment date specified in the applicable
notes and the applicable pricing supplement. If no optional repayment date is
indicated with respect to a note, it will not be repayable at the option of the
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holder before its stated maturity. Any repayment in part will be in an amount
equal to $1,000 or any other integral multiple of the authorized denomination of
the applicable note, provided that any remaining principal amount will be at
least $1,000 or the minimum authorized denomination of the note. The repurchase
price for any note so repurchased will be 100% of the principal amount to be
repaid, together with interest on the principal of the applicable note payable
to the date of repayment. For any note to be repaid, the paying agent must
receive, at its corporate trust office located at 111 Wall Street, New York, New
York 10043, not more than 60 nor less than 30 days before the optional repayment
date:
- in the case of a note in certificated form, the note and the form entitled
"Option to Elect Repayment" duly completed, or
- in the case of a note in book-entry form, instructions to that effect from
the applicable beneficial owner of the notes to the depository and
forwarded by the depository. Notices of elections to exercise the
repayment option with respect to notes in book-entry form must be received
by the paying agent by 5:00 p.m., New York City time, on the last day for
giving such notice.
Only the depository may exercise the repayment option in respect of global
securities representing notes in book-entry form. Accordingly, beneficial owners
of global securities that desire to have all or any portion of the notes in
book-entry form represented by global securities repaid must instruct the
participant through which they own their interest to direct the depository to
exercise the repayment option on their behalf by forwarding the repayment
instructions to the paying agent as discussed above. In order to ensure that the
instructions are received by the paying agent on a particular day, the
applicable beneficial owner must so instruct the participant through which it
owns its interest before that participant's deadline for accepting instructions
for that day. Different firms may have different deadlines for accepting
instructions from their customers. Accordingly, beneficial owners of notes in
book-entry form should consult the participants through which they own their
interest for the respective deadlines. All instructions given to participants
from beneficial owners of notes in book-entry form relating to the option to
elect repayment will be irrevocable. In addition, at the time instructions are
given, each beneficial owner will cause the participant through which it owns
its interest to transfer its interest in the global security or securities
representing the related notes in book-entry form, on the depository's records,
to the trustee.
Exercise of the repayment option by the holder of a note will be
irrevocable.
If applicable, PFC will comply with the requirements of Section 14(e) of the
Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder and any other securities laws or regulations in connection with any
repayment at the option of the holder.
PFC may at any time purchase notes at any price or prices in the open market
or otherwise. Notes so purchased by PFC may, at the discretion of PFC, be held,
resold or surrendered to the paying agent for cancellation.
INTEREST
Each note will bear interest from the date of issue at the rate per annum
or, in the case of a floating rate note, pursuant to the interest rate formula
stated in the applicable note and the applicable pricing supplement until the
principal of the note is paid or made available for payment. Interest will be
payable in arrears on each interest payment date specified in the applicable
note and the applicable pricing supplement on which an installment of interest
is due and payable and at Maturity. Interest payable on an interest payment date
will be payable to the person in whose name the applicable note is registered at
the close of business on (a) March 1 or September 1,
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whether or not a Business Day, next preceding the interest payment date in the
case of a fixed rate note, or (b) the fifteenth calendar day, whether or not a
Business Day, next preceding the interest payment date in the case of a floating
rate note (in each case, the "record date"); provided, however, that interest
payable at Maturity will be payable to the person to whom principal shall be
payable. The first payment of interest on any note originally issued between a
record date and the related interest payment date will be made on the interest
payment date immediately following the next succeeding record date to the
registered holder on the next succeeding record date.
FIXED RATE NOTES
Each fixed rate note will bear interest from, and including, the date of
issue, at the rate per annum specified in the applicable note and the applicable
pricing supplement until the principal amount of the note is paid or made
available for payment. Interest payments on fixed rate notes will equal the
amount of interest accrued from and including the immediately preceding interest
payment date in respect of which interest has been paid or from and including
the date of issue, if no interest has been paid with respect to the applicable
fixed rate notes, to, but excluding, the related interest payment date or
Maturity, as the case may be. 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 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 the applicable payment was
due, and no interest will accrue on the amount payable for the period from and
after the interest payment date or the Maturity, as the case may be.
FLOATING RATE NOTES
Interest on floating rate notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may be one or more
of:
- the CD Rate,
- the CMT Rate,
- the Commercial Paper Rate,
- the Federal Funds Rate,
- LIBOR,
- the Prime Rate,
- the Treasury Rate, or
- any other Interest Rate Basis or interest rate formula that is specified
in the applicable pricing supplement.
A floating rate note may bear interest with respect to two or more Interest
Rate Bases.
TERMS. Each applicable pricing supplement will specify the terms of the
floating rate note being delivered, including:
- whether the floating rate note is
- a "Regular Floating Rate Note",
- a "Inverse Floating Rate Note" or
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- a "Floating Rate/Fixed Rate Note",
- the Interest Rate Basis or Bases,
- the Initial Interest Rate,
- the Interest Reset Dates,
- the interest payment dates,
- the period to maturity of the instrument or obligation with respect to
which the Interest Rate Basis or Bases will be calculated (the "Index
Maturity"),
- the Maximum Interest Rate and Minimum Interest Rate, if any,
- the number of basis points to be added to or subtracted from the related
Interest Rate Basis or Bases (the "Spread"),
- the percentage of the related Interest Rate Basis or Bases by which the
Interest Rate Basis or Bases will be multiplied to determine the
applicable interest rate (the "Spread Multiplier"),
- if one or more of the specified Interest Rate Bases is LIBOR, the LIBOR
Currency, the Index Maturity and the Designated LIBOR Page, and
- if one or more of the specified Interest Rate Bases is the CMT Rate, the
CMT Telerate Page, the weekly average or the monthly average and the Index
Maturity.
The interest rate borne by the floating rate notes will be determined as
follows:
REGULAR FLOATING RATE NOTES. Unless a floating rate note is designated as a
Floating Rate/Fixed Rate Note, an Inverse Floating Rate Note or as having an
Addendum attached or as having "Other Provisions" apply relating to a different
interest rate formula, it will be a "Regular Floating Rate Note" and will bear
interest at the rate determined by reference to the applicable Interest Rate
Basis or Bases:
- plus or minus the applicable Spread, if any, and/or
- multiplied by the applicable Spread Multiplier, if any
Commencing on the first Interest Reset Date, the rate at which interest on
the Regular Floating Rate Note will be payable will be reset as of each Interest
Reset Date; provided, however, that the interest rate in effect for the period
from the date of issue to the first Interest Reset Date will be the Initial
Interest Rate.
FLOATING RATE/FIXED RATE NOTES. If a floating rate note is designated as a
"Floating Rate/Fixed Rate Note", it will bear interest at the rate determined by
reference to the applicable Interest Rate Basis or Bases:
- plus or minus the applicable Spread, if any, and/or
- multiplied by the applicable Spread Multiplier, if any
Commencing on the first Interest Reset Date, the rate at which interest on
the applicable Floating Rate/Fixed Rate Note will be payable will be reset as of
each Interest Reset Date; provided, however, that:
- the interest rate in effect for the period from the date of issue to the
first Interest Reset Date will be the Initial Interest Rate, and
- the interest rate in effect commencing on, and including, the date on
which interest begins to accrue on a fixed rate basis to Maturity will be
the Fixed Interest Rate, if the rate is specified
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in the applicable pricing supplement, or if no Fixed Interest Rate is
specified, the interest rate in effect on the Floating Rate/Fixed Rate
Note on the day immediately preceding the date on which interest begins to
accrue on a fixed rate basis.
INVERSE FLOATING RATE NOTES. If a floating rate note is designated as an
"Inverse Floating Rate Note", except as described below, it will bear interest
equal to the Fixed Interest Rate specified in the note and the related pricing
supplement minus the rate determined by reference to the applicable Interest
Rate Basis or Bases:
- plus or minus the applicable Spread, if any, and/or
- multiplied by the applicable Spread Multiplier, if any;
provided, however, the interest rate on the applicable Inverse Floating Rate
Note will not be less than zero percent. Commencing on the first Interest Reset
Date, the rate at which interest on the applicable Inverse Floating Rate Note is
payable will be reset as of each Interest Reset Date; provided, however, that
the interest rate in effect for the period from the date of issue to the first
Interest Reset Date will be the Initial Interest Rate.
Each Interest Rate Basis shall be the rate determined in accordance with the
applicable provisions below. Except as set forth above, the interest rate in
effect on each day will be:
- if the day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date, as defined below, immediately preceding
the applicable Interest Reset Date or
- if the day is not an Interest Reset Date, the interest rate determined as
of the Interest Determination Date immediately preceding the applicable
Interest Reset Date.
INTEREST RESET DATES. The applicable floating rate note and the applicable
pricing supplement will specify the dates on which the interest rate on the
related floating rate note will be reset (each, an "Interest Reset Date"). The
Interest Reset Date will be, in the case of floating rate notes which reset:
- daily -- each Business Day;
- weekly -- the Wednesday of each week, with the exception of weekly reset
floating rate notes as to which the Treasury Rate is an applicable
Interest Rate Basis, which will reset the Tuesday of each week, except as
described below;
- monthly -- the third Wednesday of each month;
- quarterly -- the third Wednesday of March, June, September and December of
each year;
- semiannually -- the third Wednesday of the two months specified in the
applicable pricing supplement; and
- annually -- the third Wednesday of the month specified in the applicable
pricing supplement;
provided, however, that with respect to Floating Rate/Fixed Rate Notes, the rate
of interest will not reset after the applicable date on which interest on a
fixed rate basis begins to accrue.
If any Interest Reset Date for any floating rate note would otherwise be a
day that is not a Business Day, the applicable Interest Reset Date will be
postponed to the next succeeding day that is a Business Day. However, in the
case of a floating rate note as to which LIBOR is an applicable Interest Rate
Basis, if the next succeeding Business Day falls in the next succeeding calendar
month, then the Interest Reset Date will be the immediately preceding Business
Day. In addition, in the case of a floating rate note for which the Treasury
Rate is an applicable Interest Rate Basis, if
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the Interest Determination Date would otherwise fall on an Interest Reset Date,
then the applicable Interest Reset Date will be postponed to the next succeeding
Business Day.
MAXIMUM AND MINIMUM INTEREST RATES. A floating rate note may also have
either or both of the following:
- a maximum numerical limitation, or ceiling, on the rate at which interest
may accrue during any interest period (a "Maximum Interest Rate"), and
- a minimum numerical limitation, or floor, on the rate at which interest
may accrue during any period (a "Minimum Interest Rate").
The Indenture and any senior debt securities issued under the Indenture,
including the notes, are and will be governed by and construed in accordance
with the laws of the State of New York. Under present New York law, the maximum
rate of interest, with certain exceptions, is 25% per annum on a simple interest
basis. This limit may not apply to securities in which $2,500,000 or more has
been invested. While PFC believes that New York law would be given effect by a
state or federal court sitting outside of New York, state laws frequently
regulate the amount of interest that may be charged to and paid by a borrower,
including, in some cases, corporate borrowers. It is suggested that prospective
investors consult their personal advisors with respect to the applicability of
these laws.
INTEREST PAYMENTS. Each applicable pricing supplement will specify the
dates on which interest will be payable. Each floating rate note will bear
interest from the date of issue at the rates specified in the applicable note
and the applicable pricing supplement until the principal of the note is paid or
otherwise made available for payment. Except as provided below, the interest
payment dates with respect to floating rate notes will be, in the case of
floating rate notes which reset:
- daily, weekly or monthly -- the third Wednesday of each month or on the
third Wednesday of March, June, September and December of each year, as
specified in the applicable note and the applicable pricing supplement;
- quarterly -- the third Wednesday of March, June, September and December of
each year;
- semiannually -- the third Wednesday of each of the two months of each year
specified in the applicable note and the applicable pricing supplement;
- annually -- the third Wednesday of the month of each year specified in the
applicable note and the applicable pricing supplement; and
- at Maturity.
If any interest payment date for any floating rate note, other than an
interest payment date on the Maturity, would otherwise be a day that is not a
Business Day, the interest payment date will be postponed to the next succeeding
Business Day. However, in the case of a floating rate note as to which LIBOR is
an applicable Interest Rate Basis, if the next succeeding Business Day falls in
the next succeeding calendar month, the applicable interest payment date will 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 will accrue for the period from and after the Maturity.
