<PAGE> 1
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED DECEMBER 2, 1994)
$250,000,000
KIRBY CORPORATION
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
------------------------
Kirby Corporation (the "Company") may offer from time to time $250,000,000
aggregate initial offering price, or the equivalent thereof in one or more
foreign or composite currencies, of its Medium-Term Notes Due Nine Months or
More from Date of Issue (the "Notes"). Such aggregate initial offering price is
subject to reduction as a result of the sale by the Company of other Debt
Securities described in the accompanying Prospectus. Each Note will mature on
any day nine months or more from the date of issue, as specified in the
applicable Pricing Supplement hereto (each, a "Pricing Supplement"), and may be
subject to redemption at the option of the Company or repayment at the option of
the Holder thereof, in each case, in whole or in part, prior to its Stated
Maturity Date, as set forth therein and specified in the applicable Pricing
Supplement. The Notes, other than Foreign Currency Notes (as hereinafter
defined), will be issued in minimum denominations of $1,000 and integral
multiples thereof, unless otherwise specified in the applicable Pricing
Supplement, while Foreign Currency Notes will be issued in the minimum
denominations specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will bear interest at fixed rates (the "Fixed Rate Notes") or at floating rates
(the "Floating Rate Notes"). The applicable Pricing Supplement will specify
whether a Floating Rate Note is a Regular Floating Rate Note, a Floating
Rate/Fixed Rate Note or an Inverse Floating Rate Note and whether the rate of
interest thereon is determined by reference to one or more of the CD Rate, the
CMT Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR, the Prime Rate or the Treasury Rate (each, an
"Interest Rate Basis"), or any other interest rate basis or formula, as adjusted
by any Spread and/or Spread Multiplier. Interest on each Floating Rate Note will
accrue from its date of issue and will be payable in arrears monthly, quarterly,
semiannually or annually, as specified in the applicable Pricing Supplement, and
on the Maturity Date. 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, as set forth therein and
specified in the applicable Pricing Supplement. Interest on each Fixed Rate Note
will accrue from its date of issue and, unless otherwise specified in the
applicable Pricing Supplement, will be payable semiannually in arrears on April
15 and October 15 of each year and on the Maturity Date. The Notes may also be
issued with original issue discount, and such Notes may or may not pay any
interest. See "Description of Notes."
The interest rate, or the formula for the determination of any such interest
rate, applicable to each Note and the other variable terms thereof as described
herein will be established by the Company on the date of issue of such Note and
will be set forth therein and specified in the applicable Pricing Supplement.
Interest rates, interest rate formulae and such other variable terms are subject
to change by the Company, but no change will affect any Note already issued or
as to which an offer to purchase has been accepted by the Company.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or in certificated form (a "Certificated Note"), as set forth in the
applicable Pricing Supplement. Each Book-Entry Note will be represented by one
or more fully registered global securities (the "Global Securities") deposited
with or on behalf of The Depository Trust Company (or such other depositary as
is identified in the applicable Pricing Supplement) (the "Depositary") and
registered in the name of the Depositary or the Depositary's nominee. Interests
in the Global Securities will be shown on, and transfers thereof will be
effected only through records maintained by the Depositary (with respect to its
participants) and the Depositary's participants (with respect to beneficial
owners).
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY
SUPPLEMENT HERETO. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
PRICE TO AGENT'S DISCOUNTS PROCEEDS TO
PUBLIC(1)(2) AND COMMISSIONS(1)(2) COMPANY(3)(4)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note................................. 100% .125% -- .750% 99.875% -- 99.250%
- ------------------------------------------------------------------------------------------------------------------------
Total.................................... $250,000,000 $312,500 -- $1,875,000 $249,687,500 -- $248,125,000
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Salomon Brothers Inc and Wertheim Schroder and Co. Incorporated (the
"Agents"), will purchase the Notes, as principal, from the Company, for
resale to investors and other purchasers at varying prices relating to
prevailing market prices at the time of resale as determined by the Agents,
or, if so specified in the applicable Pricing Supplement, for resale at a
fixed public offering price. Unless otherwise specified in the applicable
Pricing Supplement, any Note sold to the Agents as principal will be
purchased by the Agents at a price equal to 100% of the principal amount
thereof less a percentage of the principal amount equal to the commission
applicable to an agency sale (as described below) of a Note of identical
maturity. If agreed to by the Company and the Agents, the Agents may utilize
their reasonable efforts on an agency basis to solicit offers to purchase
the Notes at 100% of the principal amount thereof, unless otherwise
specified in the applicable Pricing Supplement. The Company will pay a
commission to the Agents, ranging from .125% to .750% of the principal
amount of a Note, depending upon its stated maturity, sold through the
Agents. Commissions with respect to Notes with stated maturities in excess
of 30 years that are sold through the Agents will be negotiated between the
Company and the Agents at the time of such sale. See "Plan of Distribution."
(2) Or the equivalent thereof in one or more foreign or composite currencies.
(3) The Company has agreed to indemnify the Agents against, and to provide
contribution with respect to, certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Plan of Distribution."
(4) Before deducting expenses payable by the Company estimated at $360,000.
