<PAGE> 1
Filed pursuant to Rule 424 (b)(5)
Registration No. 333-52857
PROSPECTUS SUPPLEMENT
(To Prospectus dated August 18, 1998)
$200,000,000
Rayonier Inc.
1177 Summer Street, Stamford, CT 06905-5529
(203) 348-7000
MEDIUM-TERM NOTES, SERIES C
Due Nine Months or More From Date of Issue
------------------------
RAYONIER INC., MAY OFFER FROM TIME TO TIME, ITS MEDIUM-TERM NOTES, SERIES C. THE
SPECIFIC TERMS OF ANY NOTES OFFERED WILL BE INCLUDED IN A PRICING SUPPLEMENT.
UNLESS THE PRICING SUPPLEMENT PROVIDES OTHERWISE, THE NOTES OFFERED WILL HAVE
THE FOLLOWING GENERAL TERMS:
- -- THE NOTES WILL MATURE IN 9 MONTHS OR MORE FROM THE DATE OF ISSUE.
- -- THE NOTES WILL BEAR INTEREST AT EITHER A FIXED OR A FLOATING RATE. FLOATING
RATE INTEREST WILL BE BASED ON:
-- CD RATE
-- CMT RATE
-- COMMERCIAL PAPER RATE
-- FEDERAL FUNDS RATE
-- LIBOR
-- PRIME RATE
-- TREASURY RATE
-- ANY OTHER RATE SPECIFIED IN THE APPLICABLE PRICING SUPPLEMENT.
- -- FIXED RATE INTEREST WILL BE PAID ON MAY 15 AND NOVEMBER 15, ACCRUING FROM THE
DATE OF ISSUE.
- -- FLOATING RATE INTEREST WILL BE PAID ON THE DATES STATED IN THE APPLICABLE
PRICING SUPPLEMENT.
- -- THE NOTES WILL BE HELD IN GLOBAL FORM BY THE DEPOSITORY TRUST COMPANY, UNLESS
OTHERWISE SPECIFIED.
- -- THE NOTES MAY BE EITHER CALLABLE BY RAYONIER INC. OR PUTTABLE BY YOU IF
SPECIFIED IN THE APPLICABLE PRICING SUPPLEMENT.
- -- THE NOTES WILL BE DENOMINATED IN U.S. DOLLARS AND HAVE MINIMUM DENOMINATIONS
OF $1,000, UNLESS OTHERWISE SPECIFIED.
------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS COMPANY
-------- ---------------------- -----------
<S> <C> <C> <C>
Per Note............. 100.000% .125% - .750% 99.875% - 99.250%
Total................ $200,000,000 $250,000 $1,500,000 $199,750,000 $198,500,000
</TABLE>
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus
supplement or the accompanying prospectus are truthful or complete. Any
representation to the contrary is a criminal offense.
Offers to purchase the notes are being solicited from time to time by the agents
listed below. The agents have agreed to use their reasonable best efforts to
sell the notes. There is no established trading market for the notes and there
can be no assurance that a secondary market for the notes will develop.
------------------------
MORGAN STANLEY DEAN WITTER
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON
November 16, 1998
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
About this Prospectus Supplement; Pricing Supplements....... S-3
Use of Proceeds............................................. S-3
Description of Notes........................................ S-3
Certain United States Federal Income Tax Considerations..... S-23
Plan of Distribution........................................ S-31
Legal Matters............................................... S-32
PROSPECTUS
Available Information....................................... 2
Incorporation of Certain Documents by Reference............. 3
Rayonier Inc. .............................................. 4
Use of Proceeds............................................. 4
Ratio of Earnings to Fixed Charges.......................... 4
Description of Debt Securities.............................. 4
Plan of Distribution........................................ 13
Legal Matters............................................... 14
Experts..................................................... 14
</TABLE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL NOTES AND MAKING OFFERS TO
BUY NOTES ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR ANY SALE OF
THE NOTES. IN THIS PROSPECTUS, THE "COMPANY" "WE," "US" AND "OUR" REFER TO
RAYONIER INC.
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ABOUT THIS PROSPECTUS SUPPLEMENT;
PRICING SUPPLEMENTS
The Company may use this Prospectus Supplement, together with the attached
Prospectus and an attached pricing supplement, to offer our Medium-Term Notes,
from time to time. The total initial public offering price of Notes that may be
offered by use of this Prospect Supplement is $200,000,000 (or the equivalent in
foreign or composite currencies). That amount will be reduced by the amount of
any securities issued under our shelf registration statement (File No.
333-52857) (the "Registration Statement").
This Prospectus Supplement sets forth certain terms of the Notes that we may
offer. It supplements the description of the Debt Securities contained in the
attached Prospectus. If information in this Prospectus Supplement is
inconsistent with the Prospectus, this Prospectus Supplement will apply and will
supersede that information in the Prospectus.
Each time we issue Notes, we will attach a pricing supplement to this Prospectus
Supplement. The pricing supplement will contain the specific description of the
Notes being offered and the terms of the offering. The pricing supplement may
also add, update or change information in this Prospectus Supplement or the
attached Prospectus. Any information in the pricing supplement, including any
changes in the method of calculating interest on any Note, that is inconsistent
with the Prospectus Supplement will apply and will supersede that information in
this Prospectus Supplement.
It is important for you to read and consider all information contained in this
Prospectus Supplement and the attached Prospectus and pricing supplement in
making your investment decision. You should also read and consider the
information in the documents we have referred you to in "Available Information"
on page 2, and "Incorporation of Certain Documents by Reference" on page 3 of
the attached Prospectus.
USE OF PROCEEDS
Except as otherwise provided in the applicable Pricing Supplement, the net
proceeds from the sale of the Notes will be added to the Company's general funds
and will be used for general corporate purposes, including, but not limited to,
additions to working capital and capital expenditures and the repayment of loans
under bank credit agreements and other short-term debt. Pending such use, the
net proceeds may be used to make short-term investments.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered hereby
supplements the description of the general terms and provisions of the Debt
Securities set forth in the Prospectus, to which reference is hereby made. In
particular, as used under this caption, the term "Company" means Rayonier Inc.
The particular terms of the Notes sold pursuant to any pricing supplement (a
"Pricing Supplement") will be described therein. The terms and conditions set
forth in "Description of Notes" will apply to each Note unless otherwise
specified in the applicable Pricing Supplement and in such Note.
If any Note is not to be denominated in U.S. dollars, the applicable Pricing
Supplement will specify the currency or currencies, including composite
currencies, in which the principal, premium, if any, and interest, if any, with
respect to such Note are to be paid, along with any other terms relating to the
non-U.S. dollar denomination, including exchange rates for the Specified
Currency as against the U.S. dollar at selected times during the last five
years, and any exchange controls affecting such Specified Currency. The
applicable Pricing Supplement will also describe: (i) conversion facilities and
procedures for the Specified Currency in the United States; (ii) any special
arrangements
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for payments in the Specified Currency, including procedures to be followed
should the Specified Currency not be available; (iii) special provisions
applicable to any composite currency; and (iv) any special considerations
related to Notes denominated in or the payment of which is related to the value
of one or more Specified Currencies.
GENERAL
The Notes will constitute a single series under the Indenture, together with any
medium-term notes of the Company issued in the future under the Indenture which
are designated by the Company as constituting a single series of securities with
the Notes for purposes of the Indenture. The Indenture does not limit the amount
of additional indebtedness that the Company may incur. The principal amount of
any Original Issue Discount Note (as defined below) means the Issue Price (as
defined below) of such Note. The principal amount of any Note issued in a
foreign currency or composite currency means the U.S. dollar equivalent on the
date of issue of the Issue Price of such Note.
Notes will rank pari passu with all other unsecured and unsubordinated
indebtedness of the Company.
Fixed Rate Notes, Amortizing Notes and Original Issue Discount Notes will mature
on any day more than nine months from the date of issue, as set forth in the
applicable Pricing Supplement. Floating Rate Notes (including Renewable Notes,
as defined below) will mature on an Interest Payment Date (as defined below)
more than nine months from the date of issue, as set forth in the applicable
Pricing Supplement. Except as may be specified for Notes denominated in foreign
or composite currencies or as otherwise provided in the applicable Pricing
Supplement, the Notes will be issued only in fully registered form in
denominations of $1,000 or any amount in excess thereof which is an integral
multiple of $1,000.
Unless otherwise provided in the applicable Pricing Supplement, Notes
denominated in a Specified Currency other than U.S. dollars will be issued in
denominations of the equivalent of $1,000 (rounded to an integral multiple of
1,000 units of such Specified Currency), or any amount in excess thereof which
is an integral multiple of 1,000 units of such Specified Currency, as determined
by reference to the noon dollar buying rate in New York City for cable transfers
of such Specified Currency published by the Federal Reserve Bank of New York
(the "Market Exchange Rate") on the Business Day (as defined below) immediately
preceding the date of issuance; provided, however, that in the case of ECUs, the
Market Exchange Rate shall be the rate of exchange determined by the Commission
of the European Communities (or any successor thereto) as published in the
Official Journal of the European Communities, or any successor publication, on
the Business Day immediately preceding the date of issuance.
The Notes will be offered on a continuing basis, and each Note will be issued
initially as either a Book-Entry Note or a Certificated Note. Except as set
forth in the Prospectus under "Description of the Debt Securities -- Global
Securities," Book-Entry Notes will not be issuable as Certificated Notes. See
"Book-Entry System" below.
The Notes may be presented for payment of principal, premium, if any, and
interest, transfer of the Notes will be registrable and the Notes will be
exchangeable at the agency in the Borough of Manhattan, The City of New York,
maintained by the Company for such purpose; provided that Book-Entry Notes will
be exchangeable only in the manner and to the extent set forth under "Book-Entry
System" below. On the date hereof, the agent for the payment, transfer and
exchange of the Notes (the "Paying Agent") is Bankers Trust Company acting
through its corporate trust office at 123 Washington Street, New York, New York
10006.
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The applicable Pricing Supplement will specify the price (the "Issue Price") of
each Note to be sold pursuant thereto, the interest rate or interest rate
formula, ranking, maturity, currency or composite currency, principal amount and
any other terms on which each such Note will be issued.
As used herein, the following terms shall have the meanings set forth below:
"Business Day" means any day, other than a Saturday or Sunday, that is neither a
legal holiday nor a day on which banking institutions are authorized or required
by law or regulation to close in The City of New York and (i) with respect to
LIBOR Notes (as defined below), that is also a London Banking Day, (ii) with
respect to Notes denominated in a Specified Currency other than U.S. dollars,
Australian dollars or euro, in the principal financial center of the country of
the Specified Currency, (iii) with respect to Notes denominated in Australian
dollars, in Sydney and (iv) with respect to Notes denominated in euro, that is a
date on which the Trans-European Automated Real-Time Gross Settlement Express
Transfer (TARGET) System is open.
An "Interest Payment Date" with respect to any Note shall be a date on which,
under the terms of such Note, regularly scheduled interest shall be payable.
"London Banking Day" means any day on which dealings in deposits in the relevant
Index Currency (as defined below) are transacted in the London interbank market.
"Original Issue Discount Note" means any Note that provides for an amount less
than the principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof pursuant to the relevant Indenture.
The "Record Date" with respect to any Interest Payment Date shall be the date 15
calendar days prior to such Interest Payment Date, whether or not such date
shall be a Business Day.
INTEREST AND PRINCIPAL PAYMENTS
Interest will be payable to the person in whose name the Note is registered at
the close of business on the applicable Record Date; provided that the interest
payable upon maturity, redemption or repayment (whether or not the date of
maturity, redemption or repayment is an Interest Payment Date) will be payable
to the person to whom principal is payable. The initial interest payment on a
Note will be made on the first Interest Payment Date falling after the date the
Note is issued; provided, however, that payments of interest (or, in the case of
an Amortizing Note, principal and interest) on a Note issued less than 15
calendar days before an Interest Payment Date will be paid on the next
succeeding Interest Payment Date to the holder of record on the Record Date with
respect to such succeeding Interest Payment Date. See "Certain United States
Federal Income Tax Considerations -- Original Issue Discount" below.
U.S. dollar payments of interest, other than interest payable at maturity (or on
the date of redemption or repayment, if a Note is redeemed or repaid by the
Company prior to maturity), will be made by check mailed to the address of the
person entitled thereto as shown on the Note register. U.S. dollar payments of
principal, premium, if any, and interest upon maturity, redemption or repayment
will be made in immediately available funds against presentation and surrender
of the Note. Notwithstanding the foregoing, (a) the Depositary (as defined
below), as holder of Book-Entry Notes, shall be entitled to receive payments of
interest by wire transfer of immediately available funds and (b) a holder of
$10,000,000 (or the equivalent) or more in aggregate principal amount of
Certificated Notes having the same Interest Payment Date shall be entitled to
receive payments of interest by wire transfer of immediately available funds
upon written request
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to the Paying Agent not later than 15 calendar days prior to the applicable
Interest Payment Date.
Unless otherwise specified in the applicable Pricing Supplement, a beneficial
owner of Book-Entry Notes denominated in a Specified Currency electing to
receive payments of principal or any premium or interest in a currency other
than U.S. dollars must notify the participant through which its interest is held
on or prior to the applicable Record Date, in the case of a payment of interest,
and on or prior to the sixteenth day prior to maturity (or the date of
redemption or repayment if a Note is redeemed or repaid prior to maturity), in
the case of principal or premium of such beneficial owner's election to receive
all or a portion of such payment in a Specified Currency. Such participant must
notify the Depositary of such election on or prior to the third Business Day
after such Record Date, in the case of a payment of interest, and on or prior to
the twelfth Business Day prior to maturity (or the date of redemption or
repayment if a Note is redeemed or repaid prior to maturity) in the case of a
payment of principal or premium. The Depositary will notify the Paying Agent of
such election on or prior to the fifth Business Day after such Record Date, in
the case of a payment of interest, and on or prior to the tenth Business Day
prior to maturity (or the date of redemption or repayment if a Note is redeemed
or repaid prior to maturity) in the case of a payment of principal or premium.
If complete instructions are received by the participant and forwarded by the
participant to the Depositary, and by the Depositary to the Paying Agent, on or
prior to such dates, the beneficial owner will receive payments in the Specified
Currency by wire transfer of immediately available funds to an account
maintained by the payee with a bank located outside the United States; otherwise
the beneficial owner will receive payments in U.S. dollars.
Certain Notes, including Original Issue Discount Notes, may be considered to be
issued with original issue discount, which must be included in income for United
States federal income tax purposes at a constant yield. See "Certain United
States Federal Income Tax Considerations -- Original Issue Discount" below.
Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any Original Issue Discount Note is declared to be due and payable
immediately as described under "Description of the Debt Securities -- Events of
Default" in the Prospectus, the amount of principal due and payable with respect
to such Note shall be limited to the aggregate principal amount of such Note
multiplied by the sum of its Issue Price (expressed as a percentage of the
aggregate principal amount) plus the original issue discount amortized from the
date of issue to the date of declaration, which amortization shall be calculated
using the "interest method" (computed in accordance with generally accepted
accounting principles in effect on the date of declaration). Special
considerations applicable to any such Notes will be set forth in the applicable
Pricing Supplement.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from the date of issuance at the annual
rate stated on the face thereof, except as described below under "Extension of
Maturity," until the principal thereof is paid or made available for payment.