All percentages resulting from any calculation on floating rate notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five one-millionths of a percentage point rounded upwards. For example,
9.876545%, or .09876545, would be rounded to 9.87655%, or .0987655. All dollar
amounts used in or resulting from any calculation on floating rate notes will be
rounded to the nearest cent with one-half cent being rounded upward.
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Interest payments on floating rate notes will equal the amount of interest
accrued from and including the immediately preceding interest payment date in
respect of which interest has been paid or from and including the date of issue,
if no interest has been paid with respect to the applicable floating rate note,
to, but excluding the related interest payment date or Maturity, as the case may
be.
With respect to each floating rate note, accrued interest is calculated by
multiplying its face amount by an accrued interest factor. The accrued interest
factor is computed by adding the interest factor calculated for each day in the
period for which accrued interest is being calculated.
- In the case of notes for which the CD Rate, the Commercial Paper Rate, the
Federal Funds Rate, LIBOR or the Prime Rate is an applicable Interest Rate
Basis, the interest factor for each day will be computed by dividing the
interest rate applicable to each day by 360.
- In the case of notes for which the CMT Rate or the Treasury Rate is an
applicable Interest Rate Basis, the interest factor for each day will be
computed by dividing the interest rate applicable to each day by the
actual number of days in the year.
- The interest factor for notes for which the interest rate is calculated
with reference to two or more Interest Rate Bases will be calculated in
each period in the same manner as if only the applicable Interest Rate
Bases applied.
INTEREST DETERMINATION DATES. The interest rate applicable to each interest
reset period commencing on the Interest Reset Date with respect to that interest
reset period will be the rate determined as of the applicable "Interest
Determination Date."
- The Interest Determination Date with respect to notes for which the CD
Rate, the CMT Rate or the Commercial Paper Rate is an applicable Interest
Rate Basis will be the second Business Day preceding each Interest Reset
Date.
- The Interest Determination Date with respect to notes for which the
Federal Funds Rate or the Prime Rate is an applicable Interest Rate Basis
will be the Business Day immediately preceding each Interest Reset Date.
- The Interest Determination Date with respect to notes for which LIBOR is
an applicable Interest Rate Basis will be the second London Banking Day
preceding each Interest Reset Date.
- The Interest Determination Date with respect to notes for which the
Treasury Rate is an applicable Interest Rate Basis will be the day in the
week in which the related Interest Reset Date falls on which day Treasury
Bills having the Index Maturity specified in the applicable pricing
supplement are normally 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 the auction may be held on the preceding Friday; provided, however,
that if an auction is held on the Friday of the week preceding the related
Interest Reset Date, the related Interest Determination Date will be the
preceding Friday; and provided, further, that if an auction falls on any
Interest Reset Date, then the related Interest Reset Date will instead be
the first Business Day following the auction.
- The Interest Determination Date pertaining to a note the interest rate of
which is determined with reference to two or more Interest Rate Bases will
be the latest Business Day which is at least two Business Days before the
applicable Interest Reset Date for the applicable note on which each
Interest Reset Basis is determinable. Each Interest Rate Basis will be
determined on the Interest Determination Date, and the applicable interest
rate will take effect on the related Interest Reset Date.
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CALCULATION DATE. Citibank, N.A. will be the calculation agent with respect
to the floating rate notes. The calculation agent will notify PFC and the paying
agent of each determination of the interest rate applicable to any floating rate
note promptly after the determination is made. The paying agent will, upon the
request of the holder of any floating rate note, provide the interest rate then
in effect and, if determined and notified to the paying agent, the interest rate
which will become effective as a result of a determination made with respect to
the most recent Interest Determination Date with respect to that note. The
paying agent will not be responsible for determining the interest rate
applicable to any floating rate note. The calculation date, if applicable,
pertaining to any Interest Determination Date will be the earlier of:
- the tenth calendar day after the applicable Interest Determination Date,
or, if the tenth calendar day is not a Business Day, the next succeeding
Business Day or
- the Business Day preceding the applicable Interest Payment Date or
Maturity, as the case may be.
CD RATE. CD Rate Notes will bear interest at the rates, calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any,
specified in the applicable CD Rate Notes and in any applicable pricing
supplement.
"CD Rate" means:
(1) the rate on the applicable Interest Determination Date for negotiable
United States dollar certificates of deposit having the Index Maturity
specified in the applicable CD Rate Note and the applicable pricing
supplement as published in H.15(519) under the caption "CDs (secondary
market)", or
(2) if the rate referred to in clause (1) above is not published by
3:00 P.M., New York City time, on the related calculation date, the rate
on the applicable Interest Determination Date for negotiable United
States dollar certificates of deposit of the Index Maturity specified in
the applicable CD Rate Note and the applicable pricing supplement as
published in H.15 Daily Update, or other recogniled electronic source
used for the purpose of displaying the applicable rate, under the caption
"CDs (secondary market)", or
(3) if the rate referred to in clause (2) is not published by 3:00 P.M., New
York City time, on the related calculation date, the rate on the
applicable Interest Determination Date calculated by the calculation
agent as the arithmetic mean of the secondary market offered rates as of
10:00 A.M., New York City time, on the applicable Interest Determination
Date, of three leading non-bank dealers in negotiable United States
dollar certificates of deposit in The City of New York, which may include
the agents or their affiliates, selected by the calculation agent for
negotiable United States dollar certificates of deposit of major United
States money market banks for negotiable United States dollar
certificates of deposit with a remaining maturity closest to the Index
Maturity specified in the applicable CD Rate Note and the applicable
pricing supplement in an amount that is representative for a single
transaction in that market at that time, or
(4) if the dealers selected by the calculation agent are not quoting as
mentioned in clause (3) above, the rate in effect on the applicable
Interest Determination Date.
"H.15(519)" means the weekly statistical release designated as H.15(519), or
any successor publication, published by the Board of Governors of the Federal
Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available through
the world-wide-web site of the Board of Governors of the Federal Reserve System
at http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
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CMT RATE. 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 the applicable CMT Rate Notes and in any applicable pricing
supplement.
"CMT Rate" means:
(1) if CMT Telerate Page 7051 is specified in the applicable CMT Rate Note
and in the applicable pricing supplement:
(a) the percentage equal to the yield for United States Treasury
securities at "constant maturity" having the Index Maturity specified
in the applicable CMT Rate Note and the applicable pricing supplement
as published in H.15(519) under the caption "Treasury Constant
Maturities", as the yield is displayed on Bridge Telerate, Inc., or
any successor service, on page 7051, or any other page as may replace
page 7051 on that service ("Telerate Page 7051"), for the applicable
Interest Determination Date, or
(b) if the rate referred to in clause (1)(a) does not appear on Telerate
Page 7051, the percentage equal to the yield for United States
Treasury securities at "constant maturity" having the Index Maturity
specified in the applicable CMT Rate Note and the applicable pricing
supplement and for the applicable Interest Determination Date as
published in H.15(519)under the caption "Treasury Constant
Maturities", or
(c) if the rate referred to in clause (1)(b) does not appear in
H.15(519), the rate on the applicable Interest Determination Date for
the period of the Index Maturity specified in the applicable CMT Rate
Note and the applicable pricing supplement as may then be published
by either the Federal Reserve System Board of Governors or the United
States Department of the Treasury that the calculation agent
determines to be comparable to the rate which would otherwise have
been published in H.15(519), or
(d) if the rate referred to in clause (1)(c) is not published, the rate
on the applicable Interest Determination Date calculated by the
calculation agent as a yield to maturity based on the arithmetic mean
of the secondary market bid prices at approximately 3:30 P.M., New
York City time, on the applicable Interest Determination Date of
three leading primary United States government securities dealers in
The City of New York, which may include the agents or their
affiliates (each, a "Reference Dealer"), selected by the calculation
agent from five 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 United States Treasury securities
with an original maturity equal to the Index Maturity specified in
the applicable CMT Rate Note and the applicable pricing supplement, a
remaining term to maturity no more than 1 year shorter than the Index
Maturity specified in the applicable CMT Rate Note and the applicable
pricing supplement and in a principal amount that is representative
for a single transaction in the securities in the market at that
time, or
(e) if fewer than five but more than two of the prices referred to in
clause (1)(d) are provided as requested, the rate on the applicable
Interest Determination Date calculated by the calculation agent based
on the arithmetic mean of the bid prices obtained and neither the
highest nor the lowest of the quotations shall be eliminated, or
(f) if fewer than three prices referred to in clause (1)(d) are provided
as requested, the rate on the applicable Interest Determination Date
calculated by the calculation agent as a yield to maturity based on
the arithmetic mean of the secondary market bid prices as of
approximately 3:30 P.M., New York City time, on the applicable
Interest
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Determination Date of three Reference Dealers selected by the
calculation agent from five Reference Dealers selected by the
calculation agent and eliminating the highest quotation or, in the
event of equality, one of the highest and the lowest quotation or, in
the event of equality, one of the lowest, for United States Treasury
securities with an original maturity greater than the Index Maturity
specified in the applicable CMT Rate Note and the applicable pricing
supplement, a remaining term to maturity closest to the Index
Maturity specified in the applicable CMT Rate Note and the applicable
pricing supplement and in a principal amount that is representative
for a single transaction in the securities in the market at that
time, or
(g) if fewer than five but more than two prices referred to in
clause (1)(f) are provided as requested, the rate on the applicable
Interest Determination Date calculated by the calculation agent based
on the arithmetic mean of the bid prices obtained and neither the
highest nor the lowest of the quotations will be eliminated, or
(h) if fewer than three prices referred to in clause (1)(f) are provided
as requested, the rate in effect on the applicable Interest
Determination Date.
(2) if CMT Telerate Page 7052 is specified in the applicable CMT Rate Note
and the applicable pricing supplement:
(a) the percentage equal to the one-week or one-month, as specified in
the applicable CMT Rate Note and the applicable pricing supplement,
average yield for United States Treasury securities at "constant
maturity" having the Index Maturity specified in the applicable CMT
Rate Note and the applicable pricing supplement as published in
H.15(519) opposite the caption "Treasury Constant Maturities", as the
yield is displayed on Bridge Telerate, Inc., or any successor
service, on page 7052, or any other page as may replace page 7052 on
that service ("Telerate Page 7052"), for the week or month, as
applicable, ended immediately preceding the week or month, as
applicable, in which the related Interest Determination Date falls,
or
(b) if the rate referred to in clause (2)(a) does not appear on Telerate
Page 7052, the percentage equal to the one-week or one-month, as
specified in the applicable CMT Rate Note and the applicable pricing
supplement, average yield for United States Treasury securities at
"constant maturity" having the Index Maturity specified in the
applicable CMT Rate Note and the applicable pricing supplement and
for the week or month, as applicable, preceding the applicable
Interest Determination Date as published in H.15(519) opposite the
caption "Treasury Constant Maturities," or
(c) if the rate referred to in clause (2)(b) does not appear in
H.15(519), the one-week or one-month, as specified, average yield for
United States Treasury securities at "constant maturity" having the
Index Maturity specified in the applicable CMT Rate Note and the
applicable pricing supplement as otherwise announced by the Federal
Reserve Bank of New York for the week or month, as applicable, ended
immediately preceding the week or month, as applicable, in which the
related Interest Determination Date falls, or
(d) if the Federal Reserve Bank of New York does not publish the rate
referred to in clause (2)(c), the rate on the applicable Interest
Determination Date calculated by the calculation agent as a yield to
maturity based on the arithmetic mean of the secondary market bid
prices at approximately 3:30 P.M., New York City time, on the
applicable Interest Determination Date of three leading primary
United States government securities dealers in the City of New York,
which may include the agents or their affiliates, selected by the
calculation agent from five Reference Dealers selected by the
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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 United States
Treasury securities with an original maturity equal to the Index
Maturity specified in the applicable CMT Rate Note and the applicable
pricing supplement, a remaining term to maturity no more than 1 year
shorter than the Index Maturity specified in the applicable CMT Rate
Note and the applicable pricing supplement and in a principal amount
that is representative for a single transaction in the securities in
the market at that time, or
(e) if fewer than five but more than two of the prices referred to in
clause (2)(d) are provided as requested, the rate on the applicable
Interest Determination Date calculated by the calculation agent based
on the arithmetic mean of the bid prices obtained and neither the
highest nor the lowest of the questions shall be eliminated, or
(f) if fewer than three prices referred to in clause (2)(d) are provided
as requested, the rate on the applicable Interest Determination Date
calculated by the calculation agent as a yield to maturity based on
the arithmetic mean of the secondary market bid prices as of
approximately 3:30 P.M., New York City time, on the applicable
Interest Determination Date of three Reference Dealers selected by
the calculation agent from five Reference Dealers selected by the
calculation agent and eliminating the highest quotation or, in the
event of equality, one of the highest and the lowest quotation or, in
the event of equality, one of the lowest, for United States Treasury
securities with an original maturity greater than the Index Maturity
specified in the applicable CMT Rate Note and the applicable pricing
supplement, a remaining term to maturity closest to the Index
Maturity specified in the applicable CMT Rate Note and the applicable
pricing supplement and in a principal amount that is representative
for a single transaction the securities in the market at the time, or
(g) if fewer than five but more than two prices referred to in
clause (2)(f) are provided as requested, the rate will be calculated
by the calculation agent based on the arithmetic mean of the bid
prices obtained and neither the highest or the lowest of the
quotations will be eliminated, or
(h) if fewer than three prices referred to in clause (2)(f) are provided
as requested, the rate in effect on the applicable Interest
Determination Date.