------------------------
The Notes are being offered on a continuous basis by the Company through the
Agents. Unless otherwise specified in the applicable Pricing Supplement, the
Notes will not be listed on any securities exchange and there can be no
assurance that the Notes offered hereby will be sold or that there will be a
secondary market for the Notes. The Company reserves the right to cancel or
modify the offer made hereby without notice. The Company or the Agents, if they
solicit the offer on an agency basis, may reject any offer to purchase Notes in
whole or in part. See "Plan of Distribution."
------------------------
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
WERTHEIM SCHRODER & CO.
INCORPORATED
------------------------
The date of this Prospectus Supplement is December 2, 1994.
<PAGE> 2
IN CONNECTION WITH THE OFFERING OF NOTES, THE AGENT MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
FOR NORTH CAROLINA RESIDENTS ONLY: THE COMMISSIONER OF INSURANCE FOR THE
STATE OF NORTH CAROLINA HAS NEITHER APPROVED NOR DISAPPROVED OF THE OFFERING IN
QUESTION, NOR HAS THE COMMISSIONER ACTED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS.
---------------------
DESCRIPTION OF NOTES
The Notes will be issued as a series of Debt Securities under an Indenture,
dated as of December 2, 1994 (the "Indenture"), between the Company and Texas
Commerce Bank National Association, as trustee (the "Trustee"). The following
summary of certain provisions of the Notes and of the Indenture does not purport
to be complete and is qualified in its entirety by reference to the Indenture, a
copy of which has been filed as an exhibit to the Registration Statement of
which this Prospectus Supplement and the accompanying Prospectus constitutes a
part. All article and section references appearing herein are to articles and
sections of the Indenture. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture or the Notes, as the case may
be. The term "Debt Securities," as used in this Prospectus Supplement, refers to
all debt securities issued and issuable from time to time under the Indenture
and includes the Notes. The following description of the Notes will apply to
each Note offered hereby unless otherwise specified in the applicable Pricing
Supplement.
GENERAL
The Notes to be issued under the Indenture will be unsecured general
obligations of the Company and will rank pari passu with all other unsecured and
unsubordinated indebtedness of the Company from time to time outstanding. The
Notes are obligations of the Company, which is a holding company. Since
operations of the Company are currently conducted principally through
wholly-owned subsidiaries, the cash flow of the Company, and therefore its
ability to service its debt, including the Notes, is dependent in part upon the
earnings of such subsidiaries and the distribution of those earnings to the
Company or upon other payments of funds to the Company by such subsidiaries. See
the accompanying Prospectus for a more complete description of certain matters
relating to the Company's corporate structure.
Debt securities other than the Notes or the Debt Securities may be issued
under additional indentures from time to time in one or more series up to the
aggregate principal amount from time to time authorized by the Company for each
series. The Company may, from time to time, without the consent of the Holders
of the Notes, provide for the issuance of Notes or other Debt Securities under
the Indenture in place of all or part of the $250,000,000 aggregate initial
offering price of Notes offered hereby.
The Notes are currently limited to $250,000,000 aggregate initial offering
price, or the equivalent thereof in one or more foreign or composite currencies.
The Notes will be offered on a continuous basis and will mature on any day nine
months or more from their dates of issue, as specified in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement,
interest-bearing Notes will either be Fixed Rate Notes or Floating Notes as
specified in the applicable Pricing Supplement. The Notes may also be issued
with original issue discount ("Original Issue Discount Notes") and such Notes
may or may not bear any interest.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in United States dollars and payments of principal of, and
premium, if any, and interest on, the Notes will be made in United States
dollars. The Notes may also be denominated in currencies or composite currencies
other than United States dollars ("Foreign Currency Notes") (the currency or
composite currency in which a Note is denominated, whether United States dollars
or otherwise, is herein referred to as the "Specified Currency"). See "Special
Provisions and Risks Relating to Foreign Currency Notes -- Payments of Principal
and Premium, if any, and Interest."
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<PAGE> 3
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for Foreign Currency Notes in the Specified Currency in
which such Notes are denominated. At the present time, there are limited
facilities in the United States for the conversion of United States dollars into
foreign currencies or composite currencies and vice versa, and commercial banks
do not generally offer non-United States dollar checking or savings account
facilities in the United States. If requested on or prior to the fifth Business
Day (as defined below) preceding the date of delivery of the Foreign Currency
Notes, or by such other day as determined by the Agents, the Agents are prepared
to arrange for the conversion of United States dollars into the Specified
Currency to enable the purchasers to pay for such Notes. Each such conversion
will be made by the Agents on such terms and subject to such conditions,
limitations and charges as the Agents may from time to time establish in
accordance with its regular foreign exchange practices. All costs of exchange
will be borne by the purchasers of the Foreign Currency Notes. See "Special
Provisions and Risks Relating to Foreign Currency Notes."
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of Notes
purchased in any single transaction. Interest rates, interest rate formulae and
other variable terms of the Notes are subject to change by the Company from time
to time, but no such change will affect any Note already issued or as to which
an offer to purchase has been accepted by the Company.
Each Note will be issued in fully registered form as a Book-Entry Note or a
Certificated Note. The authorized denominations of each Note other than a
Foreign Currency Note will be $1,000 and integral multiples thereof, unless
otherwise specified in the applicable Pricing Supplement, while the authorized
denominations of each Foreign Currency Note will be specified in the applicable
Pricing Supplement.