Unless otherwise specified in the applicable Pricing Supplement, such interest
will be computed on the basis of a 360-day year of twelve 30-day months. Unless
otherwise specified in the applicable Pricing Supplement, payments of interest
on Fixed Rate Notes other than Amortizing Notes will be made semiannually on
each May 15 and November 15 and at maturity or upon any earlier redemption or
repayment. Payments of principal and interest on Amortizing Notes, which are
securities on which payments of principal and interest are made in equal
installments over the life of the security, will be made either quarterly on
each February 15, May 15, August 15 and November 15 or semiannually on each May
15 and
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November 15, as set forth in the applicable Pricing Supplement, and at maturity
or upon any earlier redemption or repayment. Payments with respect to Amortizing
Notes will be applied first to interest due and payable thereon and then to the
reduction of the unpaid principal amount thereof. A table setting forth
repayment information in respect of each Amortizing Note will be provided to the
original purchaser and will be available, upon request made to the Company, to
subsequent holders.
If any Interest Payment Date for any Fixed Rate Note would fall on a day that is
not a Business Day, the interest payment shall be postponed to the next day that
is a Business Day, and no interest on such payment shall accrue for the period
from and after the Interest Payment Date. If the maturity date (or date of
redemption or repayment) of any Fixed Rate Note would fall on a day that is not
a Business Day, the payment of interest and principal (and premium, if any) may
be made on the next succeeding Business Day, and no interest on such payment
shall accrue for the period from and after the maturity date (or date of
redemption or repayment).
Interest payments for Fixed Rate Notes will include accrued interest from and
including the date of issue or from and including the last date in respect of
which interest has been paid, as the case may be, to, but excluding, the
Interest Payment Date or the date of maturity or earlier redemption or
repayment, as the case may be. The interest rates the Company will agree to pay
on newly issued Fixed Rate Notes are subject to change without notice by the
Company from time to time, but no such change will affect any Fixed Rate Notes
theretofore issued or that the Company has agreed to issue.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from the date of issuance until the
principal thereof is paid or made available for payment at a rate determined by
reference to an interest rate basis or formula (the "Base Rate"), which may be
adjusted by a Spread and/or Spread Multiplier (each as defined below). The
applicable Pricing Supplement will designate one or more of the following Base
Rates as applicable to each Floating Rate Note: (a) the CD Rate (a "CD Rate
Note"), (b) the Commercial Paper Rate (a "Commercial Paper Rate Note"), (c) the
Federal Funds Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR Note"),
(e) the Prime Rate (a "Prime Rate Note"), (f) the Treasury Rate (a "Treasury
Rate Note"), (g) the Constant-Maturity Treasury Rate (a "CMT Rate Note") or (h)
such other Base Rate or interest rate formula as is set forth in such Pricing
Supplement and in such Floating Rate Note. The "Index Maturity" for any Floating
Rate Note is the period of maturity of the instrument or obligation from which
the Base Rate is calculated and will be specified in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the interest
rate on each Floating Rate Note will be calculated by reference to the specified
Base Rate (i) plus or minus the Spread, if any, and/or (ii) multiplied by the
Spread Multiplier, if any. The "Spread" is the number of basis points (one
one-hundredth of a percentage point) specified in the applicable Pricing
Supplement to be added to or subtracted from the Base Rate for such Floating
Rate Note, and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement to be applied to the Base Rate for such Floating
Rate Note.
As specified in the applicable Pricing Supplement, a Floating Rate Note may also
have either or both of the following: (i) a maximum limitation, or ceiling, on
the rate of interest which may accrue during any interest period ("Maximum
Interest Rate"); and (ii) a minimum limitation, or floor, on the rate of
interest that may accrue during any interest
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period ("Minimum Interest Rate"). In addition to any Maximum Interest Rate that
may be applicable to any Floating Rate Note pursuant to the above provisions,
the interest rate on a Floating Rate Note will in no event be higher than the
maximum rate permitted by New York law, as the same may be modified by United
States law of general application. Under current New York law, the maximum rate
of interest, subject to certain exceptions, for any loan in an amount less than
$250,000 is 16% and for any loan in the amount of $250,000 or more but less than
$2,500,000 is 25% per annum on a simple interest basis. These limits do not
apply to loans of $2,500,000 or more.
Unless otherwise specified in the applicable Pricing Supplement, the rate of
interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually (such period being the "Interest Reset
Period" for such Note, and the first day of each Interest Reset Period being an
"Interest Reset Date"), as specified in the applicable Pricing Supplement. The
determination of the rate of interest at which a Floating Rate Note will be
reset on any Interest Reset Date will be made on the Interest Determination Date
(as defined below) pertaining to such Interest Reset Date. Unless otherwise
specified in the Pricing Supplement, the Interest Reset Date will be, in the
case of Floating Rate Notes which reset daily, each Business Day; in the case of
Floating Rate Notes (other than Treasury Rate Notes) which reset weekly, the
Wednesday of each week; in the case of Treasury Rate Notes which reset weekly,
the Tuesday of each week, except as provided below; in the case of Floating Rate
Notes which reset monthly, the third Wednesday of each month; in the case of
Floating Rate Notes which reset quarterly, the third Wednesday of March, June,
September and December; in the case of Floating Rate Notes which reset
semiannually, the third Wednesday of two months of each year, as specified in
the applicable Pricing Supplement; and in the case of Floating Rate Notes which
reset annually, the third Wednesday of one month of each year, as specified in
the applicable Pricing Supplement; provided, however, that (a) the interest rate
in effect from the date of issue to the first Interest Reset Date with respect
to a Floating Rate Note will be the initial interest rate set forth in the
applicable Pricing Supplement (the "Initial Interest Rate") and (b) unless
otherwise specified in the applicable Pricing Supplement, the interest rate in
effect for the ten calendar days immediately prior to maturity, redemption or
repayment will be that in effect on the tenth calendar day preceding such
maturity, redemption or repayment date. If any Interest Reset Date for any
Floating Rate Note would otherwise be a day that is not a Business Day, such
Interest Reset Date shall be postponed to the next succeeding Business Day,
except that in the case of a LIBOR Note, if such Business Day is in the next
succeeding calendar month, such Interest Reset Date shall be the immediately
preceding Business Day.
Except as provided below, unless otherwise specified in the applicable Pricing
Supplement, interest on Floating Rate Notes will be payable: (i) in the case of
Floating Rate Notes with a daily, weekly or monthly Interest Reset Date, on the
third Wednesday of each month or on the third Wednesday of March, June,
September and December, as specified in the applicable Pricing Supplement; (ii)
in the case of Floating Rate Notes with a quarterly Interest Reset Date, on the
third Wednesday of March, June, September and December; (iii) in the case of
Floating Rate Notes with a semiannual Interest Reset Date, on the third
Wednesday of the two months specified in the applicable Pricing Supplement; and
(iv) in the case of Floating Rate Notes with an annual Interest Reset Date, on
the third Wednesday of the month specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, if any Interest
Payment Date (other than the maturity date or any earlier redemption or
repayment date) for any Floating Rate Note would fall on a day that is not a
Business Day with respect to such Floating Rate Note, such Interest Payment Date
will be the following day that is a
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Business Day with respect to such Floating Rate Note, except that, in the case
of a LIBOR Note, if such Business Day is in the next succeeding calendar month,
such Interest Payment Date shall be the immediately preceding day that is a
Business Day with respect to such LIBOR Note. If the maturity date or any
earlier redemption or repayment date of a Floating Rate Note would fall on a day
that is not a Business Day, the payment of principal, premium, if any, and
interest will be made on the next succeeding Business Day, and no interest on
such payment shall accrue for the period from and after such maturity,
redemption or repayment date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes shall be the amount of interest accrued from
and including the date of issue or from and including the last date to which
interest has been paid to, but excluding, the Interest Payment Date or maturity
date or date of redemption or repayment.
With respect to a Floating Rate Note, accrued interest shall be calculated by
multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. Unless otherwise specified in the applicable Pricing Supplement, the
interest factor for each such day is computed by dividing the interest rate
applicable to such day by 360, in the case of CD Rate Notes, Commercial Paper
Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime Rate Notes or by the
actual number of days in the year, in the case of Treasury Rate Notes and CMT
Rate Notes. All percentages used in or resulting from any calculation of the
rate of interest on a Floating Rate Note will be rounded, if necessary, to the
nearest one hundred-thousandth of a percentage point (.0000001), with five
one-millionths of a percentage point rounded upward, and all dollar amounts used
in or resulting from such calculation on Floating Rate Notes will be rounded to
the nearest cent, with one-half cent rounded upward. The interest rate in effect
on any Interest Reset Date will be the applicable rate as reset on such date.
The interest rate applicable to any other day is the interest rate from the
immediately preceding Interest Reset Date (or, if none, the Initial Interest
Rate).
The applicable Pricing Supplement shall specify a calculation agent (the
"Calculation Agent") with respect to any issue of Floating Rate Notes. Upon the
request of the holder of any Floating Rate Note, the Calculation Agent will
provide the interest rate then in effect and, if determined, the interest rate
that will become effective on the next Interest Reset Date with respect to such
Floating Rate Note.
The "Interest Determination Date" pertaining to an Interest Reset Date for CD
Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, Prime Rate
Notes and CMT Rate Notes will be the second Business Day next preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a LIBOR Note will be the second London Banking Day preceding such
Interest Reset Date, except that the Interest Determination Date pertaining to
an Interest Reset Date for a LIBOR Note for which the Index Currency is pounds
sterling will be such Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date for a Treasury Rate Note will be the day of
the week in which such Interest Reset Date falls on which Treasury bills would
normally be auctioned. Treasury bills are normally sold at auction on Monday of
each week, unless that day is a legal holiday, in which case the auction is
normally held on the following Tuesday, but such auction may be held on the
preceding Friday. If, as the result of a legal holiday, an auction is so held on
the preceding Friday, such Friday will be the Interest Determination Date
pertaining to the Interest Reset Date occurring in the next succeeding week. If
an auction falls on a day that is an Interest Reset Date, such Interest Reset
Date will be the next following Business Day.
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Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," where applicable, pertaining to an Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date, or, if such day is not a Business Day, the next succeeding
Business Day, or (ii) the Business Day preceding the applicable Interest Payment
Date or Maturity Date, as the case may be.
Interest rates will be determined by the Calculation Agent as follows:
CD RATE NOTES
CD Rate Notes will bear interest at the interest rate (calculated with reference
to the CD Rate and the Spread and/or Spread Multiplier, if any, and subject to
the Minimum Interest Rate and the Maximum Interest Rate, if any) specified in
the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates," or any successor publication of the Board of Governors of the Federal
Reserve System ("H.15(519)") under the heading "CDs (Secondary Market)," or, if
not so published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate will be the rate on
such Interest Determination Date set forth in the daily update of H15(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 ("H.15 Daily Update"), for that day in respect of
certificates of deposit having the Index Maturity specified in the applicable
Pricing Supplement under the caption "CDs (secondary market)". If such rate is
not yet published in either H.15(519) or the H.15 Daily Update by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the CD Rate on such Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City time, on such
Interest Determination Date for certificates of deposit in an amount that is
representative for a single transaction at that time with a remaining maturity
closest to the Index Maturity designated in the Pricing Supplement of three
leading nonbank dealers in negotiable U.S. dollar certificates of deposit in The
City of New York selected by the Calculation Agent for negotiable certificates
of deposit of major United States money center banks; provided, however, that if
the dealers selected as aforesaid by the Calculation Agent are not quoting as
set forth above, the "CD Rate" in effect for the applicable period will be the
same as the CD Rate for the immediately preceding Interest Reset Period (or, if
there was no such Interest Reset Period, the rate of interest payable on the CD
Rate Notes for which such CD Rate is being determined shall be the Initial
Interest Rate).
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rate (calculated
with reference to the Commercial Paper Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Commercial Paper Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Interest Determination Date, the Money
Market Yield (as defined below) of the rate on such date for commercial paper
having the Index
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Maturity specified in the applicable Pricing Supplement, as such rate shall be
published in H.15(519), under the heading "Commercial Paper -- Nonfinancial." In
the event that such rate is not published by 9:00 A.M., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, then the
Commercial Paper Rate shall be the Money Market Yield of the rate on such
Interest Determination Date for commercial paper of the specified Index Maturity
as published in H.15 Daily Update under the heading "Commercial
Paper -- Nonfinancial." If by 3:00 P.M., New York City time, on such Calculation
Date such rate is not yet available in either H.15(519) or H.15 Daily Update,
then the Commercial Paper Rate shall be the Money Market Yield of the arithmetic
mean of the offered rates as of 11:00 A.M., New York City time, on such Interest
Determination Date of three leading dealers of commercial paper in The City of
New York selected by the Calculation Agent for commercial paper of the specified
Index Maturity, placed for an industrial issuer whose bond rating is "AA," or
the equivalent, from a nationally recognized rating agency; provided, however,
that if the dealers selected as aforesaid by the Calculation Agent are not
quoting offered rates as mentioned in this sentence, the Commercial Paper Rate
in effect for the applicable period will be the same as the Commercial Paper
Rate for the immediately preceding Interest Reset Period (or, if there was no
such Interest Reset Period, the rate of interest payable on the Commercial Paper
Rate Notes for which such Commercial Paper Rate is being determined shall be the
Initial Interest Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
<TABLE>
<S> <C> <C>
Money Market Yield = D X 360 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 Index Maturity.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the interest rate (calculated
with reference to the Federal Funds Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "Federal
Funds Rate" means, with respect to any Interest Determination Date, the rate on
such date for Federal funds as published in H.15(519) under the heading "Federal
Funds (Effective)," or, if not so published by 9:00 A.M., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, the Federal
Funds Rate will be the rate on such Interest Determination Date as published in
the H.15 Daily Update under the heading "Federal Funds/(Effective)." If such
rate is not yet published in either H.15(519) or H.15 Daily Update by 3:00 P.M.,
New York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Federal Funds Rate for such Interest Determination Date
will be calculated by the Calculation Agent and will be the arithmetic mean of
the rates for the last transaction in overnight Federal funds, as of 11:00 A.M.,
New York City time, on such Interest Determination Date, arranged by three
leading brokers of Federal funds transactions in The City of New York selected
by the Calculation Agent; provided, however, that if the brokers selected as
aforesaid by the Calculation Agent are not quoting as set forth above, the
"Federal Funds Rate" in effect for the applicable period will be the same as the
Federal Funds Rate for the immediately preceding Interest Reset Period (or,
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if there was no such Interest Reset Period, the rate of interest payable on the
Federal Funds Rate Notes for which such Federal Funds Rate is being determined
shall be the Initial Interest Rate).