If two United States Treasury securities with an original maturity greater
than the Index Maturity specified in the applicable CMT Rate Note and the
applicable pricing supplement have remaining terms to maturity equally close to
the Index Maturity specified in the applicable CMT Rate Note and the applicable
pricing supplement, the quotes for the United States Treasury security with the
shorter original remaining term to maturity will be used.
COMMERCIAL PAPER RATE. Commercial Paper Rate Notes will bear interest at
the rates, calculated with reference to the Commercial Paper Rate and the Spread
and/or Spread Multiplier, if any, specified in the applicable Commercial Paper
Rate Notes and in any applicable pricing supplement.
"Commercial Paper Rate" means:
(1) the Money Market Yield, as defined, on the applicable Interest
Determination Date of the rate for commercial paper having the Index
Maturity specified in the applicable Commercial Paper Rate Note and the
applicable pricing supplement as published in H.15(519) under the caption
"Commercial Paper-Nonfinancial", or
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(2) if the rate described in clause (1) is not published by 3:00 P.M., New
York City time, on the related calculation date, the Money Market Yield on
the applicable Interest Determination Date of the rate for commercial paper
having the Index Maturity specified in the applicable Commercial Paper Rate
Note and the applicable pricing supplement as published in H.15 Daily
Update, or other recognized electronic source used for the purpose of
displaying the applicable rate, under the caption "Commercial
Paper-Nonfinancial", or
(3) if the rate referred to in clause (2) is not published by 3:00 P.M.,
New York City time, on the related calculation date, the rate on the
applicable Interest Determination Date calculated by the calculation agent
as the Money Market Yield of the arithmetic mean of the offered rates at
approximately 11:00 A.M., New York City time, on the applicable Interest
Determination Date of three leading dealers of United States dollar
commercial paper in The City of New York, which may include the agents or
their affiliates, selected by the calculation agent for commercial paper
having the Index Maturity specified in the applicable Commercial Paper Rate
Note and the pricing supplement placed for industrial issuers whose bond
rating is "AA", or the equivalent, from a nationally recognized statistical
rating organization, or
(4) if the dealers selected by the calculation agent are not quoting as
mentioned in clause (3), the rate in effect on the applicable Interest
Determination Date.
"Money Market Yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:
<TABLE>
<S> <C> <C>
D X 360
Money Market Yield = --------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
FEDERAL FUNDS RATE. Federal Funds Rate Notes will bear interest at the
rates, calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any, specified in the applicable Federal Funds Rate Notes
and in any applicable pricing supplement.
"Federal Funds Rate" means:
(1) the rate on the applicable Interest Determination Date for United
States dollar federal funds as published in H.15(519) under the caption
"Federal Funds (Effective)" as displayed on Bridge Telerate, Inc. or any
successor service on page 120 or any other page as may replace the
applicable page on that service ("Telerate Page 120"), or
(2) if the rate referred to in clause (1) does not appear on Telerate Page
120 or is not so published by 3:00 P.M., New York City time, on the related
calculation date, the rate on the applicable Interest Determination Date for
United States dollar federal funds as published in H.15 Daily Update, or
other recognized electronic source used for the purpose of displaying the
applicable rate, under the caption "Federal Funds (Effective)", or
(3) if the rate referred to in clause (2) is not published by 3:00 P.M.,
New York City time, on the related calculation date, the rate on the
applicable Interest Determination Date calculated by the calculation agent
as the arithmetic mean of the rates for the last transaction in overnight
United States dollar federal funds arranged by three leading brokers of
United States dollar federal funds transactions in The City of New York,
which may include the agents or their affiliates, selected by the
calculation agent before 9:00 A.M., New York City time, on the applicable
Interest Determination Date, or
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(4) if the brokers selected by the calculation agent are not quoting as
mentioned in clause (3), the rate in effect on the applicable Interest
Determination Date.
LIBOR. LIBOR Notes will bear interest at the rates, calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, specified in
the applicable LIBOR Notes and in any applicable pricing supplement.
"LIBOR" means:
(1) if "LIBOR Telerate" is specified in the applicable LIBOR Note and the
applicable pricing supplement or if neither "LIBOR Reuters" nor "LIBOR
Telerate" is specified in the applicable LIBOR Note and the applicable
pricing supplement as the method for calculating LIBOR, LIBOR will be the
rate for deposits in the LIBOR Currency, as defined below, having the Index
Maturity specified in the applicable LIBOR Note and the applicable pricing
supplement, commencing on the Interest Reset Date immediately following the
applicable Interest Determination Date that appears on the Designated LIBOR
Page as of 11:00 A.M., London time, on the applicable Interest Determination
Date, or
(2) if "LIBOR Reuters" is specified in the applicable LIBOR Note and the
applicable pricing supplement, LIBOR will be the arithmetic mean of the
offered rates for deposits in the LIBOR Currency having the Index Maturity
specified in the applicable LIBOR Note and the applicable pricing
supplement, commencing on the Interest Reset Date immediately following the
applicable Interest Determination Date, that appear, on the Designated LIBOR
Page specified in the applicable LIBOR Note and the applicable pricing
supplement as of 11:00 A.M., London time, on the applicable Interest
Determination Date; if the Designated LIBOR Page by its terms provides only
for a single rate, then the single rate will be used, or
(3) with respect to a LIBOR Interest Determination Date on which fewer than
two offered rates appear, or no rate appears, as the case may be, on the
Designated LIBOR Page as specified in clauses (1) and (2), respectively, the
rate calculated by the calculation agent as the arithmetic mean of at least
two quotations obtained by the calculation agent after requesting the
principal London offices of each of four major reference banks, which may
include affiliates of the agents, in the London interbank market to provide
the calculation agent with its offered quotation for deposits in the LIBOR
Currency for the period of the Index Maturity specified in the applicable
LIBOR Note and the applicable pricing supplement, commencing on the Interest
Reset Date immediately following the applicable Interest Determination Date,
to prime banks in the London interbank market at approximately 11:00 A.M.,
London time, on the applicable Interest Determination Date and in a
principal amount that is representative for a single transaction in the
applicable LIBOR Currency in that market at that time, or
(4) if fewer than two quotations referred to in clause (3) are provided,
the rate on the applicable Interest Determination Date calculated by the
calculation agent as the arithmetic mean of the rates quoted at
approximately 11:00 A.M., in the applicable Principal Financial Center(s),
on the applicable Interest Determination Date by three major banks, which
may include affiliates of the agents, in the applicable Principal Financial
Center selected by the calculation agent for loans in the LIBOR Currency to
leading European banks, having the Index Maturity specified in the
applicable LIBOR Note and the applicable pricing supplement and in a
principal amount that is representative for a single transaction in the
applicable LIBOR Currency in that market at that time, or
(5) if the banks so selected by the calculation agent are not quoting as
mentioned in clause (4), the rate in effect on the applicable Interest
Determination Date.
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"LIBOR Currency" means the currency specified in the applicable LIBOR Note
and the applicable pricing supplement as to which LIBOR will be calculated or,
if no currency is specified in the applicable LIBOR Note and the applicable
pricing supplement, United States dollars.
"Designated LIBOR Page" means either:
- if "LIBOR Telerate" is designated in the applicable LIBOR Note and the
applicable pricing supplement or neither "LIBOR Reuters" nor "LIBOR
Telerate" is specified in the applicable LIBOR Note and the applicable
pricing supplement as the method for calculating LIBOR, the display on
Bridge Telerate, Inc. or any successor service, on the page specified in
the applicable LIBOR Note and the applicable pricing supplement or any
page as may replace the specified page on that service for the purpose of
displaying the London interbank rates of major banks for the applicable
LIBOR Currency, or
- if "LIBOR Reuters" is specified in the applicable LIBOR Note and the
applicable pricing supplement, the display on the Reuter Monitor Money
Rates Service or any successor service on the page specified in the
applicable LIBOR Note and the applicable pricing supplement or any other
page as may replace the specified page on that service for the purpose of
displaying the London interbank rates of major banks for the applicable
LIBOR Currency.
PRIME RATE. Prime Rate Notes will bear interest at the rates, calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any, specified in the applicable Prime Rate Notes and any applicable pricing
supplement.
"Prime Rate" means:
(1) the rate on the applicable Interest Determination Date as published in
H.15(519) under the caption "Bank Prime Loan", or
(2) if the rate referred to in clause (1) is not published by 3:00 P.M.,
New York City time, on the related calculation date, the rate on the
applicable Interest Determination Date published in H.15 Daily Update, or
such other recognized electronic source used for the purpose of displaying
the applicable rate under the caption "Bank Prime Loan", or
(3) if the rate referred to in clause (2) is not published by 3:00 P.M.,
New York City time, on the related calculation date, the rate calculated by
the calculation agent as the arithmetic mean of the rates of interest
publicly announced by at least four banks, which may include affiliates of
the agents, that appear on the Reuters Screen US PRIME 1 Page, as defined
below, as the particular bank's prime rate or base lending rate as of
11:00 A.M., New York City time, on the applicable Interest Determination
Date, or
(4) if fewer than four rates described in clause (3) by 3:00 P.M., New York
City time, appear on the related calculation date on Reuters Screen US PRIME
1 Page, the rate on the applicable Interest Determination Date calculated by
the calculation agent as the arithmetic mean of the prime rates or base
lending rates quoted on the basis of the actual number of days in the year
divided by a 360-day year as of the close of business on the applicable
Interest Determination Date by three major banks, which may include
affiliates of the agents, in The City of New York selected by the
calculation agent, or
(5) if the banks selected by the calculation agent are not quoting as
mentioned in clause (4), the rate in effect on the applicable Interest
Determination Date.
"Reuters Screen US PRIME 1 Page" means the display on the Reuter Monitor
Money Rates Service or any successor service on the "US PRIME 1" page or other
page as may replace the US
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PRIME 1 Page on such 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 rates,
calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any, specified in the applicable Treasury Rate Notes and in any
applicable pricing supplement.
"Treasury Rate" means:
(1) the rate from the auction held on the applicable Interest Determination
Date (the "Auction") of direct obligations of the United States ("Treasury
Bills") having the Index Maturity specified in the applicable Treasury Rate
Note and the applicable pricing supplement as published under the caption
"INVESTMENT RATE" on the display on Bridge Telerate, Inc. or any successor
service on page 56 or any other page as may replace page 56 on that service
("Telerate Page 56") or page 57 or any other page as may replace page 57 on
that service ("Telerate Page 57"), or
(2) if the rate described in clause (1) is not published by 3:00 P.M., New
York City time, on the related calculation date, the Bond Equivalent Yield,
as defined below, of the rate for the applicable Treasury Bills as published
in H.15 Daily Update, or other recognized electronic source used for the
purpose of displaying the applicable rate, under the caption "U.S.