Book-Entry Notes may be transferred or exchanged only through the
Depositary. See "Book-Entry Notes." Registration of transfer or exchange of
Certificated Notes will be made at the office or agency of the Company or the
Security Registrar maintained for such purpose in the Borough of Manhattan, The
City of New York. The Company has appointed Chemical Bank to act as Security
Registrar. No service charge will be made by the Company or the Security
Registrar for any such registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith (other than
exchanges pursuant to the Indenture not involving any transfer).
Payments of principal of, and interest on, Book-Entry Notes will be made by
the Company through the Paying Agent to the Depositary. See "Book-Entry Notes."
In the case of Certificated Notes, payment of principal and premium, if any, due
on the Stated Maturity Date or any prior date on which the principal, or an
installment of principal, of a Note becomes due and payable, whether by the
declaration of acceleration, call for redemption at the option of the Company,
repayment at the option of the Holder or otherwise (the Stated Maturity Date or
such prior date, as the case may be, is herein referred to as the "Maturity
Date") of each Certificated Note will be made in immediately available funds
upon presentation thereof at the office or agency of the Company maintained by
the Company for such purpose in the Borough of Manhattan, The City of New York
(or, in the case of any repayment on an Optional Repayment Date, upon
presentation of such Certificated Note in accordance with the provisions
described below). Payment of interest due on the Maturity Date of each
Certificated Note will be made to the person to whom payment of the principal
and premium, if any, shall be made. Payment of interest due on each Certificated
Note on any Interest Payment Date (as defined below) (other than the Maturity
Date) will be made at the office or agency of the Company referred to above
maintained for such purpose by check mailed to the address of the Holder
entitled thereto as such address shall appear in the Security Register of the
Company. Notwithstanding the foregoing, a Holder of $10,000,000 (or the
equivalent thereof with respect to the Specified Currency applicable to a
Foreign Currency Note) or more in aggregate principal amount of Notes (whether
having identical or different terms and provisions) will be entitled to receive
interest payments on any Interest Payment Date (other than the Maturity Date) by
wire transfer of immediately available funds if appropriate wire transfer
instructions have been received in writing by the Paying Agent not less than 15
days prior to such Interest Payment Date. Such wire instructions, upon receipt
by the Paying Agent, shall remain in effect until revoked by such Holder. For
special payment terms applicable to Foreign Currency Notes, see "Special
Provisions and Risks Relating to Foreign Currency Notes -- Payments of Principal
and Premium, if any, and Interest".
S-3
<PAGE> 4
As used herein, "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, regulation or executive order to close in The
City of New York; provided, however, that, with respect to Foreign Currency
Notes the payment of which is to be made in a Specified Currency other than
United States dollars, such day is also not a day on which banking institutions
are authorized or required by law, regulation or executive order to close in the
principal financial center of the country of such Specified Currency (or, in the
case of the European Currency Unit ("ECU"), is not a day designated as an ECU
Non-Settlement Day by the ECU Banking Association or otherwise generally
regarded in the ECU interbank market as a day on which payments in ECUs shall
not be made); provided, further, that, with respect to Notes as to which LIBOR
is an applicable Interest Rate Basis, such day is also a London Business Day (as
defined below). "London Business Day" means any day (i) if the Index Currency
(as defined below) is other than ECU, on which dealings in such Index Currency
are transacted in the London interbank market or (ii) if the Index Currency is
ECU, that is not designated as an ECU Non-Settlement Day by the ECU Banking
Association or otherwise generally regarded in the ECU interbank market as a day
on which payments in ECUs shall not be made.
REDEMPTION AT THE OPTION OF THE COMPANY
The Notes will not be subject to any sinking fund. The Notes will be
redeemable at the option of the Company prior to the Stated Maturity Date only
if an Initial Redemption Date is specified in the applicable Pricing Supplement.
If so specified, the Notes will be subject to redemption at the option of the
Company on any date on and after the applicable Initial Redemption Date in whole
or from time to time in part in increments of $1,000 or the minimum denomination
specified in such Pricing Supplement (provided that any remaining principal
amount thereof shall be at least $1,000 or such minimum denomination), at the
applicable Redemption Price (as defined below) on notice given not more than 60
nor less than 30 days prior to the date of redemption and in accordance with the
provisions of the Indenture. "Redemption Price", with respect to a Note, means
an amount equal to the sum of (i) the Initial Redemption Percentage specified in
such Pricing Supplement (as adjusted by the Annual Redemption Percentage
Reduction, if applicable) multiplied by the unpaid principal amount or the
portion to be redeemed plus (ii) accrued interest to the date of redemption. The
Initial Redemption Percentage, if any, applicable to a Note shall decline at
each anniversary of the Initial Redemption Date by an amount equal to the
applicable Annual Redemption Percentage Reduction, if any, until the Redemption
Price is equal to 100% of the unpaid principal amount thereof or the portion
thereof to be redeemed.