LIBOR NOTES
LIBOR Notes will bear interest at the interest rate (calculated with reference
to LIBOR and the Spread and/or Spread Multiplier, if any, and subject to the
Minimum Interest Rate and the Maximum Interest Rate, if any) specified in the
LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR" for
each Interest Determination Date will be determined by the Calculation Agent as
follows:
(i) As of the Interest Determination Date, the Calculation Agent will
determine (a) if "LIBOR Reuters" is specified in the applicable
Pricing Supplement, the arithmetic mean of the offered rates (unless
the specified Designated LIBOR Page (as defined below) by its terms
provides only for a single rate, in which case such single rate shall
be used) for deposits in the Index Currency for the period of the
Index Maturity, each as designated in the applicable Pricing
Supplement, commencing on the second London Banking Day immediately
following such Interest Determination Date, which appear on the
Designated LIBOR Page at approximately 11:00 A.M., London time, on
such Interest Determination Date, if at least two such offered rates
appear (unless, as aforesaid, only a single rate is required) on such
Designated LIBOR Page, or (b) if "LIBOR Telerate" is specified in the
applicable Pricing Supplement, the rate for deposits in the Index
Currency for the period of the Index Maturity, each as designated in
the applicable Pricing Supplement, commencing on the second London
Banking Day following such Interest Determination Date (or, if pounds
sterling is the Index Currency, commencing on such Interest
Determination Date), that appears on the Designated LIBOR Page at
approximately 11:00 A.M., London time, on such Interest Determination
Date. If fewer than two offered rates appear (if "LIBOR Reuters" is
specified in the applicable Pricing Supplement and calculation of
LIBOR is based on the arithmetic mean of the offered rates), or if no
rate appears (if the applicable Pricing Supplement specifies either
(x) "LIBOR Reuters" and the Designated LIBOR Page by its terms
provides only for a single rate or (y) "LIBOR Telerate"), LIBOR in
respect of that Interest Determination Date will be determined as if
the parties had specified the rate described in (ii) below.
(ii) With respect to an Interest Determination Date on which fewer than two
offered rates appear (if "LIBOR Reuters" is specified in the
applicable Pricing Supplement and calculation of LIBOR is based on the
arithmetic mean of the offered rates) or no rate appears (if the
applicable Pricing Supplement specifies either (x) "LIBOR Reuters" and
the Designated LIBOR Page by its terms provides only for a single rate
or (y) "LIBOR Telerate"), the Calculation Agent will request the
principal London offices of each of four major reference banks in the
London interbank market, as selected by the Calculation Agent (after
consultation with the Company), to provide the Calculation Agent with
its offered quotations for deposits in the Index Currency for the
period of the specified Index Maturity, commencing on the second
London Banking Day immediately following such Interest Determination
Date (or, if pounds sterling is the Index Currency, commencing on such
Interest Determination Date), to
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prime banks in the London interbank market at approximately 11:00
A.M., London time, on such Interest Determination Date and in a
principal amount equal to an amount of not less than $1 million (or
the equivalent in the Index Currency, if the Index Currency is not the
U.S. dollar) that is representative of a single transaction in such
Index Currency in such market at such time. If at least two such
quotations are provided, LIBOR determined on such Interest
Determination Date will be the arithmetic mean of such quotations. If
fewer than two quotations are provided, LIBOR determined on such
Interest Determination Date will be the arithmetic mean of rates
quoted at approximately 11:00 A.M. (or such other time specified in
the applicable Pricing Supplement), in the applicable principal
financial center for the country of the Index Currency on such
Interest Determination Date, by three major banks in such principal
financial center selected by the Calculation Agent (after consultation
with the Company) on such Interest Determination Date for loans in the
Index Currency to leading European banks, for the period of the
specified Index Maturity commencing on the second London Banking Day
immediately following such Interest Determination Date (or, if pounds
sterling is the Index Currency, commencing on such Interest
Determination Date) and in a principal amount of not less than $1
million (or the equivalent in the Index Currency, if the Index
Currency is not the U.S. dollar) that is representative of a single
transaction in such Index Currency in such market at such time;
provided, however, that if the banks selected as aforesaid by the
Calculation Agent are not quoting rates as mentioned in this sentence,
"LIBOR" for such Interest Reset Period will be the same as LIBOR for
the immediately preceding Interest Reset Period (or, if there was no
such Interest Reset Period, the rate of interest payable on the LIBOR
Notes for which LIBOR is being determined shall be the Initial
Interest Rate).
"Index Currency" means the currency (including composite currencies) specified
in the applicable Pricing Supplement as the currency for which LIBOR shall be
calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated in the
applicable Pricing Supplement, the display on the Reuters Monitor Money Rates
Service for the purpose of displaying the London interbank rates of major banks
for the applicable Index Currency, or (b) if "LIBOR Telerate" is designated in
the applicable Pricing Supplement, the display on the Dow Jones Telerate Service
for the purpose of displaying the London interbank rates of major banks for the
applicable Index Currency. If neither LIBOR Reuters nor LIBOR Telerate is
specified in the applicable Pricing Supplement, LIBOR for the applicable Index
Currency will be determined as if LIBOR Telerate (and, if the U.S. dollar is the
Index Currency, Page 3750) had been specified.
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PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime Rate"
means, with respect to any Interest Determination Date, the rate set forth in
H.15(519) for such date opposite the caption "Bank Prime Loan." If the rate is
not published prior to 9:00 a.m., New York City time, on the Calculation Date,
then the Prime Rate will be the rate on such Prime Interest Determination Date
as published in H.15 Daily Update opposite the caption "Bank Prime Loan". If
such rate is not yet published in either H.15(519) or H.15 Daily Update by 3:00
P.M., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Prime Rate for such Interest Determination Date will be
the arithmetic mean of the rates of interest publicly announced by each bank
named on the Reuters Screen USPRIME1 Page (as defined below) as such bank's
prime rate or base lending rate as in effect for such Interest Determination
Date as quoted on the Reuters Screen USPRIME1 Page on such Interest
Determination Date, or, if fewer than four such rates appear on the Reuters
Screen USPRIME1 Page for such Interest Determination Date, the rate shall be the
arithmetic mean of the prime rates quoted on the basis of the actual number of
days in the year divided by 360 as of the close of business on such Interest
Determination Date by at least two of the three major money center banks in The
City of New York selected by the Calculation Agent from which quotations are
requested. If fewer than two quotations are provided, the Prime Rate shall be
calculated by the Calculation Agent and shall be determined as the arithmetic
mean on the basis of the prime rates in The City of New York by the appropriate
number of substitute banks or trust companies organized and doing business under
the laws of the United States, or any State thereof, in each case having total
equity capital of at least $500 million and being subject to supervision or
examination by federal or state authority, selected by the Calculation Agent to
quote such rate or rates; provided, however, that if the banks or trust
companies selected as aforesaid by the Calculation Agent are not quoting rates
as set forth above, the "Prime Rate" in effect for such Interest Reset Period
will be the same as the Prime Rate for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the rate of interest
payable on the Prime Rate Notes for which such Prime Rate is being determined
shall be the Initial Interest Rate). "Reuters Screen USPRIME1 Page" means the
display designated as Page "USPRIME1" on the Reuters Monitor Money Rates Service
(or such other page as may replace the USPRIME1 Page on that service for the
purpose of displaying prime rates or base lending rates of major United States
banks).
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rate (calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Treasury Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "Treasury
Rate" means, with respect to any Interest Determination Date, the rate for the
auction held on such date of direct obligations of the United States ("Treasury
Bills") having the Index Maturity designated in the applicable Pricing
Supplement, as such rate appears on either
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<PAGE> 15
the display designated as Page 56 or the display designated as Page 57 on the
Dow Jones Telerate Service (or any successor service) under the heading "AVGE
INVEST YIELD" or, if not so published by 9:00 A.M., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the auction
average rate on such Interest Determination Date (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) as otherwise announced by the United States Department
of the Treasury. In the event that the results of the auction of Treasury Bills
having the Index Maturity designated in the applicable Pricing Supplement are
not published or reported as provided above by 3:00 P.M., New York City time, on
such Calculation Date or if no such auction is held on such Interest
Determination Date, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) calculated using the arithmetic mean of the secondary
market bid rates, as of approximately 3:30 P.M., New York City time, on such
Interest Determination Date, of three leading primary United States government
securities dealers selected by the Calculation Agent for the issue of Treasury
Bills with a remaining maturity closest to the Index Maturity designated in the
applicable Pricing Supplement; provided, however, that if the dealers selected
as aforesaid by the Calculation Agent are not quoting bid rates as mentioned in
this sentence, the "Treasury Rate" for such Interest Reset Date will be the same
as the Treasury Rate for the immediately preceding Interest Reset Period (or, if
there was no such Interest Reset Period, the rate of interest payable on the
Treasury Rate Notes for which the Treasury Rate is being determined shall be the
Initial Interest Rate).
CMT RATE NOTES
CMT Rate Notes will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
Unless otherwise indicated in an applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date, the rate displayed for
the Index Maturity designated in such CMT Rate Note on the Designated CMT
Telerate Page (as defined below) under the caption ". . . Treasury Constant
Maturities . . . Federal Reserve Board Release H.15" under the column for the
Designated CMT Maturity Index (as defined below) for (i) if the Designated CMT
Telerate Page is 7051, the rate on such Interest Determination Date and (ii) if
the Designated CMT Telerate Page is 7052, the week or the month, as applicable,
ended immediately preceding the week in which the related Interest Determination
Date occurs. If such rate is no longer displayed on the relevant page, or if not
displayed by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate for such Interest Determination Date will be such Treasury
Constant Maturity rate for the Designated CMT Maturity Index as published in the
relevant H.15(519). If such rate is no longer published, or if not published by
3:00 P.M., New York City time, on the related Calculation Date, then the CMT
Rate for such Interest Determination Date will be such Treasury Constant
Maturity rate for the Designated CMT Maturity Index (or other United States
Treasury rate for the Designated CMT Maturity Index) for the Interest
Determination Date with respect to the related Interest Reset Date as may then
be published by either the Board of Governors of the Federal Reserve System or
the United States Department of the Treasury that the Calculation Agent
determines to be comparable to the rate formerly displayed on the
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<PAGE> 16
Designated CMT Telerate Page and published in the relevant H.15(519). If such
information is not provided by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for the Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity, based on
the arithmetic mean of the secondary market closing offer side prices as of
approximately 3:30 P.M., New York City time, on the Interest Determination Date
reported, according to their written records, by three leading primary United
States government securities dealers (each, a "Reference Dealer") in The City of
New York (which may include the Agent or its affiliates) selected by the
Calculation Agent (from five such Reference Dealers selected by the Calculation
Agent, after consultation with the Company, and eliminating the highest
quotation (or, in the event of equality, one of the highest) and the lowest
quotation (or, in the event of equality, one of the lowest)), for the most
recently issued direct noncallable fixed rate obligations of the United States
("Treasury notes") with an original maturity of approximately the Designated CMT
Maturity Index and remaining term to maturity of not less than such Designated
CMT Maturity Index minus one year. If the Calculation Agent cannot obtain three
such Treasury notes quotations, the CMT Rate for such Interest Determination
Date will be calculated by the Calculation Agent and will be a yield to maturity
based on the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 P.M., New York City time, on the Interest Determination Date
of three Reference Dealers in The City of New York (from five such Reference
Dealers selected by the Calculation Agent, after consultation with the Company,
and eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for Treasury notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an amount
of at least $100,000,000. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided, however, that if fewer than
three Reference Dealers selected by the Calculation Agent are quoting as
described herein, the CMT Rate for such Interest Reset Date will be the same as
the CMT Rate for the immediately preceding Interest Reset Period (or, if there
was no such Interest Reset Period, the rate of interest payable on the CMT Rate
Notes for which the CMT Rate is being determined shall be the Initial Interest
Rate). If two Treasury notes with an original maturity as described in the
second preceding sentence have remaining terms to maturity equally close to the
Designated CMT Maturity Index, the quotes for the Treasury note with the shorter
remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in an applicable Pricing Supplement (or any other
page as may replace such page on that service for the purpose of displaying
Treasury Constant Maturities as reported in H.15(519)), for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519). If no such
page is specified in the applicable Pricing Supplement, the Designated CMT
Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" shall be the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified in
an applicable Pricing Supplement with respect to which the CMT Rate will be
calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be two years.
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RENEWABLE NOTES
The Company may also issue from time to time variable rate renewable notes (the
"Renewable Notes") that will bear interest at the interest rate (calculated with
reference to a Base Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Renewable Notes and in the applicable Pricing Supplement.
Renewable Notes are Book-Entry Floating Rate Notes.
The Renewable Notes will mature on an Interest Payment Date as specified in the
applicable Pricing Supplement (the "Initial Maturity Date"), unless the maturity
of all or any portion of the principal amount thereof is extended in accordance
with the procedures described below. On the Interest Payment Dates in March and
September in each year (unless different Interest Payment Dates are specified in
the applicable Pricing Supplement) (each such Interest Payment Date, an
"Election Date"), the maturity of the Renewable Notes will be extended to the
Interest Payment Date occurring twelve months after such Election Date (unless a
different extension period is specified in the applicable Pricing Supplement),
unless the holder thereof elects to terminate the automatic extension of the
maturity of the Renewable Notes or of any portion thereof having a principal
amount of $1,000 or any multiple of $1,000 in excess thereof by delivering a
notice to such effect to the Paying Agent not less than nor more than a number
of days to be specified in the applicable Pricing Supplement prior to such
Election Date. Such option may be exercised with respect to less than the entire
principal amount of the Renewable Notes; provided that the principal amount for
which such option is not exercised is at least $1,000 or any larger amount that
is an integral multiple of $1,000. Notwithstanding the foregoing, the maturity
of the Renewable Notes may not be extended beyond the Final Maturity Date, as
specified in the applicable Pricing Supplement (the "Final Maturity Date"). If
the holder elects to terminate the automatic extension of the maturity of any
portion of the principal amount of the Renewable Notes and such election is not
revoked as described below, such portion will become due and payable on the
Interest Payment Date falling six months (unless another period is specified in
the applicable Pricing Supplement) after the Election Date prior to which the
holder made such election.
Unless otherwise specified in the applicable Pricing Supplement, an election to
terminate the automatic extension of maturity may be revoked as to any portion
of the Renewable Notes having a principal amount of $1,000 or any multiple of
$1,000 in excess thereof by delivering a notice to such effect to the Paying
Agent on any day following the effective date of the election to terminate the
automatic extension of maturity and prior to the date 15 days before the date on
which such portion would otherwise mature. Such a revocation may be made for
less than the entire principal amount of the Renewable Notes for which the
automatic extension of maturity has been terminated; provided that the principal
amount of the Renewable Notes for which the automatic extension of maturity has
been terminated and for which such a revocation has not been made is at least
$1,000 or any larger amount that is an integral multiple of $1,000.
Notwithstanding the foregoing, a revocation may not be made during the period
from and including a Record Date to but excluding the immediately succeeding
Interest Payment Date.
An election to terminate the automatic extension of the maturity of the
Renewable Notes, if not revoked as described above by the holder making the
election or any subsequent holder, will be binding upon such subsequent holder.
The Renewable Notes may be redeemed in whole or in part at the option of the
Company on the Interest Payment Dates in each year specified in the applicable
Pricing Supplement,
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commencing with the Interest Payment Date specified in the applicable Pricing
Supplement, at a redemption price of 100% of the principal amount of the
Renewable Notes to be redeemed, together with accrued and unpaid interest to the
date of redemption. Notwithstanding anything to the contrary in this Prospectus
Supplement, notice of redemption will be provided by mailing a notice of such
redemption to each holder by first-class mail, postage prepaid, at least 180
days and not more than 210 days prior to the date fixed for redemption.
Renewable Notes may also be issued, from time to time, with the Spread or Spread
Multiplier to be reset by a remarketing agent in remarketing procedures (the
"Remarketing Procedures") to be specified in such Renewable Notes and in the
applicable Pricing Supplement. A description of the Remarketing Procedures, the
terms of the remarketing agreement between the Company and the remarketing agent
and the terms of any additional agreements with other parties that may be
involved in the Remarketing Procedures will be set forth in the applicable
Pricing Supplement.