Government Securities/Treasury Bills/Auction High", or
(3) if the rate described in clause (2) is not published by 3:00 P.M., New
York City time, on the related calculation date, the Bond Equivalent Yield
of the auction rate of the applicable Treasury Bills announced by the United
States Department of the Treasury, or
(4) if the rate referred to in clause (3) is not announced by the United
States Department of the Treasury, or if the Auction is not held, the Bond
Equivalent Yield of the rate on the applicable Interest Determination Date
of Treasury Bills having the Index Maturity specified in the applicable
Treasury Rate Note and in the applicable pricing supplement as published in
H.15(519) under the caption "U.S. Government Securities/Treasury
Bills/Secondary Market", or
(5) if the rate referred to in clause (4) is not published by 3:00 P.M.,
New York City time, on the related calculation date, the rate on the
applicable Interest Determination Date of the applicable Treasury Bills as
published in H.15 Daily Update, or other recognized electronic source used
for the purpose of displaying the applicable rate, under the caption "U.S.
Government Securities/Treasury Bills/Secondary Market", or
(6) if the rate referred to in clause (5) is not published by 3:00 P.M.,
New York City time, on the related calculation date, the rate on the
applicable Interest Determination Date calculated by the calculation agent
as the Bond Equivalent Yield of the arithmetic mean of the secondary market
bid rates, as of approximately 3:30 P.M., New York City time, on the
applicable Interest Determination Date, of three primary United States
government securities dealers, which may include the agents or their
affiliates, selected by the calculation agent, for the issue of Treasury
Bills with a remaining maturity closest to the Index Maturity specified in
the applicable Treasury Rate Note and the applicable pricing supplement, or
(7) if the dealers selected by the calculation agent are not quoting as
mentioned in clause (6), the rate in effect on the applicable Interest
Determination Date.
"Bond Equivalent Yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:
<TABLE>
<S> <C> <C>
D X N
Bond Equivalent Yield = --------------- X 100
360 - (D X M)
</TABLE>
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where "D" refers to the applicable per annum rate for Treasury Bills quoted on a
bank discount basis and expressed as a decimal, "N" refers to 365 or 366, as the
case may be, and "M" refers to the actual number of days in the interest period
for which interest is being calculated.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to an issue of notes, including the
determination of one or more Interest Rate Bases, the specification of one or
more Interest Rate Bases, the calculation of the interest rate applicable to a
floating rate note, the applicable interest payment dates, the stated maturity
date, any redemption or repayment provisions or any other matter relating to the
applicable notes may be modified by the terms as specified under "Other
Provisions" on the face of the applicable notes or in an Addendum relating to
the applicable notes, if so specified on the face of the applicable notes and in
the applicable pricing supplement.
ORIGINAL ISSUE DISCOUNT NOTES
PFC may from time to time offer notes at a price less than their redemption
price at Maturity, resulting in the applicable notes being treated as if they
were issued with original issue discount for federal income tax purposes
("Original Issue Discount Notes"). Original Issue Discount Notes may currently
pay no interest or interest at a rate which at the time of issuance is below
market rates. Additional considerations relating to any Original Issue Discount
Notes will be described in the applicable pricing supplement.
AMORTIZING NOTES
PFC may from time to time offer notes ("Amortizing Notes"), with amounts of
principal and interest payable in installments over the term of the notes.
Unless otherwise specified in the applicable pricing supplement, interest on
each Amortizing Note will be computed on the basis of a 360-day year of twelve
30-day months. Payments with respect to Amortizing Notes will be applied first
to interest due and payable on the Amortizing Notes and then to the reduction of
the unpaid principal amount of the Amortizing Notes. Further information
concerning additional terms and conditions of any issue of Amortizing Notes will
be provided in the applicable pricing supplement. A table setting forth
repayment information in respect of each Amortizing Note will be included in the
applicable note and the applicable pricing supplement.
LINKED NOTES
PFC may from time to time offer notes ("Linked Notes") the principal value
of which at Maturity will be determined by reference to:
(a) one or more debt securities, including, but not limited to, the
price or yield of such securities,
(b) any statistical measure of economic or financial performance,
including, but not limited to, any currency, consumer price or mortgage
index, or
(c) the price or value of any commodity or any other item or index or
any combination,
(collectively, the "Linked Securities"). The payment or delivery of any
consideration on any Linked Note at Maturity will be determined by the decrease
or increase, as applicable, in the price or value of the applicable Linked
Securities. The terms of and any additional considerations, including any
material tax consequences, relating to any Linked Notes will be described in the
applicable pricing supplement.
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EXTENDIBLE MATURITY NOTES
PFC may from time to time offer notes ("Extendible Maturity Notes") with the
option to extend the maturity of the notes to one or more dates indicated in the
notes and the applicable pricing supplement. The terms of and any additional
considerations relating to any Extendible Maturity Notes will be described in
the applicable pricing supplement.
BOOK-ENTRY NOTES
DESCRIPTION OF THE GLOBAL SECURITIES
Upon issuance, all notes in book-entry form having the same date of issue,
stated maturity date and otherwise having identical terms and provisions will be
represented by one or more fully registered global notes (the "Global Notes").
Each Global Note will be deposited with, or on behalf of, The Depository Trust
Company as depository registered in the name of the depository or a nominee of
the depository. Unless and until it is exchanged in whole or in part for notes
in certificated form, no Global Note may be transferred except as a whole:
- by the depository to a nominee of the depository, or
- by a nominee of the depository to the depository or another nominee of the
depository, or
- by the depository or any such nominee to a successor of the depository or
a nominee of the successor.
DTC PROCEDURES
The following is based on information furnished by the depository:
The depository will act as securities depository for the notes in book-entry
form. The notes in book-entry form will be issued as fully registered securities
registered in the name of Cede & Co., the depository's partnership nominee. One
fully registered Global Note will be issued for each issue of notes in
book-entry form, each in the aggregate principal amount of the issue, and will
be deposited with the depository. If, however, the aggregate principal amount of
any issue exceeds $400,000,000, one Global Note will be issued with respect to
each $400,000,000 of principal amount and an additional Global Note will be
issued with respect to any remaining principal amount of the issue.
The depository is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The depository holds securities that its participants deposit with the
depository. The depository also facilitates the settlement among participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants of the depository include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations.
The depository 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 depository'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. The rules applicable to the
depository and its participants are on file with the SEC.
Purchasers of notes in book-entry form under the depository's system must be
made by or through direct participants, which will receive a credit for those
notes in book-entry form on the
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depository's records. The ownership interest of each actual purchaser of each
note in book-entry form represented by a Global Note is, in turn, to be recorded
on the records of direct participants and indirect participants. Beneficial
owners in book-entry form will not receive written confirmation from the
depository 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 participants or indirect
participants through which the beneficial owner entered into the transaction.
Transfers of ownership interests in a Global Note representing notes in
book-entry form are to be accomplished by entries made on the books of
participants acting on behalf of beneficial owners. Beneficial owners of a
Global Note representing notes in book-entry form will not receive notes in
certificated form representing their ownership interests therein, except in the
event that use of the book-entry system for such notes in book-entry form is
discontinued.
To facilitate subsequent transfers, all Global Notes representing notes in
book-entry form which are deposited with, or on behalf of, the depository are
registered in the name of the depository's nominee, Cede & Co. The deposit of
Global Notes with, or on behalf of, the depository and their registration in the
name of Cede & Co. effect no change in beneficial ownership. The depository has
no knowledge of the actual beneficial owners of the Global Notes representing
the notes in book-entry form; the depository's records reflect only the identity
of the direct participants to whose accounts such notes in book-entry form 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 depository to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners, will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither the depository nor Cede & Co. will consent or vote with respect to
the Global Notes representing the notes in book-entry form. Under its usual
procedures, the depository mails an omnibus proxy to PFC as soon as possible
after the applicable record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants, identified in a
listing attached to the omnibus proxy, to whose accounts the notes in book-entry
form are credited on the applicable record date.
PFC will make principal, premium, if any, and/or interest, if any, payments
on the Global Notes representing the notes in book-entry form in immediately
available funds to the depository. The depository's practice is to credit direct
participants' accounts on the applicable payment date in accordance with their
respective holdings shown on the depository's records unless the depository has
reason to believe that it will not receive payment on the applicable payment
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 the applicable participant and not of the
depository, PFC or the trustee, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal,
premium, if any, and/or interest, if any, to the depository is the
responsibility of PFC or the trustee, disbursement of payments to direct
participants will be the responsibility of the depository, and disbursement of
payments to the beneficial owners will be the responsibility of direct
participants and indirect participants.
If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the notes in book-entry form of like tenor and terms are being redeemed,
the depository's practice is to determine by lot the amount of the interest of
each direct participant in the issue to be redeemed.
A beneficial owner will give notice of any option to elect to have its notes
in book-entry form repaid by PFC, through its participant, to the trustee, and
will effect delivery of the applicable notes
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in book-entry form by causing the direct participant to transfer the
participant's interest in the Global Note notes in book-entry form, on the
depository's records, to the paying agent. The requirement for physical delivery
of notes in book-entry form in connection with a demand for repayment will be
deemed satisfied when the ownership rights in the Global Note or Notes
representing the notes in book-entry form are transferred by direct participants
on the depository's records.
The depository may discontinue providing its services as securities
depository with respect to the notes in book-entry form at any time by giving
reasonable notice to PFC or the trustee. In the event that a successor
securities depository is not obtained, notes in certificated form are required
to be printed and delivered.
PFC may decide to discontinue use of the system of book-entry transfers
through the depository or a successor securities depository. In that event,
notes in certificated form will be printed and delivered.
The laws of some states may require that certain purchasers of securities
take physical delivery of securities in definitive form. Such limits and laws
may impair the ability to own, transfer or pledge beneficial interests in Global
Notes.
So long as the depository, or its nominee, is the registered owner of a
Global Note, the depository or its nominee, as the case may be, will be
considered the sole owner or holder of the notes represented by the Global Note
for all purposes under the Indenture. Except as provided below, beneficial
owners of a Global Note will not be entitled to have the notes represented by a
Global Note registered in their names, will not receive or be entitled to
receive physical delivery of the notes in definitive form and will not be
considered the owners or holders thereof under the Indenture. Accordingly, each
person owning a beneficial interest in a Global Note must rely on the procedures
of the depository and, if that person is not a participant, on the procedures of
the participant through which that person owns its interest, to exercise any
rights of a holder under the Indenture. PFC understands that under existing
industry practices, in the event that PFC requests any action of holders or that
an owner of a beneficial interest in a Global Note desires to give or take any
action which a holder is entitled to give or take under the Indenture, the
depository would authorize the participants holding the relevant beneficial
interests to give or take the desired action, and the participants would
authorize beneficial owners owning through the participants to give or take the
desired action or would otherwise act upon the instructions of beneficial
owners.
EXCHANGE FOR NOTES IN CERTIFICATED FORM
If:
(a) the depository is at any time unwilling or unable to continue as
depository and a successor depository is not appointed by PFC within
90 days, or
(b) PFC determines that the Global Notes shall be exchangeable for notes
in certificated form,
the Global Note or Global Notes will be exchangeable for notes in certificated
form of like tenor and terms and of different authorized denominations
aggregating an equal aggregate principal amount. The certificated notes will be
registered in the name or names as the depository provides to the paying agent.
It is expected that instructions may be based upon directions received by the
depository from participants with respect to ownership of beneficial interests
in Global Notes.
The information in this section concerning the depository and the
depository's system has been obtained from sources that PFC believes to be
reliable, but PFC takes no responsibility for the accuracy of the information.
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A further description of the depository's procedures with respect to Global
Notes representing book-entry notes is in the accompanying prospectus under
"Description of Securities -- Global Securities." The depository has confirmed
to PFC that it intends to follow these procedures.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
Except as specified in the applicable pricing supplement, foreign currency
notes (including notes denominated in the Euro) will not be sold in or to
residents of the country or economic community issuing the currency in which
particular notes are denominated. The information set forth in this prospectus
supplement is directed to prospective purchasers who are United States
residents, and it is by necessity incomplete with respect to foreign currency
notes. PFC and the agents disclaim any responsibility to advise prospective
purchasers who are residents of countries other than the United States with
respect to any matters that may affect the purchase, holding or receipt of
payments of principal of and premium, if any, and any interest on foreign
currency notes. Prospective purchasers of foreign currency notes should consult
their own financial and legal advisors with regard to such matters.