REPAYMENT AT THE OPTION OF THE HOLDER
If so specified in the applicable Pricing Supplement, the Notes will be
repayable by the Company in whole or in part at the option of the Holders
thereof on their respective Optional Repayment Dates specified in such Pricing
Supplement. If no Optional Repayment Date is specified with respect to a Note,
such Note will not be repayable at the option of the Holder thereof prior to the
Stated Maturity Date. Any repayment in part will be in increments of $1,000 or
the minimum denomination specified in the applicable Pricing Supplement
(provided that any remaining principal amount thereof shall be at least $1,000
or such minimum denomination). Unless otherwise specified in the applicable
Pricing Supplement, the repayment price for any Note to be repaid means an
amount equal to the sum of (i) 100% of the unpaid principal amount thereof or
the portion thereof plus (ii) accrued interest to the date of repayment. For any
Note to be repaid, such Note must be received, together with the form thereon
entitled "Option to Elect Repayment" duly completed, by the Paying Agent at its
principal office (or such other address of which the Company shall from time to
time notify the Holders) not more than 60 nor less than 30 days prior to the
date of repayment. Exercise of such repayment option by the Holder will be
irrevocable.
While the Book-Entry Notes are represented by the Global Securities held by
or on behalf of the Depositary, and registered in the name of the Depositary or
the Depositary's nominee, the option for repayment may be exercised by the
applicable Participant (as defined below) that has an account with the
Depositary, on behalf of the beneficial owners of the Global Security or Global
Securities representing such Book-Entry Notes, by delivering a written notice
substantially similar to the above mentioned form to the
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<PAGE> 5
Paying Agent at its principal office (or such other address of which the Company
shall from time to time notify the Holders) not more than 60 nor less than 30
days prior to the date of repayment. Notices of elections from Participants on
behalf of beneficial owners of the Global Security or Global Securities
representing such Book-Entry Notes to exercise their option to have such
Book-Entry Notes repaid must be received by the Paying Agent by 5:00 p.m., New
York City time, on the last day for giving such notice. In order to ensure that
a notice is received by the Paying Agent on a particular day, the beneficial
owner of the Global Security or Global Securities representing such Book-Entry
Notes must so direct the applicable Participant before such Participant's
deadline for accepting instructions for that day. Different firms may have
different deadlines for accepting instructions from their customers.
Accordingly, beneficial owners of the Global Security or Global Securities
representing Book-Entry Notes should consult the Participants through which they
own their interest therein for the respective deadlines for such Participants.
All notices shall be executed by a duly authorized officer of such Participant
(with signature guaranteed) and shall be irrevocable. In addition, beneficial
owners of the Global Security or Global Securities representing Book-Entry Notes
shall effect delivery at the time such notices of election are given to the
Depositary by causing the applicable Participant to transfer such beneficial
owner's interest in the Global Security or Global Securities representing such
Book-Entry Notes, on the Depositary's records, to the Paying Agent. See
"Book-Entry Notes".
If applicable, the Company will comply with the requirements of Rule 14e-1
under the Securities Exchange Act of 1934, as amended, and any other securities
laws or regulations in connection with any such repayment.
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may be held or
resold or, at the discretion of the Company, may be surrendered to the Trustee
for cancellation.
INTEREST
General
Unless otherwise specified in the applicable Pricing Supplement, each Note
will bear interest from its date of issue at the rate per annum, in the case of
a Fixed Rate Note, or pursuant to the interest rate formula, in the case of a
Floating Rate Note, in each case as specified in the applicable Pricing
Supplement, until the principal thereof is paid or duly made available for
payment. Interest payments in respect of the Notes will equal the amount of
interest accrued from and including the immediately preceding Interest Payment
Date in respect of which interest has been paid or duly made available for
payment (or from and including the date of issue, if no interest has been paid
with respect to the applicable Note) to but excluding the related Interest
Payment Date or the Maturity Date, as the case may be.
Interest will be payable in arrears on each Interest Payment Date specified
in the applicable Pricing Supplement on which an installment of interest is due
and payable and on the Maturity Date. Unless otherwise specified in the
applicable Pricing Supplement, the first payment of interest on any Note
originally issued between a Record Date (as defined below) and the related
Interest Payment Date or on an Interest Payment Date will be made on the
Interest Payment Date immediately following the next succeeding Record Date to
the Holder on such next succeeding Record Date. Unless otherwise specified in
the applicable Pricing Supplement, a "Record Date" shall be the fifteenth
calendar day (whether or not a Business Day) immediately preceding the related
Interest Payment Date.
Fixed Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, the
"Interest Payment Dates" for the Fixed Rate Notes will be April 15 and October
15 of each year and the Maturity Date. Unless otherwise specified in the
applicable Pricing Supplement, interest on Fixed Rate Notes will be computed on
the basis of a 360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note
falls on a day that is not a Business Day, the required payment of principal,
premium, if any, and/or interest will be made on the next
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<PAGE> 6
succeeding Business Day as if made on the date such payment was due, and no
interest will accrue on such payment for the period from and after such Interest
Payment Date or the Maturity Date, as the case may be, to the date of such
payment on the next succeeding Business Day.