INDEXED NOTES
The Notes may be issued, from time to time, as Notes of which the principal
amount payable on a date more than nine months from the date of original issue
(the "Stated Maturity") and/or on which the amount of interest payable on an
Interest Payment Date will be determined by reference to currencies, currency
units, commodity prices, financial or non-financial indices or other factors
(the "Indexed Notes"), as indicated in the applicable Pricing Supplement.
Holders of Indexed Notes may receive a principal amount at maturity that is
greater than or less than the face amount of such Notes depending upon the
fluctuation of the relative value, rate or price of the specified index.
Specific information pertaining to the method for determining the principal
amount payable at maturity, a historical comparison of the relative value, rate
or price of the specified index and the face amount of the Indexed Note and
certain additional United States federal tax considerations will be described in
the applicable Pricing Supplement.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Fixed Rate Note (other than an
Amortizing Note or a Currency Linked Note) will indicate whether the Company has
the option to extend the maturity of such Fixed Rate Note for one or more
periods of one or more whole years (each, an "Extension Period") up to but not
beyond the date (the "Final Maturity Date") set forth in such Pricing
Supplement. If the Company has such option with respect to any such Fixed Rate
Note (an "Extendible Note"), the following procedures will apply, unless
modified as set forth in the applicable Pricing Supplement.
The Company may exercise such option with respect to an Extendible Note by
notifying the Paying Agent of such exercise at least 45 but not more than 60
days prior to the maturity date originally in effect with respect to such Note
(the "Original Maturity Date") or, if the maturity date of such Note has already
been extended, prior to the maturity date then in effect (an "Extended Maturity
Date"). No later than 38 days prior to the Original Maturity Date or an Extended
Maturity Date, as the case may be (each, a "Maturity Date"), the Paying Agent
will mail to the holder of such Note a notice (the "Extension Notice") relating
to such Extension Period, first-class mail, postage prepaid, setting forth (a)
the election of the Company to extend the maturity of such Note; (b) the new
Extended Maturity Date; (c) the interest rate applicable to the Extension
Period; and (d) the provisions, if any, for redemption during the Extension
Period, including the date
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or dates on which, the period or periods during which and the price or prices at
which such redemption may occur during the Extension Period. Upon the mailing by
the Paying Agent of an Extension Notice to the holder of an Extendible Note, the
maturity of such Note shall be extended automatically, and, except as modified
by the Extension Notice and as described in the next paragraph, such Note will
have the same terms it had prior to the mailing of such Extension Notice.
Notwithstanding the foregoing, not later than 10:00 A.M., New York City time, on
the twentieth calendar day prior to the Maturity Date then in effect for an
Extendible Note (or, if such day is not a Business Day, not later than 10:00
A.M., New York City time, on the immediately succeeding Business Day), the
Company may, at its option, revoke the interest rate provided for in the
Extension Notice and establish a higher interest rate for the Extension Period
by causing the Paying Agent to send notice of such higher interest rate to the
holder of such Note by first-class mail, postage prepaid, or by such other means
as shall be agreed between the Company and the Paying Agent. Such notice shall
be irrevocable. All Extendible Notes with respect to which the Maturity Date is
extended in accordance with an Extension Notice will bear such higher interest
rate for the Extension Period, whether or not tendered for repayment.
If the Company elects to extend the maturity of an Extendible Note, the holder
of such Note will have the option to require the Company to repay such Note on
the Maturity Date then in effect at a price equal to the principal amount
thereof plus any accrued and unpaid interest to such date. In order for an
Extendible Note to be so repaid on such Maturity Date, the holder thereof must
follow the procedures set forth below under "Repayment at the Noteholders'
Option; Repurchase" for optional repayment, except that the period for delivery
of such Note or notification to the Paying Agent shall be at least 25 but not
more than 35 days prior to the Maturity Date then in effect and except that a
holder who has tendered an Extendible Note for repayment pursuant to an
Extension Notice may, by written notice to the Paying Agent, revoke any such
tender for repayment until 3:00 P.M., New York City time, on the twentieth
calendar day prior to the Maturity Date then in effect (or, if such day is not a
Business Day, until 3:00 P.M., New York City time, on the immediately succeeding
Business Day).
BOOK-ENTRY SYSTEM
Upon issuance, all Fixed Rate Book-Entry Notes having the same Issue Date,
interest rate, if any, amortization schedule, if any, ranking, maturity date and
other terms, if any, will be represented by a single Global Security, and all
Floating Rate Book-Entry Notes having the same Issue Date, Initial Interest
Rate, Base Rate, Interest Reset Period, Interest Payment Dates, Index Maturity,
Spread and/or Spread Multiplier, if any, Minimum Interest Rate, if any, Maximum
Interest Rate, if any, ranking, maturity date and other terms, if any, will be
represented by a single Global Security. Each Global Security representing
Book-Entry Notes will be deposited with, or on behalf of, The Depository Trust
Company, New York, New York (the "Depositary"), and registered in the name of a
nominee of the Depositary. Certificated Notes will not be exchangeable for
Book-Entry Notes (or interests therein) and, except under the circumstances
described in the Prospectus under "Description of the Debt Securities -- Global
Securities," Book-Entry Notes (or interests therein) will not be exchangeable
for Certificated Notes and will not otherwise be issuable as Certificated Notes.
Upon the issuance of a Global Security, the Depositary for such Global Security
or its nominee will credit the accounts of its participants held with it with
the respective
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principal or face amounts of the Book-Entry Notes represented by such Global
Security. Such accounts shall be designated by the Agents (as defined herein)
with respect to Book-Entry Notes or by the Company if such Notes are offered and
sold directly by the Company. Ownership of beneficial interests in a Global
Security will be limited to participants and to persons that have accounts with
the Depositary ("Participants") or persons that may hold interests through
Participants. Ownership interests in a Global Security will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by the Depositary or its nominee (with respect to a Participant's
interest) for such Global Security and records maintained by Participants (with
respect to interests of persons other than Participants).
Payment of principal of and any premium and interest on Book-Entry Notes
represented by any such Global Security will be made to the Depositary or its
nominee, as the case may be, as the sole registered owner and the sole Holder of
the Book-Entry Notes represented thereby for all purposes under the Indenture.
Neither the Company nor the Trustee, nor any agent of the Company or the
Trustee, will have any responsibility or liability for any aspect of the
Depositary's records relating to or payments made on account of beneficial
ownership interests in a Global Security representing any Book-Entry Notes or
for maintaining, supervising or reviewing any of the Depositary's records
relating to such beneficial ownership interests.
The Company has been advised by the Depositary that upon receipt of any payment
of principal of or any premium or interest on any Global Security, the
Depositary or its nominee will immediately credit, on its book-entry
registration and transfer system, the accounts of Participants with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of the Depositary or its
nominee. Payments by Participants to owners of beneficial interests in a Global
Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for customer accounts registered in "street name," and will be the sole
responsibility of such Participants.
A Global Security may not be transferred except as a whole by the Depositary to
a nominee of the Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or by the Depositary or any
nominee to a successor Depositary or any nominee of such successor. A Global
Security representing Book-Entry Notes is exchangeable only if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for such Global Security or if at any time the Depositary ceases to
be a clearing agency under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Company does not appoint a successor Depositary (in any
case in which the Company may appoint a successor Depositary), within 90 days
after the Company receives notice or becomes aware of such unwillingness,
inability or ineligibility, (ii) the Company executes and delivers to the
Trustee a Company Order that all such Global Securities shall be exchangeable
for definitive Notes in registered form, or (iii) there shall have occurred and
be continuing an Event of Default with respect to the Notes represented by such
Global Security. Unless otherwise specified in the applicable Pricing
Supplement, any Global Security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for Certificated Notes issuable in denominations
of $1,000 and integral multiples of $1,000 in excess thereof and registered in
such names as the Depositary holding such Global Security shall direct. Subject
to the foregoing, the Global Security is not exchangeable, except for a Global
Security of like denomination to be registered in the name of the Depositary or
its nominee.
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So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole Holder of Book-Entry Notes
represented by such Global Security for the purposes of receiving payment on the
Notes, receiving notices and for all other purposes under the Indenture and the
Notes. Except as provided above, owners of beneficial interests in a Global
Security will not be entitled to receive physical delivery of Notes in
definitive form and will not be considered the Holders thereof for any purpose
under the Indenture. Accordingly, each person owning a beneficial interest in
such a Global Security must rely on the procedures of the Depositary and, if
such person is not a Participant, on the procedures of the Participant through
which such person owns its interest, to exercise any rights of a Holder under
the Indenture. The Company understands that under existing industry practices,
in the event that the Company requests any action of Holders or that an owner of
a beneficial interest in such a Global Security desires to give or take any
action which a Holder is entitled to give or take under the Indenture, the
Depositary would authorize the Participants holding the relevant beneficial
interests to give or take such action, and such Participants would authorize
beneficial owners through such Participants to give or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
The Depositary has advised the Company that the Depositary is a limited-purpose
trust company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered under the
Exchange Act. The Depositary was created to hold the securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers (including the Agents), banks, trust
companies, clearing corporations, and certain other organizations some of whom
(and/or their representatives) own the Depositary. Access to the Depositary's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
A further description of the Depositary's procedures with respect to Global
Securities representing Book-Entry Notes is set forth in the Prospectus under
"Description of the Debt Securities -- Global Securities." The Depositary has
confirmed to the Company, the Agent and each Trustee that it intends to follow
such procedures.
OPTIONAL REDEMPTION
If applicable, the Pricing Supplement will indicate the terms on which the Notes
will be redeemable at the option of the Company. Notice of redemption will be
provided by mailing a notice of such redemption to each holder by first-class
mail, postage prepaid, at least 30 days and not more than 60 days prior to the
date fixed for redemption to the respective address of each holder as that
address appears upon the books maintained by the Paying Agent. The Notes, except
for Amortizing Notes, will not be subject to any sinking fund.
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
If applicable, the Pricing Supplement relating to each Note will indicate that
the Note will be repayable at the option of the holder on a date or dates
specified prior to its maturity
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date and, unless otherwise specified in such Pricing Supplement, at a price
equal to 100% of the principal amount thereof, together with accrued interest to
the date of repayment, unless such Note was issued with original issue discount,
in which case the Pricing Supplement will specify the amount payable upon such
repayment.
In order for such a Note to be repaid, the Paying Agent must receive at least 15
days but not more than 30 days prior to the repayment date (i) the Note with the
form entitled "Option to Elect Repayment" on the reverse of the Note duly
completed or (ii) a telegram, telex, facsimile transmission or a letter from a
member of a national securities exchange, or the National Association of
Securities Dealers, Inc. (the "NASD") or a commercial bank or trust company in
the United States setting forth the name of the holder of the Note, the
principal amount of the Note, the principal amount of the Note to be repaid, the
certificate number or a description of the tenor and terms of the Note, a
statement that the option to elect repayment is being exercised thereby and a
guarantee that the Note to be repaid, together with the duly completed form
entitled "Option to Elect Repayment" on the reverse of the Note, will be
received by the Paying Agent not later than the fifth Business Day after the
date of such telegram, telex, facsimile transmission or letter; provided,
however, that such telegram, telex, facsimile transmission or letter shall only
be effective if such Note and form duly completed are received by the Paying
Agent by such fifth Business Day. Except in the case of Renewable Notes or
Extendible Notes, and unless otherwise specified in the applicable Pricing
Supplement, exercise of the repayment option by the holder of a Note will be
irrevocable. The repayment option may be exercised by the holder of a Note for
less than the entire principal amount of the Note but, in that event, the
principal amount of the Note remaining outstanding after repayment must be an
authorized denomination.
If a Note is represented by a Registered Global Security, the Depositary's
nominee will be the holder of such Note and therefore will be the only entity
that can exercise a right to repayment. In order to ensure that the Depositary's
nominee will timely exercise a right to repayment with respect to a particular
Note, the beneficial owner of such Note must instruct the broker or other direct
or indirect participant through which it holds an interest in such Note to
notify the Depositary of its desire to exercise a right to repayment. Different
firms have different cut-off times for accepting instructions from their
customers and, accordingly, each beneficial owner should consult the broker or
other direct or indirect participant through which it holds an interest in a
Note in order to ascertain the cut-off time by which such an instruction must be
given in order for timely notice to be delivered to the Depositary.
The Company may purchase Notes at any price in the open market or otherwise.
Notes so purchased by the Company may, at the discretion of the Company, be held
or resold or surrendered to the relevant Trustee for cancelation.
GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of the
State of New York. If a court in the United States were to grant a judgment in
an action based on Notes denominated in a Specified Currency other than U.S.
dollars, it is likely that such court would grant judgment only in U.S. dollars.
If the court were a New York court, however, such court would grant a judgment
in the Specified Currency or currency in respect of which any payment on a Note
was due. Such judgment would then be converted into U.S. dollars at the rate of
exchange prevailing on the date of entry of the judgment.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the principal U.S. Federal income tax consequences
resulting from the beneficial ownership of Notes by certain persons. This
summary does not purport to consider all the possible U.S. Federal tax
consequences of the purchase, ownership or disposition of the Notes and is not
intended to address the individual tax position of any beneficial owner. It
deals only with Notes and currencies or composite currencies other than U.S.
dollars ("Foreign Currency") held as capital assets. Moreover, except as
expressly indicated, it addresses only initial purchasers who purchase Notes at
their initial offering price and does not address beneficial owners that may be
subject to special tax rules, such as banks, insurance companies, dealers in
securities or currencies, Notes (or Foreign Currency) held as a hedge against
currency risks or as part of a straddle with other investments or as part of a
"synthetic security" or other integrated investment (including a "conversion
transaction") comprised of a Note and one or more other investments, or
situations in which the "functional currency" of the beneficial owner is not the
U.S. dollar. Except to the extent discussed below under "Non-U.S. Holders," this
summary applies only to U.S. Holders (as defined below). This summary is based
upon the U.S. Federal income tax laws and regulations as now in effect and as
currently interpreted and does not take into account possible changes in such
tax laws or such interpretations, any of which may be applied retroactively. It
does not include any description of the tax laws of any state, local or foreign
governments that may be applicable to the Notes or holders thereof. Persons
considering the purchase of Notes should consult their own tax advisors
concerning the application of the U.S. Federal tax laws to their particular
situations as well as any consequences to them under the laws of any other
taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note that
is for United States Federal income tax purposes (i) a citizen or resident of
the United States, (ii) a corporation created or organized under the laws of the
United States or of any state thereof or the District of Columbia, (iii) an
estate or trust described in Section 7701(a)(30) of the Internal Revenue Code of
1986, as amended (the "Code") or (iv) a person otherwise subject to United
States Federal income taxation on its worldwide income regardless of its source.
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
In general, interest on a Note, whether payable in U.S. dollars or a Foreign
Currency (other than certain payments on a Discount Note, as defined and
described below under "Original Issue Discount"), will be taxable to a U.S.
Holder as ordinary income at the time it is received or accrued, depending on
the U.S. Holder's method of accounting for tax purposes. If an interest payment
is denominated on or determined by reference to a Foreign Currency, then special
rules, described below under "Foreign Currency Notes," apply.
ORIGINAL ISSUE DISCOUNT
The following discussion summarizes the U.S. Federal income tax consequences to
U.S. Holders of Notes issued with original issue discount ("OID") for Federal
income tax purposes. The basic rules for reporting OID are contained in the
applicable Code provisions and the Treasury regulations thereunder (the "OID
Regulations").