PAYMENT OF PRINCIPAL, ANY PREMIUM AND INTEREST
Except as specified in the applicable note and the applicable pricing
supplement, we will pay the principal, any premium and interest on foreign
currency notes in the specified currency. The Exchange Rate Agent named in the
applicable pricing supplement will, unless otherwise specified below or in the
applicable note and the applicable pricing supplement, convert the payment into
United States dollars for payment to holders. However, unless otherwise
indicated in the applicable note and the applicable pricing supplement, the
holder of a foreign currency note may elect to receive the payments in the
specified currency, as described below.
PFC's payment will be converted into United States dollars based on the
highest bid quotation in The City of New York at approximately 11:00 A.M. on the
second Business Day preceding the applicable payment date for the purchase of
the specified currency for United States dollars for settlement on the
applicable payment date in the aggregate amount of the specified currency
payable to all holders of foreign currency notes scheduled to receive United
States dollar payments and at which the applicable foreign exchange dealer
commits to execute a contract. The bid quotations shall be obtained from three
recognized foreign exchange dealers, one of which may be the Exchange Rate
Agent, selected by the Exchange Rate Agent and approved by PFC. If the bid
quotations are not available, payments will be made in the specified currency.
All currency exchange costs will be borne by the holder of the foreign currency
note by deductions from such payments.
Unless otherwise specified in the applicable note and the applicable pricing
supplement, a holder of a foreign currency note may elect to receive all or a
specified portion of any payment on that note in the specified currency. Any
holder desiring to receive payment in the specified currency must submit a
written request to the corporate trust office of the paying agent in The City of
New York, on or before the applicable record date or at least fifteen calendar
days before Maturity, as the case may be. The written request may be mailed,
hand delivered or sent by cable, telex or other form of facsimile transmission.
A holder of a foreign currency note may elect to receive payment in the
specified currency for all or a specified portion of all principal, any premium
and interest payments and need not file a separate election for each payment.
The election will remain in effect until revoked by written notice to the paying
agent, but written notice of any revocation must be received by the paying agent
on or before the relevant record date or at least the fifteenth calendar day
before Maturity, as the case may be. Holders of foreign currency notes whose
notes are to be held in the name of a broker or nominee should contact such
broker or nominee to determine whether and how an election to receive payments
in the specified currency may be made.
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Principal, any premium and interest on a foreign currency note paid in
United States dollars will be paid in the manner specified in this prospectus
supplement for notes denominated in United States dollars. Interest on a foreign
currency note paid in the specified currency which are to be made on an interest
payment date other than at Maturity will be paid by check mailed to the address
of the holder entitled to the interest payment as shown on the note register,
subject to the right to receive interest payments by wire transfer of
immediately available funds under the circumstances described under "Description
of Notes -- Terms of the Notes". All checks payable in a specified currency will
be drawn on a bank office located outside the United States. Payments of
principal, any premium and interest on foreign currency notes paid in the
specified currency at Maturity will be made by wire transfer of immediately
available funds to an account with a bank designated by the holder at least
fifteen days before Maturity, provided that the bank has appropriate facilities
to make the wire transfer and that the note is presented and surrendered at the
corporate trust office of the trustee or the paying agent in the Borough of
Manhattan, The City of New York, in time for the paying agent to make such
payments in such funds in accordance with its normal procedures.
Unless otherwise specified in the applicable pricing supplement, a
beneficial owner of a note in book-entry form denominated in a specified
currency may elect to receive payments of principal or any premium or interest
in the specified currency instead of United States dollars. The beneficial owner
must give the participant through which its interest is held written notice of
its election on or before the applicable record date, in the case of a payment
of interest, and on or prior to the fifteenth day prior to Maturity, in the case
of principal or premium. The participant must notify the depository of such
election on or before the third Business Day after the record date. The
depository will notify the paying agent of the election on or before the fifth
Business Day after the record date or at least ten calendar days before
Maturity, as the case may be. If complete instructions are received by the
participant and forwarded by the participant to the depository and by the
depository to the paying agent, on or before the specified dates, the beneficial
owner of the notes in book-entry form will receive payments in the specified
currency.
AVAILABILITY OF SPECIFIED CURRENCY
If the specified currency for a foreign currency note is not available for
the payment of principal, any premium and interest due to the imposition of
exchange controls or other circumstances beyond the control of PFC, we will be
entitled to satisfy our obligations on the note by making the required payment
in United States dollars on the basis of the Market Exchange Rate, computed by
the Exchange Rate Agent, on the second Business Day before the applicable
payment or, if the Market Exchange Rate is not then available, on the basis of
the most recently available Market Exchange Rate, or as otherwise specified in
the applicable pricing supplement.
The "Market Exchange Rate" for a specified currency other than United States
dollars means the noon dollar buying rate in The City of New York for cable
transfers for the specified currency as certified for customs purposes, or, if
not so certified, as otherwise determined, by the Federal Reserve Bank of New
York. Any payment made in United States dollars under circumstances where the
required payment is in a specified currency other than United States dollars
will not constitute an Event of Default under the Indenture with respect to the
notes.
All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of the foreign currency
notes.
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JUDGMENTS
Under current New York law, a state court in the State of New York rendering
a judgment in respect of a foreign currency note would be required to render the
judgment in the specified currency, and the foreign currency judgment would be
converted into United States dollars at the exchange rate prevailing on the date
of entry of the judgment. Accordingly, the holder of a foreign currency note
would be subject to exchange rate fluctuations between the date of entry of the
foreign currency judgment and the time the amount of the foreign currency
judgment is paid to the holder in United States dollars and converted by the
holder into the specified currency. It is not certain, however, whether a
non-New York state court would follow the same rules and procedures with respect
to conversions of foreign currency judgments.
PFC will indemnify the holder of any note against any loss incurred by it as
a result of any judgment or order being given or made for any amount due under
the note and judgment or order requiring payment in a currency other than the
specified currency, and as a result of any variation between (i) the rate of
exchange at which the specified currency amount is converted into the currency
in the judgment or order, and (ii) the rate of exchange at which the holder of
the note, on the date of payment of the judgment or order, is able to purchase
the specified currency with the amount actually received under the judgment or
order.
UNITED STATES FEDERAL INCOME TAXATION
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 in this prospectus, the term "U.S. Holder" means a beneficial owner
of a note that is for United States Federal income tax purposes:
(1) a citizen or resident of the United States,
(2) a corporation or a partnership (including an entity treated as a
corporation or a partnership for United States Federal income tax purposes)
created or organized in or under the laws of the United States, any state
thereof or the District of Columbia (unless, in the case of a partnership,
Treasury regulations are adopted that provide otherwise),
(3) an estate whose income is subject to United States Federal income tax
regardless of its source,
(4) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust, or
(5) 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.
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Certain trusts not described in clause (4) above in existence on August 20, 1996
that elect to be treated as a United States person will also be a U.S. Holder
for purposes of the following discussion. As used herein, the term "non-U.S.
Holder" means a beneficial owner of a note that is not a U.S. Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST. Payments of interest on a note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular method
of tax accounting).
ORIGINAL ISSUE DISCOUNT. The following summary is a general discussion of
the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of notes issued with original issue discount
("Discount Notes"). The following summary is based upon final Treasury
regulations (the "OID Regulations") released by the Internal Revenue Service on
January 27, 1994, and subsequently amended under the original issue discount
provisions of the Code.
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a note over its issue
price, if such excess equals or exceeds a DE MINIMIS amount (generally 1/4 of 1%
of the note's stated redemption price at maturity multiplied by the number of
complete years to its maturity from its issue date or, in the case of a note
providing for the payment of any amount other than qualified stated interest (as
defined below) prior to maturity, multiplied by the weighted average maturity of
the note). The issue price of each note of an issue of notes equals the first
price at which a substantial amount of the notes has been sold (ignoring sales
to bond houses, brokers, or similar persons or organizations acting in the
capacity of underwriters, placement agents, or wholesalers). The stated
redemption price at maturity of a note is the sum of all payments provided by
the note other than "qualified stated interest" payments. The term "qualified
stated interest" generally means stated interest that is unconditionally payable
in cash or property (other than debt instruments of the issuer) at least
annually at a single fixed rate. In addition, under the OID Regulations, if a
note bears interest for one or more accrual periods at a rate below the rate
applicable for the remaining term of the note (e.g., notes with teaser rates or
interest holidays), and if the greater of either the resulting foregone interest
on the note or any "true" discount on the note (i.e., the excess of the note's
stated principal amount over its issue price) equals or exceeds a specified DE
MINIMIS amount, then the stated interest on the note would be treated as
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 the 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 the
Discount Note for each day during the taxable year (or portion of the taxable
year) on which the U.S. Holder held the 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
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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
- 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
- the amount of any qualified stated interest payments allocable to such
accrual period.
The "adjusted issue price" of a Discount Note at the beginning of any
accrual period is the sum of the issue price of the Discount Note plus the
amount of original issue discount allocable to all prior accrual periods minus
the amount of any prior payments on the Discount Note that were not qualified
stated interest payments. Under these rules, U.S. Holders generally will have to
include in income increasingly greater amounts of original issue discount in
successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium". Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder must
include in its gross income with respect to such Discount Note for any taxable
year (or portion thereof in which the U.S. Holder holds the Discount Note) will
be reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes
(hereinafter "Variable Notes") are subject to special rules whereby a Variable
Note will qualify as a "variable rate debt instrument" if
- 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
- it provides for stated interest, compounded or paid at least annually, at
current values of:
- one or more qualified floating rates,
- a single fixed rate and one or more qualified floating rates,
- a single objective rate, or
- a single fixed rate and a single objective rate that is a qualified
inverse floating rate.
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 .65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than .65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the 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
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rate under the OID Regulations unless such cap or floor is fixed throughout the
term of the note. An "objective rate" is a rate that is not itself a qualified
floating rate but which is determined using a single fixed formula that is based
on objective financial or economic information. A rate will not qualify as an
objective rate if it is based on information that is within the control of the
issuer (or a related party) or that is unique to the circumstances of the issuer
(or a related party), such as dividends, profits, or the value of the issuer's
stock (although a rate does not fail to be an objective rate merely because it
is based on the credit quality of the issuer). A "qualified inverse floating
rate" is any objective rate where such rate is equal to a fixed rate minus a
qualified floating rate, as long as variations in the rate can reasonably be
expected to inversely reflect contemporaneous variations in the qualified
floating rate. The OID Regulations also provide that if a Variable Note provides
for stated interest at a fixed rate for an initial period of one year or less
followed by a variable rate that is either a qualified floating rate or an
objective rate and if the variable rate on the Variable Note's issue date is
intended to approximate the fixed rate (e.g., the value of the variable rate on
the issue date does not differ from the value of the fixed rate by more than 25
basis points), then the fixed rate and the variable rate together will
constitute either a single qualified floating rate or objective rate, as the
case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, and if
the interest on a Variable Note is unconditionally payable in cash or property
(other than debt instruments of the issuer) at least annually, then all stated
interest on the Variable Note will constitute qualified stated interest and will
be taxed accordingly. Thus, a Variable Note that provides for stated interest at
either a single qualified floating rate or a single objective rate throughout
the term thereof and that qualifies as a "variable rate debt instrument" under
the OID Regulations will generally not be treated as having been issued with
original issue discount unless the Variable Note is issued at a "true" discount
(i.e., at a price below the Variable Note's stated principal amount) in excess
of a specified DE MINIMIS amount. The amount of qualified stated interest and
the amount of original issue discount, if any, that accrues during an accrual
period on such a Variable Note is determined under the rules applicable to fixed
rate debt instruments by assuming that the variable rate is a fixed rate equal
to
(1) in the case of a qualified floating rate or qualified inverse floating
rate, the value as of the issue date, of the qualified floating rate or
qualified inverse floating rate, or
(2) in the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is reasonably
expected for the Variable Note.