Floating Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. The applicable Pricing Supplement
will specify certain terms with respect to which each Floating Rate Note is
being delivered, including: whether such Floating Rate Note is a "Regular
Floating Rate Note," a "Floating Rate/Fixed Rate Note" or an "Inverse Floating
Rate Note," Fixed Rate Commencement Date and Fixed Interest Rate, as applicable,
Interest Rate Basis or Bases, Initial Interest Rate, Interest Reset Period and
Interest Reset Dates, Record Dates, Interest Payment Period and Interest Payment
Dates, Index Maturity, maximum interest rate and minimum interest rate, if any,
and Spread and/or Spread Multiplier, if any, and if one or more of the
applicable Interest Rate Bases is LIBOR, the Index Currency and the Designated
LIBOR Page, as described below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," an "Inverse Floating Rate Note" or as having an
Addendum attached, such Floating Rate Note will be designated as a "Regular
Floating Rate Note" and, except as described below or in the applicable
Pricing Supplement, bear interest at the rate determined by reference to
the applicable Interest Rate Basis or Bases (a) plus or minus the
applicable Spread, if any, and/or (b) multiplied by the applicable Spread
Multiplier, if any. Commencing on the first Interest Reset Date (as defined
below), the rate at which interest on such Regular Floating Rate Note shall
be payable shall be reset as of each Interest Reset Date; provided,
however, that the interest rate in effect for the period from the date of
issue to the first Interest Reset Date will be the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," then, except as described below or in the applicable
Pricing Supplement, such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the first Interest
Reset Date, the rate at which interest on such Floating Rate/Fixed Rate
Note shall be payable shall be reset as of each Interest Reset Date,
provided, however, that (y) the interest rate in effect for the period from
the date of issue to the first Interest Reset Date will be the Initial
Interest Rate and (z) the interest rate in effect commencing on the Fixed
Rate Commencement Date to the Maturity Date shall be the Fixed Interest
Rate, if such rate is specified in the applicable Pricing Supplement or, if
no such Fixed Interest Rate is so specified, the interest rate in effect
thereon on the day immediately preceding the Fixed Rate Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest equal to the Fixed
Interest Rate specified in the applicable Pricing Supplement minus the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any; provided, however, that, unless
otherwise specified in the applicable Pricing Supplement, the interest rate
thereon will not be less than zero. Commencing on the first Interest Reset
Date, the rate at which interest on such Inverse Floating Rate Note is
payable shall be reset as of each Interest Reset Date; provided, however,
that the interest rate in effect for the period from the date of issue to
the first Interest Reset Date will be the Initial Interest Rate.
The "Spread" is the number of basis points to be added to or subtracted
from the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest Rate
Basis or Bases will be multiplied to determine the applicable interest rate on
such Floating Rate Note. The "Index Maturity"
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<PAGE> 7
is the period to maturity of the instrument or obligation with respect to which
the related Interest Rate Basis or Bases will be calculated.
Notwithstanding the foregoing, if such Floating Rate Note is designated as
having an Addendum attached as specified on the face thereof, such Floating Rate
Note shall bear interest in accordance with the terms described in such Addendum
and the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Pricing Supplement, the interest rate in effect on each day shall
be (i) if such day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date (as defined below) immediately preceding such
Interest Reset Date or (ii) if such day is not an Interest Reset Date, the
interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date.
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper
Rate, (iv) the Eleventh District Cost of Funds Rate, (v) the Federal Funds Rate,
(vi) LIBOR, (vii) the Prime Rate, (viii) the Treasury Rate, or (ix) such other
Interest Rate Basis or interest rate formula as may be set forth in the
applicable Pricing Supplement; provided, however, that with respect to a
Floating Rate/Fixed Rate Note, the interest rate commencing on the Fixed Rate
Commencement Date to the Maturity Date shall be the Fixed Interest Rate, if such
rate is specified in the applicable Pricing Supplement or, if no such Fixed
Interest Rate is specified, the interest rate in effect thereon on the day
immediately preceding the Fixed Rate Commencement Date.
The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually, annually or such other specified period (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Date will be, in the case of
Floating Rate Notes that reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Floating Rate Notes
as to which the Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month (with the exception of monthly reset Floating Rate
Notes as to which the Eleventh District Cost of Funds Rate is an applicable
Interest Rate Basis, which will reset on the first calendar day of the month);
(iv) quarterly, the third Wednesday of March, June, September and December of
each year, (v) semiannually, the third Wednesday of two months specified in the
applicable Pricing Supplement; and (vi) annually, the third Wednesday of the
month specified in the applicable Pricing Supplement; provided, however, that,
with respect to Floating Rate/Fixed Rate Notes, the fixed rate of interest in
effect for the period from the Fixed Rate Commencement Date to the Maturity Date
shall be the Fixed Interest Rate or, if no such Fixed Interest Rate is
specified, the interest rate in effect on the day immediately preceding the
Fixed Rate Commencement Date, as specified in the applicable Pricing Supplement.
If any Interest Reset Date for any Floating Rate Note would otherwise be a day
that is not a Business Day, such Interest Reset Date will be postponed to the
next succeeding day that is a Business Day, except that in the case of a
Floating Rate Note as to which LIBOR is an applicable Interest Rate Basis, if
such Business Day falls in the next succeeding calendar month, such Interest
Reset Date will be the immediately preceding Business Day.