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Special rules apply to OID on a Discount Note that is denominated in Foreign
Currency. See "Foreign Currency Notes-Foreign Currency Discount Notes".
GENERAL. A Note will be treated as issued with OID (a "Discount Note") if the
excess of the Note's "stated redemption price at maturity" over its issue price
is greater than a de minimis amount (set forth in the Code and the OID
Regulations). Generally, the issue price of a Note (or any Note that is part of
an issue of Notes) will be the first price at which a substantial amount of
Notes that are part of such issue of Notes is sold to the public (other than to
underwriters, placement agents or wholesalers). Under the OID Regulations, the
"stated redemption price at maturity" of a Note is the sum of all payments
provided by the Note that are not payments of "qualified stated interest." A
"qualified stated interest" payment includes any stated interest payment on a
Note that is unconditionally payable in cash or property (other than debt
instruments of the Company) at least annually at a single fixed rate (or at
certain floating rates) that appropriately takes into account the length of the
interval between stated interest payments. The applicable Pricing Supplement
will state whether a particular issue of Notes will constitute an issue of
Discount Notes.
In general, if the amount of a Note's OID is less than 1/4 of 1 percent of its
stated redemption price at maturity times the number of complete years to
maturity, then such excess constitutes "de minimis OID". Under the OID
Regulations, unless the election described below under "Election to Treat All
Interest as Original Issue Discount" is made, such a Note will not be treated as
issued with OID (in which case the following paragraphs under "Original Issue
Discount" will not apply) and a U.S. Holder of such a Note will recognize
capital gain with respect to such de minimis OID as stated principal payments
are made on the Note. The amount of such gain with respect to each such payment
will equal the product of the total amount of the Note's de minimis OID and a
fraction, the numerator of which is the amount of the principal payment made and
the denominator of which is the stated principal amount of the Note.
In certain cases, Notes that bear stated interest and are issued at par may be
deemed to bear OID for Federal income tax purposes, with the result that the
inclusion of interest in income for Federal income tax purposes may vary from
the actual cash payments of interest made on such Notes, generally accelerating
income for cash method taxpayers. Under the OID Regulations, a Note may be a
Discount Note where, among other things, (i) a Floating Rate Note provides for a
maximum interest rate or a minimum interest rate that is reasonably expected as
of the issue date to cause the yield on the debt instrument to be significantly
less, in the case of a maximum rate, or more, in the case of a minimum rate,
than the expected yield determined without the maximum or minimum rate, as the
case may be; (ii) a Floating Rate Note provides for significant front-loading or
back-loading of interest; or (iii) a Note bears interest at a floating rate in
combination with one or more other floating or fixed rates. Notice will be given
in the applicable Pricing Supplement when the Company determines that a
particular Note will be a Discount Note. Unless specified in the applicable
Pricing Supplement, Floating Rate Notes will not be Discount Notes.
The Code and the OID Regulations provide rules that require a U.S. Holder of a
Discount Note having a maturity of more than one year from its date of issue to
include OID in gross income before the receipt of cash attributable to such
income, without regard to the holder's method of accounting for tax purposes.
The amount of OID includible in gross income for a taxable year by a U.S. Holder
of a Discount Note is the sum of the "daily portions" of OID with respect to the
Discount Note for each day during the portion of the
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taxable year in which the U.S. Holder holds such Discount Note ("accrued OID").
The daily portion is determined by allocating to each day in any "accrual
period" a pro rata portion of the OID allocable to that accrual period. Under
the OID Regulations, accrual periods with respect to a Note may be any set of
periods (which may be of varying lengths) selected by the U.S. Holder as long as
(i) no accrual period is longer than one year and (ii) each scheduled payment of
interest or principal on the Note occurs on the first day or final day of an
accrual period.
The amount of OID allocable to an accrual period equals the excess of (a) the
product of the Discount Note's adjusted issue price at the beginning of the
accrual period and the Discount Note's yield to maturity (determined on the
basis of compounding at the close of each accrual period and properly adjusted
for the length of the accrual period) over (b) the sum of any payments of
qualified stated interest on the Discount Note allocable to the accrual period.
The "adjusted issue price" of a Discount Note at the beginning of the first
accrual period is the issue price and at the beginning of any accrual period
thereafter is (x) the sum of the issue price of such Discount Note, the accrued
OID for each prior accrual period (determined without regard to the amortization
of any acquisition premium or bond premium, which are discussed below), and the
amount of any qualified stated interest on the Note that has accrued prior to
the beginning of the accrual period but is not payable until a later date, less
(y) any prior payments on the Discount Note that were not qualified stated
interest payments. If a payment (other than a payment of qualified stated
interest) is made on the first day of an accrual period, then the adjusted issue
price at the beginning of such accrual period is reduced by the amount of the
payment. If a portion of the initial purchase price of a Note is attributable to
interest that accrued prior to the Note's issue date, the first stated interest
payment on the Note is to be made within one year of the Note's issue date and
such payment will equal or exceed the amount of pre-issuance accrued interest,
then the issue price will be decreased by the amount of pre-issuance accrued
interest, in which case a portion of the first stated interest payment will be
treated as a return of the excluded pre-issuance accrued interest and not as an
amount payable on the Note.
The OID Regulations contain certain special rules that generally allow any
reasonable method to be used in determining the amount of OID allocable to a
short initial accrual period (if all other accrual periods are of equal length)
and require that the amount of OID allocable to the final accrual period equal
the excess of the amount payable at the maturity of the Discount Note (other
than any payment of qualified stated interest) over the Discount Note's adjusted
issue price as of the beginning of such final accrual period. In addition, if an
interval between payments of qualified stated interest on a Discount Note
contains more than one accrual period, then the amount of qualified stated
interest payable at the end of such interval is allocated pro rata (on the basis
of their relative lengths) between the accrual periods contained in the
interval.
U.S. Holders of Discount Notes generally will have to include in income
increasingly greater amounts of OID over the life of the Notes.
OPTIONAL REDEMPTION. If the Company has an option to redeem a Discount Note, or
the holder has an option to cause a Discount Note to be repurchased, prior to
the Discount Note's stated maturity, such option will be presumed to be
exercised if, by utilizing any date on which such Discount Note may be redeemed
or repurchased as the maturity date and the amount payable on such date in
accordance with the terms of such Discount Note (the "redemption price") as the
stated redemption price at maturity, the yield on the Discount Note would be (i)
in the case of an option of the Company, lower than its yield
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to stated maturity, or (ii) in the case of an option of the holder, higher than
its yield to stated maturity. If such option is not in fact exercised when
presumed to be exercised, the Note would be treated solely for OID purposes as
if it were redeemed or repurchased, and a new Note were issued, on the presumed
exercise date for an amount equal to the Discount Note's adjusted issue price on
that date.
SHORT-TERM NOTES. Under the Code, special rules apply with respect to OID on
Notes that mature one year or less from the date of issuance ("Short-Term
Notes"). In general, a cash basis U.S. Holder of a Short-Term Note is not
required to include OID in income as it accrues for U.S. Federal income tax
purposes unless it elects to do so. Accrual basis U.S. Holders and certain other
U.S. Holders, including banks, regulated investment companies, dealers in
securities and cash basis U.S. Holders who so elect, are required to include OID
in income as it accrues on Short-Term Notes on a straight-line basis or, at the
election of the U.S. Holder, under the constant yield method (based on daily
compounding). In the case of U.S. Holders not required and not electing to
include OID in income currently, any gain realized on the sale or retirement of
Short-Term Notes will be ordinary income to the extent of the OID accrued on a
straight-line basis (unless an election is made to accrue the original issue
discount under the constant yield method) through the date of sale or
retirement. U.S. Holders who are not required and do not elect to include OID on
Short-Term Notes in income as it accrues will be required to defer deductions
for interest on borrowings allocable to Short-Term Notes in an amount not
exceeding the deferred income until the deferred income is realized.
For purposes of determining the amount of OID subject to these rules, the OID
Regulations provide that no interest payments on a Short-Term Note are qualified
stated interest, but instead such interest payments are included in the
Short-Term Note's stated redemption price at maturity. Actual receipt of stated
interest will be taxable to the extent of accrued OID not otherwise included in
income at the time of receipt.
NOTES PURCHASED AT A PREMIUM
Under the Code, a U.S. Holder that purchases a Note for an amount in excess of
its principal amount will not be subject to the OID rules and may elect to treat
such excess as "amortizable bond premium", in which case the amount of qualified
stated interest required to be included in the U.S. Holder's income each year
with respect to interest on the Note will be reduced by the amount of
amortizable bond premium allocable (based on the Note's yield to maturity) to
such year. Any election to amortize bond premium is applicable to all bonds
(other than bonds the interest on which is excludable from gross income) held by
the U.S. Holder at the beginning of the first taxable year to which the election
applies or thereafter acquired by the U.S. Holder, and may not be revoked
without the consent of the Internal Revenue Service ("IRS"). A U.S. Holder will
be required to reduce the adjusted basis of a Note by the amount treated as
amortizable bond premium. A U.S. Holder that does not elect to amortize bond
premium generally will be entitled to treat the premium as capital loss when the
Note matures. See also "Election to Treat All Interest as Original Issue
Discount."
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT
Any U.S. Holder may elect to include in gross income all interest that accrues
on a Note using the constant yield method described above under the heading
"Original Issue Discount -- General," with the modifications described below.
For purposes of this election, interest includes stated interest, OID, de
minimis OID, market discount,
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acquisition discount, de minimis market discount and unstated interest, as
adjusted by any amortizable bond premium or acquisition premium.
In applying the constant yield method to a Note with respect to which this
election has been made, the amount treated as the issue price of the Note will
be the electing U.S. Holder's adjusted basis in the Note immediately after its
acquisition, the issue date of the Note will be deemed to be the date of its
acquisition by the electing U.S. Holder, and no payments on the Note will be
treated as payments of qualified stated interest. This election is generally
applicable only to the Note with respect to which it is made and may not be
revoked without the consent of the IRS. If this election is made with respect to
a Note with amortizable bond premium, the electing U.S. Holder will be deemed to
have elected to apply amortizable bond premium against interest with respect to
all debt instruments with amortizable bond premium (other than debt instruments
the interest on which is excludable from gross income) that is held by such
electing U.S. Holder as of the beginning of the taxable year in which the Note
with respect to which the election is made is acquired or is thereafter
acquired. The deemed election with respect to amortizable bond premium may not
be revoked without the consent of the IRS.
If the election described above to apply the constant yield method to all
interest on a Note is made with respect to a Market Discount Note, as defined
above, then the electing U.S. Holder will be treated as having made the election
discussed above under "Notes Purchased at a Market Discount" to include market
discount in income currently over the life of all debt instruments held or
thereafter acquired by such U.S. Holder.
PURCHASE, SALE AND RETIREMENT OF THE NOTES
A U.S. Holder's tax basis in a Note generally will equal its U.S. dollar cost
(which, in the case of a Note purchased with a Foreign Currency, will be the
U.S. dollar value of the purchase price on the date of purchase), increased by
the amount of any OID or market discount (or acquisition discount, in the case
of a Short-Term Note) included in the U.S. Holder's income with respect to the
Note and the amount, if any, of income attributable to de minimis OID included
in the U.S. Holder's income with respect to the Note, and reduced by the sum of
(i) the amount of any payments that are not qualified stated interest payments,
and (ii) the amount of any amortizable bond premium applied to reduce interest
on the Note. A U.S. Holder generally will recognize gain or loss on the sale or
retirement of a Note equal to the difference between the amount realized on the
sale or retirement and the U.S. Holder's adjusted tax basis in the Note. The
amount realized on a sale or retirement for an amount in Foreign Currency will
be the U.S. dollar value of such amount on the date of sale or retirement.
Except to the extent described above under "Original Issue Discount -- Short
Term Notes" or "Notes Purchased at a Market Discount" or below under "Foreign
Currency Notes -- Exchange Gain or Loss," and except to the extent attributable
to accrued but unpaid interest, gain or loss recognized on the sale or
retirement of a Note generally will be capital gain or loss and will be long-
term capital gain or loss if the Notes were held for more than 12 months.
FOREIGN CURRENCY NOTES
STATED INTEREST. If an interest payment is denominated in or determined by
reference to a Foreign Currency, the amount of income recognized by a cash basis
U.S. Holder will be the U.S. dollar value of the interest payment, based on the
exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars. Accrual basis U.S. Holders may
determine the amount of income recognized with respect
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<PAGE> 28
to such interest payment in accordance with either of two methods. Under the
first method, the amount of income recognized will be based on the average
exchange rate in effect during the interest accrual period (or, with respect to
an accrual period that spans two taxable years, the partial period within the
taxable year). Upon receipt of an interest payment (including a payment
attributable to accrued but unpaid interest upon the sale or retirement of a
Note) determined by reference to a Foreign Currency, an accrual basis U.S.
Holder will recognize ordinary income or loss measured by the difference between
such average exchange rate and the exchange rate in effect on the date of
receipt, regardless of whether the payment is in fact converted into U.S.
dollars. Under the second method, an accrual basis U.S. Holder may elect to
translate interest income into U.S. dollars at the spot exchange rate in effect
on the last day of the accrual period or, in the case of an accrual period that
spans two taxable years, at the exchange rate in effect on the last day of the
partial period within the taxable year. Additionally, if a payment of interest
is actually received within five business days of the last day of the accrual
period or taxable year, an accrual basis U.S. Holder applying the second method
may instead translate such accrued interest into U.S. dollars at the spot
exchange rate in effect on the day of actual receipt (in which case no exchange
gain or loss will result). Any election to apply the second method will apply to
all debt instruments held by the U.S. Holder at the beginning of the first
taxable year to which the election applies or thereafter acquired by the U.S.
Holder and may not be revoked without the consent of the IRS.
EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS. Foreign Currency received as
interest on a Note or on the sale or retirement of a Note will have a tax basis
equal to its U.S. dollar value at the time such interest is received or at the
time of such sale or retirement, as the case may be. Foreign Currency that is
purchased generally will have a tax basis equal to the U.S. dollar value of the
Foreign Currency on the date of purchase. Any gain or loss recognized on a sale
or other disposition of a Foreign Currency (including its use to purchase Notes
or upon exchange for U.S. dollars) will be ordinary income or loss.
FOREIGN CURRENCY DISCOUNT NOTES. OID for any accrual period on a Discount Note
that is denominated in a Foreign Currency will be determined in the Foreign
Currency and then translated into U.S. dollars in the same manner as described
above for stated interest accrued by an accrual basis U.S. Holder. Upon receipt
of an amount attributable to OID (whether in connection with a payment of
interest or the sale or retirement of a Note), a U.S. Holder may recognize
ordinary income or loss.
AMORTIZABLE BOND PREMIUM. In the case of a Note that is denominated in a
Foreign Currency, bond premium will be computed in units of Foreign Currency,
and amortizable bond premium will reduce interest income in units of the Foreign
Currency. At the time amortized bond premium offsets interest income, a U.S.
Holder may realize ordinary income or loss, measured by the difference between
exchange rates at that time and at the time of the acquisition of the Notes.