The qualified stated interest allocable to an accrual period is increased
(or decreased) if the interest actually paid during an accrual period exceeds
(or is less than) the interest assumed to be paid during the accrual period
pursuant to the foregoing rules.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed rate
that reflects the yield that is reasonably expected for the Variable Note. In
the case of a Variable Note that qualifies as a "variable rate debt instrument"
and provides for stated 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
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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. On June 11, 1996, the Treasury Department
issued final regulations (the "CPDI Regulations") concerning the proper United
States Federal income tax treatment of contingent payment debt instruments. In
general, the CPDI Regulations would cause the timing and character of income,
gain or loss reported on a contingent payment debt instrument to substantially
differ from the timing and character of income, gain or loss reported on a
contingent payment debt instrument under general principles of current United
States Federal income tax law. Specifically, the CPDI Regulations generally
require a U.S. Holder of such an instrument to include future contingent and
noncontingent interest payments in income as such interest accrues based upon a
projected payment schedule. Moreover, in general, under the CPDI Regulations,
any gain recognized by a U.S. Holder on the sale, exchange, or retirement of a
contingent payment debt instrument will be treated as ordinary income and all or
a portion of any loss realized could be treated as ordinary loss as opposed to
capital loss (depending upon the circumstances). The CPDI Regulations apply to
debt instruments issued on or after August 13, 1996. The proper United States
Federal income tax treatment of Variable Notes that are treated as contingent
payment debt obligations will be more fully described in the applicable pricing
supplement. Furthermore, any other special United States Federal income tax
considerations, not otherwise discussed herein, which are applicable to any
particular issue of notes will be discussed in the applicable pricing
supplement.
PFC may issue notes which;
- may be redeemable at the option of PFC prior to their stated maturity (a
"call option") and/or
- 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
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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.
SHORT-TERM NOTES. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects to
do so. If such an election is not made, any gain recognized by the U.S. Holder
on the sale, exchange or maturity of the Short-Term Note will be ordinary income
to the extent of the original issue discount accrued on a straight-line basis,
or upon election under the constant yield method (based on daily compounding),
through the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States Federal income tax
purposes under the accrual method, and certain other holders including banks and
dealers in securities, are required to accrue original issue discount on a
Short-Term Note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
MARKET DISCOUNT. If a U.S. Holder purchases a note, other than a Discount
Note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of a Discount Note, for an amount that is less than its adjusted issue price as
of the purchase date, such U.S. Holder will be treated as having purchased the
note at a "market discount", unless such market discount is less than a
specified DE MINIMIS amount.
Under the market discount rules, a U.S. Holder will be 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:
- the amount of such payment or realized gain or
- the market discount which has not previously been included in income and
is treated as having accrued on the note at the time of such payment or
disposition.
Market discount will be considered to accrue ratably during the period from
the date of acquisition to the maturity date of the note, unless the U.S. Holder
elects to accrue market discount on the basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to the
extent the interest expense exceeds an allocable portion of market discount. A
U.S. Holder may elect to include market discount in income currently as it
accrues (on either a ratable or semiannual compounding basis), in which case the
rules described above regarding the treatment as ordinary income of gain upon
the disposition of the note and upon the receipt of certain cash payments and
regarding the deferral of interest deductions will not apply. Generally, such
currently included market discount is treated as ordinary interest for United
States Federal income tax purposes. Such an election will apply to all debt
instruments acquired by the U.S. Holder on or after the first day of the taxable
year to which such election applies and may be revoked only with the consent of
the IRS.
PREMIUM. If a U.S. Holder purchases a note for an amount that is greater
than the sum of all amounts payable on the note after the purchase date other
than payments of qualified stated interest, the U.S. Holder will be considered
to have purchased the note with "amortizable bond
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premium" equal in amount to such excess. A U.S. Holder may elect to amortize
such premium using a constant yield method over the remaining term of the note
and may offset interest otherwise required to be included in respect of the note
during any taxable year by the amortized amount of such excess for the taxable
year. However, if the note may be optionally redeemed after the U.S. Holder
acquires it at a price in excess of its stated redemption price at maturity,
special rules would apply which could result in a deferral of the amortization
of some bond premium until later in the term of the note. Any election to
amortize bond premium applies to all taxable debt obligations then owned and
thereafter acquired by the U.S. Holder and may be revoked only with the consent
of the IRS.
DISPOSITION OF A NOTE. Except as discussed above, upon the sale, exchange
or retirement of a note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest) and
the U.S. Holder's adjusted tax basis in the note. A U.S. Holder's adjusted tax
basis in a note generally will equal the 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
the note. Such gain or loss generally will be long-term capital gain or loss if
the note were held for more than one year. Long-term capital gains of
individuals are subject to reduced capital gain rates while short-term capital
gains are subject to ordinary income rates. The deductibility of capital losses
is subject to certain limitations. Prospective investors should consult their
own tax advisors concerning these tax law provisions.
NOTES DENOMINATED, OR IN RESPECT OF WHICH INTEREST IS PAYABLE, 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
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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 "Accrual Method" above. If a U.S. Holder
receives Foreign Currency on such a sale, exchange or retirement the amount
realized will be based on the U.S. dollar value of the foreign currency on the
date the payment is received or the note is disposed of (or deemed disposed of
as a result of a material change in the terms of the note). In the case of a
note that is denominated in foreign currency and is traded on an established
securities market, a cash basis U.S. Holder (or, upon election, an accrual basis
U.S. Holder) will determine the U.S. dollar value of the amount realized by
translating the foreign currency payment at the spot rate of exchange on the
settlement date of the sale. A U.S. Holder's adjusted tax basis in a note will
equal the cost of the note to such holder, increased by the amounts of any
market discount or original issue discount previously included in income by the
holder with respect to such note and reduced by any amortized acquisition or
other premium and any principal payments received by the holder. A U.S. Holder's
tax basis in a note, and the amount of any subsequent adjustments to such
holder's tax basis will be the U.S. dollar value of the foreign currency amount
paid for such note, or of the foreign currency amount of the adjustment,
determined on the date of such purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a note that
is attributable to fluctuations in currency exchange rates will be ordinary
income or loss which will not be treated as interest income or expense. Gain or
loss attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the foreign currency principal amount of the
note, determined on the date such payment is received or the note is disposed
of, and the U.S. dollar value of the foreign currency principal amount of the
note, determined on the date the U.S. Holder acquired the note. The 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 "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
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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 "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 PFC, a controlled foreign corporation related to
PFC 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
(1) is signed by the beneficial owner of the note under penalties of perjury,
(2) certifies that such owner is not a U.S. Holder and (3) 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.
On October 6, 1997, the Treasury issued new regulations (the "New
Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
2000, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
Generally, a non-U.S. Holder will not be subject to United States Federal
income taxes on any amount which constitutes capital gain upon retirement or
disposition of a note, provided the gain is not effectively connected with the
conduct of a trade or business in the United States by the non-U.S. Holder.
Certain other exceptions may be applicable, and a non-U.S. Holder should consult
its tax advisor in this regard.
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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 PFC 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:
- the broker determines that the seller is a corporation or other exempt
recipient or
- 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:
- the broker determines that the seller is an exempt recipient or
- 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. In addition,
prospective U.S. Holders are strongly urged to consult their own tax advisors
with respect to the New Withholding Regulations. See "United States Federal
Income Taxation-Non-U.S. Holders".
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
PFC and Goldman, Sachs & Co., Banc of America Securities LLC, Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan
Stanley & Co. Incorporated and Salomon Smith Barney Inc. (the "agents") have
entered into a distribution agreement with respect to the notes. Subject to
certain conditions, the agents have agreed to use their reasonable efforts to
solicit purchases of the notes. PFC has the right to accept offers to purchase
notes and may reject any proposed purchase of the notes. The agents may also
reject any offer to purchase notes. PFC will pay the agents a commission on any
notes sold through the agents. The commission will range from .100% to .650% of
the principal amount of the notes, depending on the maturity of the notes.
Commissions with respect to notes with maturities in excess of 30 years that are
sold through an agent as an agent of PFC will be negotiated between the Company
and the agent at time of the sale.
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PFC may also sell notes to the agents who will purchase the notes as
principals for their own accounts. Any such sale will be made at a discount
equal to the discount set forth on the cover page hereof if no other discount is
agreed. Any notes the agents purchase as principal may be resold at the market
price or at other prices determined by the agents at the time of resale. PFC may
also sell notes directly on its own behalf. No commissions will be paid on notes
sold directly by PFC at such discount.
PFC may also enter into separate arrangements with firms other than the
agents which allow such firms to purchase for resale to the public all or a
portion of the notes. The name of any firm, the underwriting discount and the
initial public offering price for such notes will be set forth on the cover page
of the prospectus supplement delivered in connection with the offering and the
sale of the applicable notes.
The agents may resell any notes they purchase to other brokers or dealers at
a discount which may include all or part of the discount the agents received
from PFC. The agents will purchase the notes at a price equal to 100% of the
principal amount less a discount. Unless otherwise specified in the applicable
pricing supplement, the discount will equal the applicable commission on an
agency sales of notes of the same maturity. If all the notes are not sold at the
initial offering price, the agents may change the offering price and the other
selling terms.
In connection with the offering, the agents may purchase and sell notes in
the open market. These transactions may include short sales, stabilizing
transactions and purchases to cover positions created by short sales. Short
sales involve the sale by the agents of a greater number of notes than they are
required to purchase in the offering. Stabilizing transactions consist of
certain bids or purchases made for the purpose of preventing or retarding a
decline in the market price of the notes while the offering is in progress.
The agents also may impose a penalty bid. This occurs when a particular
agent repays to the agents a portion of the underwriting discount received by it
because the agents have repurchased notes sold by or for the account of such
agent in stabilizing or short covering transactions.
These activities by the agents may stabilize, maintain or otherwise affect
the market price of the notes. As a result, the price of the notes may be higher
than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the agents at any time.
These transactions may be effected in the over-the-counter market or otherwise.
The agents, whether acting as agents or principals, may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 as amended. PFC
has agreed to indemnify the several agents against certain liabilities,
including liabilities under the Securities Act. PFC has agreed to reimburse the
agents for certain expenses.
The agents may sell to dealers who may resell to investors and the agents
may pay all or part of the discount or commission they receive from PFC to the
dealers. Such dealers may be deemed to be "underwriters" within the meaning of
the Act.
From time to time, PFC may also sell notes or other debt securities pursuant
to another prospectus supplement to the accompanying prospectus. Any such sales
will reduce the principal amount of notes that may be offered by this prospectus
supplement and the accompanying prospectus.
No assurance can be given as to the liquidity of the trading market for the
notes.
PFC estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$2,170,500.
S-37
<PAGE>
Unless otherwise indicated in the applicable pricing supplement, the
purchase price of the notes will be required to be paid in immediately available
funds in New York, New York.
The agents may be customers of, engage in transactions with and perform
services for PFC in the ordinary course of business.
VALIDITY OF THE NOTES
The validity of the notes will be passed upon for PFC by Bruce N. Holliday,
Assistant General Counsel of PACCAR Inc, and counsel for PFC. Certain other
legal matters have been passed upon for PFC by Perkins Coie LLP, and for the
agents by Brown & Wood LLP, New York, New York.
S-38
<PAGE>
PROSPECTUS
[LOGO]
PACCAR FINANCIAL CORP.
SENIOR DEBT SECURITIES
--------------
- By this prospectus, we may offer from time to time up to $2,500,000,000 of
our senior debt securities.
- When we offer these securities, we will provide you with a prospectus
supplement describing the terms of the specific issue of securities
including the offering price of the securities.
- You should read this prospectus and the prospectus supplement relating to
the specific issue of securities carefully before you invest.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------
The date of this prospectus is March 22, 2000.
<PAGE>
PACCAR FINANCIAL CORP.
We provide financing for dealers and purchasers of Kenworth and Peterbilt
trucks, which are manufactured by PACCAR Inc, our parent corporation. We offer
the following types of financing arrangements:
- installment sales and leases of new Kenworth and Peterbilt trucks;
- installment sales of all brands of used trucks;
- installment sales and leases of all brands of new trailers and installment
sales of used trailers;
- loans to dealers to finance their inventory of new and used trucks and
trailers; and
- loans to dealers for working capital purposes and for facilities
improvements.