The interest rate applicable to each Interest Reset Period commencing on
the Interest Reset Date with respect to such Interest Reset Period will be the
rate determined as of the applicable Interest Determination Date on or prior to
the Calculation Date (as defined below). The "Interest Determination Date" with
respect to the CD Rate, the CMT Rate, the Commercial Paper Rate, the Federal
Funds Rate and the Prime Rate will be the second Business Day immediately
preceding the applicable Interest Reset Date; the "Interest Determination Date"
with respect to the Eleventh District Cost of Funds Rate will be the last
working day of the month immediately preceding the applicable Interest Reset
Date on which the Federal Home Loan Bank of San Francisco (the "FHLB of San
Francisco") publishes the Index (as defined below); and the "Interest
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Determination Date" with respect to LIBOR will be the second London Business Day
immediately preceding the applicable Interest Reset Date. With respect to the
Treasury Rate, the "Interest Determination Date" will be the day in the week in
which the applicable Interest Reset Date falls on which day Treasury Bills (as
defined below) are normally auctioned (Treasury Bills are normally sold at an
auction held on Monday of each week, unless that day is a legal holiday, in
which case the auction is normally held on the following Tuesday, except that
such auction may be held on the preceding Friday); provided, however, that if an
auction is held on the Friday of the week preceding the applicable Interest
Reset Date, the Interest Determination Date will be such preceding Friday; and
provided, further, that if an auction falls on the applicable Interest Reset
Date, then the Interest Reset Date will instead be the first Business Day
following such auction. The "Interest Determination Date" pertaining to a
Floating Rate Note the interest rate of which is determined by reference to two
or more Interest Rate Bases will be the most recent Business Day that is at
least two Business Days prior to the applicable Interest Reset Date for such
Floating Rate Note on which each Interest Rate Basis is determinable. Each
Interest Rate Basis will be determined on such date, and the applicable interest
rate will take effect on the applicable Interest Reset Date.
A Floating Rate Note may also have either or both of the following: (i) a
maximum numerical limitation, or ceiling, on the rate at which interest may
accrue during any interest period; and (ii) a minimum numerical limitation, or
floor, on the rate at which interest may accrue during any interest period. 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 Floating Rate
Notes will in no event be higher than the maximum rate permitted by New York
law, as the same may be modified by United States law of general application.
Except as provided below or in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes that reset: (i) daily,
weekly or monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as specified in
the applicable Pricing Supplement; (ii) quarterly, on the third Wednesday of
March, June, September and December of each year; (iii) semiannually, on the
third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; and (iv) annually, the third Wednesday of the month of each
year specified in the applicable Pricing Supplement (each, an "Interest Payment
Date") and, in each case, on the Maturity Date. If any Interest Payment Date for
any Floating Rate Note (other than the Maturity Date) would otherwise be a day
that is not a Business Day, such Interest Payment Date will be postponed to the
next succeeding day that is a Business Day, except that in the case of a
Floating Rate Note as to which LIBOR is an applicable Interest Rate Basis, if
such Business Day falls in the next succeeding calendar month, such Interest
Payment Date will be the immediately preceding Business Day. If the Maturity
Date of a Floating Rate Note falls on a day that is not a Business Day, the
required payment of principal, premium, if any, and/or interest will be made on
the next succeeding Business Day as if made on the date such payment was due,
and no interest shall accrue on such payment for the period from and after the
Maturity Date to the date of such payment on the next succeeding Business Day.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five-one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used in
or resulting from such calculation on Floating Rate Notes will be rounded, in
the case of United States dollars, to the nearest cent or, in the case of a
Specified Currency other than United States dollars, to the nearest unit (with
one-half cent or unit being rounded upward).
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the period for which accrued interest is being calculated. Unless
otherwise specified in the applicable Pricing Supplement, the interest factor
for each such day will be computed by dividing the interest rate applicable to
such day by 360, in the case of Notes for which the Interest Rate Basis is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of days
in the year in the case of Notes for which the Interest Rate Basis is the CMT
Rate or the Treasury Rate. Unless otherwise specified in the applicable Pricing
Supplement, the interest factor for Notes for which the interest rate is
calculated with reference to two or more Interest
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Rate Bases will be calculated in each period in the same manner as if only one
of the applicable Interest Rate Bases applied as specified in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the Paying
Agent will be the "Calculation Agent." Upon request of the Holder of any
Floating Rate Note, the Calculation Agent will disclose the interest rate then
in effect and, if determined, the interest rate that will become effective as a
result of a determination made for the next succeeding Interest Reset Date with
respect to such Floating Rate Note. Unless otherwise specified in the applicable
Pricing Supplement, the "Calculation Date," if applicable, pertaining to any
Interest Determination Date will be the earlier of (i) the tenth calendar day
after such Interest Determination Date, or, if such day is not a Business Day,
the next succeeding Business Day or (ii) the Business Day immediately preceding
the applicable Interest Payment Date or the Maturity Date, as the case may be.