MARKET DISCOUNT. Market discount is determined in units of the Foreign
Currency. Accrued market discount that is required to be taken into account on
the maturity or upon disposition of a Note is translated into U.S. dollars at
the exchange rate on the maturity or the disposition date, as the case may be
(and no part is treated as exchange gain or loss). Accrued market discount
currently includible in income by an electing U.S. Holder is translated into
U.S. dollars at the average exchange rate for the accrual period (or the partial
accrual period during which the U.S. Holder held the Note), and exchange gain or
loss is determined on maturity or disposition of the Note (as the case may be)
in the manner described above under "Foreign Currency Notes -- Stated Interest"
with respect
S-28
<PAGE> 29
to the computation of exchange gain or loss on the receipt of accrued interest
by an accrual method holder.
EXCHANGE GAIN OR LOSS. Gain or loss recognized by a U.S. Holder on the sale or
retirement of a Note that is attributable to changes in exchange rates will be
treated as ordinary income or loss. However, such exchange gain or loss is taken
into account only to the extent of total gain or loss realized on the
transaction.
INDEXED NOTES
The applicable Pricing Supplement will contain a discussion of any special U.S.
Federal income tax rules with respect to Indexed Notes.
NON-U.S. HOLDERS
Subject to the discussion of backup withholding below, payments of principal
(and premium, if any) and interest (including OID) by the Company or any agent
of the Company (acting in its capacity as such) to any Non-U.S. Holder will not
be subject to U.S. Federal withholding tax, provided, in the case of interest
(including OID), that (i) the Non-U.S. Holder does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote, (ii) the Non-U.S. Holder is not a
controlled foreign corporation for U.S. tax purposes that is related to the
Company (directly or indirectly) through stock ownership, and (iii) either (A)
the Non-U.S. Holder certifies to the Company or its agent under penalties of
perjury that it is not a United States person and provides its name and address
or (B) a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
(a "financial institution") and holds the Note certifies to the Company or its
agent under penalties of perjury that such statement has been received from the
Non-U.S. Holder by it or by another financial institution and furnishes the
payor with a copy thereof. A Non-U.S. Holder of a Note providing for payments of
contingent interest within the meaning of Section 871 (h) of the Code, will not,
however, be exempt from U.S. Federal withholding tax with respect to payments of
such contingent interest. The applicable Pricing Supplement will contain a
description of U.S. Federal withholding tax consequences to Non-U.S. Holders of
a purchase of a Note providing for payments of such contingent interest.
If a Non-U.S. Holder is engaged in a trade or business in the United States and
interest (including OID) on the Note is effectively connected with the conduct
of such trade or business, the Non-U.S. Holder, although exempt from the
withholding tax discussed in the preceding paragraph (provided that such holder
timely furnishes an IRS Form 4224 to claim such exemption), may be subject to
U.S. Federal income tax on such interest (or OID) in the same manner as if it
were a U.S. Holder. In addition, if the Non-U.S. Holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% of its
effectively connected earnings and profits for the taxable year, subject to
certain adjustments. For purposes of the branch profits tax, interest (including
OID) on a Note will be included in the earnings and profits of such holder if
such interest (or OID) is effectively connected with the conduct by such holder
of a trade or business in the United States. In lieu of the certificate
described in the preceding paragraph, such a holder must timely furnish the
payor with a properly executed IRS Form 4224 to claim an exemption from U.S.
Federal withholding tax.
Any capital gain, market discount or exchange gain realized on the sale,
exchange, retirement or other disposition of a Note by a Non-U.S. Holder will
not be subject to U.S.
S-29
<PAGE> 30
Federal income or withholding taxes if (i) such gain is not effectively
connected with a U.S. trade or business of the Non-U.S. Holder and (ii) in the
case of an individual, such Non-U.S. Holder (A) is not present in the United
States for 183 days or more in the taxable year of the sale, exchange,
retirement or other disposition or (B) does not have a tax home (as defined in
Section 911 (d)(3) of the Code) in the United States in the taxable year of the
sale, exchange, retirement or other disposition and the gain is not attributable
to an office or other fixed place of business maintained by such individual in
the United States.
Notes held by an individual who is neither a citizen nor a resident of the
United States for U.S. Federal tax purposes at the time of such individual's
death will not be subject to U.S. Federal estate tax, provided that the income
from such Notes was not or would not have been effectively connected with a U.S.
trade or business of such individual and that such individual qualified for the
exemption from U.S. Federal withholding tax (without regard to the certification
requirements) described above.
PURCHASERS OF NOTES THAT ARE NON-U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE POSSIBLE APPLICABILITY OF UNITED STATES WITHHOLDING
AND OTHER TAXES UPON INCOME REALIZED IN RESPECT OF THE NOTES.
INFORMATION REPORTING AND BACKUP WITHHOLDING
For each calendar year in which the Notes are outstanding, the Company is
required to provide the IRS with certain information, including the holder's
name, address and taxpayer identification number (either the holder's Social
Security number or its employer identification number, as the case may be), the
aggregate amount of principal and interest paid (including OID, if any) to that
holder during the calendar year and the amount of tax withheld, if any. This
obligation, however, does not apply with respect to certain U.S. Holders,
including corporations, tax-exempt organizations, qualified pension and profit
sharing trusts and individual retirement accounts.
In the event that a U.S. Holder subject to the reporting requirements described
above fails to supply its correct taxpayer identification number in the manner
required by applicable law or underreports its tax liability, the Company, its
agents or paying agents or a broker may be required to "backup" withhold a tax
equal to 31% of each payment of interest (including OID) and principal (and
premium, if any) on the Notes. This backup withholding is not an additional tax
and may be credited against the U.S. Holder's U.S. Federal income tax liability,
provided that the required information is furnished to the IRS.
Under current Treasury Regulations, backup withholding and information reporting
will not apply to payments made by the Company or any agent thereof (in its
capacity as such) to a Non-U.S. Holder of a Note if such holder has provided the
required certification that it is not a United States person as set forth in
clause (iii) in the first paragraph under "Non-U.S. Holders" above, or has
otherwise established an exemption (provided that neither the Company nor its
agent has actual knowledge that the holder is a United States person or that the
conditions of any exemption are not in fact satisfied). Recently adopted
Treasury Regulations may affect the method of certification as to non-U.S.
status for payments made to Non-U.S. Holders after December 31, 1999. A Non-U.S.
Holder should discuss with its tax advisor the effect on it, if any, of such
regulations.
S-30
<PAGE> 31
Payment of the proceeds from the sale of a Note to or through a foreign office
of a broker will not be subject to information reporting or backup withholding,
except that if the broker is a United States person, a controlled foreign
corporation for United States tax purposes or a foreign person 50 percent or
more of whose gross income from all sources for the three-year period ending
with the close of its taxable year preceding the payment was effectively
connected with a U.S. trade or business, information reporting may apply to such
payments. Payment of the proceeds from a sale of a Note to or through the U.S.
Office of a broker is subject to information reporting and backup withholding
unless the holder or beneficial owner certifies as to its taxpayer
identification number or otherwise establishes an exemption from information
reporting and backup withholding.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company through the
Agents, Morgan Stanley & Co. Incorporated, Chase Securities Inc. and Credit
Suisse First Boston Corporation, who have agreed to use reasonable efforts to
solicit offers to purchase such Notes. The Company will have the sole right to
accept offers to purchase Notes and may reject any such offer in whole or in
part. An Agent will have the right to reject any offer to purchase Notes
solicited by it in whole or in part. Payment of the purchase price of the Notes
will be required to be made in immediately available funds. Unless otherwise
specified in the applicable Pricing Supplement, the Company will pay an Agent,
in connection with sales of Notes resulting from a solicitation made or an offer
to purchase received by such Agent, a commission ranging from .125% to .750% of
the initial offering price of the Notes to be sold, depending upon the maturity
of the Notes; provided, however, that commissions with respect to Notes having a
maturity of 30 years or greater will be negotiated.
The Company may also sell Notes to an Agent as principal for its own account at
discounts to be agreed upon at the time of sale. Such Notes may be resold to
investors and other purchasers at a fixed offering price or at prevailing market
prices, or prices related thereto at the time of such resale or otherwise, as
determined by the Agent and specified in the applicable Pricing Supplement. An
Agent may offer the Notes it has purchased as principal to other dealers. An
Agent may sell the Notes to any dealer at a discount and, unless otherwise
specified in the applicable Pricing Supplement, such discount allowed to any
dealer will not be in excess of the discount to be received by such Agent from
the Company. After the initial public offering of Notes that are to be resold by
the Agents to investors and other purchasers on a fixed public offering price
basis, the public offering price, concession and discount may be changed.
The Company has reserved the right to sell Notes directly to investors from time
to time on its own behalf and on such sales no discounts will be allowed and no
commissions will be paid. In addition, the Company may appoint additional agents
or terminate existing Agents.
In order to facilitate the offering of the Notes, the Agents may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Notes may overallot in connection with the offering,
creating a short position in the Notes for their own account. In addition, to
cover overallotments or to stabilize the price of the Notes, the Agents may bid
for, and purchase, the Notes in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an underwriter or a dealer
for distributing the Notes in the offering, if the syndicate repurchases
previously distributed the Notes in transactions to cover syndicate short
positions, in stabilization transactions or
S-31
<PAGE> 32
otherwise. Any of these activities may stabilize or maintain the market price of
the Notes above independent market levels. The Agents are not required to engage
in these activities, and may end any of these activities at any time.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933 (the "Securities Act"). The Company and the Agents have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments made in
respect thereof. The Company has also agreed to reimburse the Agents for certain
expenses. The Company expects to incur expenses totaling $200,000 in connection
with this program.
Unless otherwise provided in the applicable Pricing Supplement, the Company does
not intend to apply for the listing of the Notes on a national securities
exchange, but has been advised by the Agents that the Agents intend to make a
market in the Notes, as permitted by applicable laws and regulations. The Agents
are not obligated to do so, however, and the Agents may discontinue making a
market at any time without notice. No assurance can be given as to the liquidity
of any trading market for the Notes.
Concurrently with the offering of Notes through the Agent as described herein,
the Company may issue other Debt Securities pursuant to the Indenture referred
to herein. Any Debt Securities sold by the Company pursuant to the Prospectus,
will reduce the aggregate offering price of Notes that may be offered by this
Prospectus Supplement and the Prospectus.
The Agents and/or certain of their affiliates may engage in transactions with
and perform services for the Company and certain of its affiliates in the
ordinary course of business.
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by John B.
Canning, Corporate Secretary and Associate General Counsel of the Company, or
such other attorney of the Company as the Company may designate, and for the
Agents by Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New York .
S-32
<PAGE> 33
PROSPECTUS
$200,000,000
RAYONIER INC.
DEBT SECURITIES
- ------------------------
Rayonier Inc. ("Rayonier" or the "Company") may offer or issue from time to time
its unsecured debt securities consisting of notes, debentures or other evidences
of indebtedness (the "Debt Securities") in an aggregate principal amount of up
to $200,000,000 (or, if Debt Securities are issued at an original issue
discount, such greater amount as shall result in aggregate proceeds of
$200,000,000 to the Company). The Debt Securities may be offered as separate
series in amounts, at prices and on terms to be determined in light of market
conditions at the time of sale and set forth in an accompanying supplement to
this Prospectus (each a "Prospectus Supplement").
The terms of each series of Debt Securities, including, where applicable, the
specific designation, aggregate principal amount, authorized denominations,
maturity, interest rate or rates (which may be fixed or variable) and time or
times of payment of any interest, any terms for optional or mandatory redemption
or payment of additional amounts or any sinking fund provisions, any initial
public offering price, the proceeds to the Company and any other specific terms
in connection with the offering and sale of such series (the "Offered
Securities") will be set forth in a Prospectus Supplement.
The Debt Securities may be sold directly by the Company, through agents
designated from time to time or to or through underwriters or dealers. See "Plan
of Distribution." If agents, dealers or underwriters are involved in the sale of
the Debt Securities, the names of such agents, dealers or underwriters and any
applicable agents' commissions, dealers' purchase price or underwriters'
discounts will be set forth in a Prospectus Supplement. The net proceeds to the
Company from such sale will also be set forth in a Prospectus Supplement.
Each Prospectus Supplement will state whether the Offered Securities will be
listed on any securities exchange. If the Offered Securities are not listed on
any national securities exchange, there can be no assurance that there will be a
secondary market for the Offered Securities.
The Debt Securities may be issued only in registered form, and may be issued in
temporary or definitive global form.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
This Prospectus may not be used to consummate sales of Debt Securities unless
accompanied by a Prospectus Supplement.
August 18, 1998
<PAGE> 34
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND A PROSPECTUS SUPPLEMENT IN CONNECTION WITH THE
OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
UNDERWRITER, AGENT OR DEALER. THIS PROSPECTUS AND A PROSPECTUS SUPPLEMENT DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS AND/OR A PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company with the Commission can be inspected and copied at the
public reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: 7 World Trade Center, Suite 1300, New York,
New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, at prescribed rates. The Commission maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants, including the Company, that file
electronically with the Commission.
This Prospectus constitutes part of a Registration Statement on Form S-3
(the "Registration Statement," which term shall include any amendments thereto)
filed by the Company with the Commission under the Securities Act of 1933 (the
"Securities Act"), relating to the securities offered hereby. This Prospectus
omits certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the
securities offered hereby. Any statements contained herein concerning the
provisions of any document are not necessarily complete and in each instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
2
<PAGE> 35
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There is hereby incorporated in this Prospectus by reference the following
documents filed by Rayonier with the Commission under the Exchange Act:
(a) Annual Report on Form 10-K for the year ended December 31, 1997;
and
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998 and June 30, 1998.
All documents filed by Rayonier pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Debt Securities offered hereby shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein, or in
the accompanying Prospectus Supplement, shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated or deemed to be incorporated by reference herein, or in an
accompanying Prospectus Supplement, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Rayonier will furnish without charge to each person to whom a copy of this
Prospectus is delivered, upon request, a copy of any of the documents
incorporated herein by reference, other than exhibits to such documents (unless
such exhibits are specifically incorporated by reference in such documents).
Requests should be directed to Corporate Secretary, Rayonier Inc., 1177 Summer
Street, Stamford, Connecticut 06905-5529. Telephone requests may be directed to
(203) 348-7000.
3
<PAGE> 36
RAYONIER INC.
Rayonier Inc. (Rayonier or the Company), including its subsidiaries, is a
leading international forest products company primarily engaged in the trading,
merchandising and manufacturing of logs, timber and wood products, and in the
production and sale of high-value-added specialty pulps. Rayonier owns, leases,
manages or controls approximately 1.5 million acres of timberland in the United
States and New Zealand. In addition, the Company operates two pulp mills and
three lumber manufacturing facilities in the United States and, as of October 1,
1997, a medium density fiberboard plant in New Zealand.
Rayonier was founded as Rainier Pulp and Paper Company in Shelton, WA in
1926. In 1937, the Company became "Rayonier Incorporated", a corporation whose
stock was publicly traded on the New York Stock Exchange (NYSE) until Rayonier
became a wholly owned subsidiary of ITT Industries, Inc. (ITT), then known as
ITT Corporation, in 1968. On February 28, 1994, Rayonier again became an
independent company when ITT distributed all of the Common Shares of Rayonier to
ITT stockholders. Rayonier shares are publicly traded on the NYSE under the
symbol RYN.
Rayonier is a North Carolina corporation with its executive offices at 1177
Summer Street, Stamford, CT 06905-5529. Its telephone number is (203) 348-7000.
Rayonier operates in two major business segments, Timber and Wood Products
and Specialty Pulp Products. In 1997, Timber and Wood Products accounted for 50
percent of sales and Specialty Pulp Products accounted for 47 percent of sales.