Our principal executive offices are located at 777 106th Avenue N.E.,
Bellevue, Washington 98004; our telephone number is (425) 468-7100.
If you want to find more information about us, please see the sections
entitled "Where You Can Find More Information" and "Incorporation of Information
We File with the SEC" in this prospectus.
In this prospectus, "PFC", "we", "us" and "our" refer specifically to PACCAR
Financial Corp., the issuer of the securities offered under this prospectus.
USE OF PROCEEDS
We intend to use the proceeds from the sale of the securities for general
corporate purposes, unless otherwise specified in the prospectus supplement
relating to a specific issue of securities. Our general corporate purposes may
include the repayment of existing indebtedness, including indebtedness to PACCAR
and its subsidiaries, and may include loans to or investments in PACCAR and
PACCAR's other finance and leasing subsidiaries.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
PFC and for PACCAR and all of its subsidiaries, including PFC, for the periods
indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PFC....................................................... 1.39 1.36 1.50 1.53 1.52
PACCAR and subsidiaries................................... 5.48 4.64 4.47 3.27 4.09
</TABLE>
In the ratio of earnings to fixed charges for PFC, "earnings" consist of
income before income taxes and fixed charges but exclude capitalized interest.
"Fixed charges" consist of interest costs, the interest factor in rentals,
amortization of debt issuance costs and capitalized interest. The ratio of
earnings to fixed charges shown above complies with the SEC's reporting
requirements but differs from the method called for in the support agreement
between PFC and PACCAR. See "Relationship with PACCAR." The ratios computed
pursuant to the support agreement were 1.44, 1.41, 1.57, 1.62, and 1.63 for the
years 1999-1995, respectively.
In the ratio of earnings to fixed charges for PACCAR and its subsidiaries,
"earnings" consist of income before income taxes and fixed charges, plus
undistributed net earnings of the subsidiaries. "Fixed charges" consist of
interest costs, the interest factor in rentals, amortization of debt issuance
costs and capitalized interest.
2
<PAGE>
RELATIONSHIP WITH PACCAR
GENERAL
PFC was formed to finance sales of PACCAR products to and by PACCAR's
dealers. Sales of PACCAR products continue to provide PFC's principal source of
financing business. We receive administrative support services from PACCAR. We
have borrowed funds from and loaned funds to PACCAR and PACCAR's other finance
and leasing subsidiaries, and we may do so in the future. Since PACCAR owns all
of PFC's common stock, PACCAR can control the management and policies of PFC.
SUPPORT AGREEMENT
We have a support agreement with PACCAR that obligates PACCAR:
- to provide financial assistance to us when required; and
- to own, directly or indirectly, all of our outstanding voting stock.
PACCAR is required to provide financial assistance to us if our ratio of net
earnings available for fixed charges to fixed charges, as defined in the support
agreement, is less than 1.25 to 1 for any fiscal year. PACCAR must provide
financial assistance as necessary to meet the ratio requirement if this ratio is
not satisfied. We met the required ratios for the years ended December 31,
1995-1999 without assistance from PACCAR.
PFC and PACCAR may amend or cancel the support agreement upon 30 days
notice. The amendment or termination will be effective only if:
- two nationally recognized statistical rating organizations which have
issued ratings with respect to PFC's debt confirm in writing that their
ratings for PFC's debt would remain the same after the amendment or
cancellation, or
- the notice provides that the support agreement will continue in effect
with respect to any of PFC's debt which is rated by a nationally
recognized statistical rating organization until that debt has been paid
or defeased in accordance with its terms, or
- the holders of at least two-thirds of the principal amount of all
outstanding debt of PFC with an original maturity in excess of 270 days
which is rated by a nationally recognized statistical rating organization
consent in writing to the amendment or cancellation. In this situation,
the holders of any debt with an original maturity of 270 days or less
shall continue to have the benefit of the support agreement until the
maturity of their debt.
PACCAR's obligations to PFC do not constitute a guarantee of any
indebtedness or liability of PFC and do not create any rights against PACCAR by
any third person. There are no direct or indirect guarantees by PACCAR for the
payment of the securities to be issued under this prospectus or of any other
indebtedness of the PFC.
DESCRIPTION OF SECURITIES
The senior debt securities will be issued under an Indenture between PFC and
Citibank, N.A., as trustee, dated as of December 1, 1983, and amended by the
first supplemental indenture dated as of June 19, 1989. Securities issued under
the Indenture are unsecured senior indebtedness of PFC and are not limited to
any aggregate amount. A copy of the Indenture including the first supplemental
indenture is filed as an exhibit to the registration statement relating to the
securities. The summary of the material provisions of the Indenture in the
"Provisions of the Indenture" section below is not complete, and is subject to
and qualified in its entirety by reference to the provisions of the Indenture,
including the definitions of terms.
3
<PAGE>
TERMS OF THE SECURITIES
PFC may issue the securities from time to time and in one or more series.
PFC may issue the securities upon the terms fixed or established in a resolution
of the Board of Directors of PFC, or a committee of the Board of Directors, or
in a certificate of an officer of PFC who has been authorized by the Board of
Directors to take that kind of action. (See Section 301 of the Indenture.) Any
resolution or officer's certificate approving the issuance of any issue of
securities will establish the terms of that issue, including:
- the title of the securities;
- any limit on the aggregate principal amount of the securities;
- the date or dates on which the securities will mature;
- the rate or rates per annum at which the securities will bear interest, if
any, or the manner in which the interest rate or rates are determined, and
the date or dates from which interest, if any, will accrue;
- the dates on which interest, if any, on the securities will be payable and
the related record dates;
- any mandatory or optional sinking fund or analogous provisions;
- whether the securities are to be issued in the form of one or more global
securities and the identity of the depositary for global securities;
- any redemption terms;
- any additional covenants for the benefit of the holders of the securities;
- the currency for payment of principal and interest if other than United
States dollars;
- whether the amount of payments of principal, premium and interest on the
securities may be determined with reference to an index, formula or other
method and the manner in which the amounts shall be determined; and
- other terms, including, but not limited to, PFC's ability to satisfy and
discharge its obligations under the Indenture more than one year prior to
the maturity or redemption of the securities. (See Sections 301 and 401 of
the Indenture).
Please see the accompanying prospectus supplement you have received or will
receive for the terms of the specific securities being offered.
Prospective purchasers of securities should be aware that special U.S.
Federal income tax, accounting and other considerations may be applicable to the
specific securities being offered. The prospectus supplement relating to an
issue of securities will describe these considerations, if they apply.
Transfer of the securities will be registered at the corporate trust office
of the trustee. No service charge will be made for any transfer or exchange of
the securities, but PFC may require payment of a sum sufficient to cover any tax
or other governmental charge payable.
GLOBAL SECURITIES
PFC may issue series of securities in global form that will be deposited
with, or on behalf of, a depositary identified in the prospectus supplement
relating to that series. If any securities are issued in global form, please see
the accompanying prospectus supplement you have received or will receive for the
terms of the specific debt securities being offered. Unless the prospectus
4
<PAGE>
supplement states different terms for the securities being offered, global
securities will have the following terms:
- A global security may not be transferred except as a whole by the
depositary to a nominee or to a successor of the depositary, unless
exchanged for securities in definitive form. (See Sections 303 and 305 of
the Indenture).
- Only persons that have accounts with the depositary or its nominee, which
we refer to as a participant, or that may hold interests through a
participant may own beneficial interests in a global security. These
accounts will be designated by the applicable underwriters or agents or by
PFC if the securities are offered and sold directly by PFC.
- Upon the issuance of a global security, the depositary will credit the
principal amounts of the securities to the participants' accounts on its
book-entry registration and transfer system. Ownership and transfer of the
ownership of a beneficial interest in a global security will be shown on
and effected only through records maintained by the depositary or by the
records of participants (with respect to interests of persons held through
participants). (See Section 308 of the Indenture).
- So long as the depositary is the registered owner of a global security,
the depositary will be considered the sole owner of the securities
represented by the global security for all purposes under the Indenture.
(See Section 303 of the Indenture). Owners of beneficial interests in a
global security will not be entitled to:
- have the securities represented by the global security registered in
their names;
- will not receive physical delivery of the securities in definitive
form; and
- will not be considered the owners of the global security under the
Indenture.
- Payments on global securities registered in the name of the depositary
will be made to the depositary. The depositary will confirm to PFC that
payments made with respect to a global security will immediately be
credited to the participants' accounts according to their interests as
shown on the records of the depositary. The depositary shall be solely
responsible for its records relating to beneficial ownership interests in
the global security and for the allocation and distribution of payments
made by PFC to the depositary. (See Section 308 of the Indenture).
- Each participant is responsible to make payments to the owners of
beneficial interests in the global security held through that participant.
Participants have the same obligation with respect to securities
registered in "street name" and held for the accounts of customers. The
participants shall be solely responsible for their records relating to
beneficial ownership interests in the global security and for the
allocation and distribution of payments made by the depositary to the
participants. (See Section 308 of the Indenture).
- If the depositary for any global security resigns or is unable to continue
as depositary and a successor depositary is not appointed by PFC within
ninety days, PFC will issue securities in definitive form in exchange for
the global security. (See Section 305 of the Indenture).
- PFC may at any time and in its sole discretion determine not to have the
securities represented by a global security. In that event, PFC will issue
securities of the same series in definitive form in exchange for the
global security. (See Section 305 of the Indenture).
The laws of some states may require that certain purchasers of securities
take physical delivery of securities in definitive form. This type of law may
impair the ability to transfer beneficial interests in a global security.
5
<PAGE>
PROVISIONS OF THE INDENTURE
Unless the prospectus supplement states different terms for the securities
being offered, the securities will be covered by the following provisions of the
Indenture:
- principal and interest on the securities will be payable at the corporate
trust office of the trustee, except that payment of interest may be made
at the option of PFC by check mailed to the registered address of the
person entitled to the interest. (See Sections 301 and 1002 of the
Indenture).
- the securities will be issued only in fully registered form without
coupons. (See Section 302 of the Indenture).
- the securities will be denominated in United States dollars and will be
issued in denominations of $1,000 or any integral multiple of $1,000. (See
Sections 301 and 302 of the Indenture).
- the transfer of the securities will be registerable at the corporate trust
office of the trustee. (See Section 305 of the Indenture).
- the securities may be issuable in whole or in part in the form of one or
more global securities, as described in the "Global Securities" section
above. (See Sections 203, 301 and 305 of the Indenture).
- Securities of a single series may be issued at various times, with
different maturity dates and interest rates and may otherwise vary, all as
provided in the Indenture. (See Section 301 of the Indenture).
- Securities may be issued as original issue discount securities (bearing no
interest or bearing interest at a rate which at the time of issue is
significantly below market rates) to be sold at a substantial discount
below their principal amount. (See Section 301 of the Indenture) If any
securities are issued as original issue discount securities, the terms
will be described in the prospectus supplement relating to the securities.
RESTRICTIONS ON SECURED DEBT. PFC will not permit any lien or security
interest on its property or on the property of its majority owned subsidiaries,
except as permitted by the Indenture. (See Section 1005 of the Indenture) The
Indenture allows PFC to incur secured debt, if the debt securities issued under
the Indenture are secured equally and ratably with all other secured debt. The
Indenture also permits PFC to incur secured debt, without providing security for
the securities issued under the Indenture, in the following situations:
- The aggregate amount of all secured debt (excluding secured debt permitted
under any of the other exceptions listed immediately below) would not
exceed 15% of PFC's consolidated net tangible assets.
- Liens or security interests on the stock or property of any corporation
that existed at the time that corporation became a subsidiary of PFC.
- Liens or security interests for debt between PFC and its majority owned
subsidiaries.
- Liens or security interests in favor of any governmental body to secure
progress, advance or other payments pursuant to any contract, statute or
rule of court.
- Liens or encumbrances on property repossessed by PFC or its subsidiaries
in the ordinary course of their business
- Bankers' liens or other rights of offset.