CD Rate. CD Rate Notes will bear interest at the rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in such CD Rate Notes and the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date relating to a CD Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CD Rate (a "CD Rate Interest Determination Date"), the rate on
such date for negotiable certificates of deposit having the Index Maturity
specified in the applicable Pricing Supplement as published by the Board of
Governors of the Federal Reserve System in "Statistical Release H.15(519),
Selected Interest Rates" or any successor publication ("H.15(519)") under the
heading "CDs (Secondary Market)," or, if not published by 3:00 P.M., New York
City time, on the related Calculation Date, the rate on such CD Rate Interest
Determination Date for negotiable certificates of deposit of the Index Maturity
specified in the applicable Pricing Supplement as published by the Federal
Reserve Bank of New York in its daily statistical release "Composite 3:30 P.M.
Quotations for U.S. Government Securities" or any successor publication
("Composite Quotations") under the heading "Certificates of Deposit." If such
rate is not yet published in either H.15(519) or Composite Quotations by 3:00
P.M., New York City time, on the related Calculation Date, then the CD Rate on
such CD Rate Interest Determination Date will be calculated by the Calculation
Agent and will be the arithmetic mean of the secondary market offered rates as
of 10:00 A.M., New York City time, on such CD Rate Interest Determination Date,
of three leading nonbank dealers in negotiable United States dollar certificates
of deposit in The City of New York (which may include the Agents or their
affiliates) selected by the Calculation Agent for negotiable certificates of
deposit of major United States money market banks for negotiable certificates of
deposit with a remaining maturity closest to the Index Maturity designated in
the applicable Pricing Supplement in an amount that is representative for a
single transaction in that market at that time; provided, however, that if the
dealers so selected by the Calculation Agent are not quoting as mentioned in
this sentence, the CD Rate determined as of such CD Rate Interest Determination
Date will be the CD Rate in effect on such CD Rate Interest Determination Date.
CMT Rate. CMT Rate Notes will bear interest at the rates (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any)
specified in such CMT Rate Notes and any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date relating to a CMT Rate
Note or any Floating Rate Note for which the interest rate is determined with
reference to the CMT Rate (a "CMT Rate Interest Determination Date"), the rate
displayed on the Designated CMT Telerate Page (as defined below) under the
caption ". . . Treasury Constant Maturities . . . Federal Reserve Board Release
H.15 . . . Mondays Approximately 3:45 P.M.," under the column for the Designated
CMT Maturity Index (as defined below) for (i) if the Designated CMT Telerate
Page is 7055, the rate on such CMT Rate Interest Determination Date and (ii) if
the Designated CMT Telerate Page is 7052, the week, or the month, as applicable,
ended immediately preceding the week in which the related CMT Rate Interest
Determination Date occurs. If such rate is no longer displayed on the relevant
page, or if not displayed by 3:00 P.M., New York City time, on the Calculation
Date, then the CMT Rate for such CMT Rate Interest Determination Date will be
such treasury constant maturity rate for the
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Designated CMT Maturity Index as published in the relevant H.15(519). If such
rate is no longer published, or if not published by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate for such CMT Rate
Interest Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the CMT Rate Interest Determination Date with
respect to such Interest Reset Date as may then be published by either the Board
of Governors of the Federal Reserve System or the United States Department of
Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate for the CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be a yield to maturity, based on the arithmetic mean of the secondary market
closing offer side prices as of approximately 3:30 P.M., New York City time, on
the CMT Rate Interest Determination Date reported, according to their written
records, by three leading primary United States government securities dealers
(each, a "Reference Dealer") in The City of New York (which may include the
Agents or their affiliates) selected by the Calculation Agent (from five such
Reference Dealers selected by the Calculation Agent and eliminating the highest
quotation (or, in the event of equality, one of the highest) and the lowest
quotation (or, in the event of equality, one of the lowest)), for the most
recently issued direct noncallable fixed rate obligations of the United States
("Treasury Notes") with an original maturity of approximately the Designated CMT
Maturity Index and a remaining term to maturity of not less than such Designated
CMT Maturity Index minus one year. If the Calculation Agent cannot obtain three
such Treasury Note quotations, the CMT Rate for such CMT Rate Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity based on the arithmetic mean of the secondary market offer
side prices as of approximately 3:30 P.M., New York City time, on the CMT Rate
Interest Determination Date of three Reference Dealers in The City of New York
(from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for the Treasury Notes with an original maturity of the number of
years that is the next highest to the Designated CMT Maturity Index and a
remaining term to maturity closest to the Designated CMT Maturity Index and in
an amount of at least $100 million. If three or four (and not five) of such
Reference Dealers are quoting as described above, then the CMT Rate will be
based on the arithmetic mean of the offer prices obtained and neither the
highest nor the lowest of such quotes will be eliminated; provided, however,
that if fewer than three Reference Dealers selected by the Calculation Agent are
quoting as described herein, the CMT Rate will be the CMT Rate in effect on such
CMT Rate Interest Determination Date. If two Treasury Notes with an original
maturity as described in the third preceding sentence have remaining terms to
maturity equally close to the Designated CMT Maturity Index, the quotes for the
Treasury Note with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no such page is specified in the applicable Pricing Supplement, the Designated
CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20, or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be 2 years.