The remaining 3 percent of sales (classified in Dispositions) were made from
inventory of the Company's Port Angeles, WA, pulp mill, which was closed on
February 28, 1997. With customers in 70 countries, 49 percent of Rayonier's 1997
sales of $1.104 billion were made to customer outside of the United States.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Debt
Securities will be used as set forth in the applicable Prospectus Supplement.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED -----------------------------------------
JUNE 30, 1998 1997 1996 1995 1994 1993
- ------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
3.96x 5.36x 1.49x 7.55x 5.34x 5.25x
</TABLE>
For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of income (loss) from continuing operations adjusted to
eliminate minority interest in consolidated partnerships, amortization of
capitalized interest, the provision for income taxes and fixed charges. Fixed
charges comprise interest on long-term and short-term debt, amortization of debt
discount and debt expense, and the portion of rentals deemed representative of
the interest factor.
DESCRIPTION OF THE DEBT SECURITIES
The Debt Securities will be issued under an indenture, dated as of
September 1, 1992, as supplemented and amended, between Rayonier and Bankers
Trust Company, a New York banking corporation, as Trustee (the "Trustee"), a
copy of which indenture is filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The statements under this caption are brief
summaries of certain provisions of the Indenture, do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all of
the provisions of the Indenture, including the definitions therein of certain
terms. Whenever particular sections of the Indenture or terms that are defined
in the
4
<PAGE> 37
Indenture are referred to herein or in a Prospectus Supplement, it is intended
that such sections or defined terms shall be incorporated by reference herein or
therein, as the case may be.
The Debt Securities may be issued by Rayonier from time to time in one or
more series. The particular terms of each series of Offered Securities will be
described in the Prospectus Supplement or Prospectus Supplements relating to
such series.
GENERAL
The Debt Securities offered pursuant to this Prospectus will be limited to
$200,000,000 aggregate principal amount (or, if any Debt Securities are issued
at original issue discount, such greater amount as shall result in proceeds of
$200,000,000 to the Company). Debt Securities may be issued under the Indenture
from time to time in separate series up to the aggregate amount from time to
time authorized by the Company for each series.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the Offered Securities: (1) the title of the
Offered Securities; (2) the aggregate principal amount of the Offered
Securities; (3) the date on which the principal of the Offered Securities will
mature; (4) the rate or rates (or, if subject to adjustment, the manner for
determining such rates) at which the Offered Securities shall bear interest, if
any, the date or dates from which any such interest shall accrue, the Interest
Payment Dates on which any such interest shall be payable, and the Regular
Record Date for any interest payable on any Interest Payment Date; (5) the place
or places where, subject to the terms of the Indenture as described below under
"Payment and Paying Agents," the principal of (and premium, if any) and interest
on the Offered Securities will be payable and where, subject to the terms of the
Indenture as described below under "Denominations, Registration and Transfer,"
the Offered Securities may be presented for registration of transfer or exchange
and the place or places where notices and demands to or upon the Company in
respect of the Offered Securities and the Indenture may be made ("Place of
Payment"); (6) any period or periods within or date or dates on which, the price
or prices at which and the terms and conditions upon which Offered Securities
may be redeemed, in whole or in part, at the option of the Company; (7) the
obligation or the right, if any, of the Company to redeem, purchase or repay the
Offered Securities prior to the Stated Maturity pursuant to any sinking fund,
amortization or analogous provisions or at the option of a Holder thereof or of
the Company and the date or dates on which, the period or periods within which,
the price or prices at which and the terms and conditions upon which the Offered
Securities shall be redeemed, purchased or repaid, in whole or in part, pursuant
to such obligation; (8) the denominations in which any Offered Securities shall
be issued if other than $1,000 or any integral multiple thereof; (9) any
addition to, or modification or deletion of, any Event of Default or any
covenant of the Company specified in the Indenture with respect to the Offered
Securities; (10) if other than the principal amount thereof, the portion of the
principal amount of the Offered Securities which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to the Indenture;
(11) any index or indices used to determine the amount of payments of principal
of and premium, if any, on the Offered Securities and the manner in which such
amounts will be determined; and (12) any other terms of the Offered Securities
not inconsistent with the provisions of the Indenture. (Section 3.01.)
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise set forth in the Prospectus Supplement for the Offered
Securities, the Debt Securities will be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. Debt
Securities of any series will be exchangeable for other Debt Securities of the
same issue and series, of any authorized denominations, of a like aggregate
principal amount, of the same Original Issue Date and Stated Maturity and
bearing the same interest rate. (Section 3.05.)
Debt Securities may be presented for exchange as provided above, and may be
presented for registration of transfer (with the form of transfer endorsed
thereon, or a satisfactory written instrument of transfer, duly executed), at
the office of the Securities Registrar or at the office of any transfer agent
designated by the Company for such purpose with respect to any series of Debt
Securities and referred
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to in an applicable Prospectus Supplement, without service charge and upon
payment of any taxes and other governmental charges as described in the
Indenture. The Company has appointed the Trustee as Securities Registrar.
(Section 3.05.) If a Prospectus Supplement refers to any transfer agents (in
addition to the Securities Registrar) initially designated by the Company with
respect to any series of Debt Securities, the Company may at any time rescind
the designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, provided that the Company maintains
a transfer agent in each Place of Payment for such series. The Company may at
any time designate additional transfer agents with respect to any series of Debt
Securities. (Section 10.02.)
In the event of any redemption, neither the Company nor the Trustee shall
be required to (i) issue, register the transfer of, or exchange Debt Securities
of any series during a period beginning at the opening of business 15 days
before the day of selection for redemption of Debt Securities of that series and
ending at the close of business on the day of mailing of the relevant notice of
redemption or (ii) transfer or exchange any Debt Security so selected for
redemption, except, in the case of any Debt Security being redeemed in part, any
portion thereof not to be redeemed. (Section 3.05.)
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (a "Global Security") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the Prospectus Supplement relating to such series. Global Securities may be
issued only in fully registered form and in either temporary or permanent form.
Unless and until it is exchanged in whole or in part for the individual Debt
Securities represented thereby, a Global Security may not be transferred except
as a whole by the Depositary for such Global Security to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by the Depositary or any nominee to a successor
Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
such series. The Company anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security or its nominee will credit, on its book-entry registration and transfer
system, the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depositary ("Participants"). Such accounts shall be
designated by the agents, underwriters or dealers with respect to such Debt
Securities or by the Company if such Debt Securities are offered and sold
directly by the Company. Ownership of beneficial interests in a Global Security
will be limited to Participants or persons that may hold interests through
Participants. Ownership of beneficial interests in such Global Security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by the applicable Depositary or its nominee (with respect to
interests of Participants) and the records of Participants (with respect to
interests of persons who hold through Participants). The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the ability
to transfer beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture governing such Debt Securities. Except as provided below, owners of
beneficial interests in a Global Security will not be entitled to have any of
the individual Debt Securities of the series represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such Debt Securities of such series in definitive form and will
not be considered the owners or holders thereof under the Indenture governing
such Debt Securities.
Payments of principal of (and premium, if any) and interest on individual
Debt Securities represented by a Global Security registered in the name of a
Depositary or its nominee will be made to the
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Depositary or its nominee, as the case may be, as the registered owner of the
Global Security representing such Debt Securities. None of the Company, the
Trustee for such Debt Securities, any Paying Agent, or the Securities Registrar
for such Debt Securities will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interest of the Global Security for such Debt Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Company expects that the Depositary for a series of Debt Securities or
its nominee, upon receipt of any payment of principal, premium or interest in
respect of a permanent Global Security representing any of such Debt Securities,
immediately will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the principal amount of
such Global Security for such Debt Securities as shown on the records of such
Depositary or its nominee. The Company also expects that payments by
Participants to owners of beneficial interests in such Global Security held
through such Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name." Such payments will be
the responsibility of such Participants.
If a Depositary for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is not
appointed by the Company within 90 days, the Company will issue individual Debt
Securities of such series in exchange for the Global Security representing such
series of Debt Securities. In addition, the Company may at any time and in its
sole discretion, subject to any limitations described in the Prospectus
Supplement relating to such Debt Securities, determine not to have any Debt
Securities of such series represented by one or more Global Securities and, in
such event, will issue individual Debt Securities of such series in exchange for
the Global Security or Securities representing such series of Debt Securities.
Further, if the Company so specifies with respect to the Debt Securities of a
series, an owner of a beneficial interest in a Global Security representing Debt
Securities of such series may, on terms acceptable to the Company, the Trustee
and the Depositary for such Global Security, receive individual Debt Securities
of such series in exchange for such beneficial interests, subject to any
limitations described in the Prospectus Supplement relating to such Debt
Securities. In any such instance, an owner of a beneficial interest in a Global
Security will be entitled to physical delivery of individual Debt Securities of
the series represented by such Global Security equal in principal amount to such
beneficial interest and to have such Debt Securities registered in its name.
Individual Debt Securities of such series so issued will be issued in
denominations, unless otherwise specified by the Company, of $1,000 and integral
multiples thereof.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Debt Securities will
be made at the office of the Trustee in the City of New York or at the office of
such Paying Agent or Paying Agents as the Company may designate from time to
time in an applicable Prospectus Supplement, except that at the option of the
Company payment of any interest may be made (i) by check mailed to the address
of the Person entitled thereto as such address shall appear in the Securities
Register or (ii) by transfer to an account maintained by the Person entitled
thereto as specified in the Securities Register, provided that proper transfer
instructions have been received by the Trustee or any Paying Agent, as the case
may be, by the Regular Record Date. Unless otherwise indicated in an applicable
Prospectus Supplement, payment of any interest on Debt Securities will be made
to the Person in whose name such Debt Security is registered at the close of
business on the Regular Record Date for such interest, except in the case of
Defaulted Interest. The Company may at any time designate additional Paying
Agents or rescind the designation of any Paying Agent; however, the Company will
at all times be required to maintain a Paying Agent in each Place of Payment for
each series of Debt Securities. (Sections 3.01, 3.07 and 10.02.)
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Any moneys deposited with the Trustee or any Paying Agent, or then held by
the Company in trust, for the payment of the principal of (and premium, if any)
or interest on any Debt Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall, at the request of the Company, be repaid to the Company, and the Holder
of such Debt Security shall thereafter look, as a general unsecured creditor,
only to the Company for payment thereof. (Section 10.03.)
REDEMPTION
Unless otherwise indicated in an applicable Prospectus Supplement, Debt
Securities will not be subject to any sinking fund and will not be redeemable
prior to their Stated Maturity.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company shall not consolidate with or merge into any other corporation
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and no Person shall consolidate with or merge into the
Company or convey, transfer or lease its properties and assets substantially as
an entirety to the Company, unless (i) in case the Company consolidates with or
merges into another corporation or conveys, transfers or leases its properties
and assets substantially as an entirety to any Person, the successor corporation
is organized under the laws of the United States of America or any state or the
District of Columbia, and such successor corporation expressly assumes the
Company's obligations on the Debt Securities issued under the Indenture; (ii)
immediately after giving effect thereto, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of Default,
shall have happened and be continuing; and (iii) certain other conditions as
prescribed in the Indenture are met.
The Indenture provides that in the event of any conveyance, transfer or
lease in accordance with the preceding paragraph, the Company shall be
discharged from all obligations and covenants under the Indenture and the Debt
Securities and may be dissolved and liquidated.
The Indenture also provides that if, upon any consolidation or merger of
the Company with or into any other corporation, or upon any conveyance, transfer
or lease of its properties and assets substantially as an entirety to any
Person, any of the property or assets of the Company or of any Restricted
Subsidiary would thereupon become subject to any mortgage, lien or pledge, the
Company, prior to or simultaneously with such consolidation, merger, conveyance,
transfer or lease will secure the Debt Securities equally and ratably with any
other obligations of the Company or any Restricted Subsidiary then entitled
thereto, by a direct lien on all such property and assets prior to all liens
other than any theretofore existing thereon.
COVENANTS
The Indenture contains covenants including, among others, the following:
Limitations on Liens
The Indenture provides that the Company will not, nor will it permit any
Restricted Subsidiary to, issue, assume or guarantee any indebtedness for money
borrowed if such indebtedness is secured by a Lien upon any Principal Property
of the Company or any Restricted Subsidiary or on any shares of stock of any
Restricted Subsidiary (whether such Principal Property or shares of stock are
now owned or hereafter acquired) without in any such case effectively providing
that the Debt Securities of any series Outstanding which are entitled to the
benefits of such provision of the Indenture (together with, if the Company shall
so determine, any other Indebtedness of or guaranteed by the Company or such
Restricted Subsidiary entitled thereto, subject to applicable priority of
payment) shall be secured equally and ratably with or prior to such
Indebtedness, except that the foregoing restriction shall not apply to
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(i) Liens on property or shares of stock of any corporation existing
at the time such corporation becomes a Restricted Subsidiary;
(ii) Liens on property existing at the time of acquisition thereof, or
Liens on property which secure the payment of the purchase price of such
property, or Liens on property which secure indebtedness incurred or
guaranteed for the purpose of financing the purchase price of such property
or the construction of such property (including improvements to existing
property), which indebtedness is incurred or guaranteed within 180 days
after the latest of such acquisition or completion of such construction or
commencement of operation of such property; provided that such Lien shall
not extend to or cover any property of the Company or any Restricted
Subsidiary other than such property hereafter acquired or previously
unimproved property theretofore owned and the principal amount of Funded
Debt secured by such Lien shall not exceed (a) in the case of any
timberlands or pollution control facility, 100% of the lesser of (i) the
cost of such acquisition, construction or improvement of such property to
the Company or such Restricted Subsidiary or (ii) the fair value of such
acquisition, construction or improvement of such property at the time of
such acquisition, construction or improvement, and (b) in the case of any
other type of property, 75% of the lesser of (i) the cost of such
acquisition, construction or improvement of such property to the Company or
such Restricted Subsidiary or (ii) the fair value of such acquisition,
construction or improvement of such property at the time of such
acquisition, construction or improvement;
(iii) Liens securing indebtedness owing by any Restricted Subsidiary
to the Company or a wholly owned Restricted Subsidiary;
(iv) Liens on property of a corporation existing at the time such
corporation is merged into or consolidated with the Company or a Restricted
Subsidiary or at the time of a purchase, lease or other acquisition of the
properties of a corporation or other Person as an entirety or substantially
as an entirety by the Company or a Restricted Subsidiary;
(v) Liens on property of the Company or a Restricted Subsidiary in
favor of the United States of America or any State thereof or any agency,
instrumentality or political subdivision thereof, or in favor of any other
country, or any political subdivision thereof, to secure any indebtedness
incurred or guaranteed for the purpose of financing all or any part of the
purchase price or the cost of construction of the property subject to such
Liens within 180 days after the latest of the acquisition, completion of
construction or commencement of operation of such property; and
(vi) any extension renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any Lien referred to in
the foregoing clauses (i) to (v), inclusive, provided however, that the
principal amount of such indebtedness secured thereby shall not exceed the
principal amount of such indebtedness so secured at the time of such
extension, renewal or replacement, and that such extension, renewal or
replacement shall be limited to all or a part of the property which secured
the Lien so extended, renewed or replaced (plus improvements and
construction on such property).