- Liens or security interests on property, and related rentals that
6
<PAGE>
- existed at the time of acquisition of the property, or
- secure debt for the purchase of the property or the construction of
improvements on the property, or
- were created prior to or within 180 days after the acquisition of the
property or the completion of construction, for the purpose of
financing the acquisition of or construction on the property.
- Any extension, renewal or replacement of any lien or security interest
described above that is limited to the same property that secured the
prior lien or security interest.
EVENT RISKS. The Indenture does not prohibit a change of control of PFC or
a recapitalization or highly leveraged transaction, unless the transaction or
change of control includes a merger, consolidation or transfer of all or
substantially all of the assets of PFC. See "Description of Securities--Mergers
and Sales of Assets by PFC." There are no provisions for a right to acquire any
increased interests or any other rights that would afford holders of the
securities additional protection in the event of a change of control of PFC or a
recapitalization or highly leveraged transaction. The support agreement requires
PACCAR to own all outstanding voting stock of PFC and to provide financial
assistance to PFC under certain circumstances. See "Relationship with
PACCAR--Support Agreement."
MERGERS AND SALES OF ASSETS BY PFC. PFC may consolidate or merge with any
other corporation, and it may transfer all or substantially all of its assets to
another corporation, if the following conditions are satisfied (See Article 8 of
the Indenture):
- The surviving corporation:
- shall be organized and existing under the laws of the United States,
any State or the District of Columbia, and
- shall expressly assume payment of the principal of and premium, if any,
and interest on the securities issued under the Indenture and the
performance and observance of the Indenture;
- PFC or the successor corporation shall not immediately after the
transaction be in default under the Indenture; and
- PFC and its property shall not become subject to a lien or security
interest prohibited by the Indenture.
Except as permitted above, PFC has agreed to preserve its corporate existence.
(See Section 1004 of the Indenture).
7
<PAGE>
SATISFACTION AND DISCHARGE. PFC may discharge its obligations under the
securities of a specific series (See Article Four of the Indenture) when it
satisfies the following requirements with respect to the securities of that
series:
- PFC irrevocably deposits with the trustee in trust,
- sufficient funds to pay the principal of and premium, if any, and
interest to maturity or redemption on the securities, or
- if the securities are payable in United States dollars, the amount of
direct obligations of or fully guaranteed by the United States as will
be sufficient to pay when due the principal of and premium, if any, and
interest to maturity or redemption on the securities;
- PFC pays all other sums payable on the securities, and
- if the deposit identified above occurs more than one year prior to the
maturity or redemption of the securities,
- notice has been given to the holders of the securities, and
- the trustee has received an opinion of recognized tax counsel to the
effect that the deposit and discharge will not result in recognition by
the holders of the securities of income, gain or loss for federal
income tax purposes other than income, gain or loss which would have
been recognized in like amount and at a like time absent the deposit,
satisfaction and discharge.
Upon discharge, the holders of the securities of the specific series will no
longer be entitled to the benefits of the Indenture, except for the purposes of
registration of transfer and exchange of the securities. The holders shall be
paid only from the deposited funds or obligations.
EVENTS OF DEFAULT. The following are Events of Default under the Indenture
(See Section 501 of the Indenture) with respect to the securities of any series:
- a default in the payment of principal of or any premium on any security of
that series when due;
- a default in the payment of any interest on any security of that series
when due and continuance of such default for 30 days;
- a default in the deposit of any sinking fund payment when due in respect
of any security of that series;
- a default in the performance of any other covenant of PFC in the Indenture
other than a covenant included in the Indenture solely for the benefit of
a series of securities other than that series, and continuance of that
default for 90 days after written notice;
- an event of bankruptcy, insolvency or reorganization as defined in the
Indenture;
- a default under any mortgage, indenture or instrument evidencing
indebtedness of PFC, including the Indenture, which has resulted in the
acceleration of indebtedness in excess of $10,000,000 in aggregate
principal amount except that this amount shall not apply in respect to a
default on securities of another series covered by the Indenture and the
acceleration shall not have been rescinded or the indebtedness discharged
within a period of 30 days after written notice as provided in the
Indenture; and
- any other event of default provided for that series of securities.
If an Event of Default with respect to the securities of any series occurs
and is continuing, the principal amount of all the securities of that series may
be declared to be due and payable
8
<PAGE>
immediately by written notice as provided in the Indenture. If the securities of
that series are original issue discount securities, the portion of the principal
amount as may be specified in the terms of that series may be declared due and
payable. This declaration may be made by either the trustee or the holders of at
least 25% in aggregate principal amount of the outstanding securities of that
series. The holders of a majority in principal amount of the outstanding
securities of that series may, under the circumstances described in the
Indenture, rescind and annul the acceleration. (See Section 502 of the
Indenture.)
The trustee has the duty to act with the required standard of care during
default. The trustee is not obligated to exercise any of its rights or powers
under the Indenture at the request or direction of any of the holders, unless
the holders have offered to the trustee reasonable indemnity. (See Section 603
of the Indenture.) Subject to the provisions for the indemnification of the
trustee and other conditions specified in the Indenture (See Section 512 of the
Indenture), the holders of a majority in principal amount of the outstanding
securities of any series will have the right to direct the time, method and
place of:
- conducting any proceeding for any remedy available to the trustee, or
- exercising any trust or power conferred on the trustee, with respect to
the securities of that series.
The right of a holder of any security to institute a proceeding with respect
to the Indenture is subject to certain conditions specified in the Indenture.
(See Section 507 of the Indenture.) Each holder has an absolute right to receive
payment of principal, premium and interest, if any, when due and to institute
suit for the enforcement of any the payment. (See Section 508 of the Indenture.)
The Indenture provides that the trustee is required to give the holders of the
securities of any series written notice of any default within 90 days after the
occurrence of the default, unless previously cured or waived. In the case of
default in the payment of principal, premium or interest, or in the payment of
any sinking fund or redemption installment, the trustee may withhold the notice
of default if it determines it is in the interest of such holders to do so. (See
Section 602 of the Indenture.)
PFC is required to furnish to the trustee annually a statement as to the
performance by PFC of its obligations under the Indenture and as to any default
in its performance. (See Section 1006 of the Indenture.)
MODIFICATION AND WAIVER. PFC and the trustee may amend the Indenture with
the consent of the holders of not less than a majority in principal amount of
the outstanding securities of each series affected by the amendment. (See
Section 902 of the Indenture.) The Indenture may not be amended without the
consent of the holder of each outstanding security adversely affected if the
amendment:
- changes the stated maturity date of the principal or interest on any
security;
- reduces the principal, premium or rate of interest on any security;
- changes the method for determination of the rate of interest on any
security;
- changes the premium payable upon the redemption of any security,
- reduces the amount of principal of an original issue discount security
payable upon acceleration of the maturity of the original issue discount
security,
- changes the place or currency of payment of principal, premium or interest
on any security;
- impairs the right to institute suit for the enforcement of any payment on
any security; or
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<PAGE>
- reduces the percentage of holders whose consent is required for amendment
of the Indenture, waiver of compliance with the Indenture or waiver of
defaults under the Indenture.
The holders of a majority in principal amount of the outstanding securities
of each series may, on behalf of all holders of securities of that series:
- waive compliance by PFC with some restrictive provisions of the Indenture
(See Section 1007 of the Indenture), and
- waive any past default under the Indenture with respect to securities of
that series (See Section 1007 of the Indenture), except for a default
- in the payment of principal, premium or interest, or
- in respect of a covenant or condition which cannot be waived without
the consent of each holder of securities of that series.
REGARDING THE TRUSTEE
PFC and PACCAR maintain general banking and credit relationships with
Citibank, N.A., in the ordinary course of business. Citibank, N.A., serves as
trustee under the Indenture with respect to PFC's other senior debt securities.
GOVERNING LAW
The Indenture and the securities will be governed by, and construed in
accordance with, the laws of the State of New York.
PLAN OF DISTRIBUTION
PFC may sell the securities:
- to or through agents, or
- to or through underwriters, or
- directly to purchasers.
The prospectus supplement with respect to the securities describes the terms
of the offering of the securities, including:
- the names of the agents or underwriters,
- the public offering price or purchase price for the securities,
- the rate of interest or method of computing the rate of interest,
- the maturity date,
- other terms and conditions of the securities,
- any discounts and commissions to be allowed or paid to the agents,
underwriters, or any dealers and any other items constituting underwriting
compensation, and
- any exchanges on which the securities will be listed.
Only the agents or underwriters named in the prospectus supplement will be
agents or underwriters in connection with the securities being offered.
If so indicated in the prospectus supplement, PFC will authorize
underwriters or agents to solicit offers by certain institutions to purchase
securities from PFC pursuant to delayed delivery
10
<PAGE>
contracts providing for payment and delivery on the date stated in the
prospectus supplement. Each contract will be for an amount not less than, and,
unless PFC otherwise agrees, the aggregate principal amount of securities sold
pursuant to the contracts shall not be more than, the amounts stated in the
prospectus supplement. Institutions with whom the contracts may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions.
PFC has agreed to indemnify the agents and the several underwriters against
certain civil liabilities, including liabilities under the Securities Act of
1933, as amended, or contribute to payments the agent or the underwriters may be
required to make.
WHERE YOU CAN FIND MORE INFORMATION
We file reports and other information with the SEC. Our SEC filings are also
available over the Internet at the SEC's web site at http://www.sec.gov. You may
also read and copy any document we file by visiting the SEC's public reference
rooms in Washington, D.C., New York, New York, and Chicago, Illinois. Please
call the SEC at 1-800-SEC-0330 for further information about the public
reference rooms.
We have filed a registration statement on Form S-3 with the SEC covering the
securities. For further information about PFC and the securities, you should
refer to our registration statement and its exhibits. This prospectus summarizes
material provisions of contracts and other documents that we refer you to.
Because the prospectus may not contain all the information that you may find
important, you should review the full text of these documents. We have included
copies of these documents as exhibits to our registration statement of which
this prospectus is a part.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file with
them, which means:
- incorporated documents are considered part of the prospectus;
- we can disclose important information to you by referring you to those
documents; and
- information that we file with the SEC will automatically update and
supersede this incorporated information.
We incorporate by reference the documents listed below which were filed with
the SEC under the Securities Exchange Act of 1934, as amended:
- annual report on Form 10-K for the year ended December 31, 1999.
We also incorporate by reference each of the following documents that we
will file with the SEC after the date of this prospectus until this offering is
completed:
- reports filed under Sections 13(a) and (c) of the Exchange Act; and
- any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by reference
in this prospectus. We have not authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not making an offer to sell the
securities in any jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
11
<PAGE>
You may request a copy of any filings referred to above, excluding exhibits,
at no cost, by contacting us at the following address: PACCAR Financial Corp.
777 106(th) Avenue N. E., Bellevue, Washington 98004, Attention: Treasury,
Telephone: (425) 468-7185.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements (and schedules) included in our Annual report on form 10-K for the
year ended December 31, 1999, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements (and schedules) are incorporated by
reference in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
12
<PAGE>
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No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus supplement or the
accompanying prospectus. You must not rely on any unauthorized information or
representations. This prospectus supplement and the accompanying prospectus is
an offer to sell only the notes offered hereby, but only under circumstances and
in jurisdictions where it is lawful to do so. The information contained in this
prospectus supplement and the accompanying prospectus is current only as of
their respective dates.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Prospectus Supplement
Risk Factors.............................. S-2
Description of the Notes.................. S-3
Special Provisions Relating to Foreign
Currency Notes.......................... S-25
United States Federal Income Taxation..... S-27
Plan of Distribution...................... S-36
Validity of the Notes..................... S-38
Prospectus
PACCAR Financial Corp..................... 2
Use of Proceeds........................... 2
Ratio of Earnings to Fixed Charges........ 2
Relationship with PACCAR.................. 3
Description of Securities................. 3
Plan of Distribution...................... 10
Where You Can Find More Information....... 11
Incorporation of Information We File With
the SEC................................. 11
Experts................................... 12
</TABLE>
$2,500,000,000
PACCAR FINANCIAL CORP.
Medium-Term Notes, Series J
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GOLDMAN, SACHS & CO.
BANC OF AMERICA SECURITIES LLC
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
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