Notwithstanding the above, the Company and one or more Restricted
Subsidiaries may, without securing the Debt Securities, issue, assume or
guarantee secured indebtedness which would otherwise be subject to the foregoing
restrictions, provided that after giving effect thereto the aggregate amount of
such indebtedness issued pursuant to such exception at such time and the
aggregate Value of Sale and Lease-Back Transactions (other than those in
connection with which the Company has voluntarily retired Funded Debt in
compliance with the provisions described below under "Limitation on Sale and
Lease-Back Transactions") does not at any one time exceed 10% of Consolidated
Net Tangible Assets. In computing the aggregate amount of indebtedness
outstanding for purposes of the foregoing sentence, there shall not be included
in the calculation any indebtedness issued, assumed or guaranteed pursuant to
clauses (i) through (vi) above. (Section 10.08.)
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Limitation on Sale and Lease-Back Transactions
The Indenture provides that the Company shall not and, shall not permit any
Restricted Subsidiary to, enter into any Sale and Lease-Back Transaction with
respect to any Principal Property with any person (other than the Company or a
Restricted Subsidiary) unless either (a) the Company or such Restricted
Subsidiary would be entitled, pursuant to the provisions set forth above under
"Limitation on Liens," to incur Funded Debt in a principal amount equal to or
exceeding the Value of such Sale and Lease-Back Transaction secured by a Lien on
the Principal Property to be leased without equally and ratably securing the
Debt Securities, or (b) the Company, during the four-month period after the
effective date of such transaction, applies to the voluntary retirement of its
Funded Debt an amount equal to the greater of: (1) the net proceeds of the sale
of the Principal Property leased in such transaction or (2) the fair market
value in the good faith opinion of the Board of Directors of the Company of the
Principal Property at the time such transaction was entered into. (Section
10.09.)
Certain Definitions
"Consolidated Net Tangible Assets" means the total amount of assets (less
applicable reserves and other properly deductible items) after deducting
therefrom (i) all current liabilities (excluding any thereof which are by their
terms extendible or renewable at the option of the obligor thereon to a time
more than 12 months after the time as of which the amount thereof is being
computed) and (ii) all segregated goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles, all as set
forth on the most recent balance sheet of the Company and its consolidated
Subsidiaries and prepared in accordance with generally accepted accounting
principles.
"Funded Debt" means all indebtedness for borrowed money having a maturity
of more than 12 months from the date as of which the amount thereof is to be
determined or having a maturity of less than 12 months but by its terms being
renewable or extendible beyond 12 months from such date at the option of the
borrower.
"Lien" means any mortgage, pledge, lien, encumbrance or security interest
of any kind.
"Principal Property" means all timberlands, land, buildings, machinery and
equipment, and leasehold interests and improvements in respect of the foregoing,
which would be reflected on a consolidated balance sheet of the Company and its
Subsidiaries prepared in accordance with generally accepted accounting
principles, excluding all such tangible property located outside the United
States, Canada and New Zealand (including their respective territories and
possessions) and excluding any such property which, in the opinion of the Board
of Directors set forth in a Board Resolution, is not material to the Company and
its Subsidiaries taken as a whole.
"Restricted Subsidiary" is defined as any Subsidiary (a) substantially all
of the property of which is located in the United States, Canada or New Zealand
(including their respective territories and possessions) and which owns a
Principal Property; provided, however, that no Subsidiary shall be a Restricted
Subsidiary if pursuant to this clause (a) (i) the total assets of such
Subsidiary are less than 10% of the total assets of the Company and its
consolidated Subsidiaries (including such Subsidiary) in each case as set forth
on the most recent fiscal year-end balance sheets of such Subsidiary and the
Company and its consolidated Subsidiaries, respectively, and computed in
accordance with generally accepted accounting principles, or (ii) in the
judgment of the Board of Directors, as evidenced by a Board Resolution, the
Company determines that such Subsidiary is not material to the financial
condition of the Company and its Subsidiaries taken as a whole or (b) that is
designated as a Restricted Subsidiary by the Board of Directors, as evidenced by
a Board Resolution. As of the date of this Prospectus the subsidiaries of
Rayonier which meet the definition of Restricted Subsidiaries are Rayonier
Timberlands, L.P., Rayonier Timberlands Operating Company, L.P. and Rayonier New
Zealand Limited.
"Sale and Lease-Back Transaction" means any arrangement with any bank,
insurance company or other lender or investor, or to which any such lender or
investor is a party, providing for the leasing by the Company or a Restricted
Subsidiary for a period, including renewals, in excess of three years of any
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Principal Property of the Company or a Restricted Subsidiary which has been or
is to be sold or transferred by the Company or a Restricted Subsidiary to such
lender or investor or to any person to which funds have been or are to be
advanced by such lender or investor on the security of such Principal Property.
"Subsidiary" means (i) any corporation of which at the time of
determination the Company and/or one or more Subsidiaries owns or controls
directly or indirectly more than 50% of the outstanding shares of voting stock
or (ii) any other Person (other than a corporation) in which the Company or one
or more Subsidiaries directly or indirectly owns or controls more than 50% of
the voting interests therein or otherwise has the power to direct the policies,
management and affairs thereof.
"Value" means, with respect to a Sale and Lease-Back Transaction, as of any
particular time, the amount equal to the greater of (i) the net proceeds of the
sale or transfer of the Principal Property leased pursuant to such Sale and
Lease-Back Transaction and (ii) the fair market value, in the good faith opinion
of the Board of Directors, of such Principal Property at the time of entering
into such Sale and Lease-Back Transaction, in either case divided first by the
number of full years of the term of the lease and then multiplied by the number
of full years of such term remaining at the time of determination, without
regard to any renewal or extension options contained in the lease.
MODIFICATION AND WAIVER
Modification and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the holders of a majority in aggregate principal
amount of the Outstanding Debt Securities of each series affected thereby;
provided, however, that no such modification or amendment may, without the
consent of the Holder of each Outstanding Debt Security affected thereby, (i)
change the Stated Maturity of the principal of, or any installment of interest
on, any Outstanding Debt Security; (ii) reduce the principal amount of, or the
rate of interest on or any premium payable upon the redemption of, or the amount
of principal of an Original Issue Discount Security that would be due and
payable upon a declaration of acceleration of the Maturity of, any Outstanding
Debt Security; (iii) change the Place of Payment, or the coin or currency in
which any Outstanding Debt Security or the interest thereon is payable; (iv)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Outstanding Debt Security after the Stated Maturity; or (v)
change the provisions of the Indenture relating to amendments of the Indenture
requiring the consent of the affected Holders for waiver of compliance with
certain provisions of the Indenture or waiver of past defaults. (Section 9.02.)
The Holders of a majority in principal amount of the Outstanding Debt
Securities of each series may on behalf of the Holders of all Debt Securities of
that series waive, insofar as the series is concerned, compliance by the Company
with certain restrictive covenants of the Indenture. (Section 10.10.) The
Holders of not less than a majority in principal amount of the Outstanding Debt
Securities of any series may on behalf of the Holders of that series waive any
past default under the Indenture with respect to that series of Debt Securities,
except a default in the payment of the principal of (or premium, if any), or any
interest on, or payment into any sinking fund on, any Debt Security of that
series or in respect of a provision which under the Indenture cannot be modified
or amended without the consent of the Holder of each Outstanding Debt Security
of that series affected. (Section 5.13.)
EVENTS OF DEFAULT
The Indenture provides that the following shall constitute Events of
Default with respect to any series of Debt Securities: (i) default for 30 days
in the payment of any interest when due; (ii) default in the payment of
principal (or premium, if any) at Maturity; (iii) default in the payment of any
sinking fund or analogous payments; (iv) default in the performance of any other
covenant in the Indenture for 60 days after written notice thereof; (v) certain
events in bankruptcy, insolvency or reorganization; (vi) acceleration of
indebtedness for borrowed money in excess of $10,000,000, which acceleration
shall not have been rescinded or annulled within 30 days after notice; or (vii)
any other Event of Default provided in the applicable Board Resolution or
supplemental indenture under which such series of Debt
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Securities is issued. (Section 5.01.) The Company is required to furnish the
Trustee annually with a statement as to the fulfillment by the Company of its
obligations under the Indenture. (Section 10.06.) The Indenture provides that
the Trustee may withhold notice to the Holders of the Debt Securities of any
default (except in respect of the payment of principal or interest on the Debt
Securities) if it considers it in the interest of the Holders to do so. (Section
6.02.)
If an Event of Default with respect to Outstanding Debt Securities of any
series occurs and is continuing, then and in every such case the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Debt
Securities of that series may declare the principal amount (or, if the Debt
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms of that series) of all
the Debt Securities of that series to be due and payable immediately, by a
notice in writing to the Company (and to the Trustee if given by Holders), and
upon any such declaration such principal shall become immediately due and
payable. However, at any time after a declaration or acceleration with respect
to Debt Securities of any series has been made, but before a judgment or decree
for payment of the money due has been obtained, the Holders of a majority in
principal amount of Outstanding Debt Securities of that series may, subject to
certain conditions, rescind and annul such declaration. (Section 5.02.)
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing the Trustee
shall be under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the Holders, unless such
Holders shall have offered to the Trustee reasonable security or indemnity.
(Section 6.03.) Subject to such provisions for the security or indemnification
of the Trustee, the Holders of a majority in principal amount of the Outstanding
Debt Securities of any series shall 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
Debt Securities of that series. (Section 5.12.)
No Holder of any Debt Security of any series will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder, unless such Holder shall have previously given to the Trustee
written notice of a continuing Event of Default with respect to Debt Securities
of that series and unless the Holders of at least 25% in principal amount of the
Outstanding Debt Securities of that series shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and, within 60 days following the receipt of such notice, the Trustee
shall not have received from the Holders of a majority in principal amount of
the Outstanding Debt Securities of that series a direction inconsistent with
such request, and the Trustee shall have failed to institute such proceeding.
(Section 5.07.) However, the Holder of any Debt Security will have an absolute
right to receive payment of the principal of (and premium, if any) and interest
on such Debt Security on or after the due dates expressed in such Debt Security
and to institute a suit for the enforcement of any such payment. (Section 5.08.)
DEFEASANCE OF DEBT SECURITIES AND CERTAIN COVENANTS
The Company, at its option, either (a) will be discharged from any and all
obligations with respect to any series of Debt Securities (except for certain
obligations to register the transfer or exchange of Debt Securities, replace
stolen, lost or mutilated Debt Securities, maintain paying agencies and hold
moneys for payment in trust) or (b) will cease to be under any obligation to
comply with certain restrictive covenants of the Indenture with respect to any
Debt Securities, upon the deposit with the Trustee, in trust, of money or U.S.
government securities or securities of U.S. government agencies backed by the
full faith and credit of the U.S. government, or a combination thereof, which
through the payment of interest thereon and principal thereof in accordance with
their terms will provide money in an amount sufficient to pay all the principal
and interest on such series of Debt Securities on the dates such payments are
due in accordance with the terms of the Debt Securities. To exercise any such
option, no Event of Default or event which with notice or lapse of time would
become an Event of Default with respect to such series of Debt Securities shall
have occurred and be continuing. The Company is required to deliver to the
Trustee an opinion of counsel (i) to the effect that the deposit and related
defeasance
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would not cause the holders of the Debt Securities to recognize income, gain or
loss for Federal income tax purposes and, in the case of a discharge pursuant to
clause (a), accompanied by a ruling to such effect from the United States
Internal Revenue Service and (ii) with respect to certain other matters.
(Sections 4.01 and 4.03.)
CHANGES IN CONTROL AND HIGHLY LEVERAGED TRANSACTIONS
The Indenture does not contain provisions requiring redemption of the Debt
Securities by the Company, or adjustment to any terms of the Debt Securities,
upon any change in control of the Company.
Other than restrictions on Liens and Sale and Lease-Back Transactions
described under "Covenants" above, the Indenture does not contain any covenants
or other provisions designed to afford holders of the Debt Securities protection
in the event of a highly leveraged transaction involving the Company.
CONCERNING THE TRUSTEE
Bankers Trust Company, a New York banking corporation, will act as trustee
for the Debt Securities, and acts as depositary for funds of, makes loans to,
and performs other services for, the Company and its subsidiaries in the normal
course of business.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities (i) through underwriters or
dealers; (ii) directly to one or more purchasers; or (iii) through agents. The
Prospectus Supplement with respect to the Debt Securities being offered thereby
sets forth the terms of the offering of such Debt Securities, including the name
or names of any underwriters, the purchase price of such Debt Securities and the
proceeds to the Company from such sale, any underwriting discounts and other
items constituting underwriters' compensation, any initial public offering
price, any discounts or concessions allowed or reallowed or paid to dealers and
any securities exchange on which such Debt Securities may be listed. Only
underwriters so named in the Prospectus Supplement are deemed to be underwriters
in connection with the Debt Securities offered thereby.
If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
obligations of the underwriters to purchase such Debt Securities will be subject
to certain conditions precedent, and the underwriters will be obligated to
purchase all the Debt Securities of the series offered by the Company's
Prospectus Supplement if any of such Debt Securities are purchased. Any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
Debt Securities may also be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offering
and sale of the Debt Securities will be named, and any commissions payable by
the Company to such agent will be set forth, in the Prospectus Supplement.
Unless otherwise indicated in the Prospectus Supplement, any such agent is
acting on a best efforts basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain institutional
investors to purchase Debt Securities providing for payment and delivery on a
future date specified in the Prospectus Supplement. There may be limitations on
the minimum amount which may be purchased by any such institutional investor or
on the portion of the aggregate principal amount of the particular Debt
Securities which may be sold pursuant to such arrangements. Institutional
investors to which such offers may be made, when authorized, include commercial
and savings banks, insurance companies, pension funds, investment companies,
education and charitable institutions and such other institutions as may be
approved by the Company. The obligations of any such purchasers pursuant to such
delayed delivery and payment arrangements will not be subject to any conditions
except (i) the purchase by an institution of the particular Debt Securities
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shall not at any time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject and (ii)
if the particular Debt Securities are being sold to underwriters, the Company
shall have sold to such underwriters the total principal amount of such Debt
Securities less the principal amount thereof covered by such arrangements. The
agents, underwriters or dealers soliciting such offers will not have any
responsibility with respect to the validity of such arrangements or the
performance of the Company or such institutional investors thereunder.
Underwriters, dealers and agents that participate in the distribution of
the Debt Securities may be deemed to be underwriters, and any discounts or
commissions received by them from the Company and any profit on the resale of
Debt Securities by them may be deemed to be underwriting discounts and
commissions, under the Act. Under agreements which may be entered into by the
Company, underwriters, dealers and agents who participate in the distribution of
Debt Securities may be entitled to indemnification by the Company against
certain civil liabilities, including liabilities under the Act, or to
contribution with respect to payments which the underwriters, dealers or agents
may be required to make with respect thereto. Underwriters, dealers and agents
may engage in transactions with, or perform services for, the Company or its
subsidiaries in the ordinary course of their respective businesses.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sales, at prices related to such prevailing market prices or at
negotiated prices.
LEGAL MATTERS
Unless otherwise indicated in the Prospectus Supplement, the validity of
the Offered Securities will be passed upon for the Company by John B. Canning,
Esq., Corporate Secretary and Associate General Counsel of the Company, and for
the underwriters or agents, as the case may be, by Cravath, Swaine & Moore, 825
Eighth Avenue, New York, New York 10019.
EXPERTS
The audited financial statements and schedules incorporated by reference in
this Prospectus and elsewhere in the Registration Statement, to the extent and
for the periods indicated in their report, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
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