Commercial Paper Rate. Commercial Paper Rate Notes will bear interest at
the rates (calculated with reference to the Commercial Paper Rate and the Spread
and/or Spread Multiplier, if any) specified in such 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
relating to a Commercial Paper Rate Note or any Floating Rate Note for which the
interest rate is determined with reference to the Commercial Paper Rate (a
"Commercial Paper Rate Interest Determination Date"), the Money Market Yield (as
defined below) on such date of the
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rate for commercial paper having the Index Maturity specified in the applicable
Pricing Supplement as published in H.15(519) under the heading "Commercial
Paper." In the event that such rate is not published by 3:00 P.M., New York City
time, on the related Calculation Date, then the Commercial Paper Rate will be
the Money Market Yield on such Commercial Paper Rate Interest Determination Date
of the rate for commercial paper having the Index Maturity specified in the
applicable Pricing Supplement as published in Composite Quotations under the
heading "Commercial Paper" (with an Index Maturity of one month or three months
being deemed to be equivalent to an Index Maturity of 30 days or 90 days,
respectively). If by 3:00 P.M., New York City time, on the related Calculation
Date such rate is not yet published in either H.15(519) or Composite Quotations,
then the Commercial Paper Rate on such Commercial Paper Rate Interest
Determination Date will be calculated by the Calculation Agent and will be the
Money Market Yield of the arithmetic mean of the offered rates at approximately
11:00 A.M., New York City time, on such Commercial Paper Rate Interest
Determination Date of three leading dealers of commercial paper in The City of
New York (which may include the Agents or their affiliates) selected by the
Calculation Agent for commercial paper having the Index Maturity designated in
the applicable Pricing Supplement placed for an industrial issuer whose bond
rating is "AA", or the equivalent, from a nationally recognized statistical
rating organization; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Commercial
Paper Rate determined as of such Commercial Paper Rate Interest Determination
Date will be the Commercial Paper Rate in effect on such Commercial Paper Rate
Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated
in accordance with the following formula:
D X 360
Money Market Yield = ------------- X 100
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
Eleventh District Cost of Funds Rate. Eleventh District Cost of Funds Rate
Notes will bear interest at the rate (calculated with reference to the Eleventh
District Cost of Funds Rate and the Spread and/or Spread Multiplier, if any)
specified in such Eleventh District Cost of Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Eleventh
District Cost of Funds Rate" means, with respect to any Interest Determination
Date relating to an Eleventh District Cost of Funds Rate Note or any Floating
Rate Note for which the interest rate is determined with reference to the
Eleventh District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate
Interest Determination Date"), the rate equal to the monthly weighted average
cost of funds for the calendar month immediately preceding the month in which
such Eleventh District Cost of Funds Rate Interest Determination Date falls, as
set forth under the caption, "11th District" on Telerate Page 7058 as of 11:00
A.M., San Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on any
related Eleventh District Cost of Funds Rate Interest Determination Date, the
Eleventh District Cost of Funds Rate for such Eleventh District Cost of Funds
Rate Interest Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month immediately preceding the
date of such announcement. If the FHLB of San Francisco fails to announce such
rate for the calendar month immediately preceding such Eleventh District Cost of
Funds Rate Interest Determination Date, then Eleventh District Cost of Funds
Rate determined as of such Eleventh District Cost of Funds Rate Interest
Determination Date will be the Eleventh District Cost of Funds Rate in effect on
such Eleventh District Cost of Funds Rate Interest Determination Date.
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Federal Funds Rate. Federal Funds Rate Notes will bear interest at the
rates (calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in such Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to a
Federal Funds Rate Note or any Floating Rate Note for which the interest rate is
determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for federal funds as
published in H.15(519) under the heading "Federal Funds (Effective)" or, if not
published by 3:00 P.M., New York City time, on the related Calculation Date, the
rate on such Federal Funds Rate Interest Determination Date as published in
Composite Quotations under the heading "Federal Funds/Effective Rate." If by
3:00 P.M., New York City time, on the related Calculation Date such rate is not
published in either H.15(519) or Composite Quotations, then the Federal Funds
Rate on such Federal Funds Rate Interest Determination Date will be calculated
by the Calculation Agent and will be the arithmetic mean of the rates for the
last transaction in overnight United States dollar federal funds arranged by
three leading brokers of federal funds transactions in The City of New York
(which may include the Agents or their affiliates) selected by the Calculation
Agent prior to 9:00 A.M., New York City time, on such Federal Funds Rate
Interest Determination Date; provided, however, that if the brokers so selected
by the Calculation Agent are not quoting as mentioned in this sentence, the
Federal Funds Rate determined as of such Federal Funds Rate Interest
Determination Date will be the Federal Funds Rate in effect on such Federal
Funds Rate Interest Determination Date.
LIBOR Rate. LIBOR Notes will bear interest at the rates (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any) specified in
such LIBOR Notes and in any applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined by the Calculation Agent in accordance with the
following provisions:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note or any Floating Rate Note for which the interest rate is determined
with reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will
be either: (a) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the specified
Designated LIBOR Page by its terms provides only for a single rate, in
which case such single rate shall be used) for deposits in the Index
Currency (as defined below) having the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second London Business Day
immediately following such LIBOR Interest Determination Date, that appear
on the Designated LIBOR Page specified in the applicable Pricing Supplement
as of 11:00 A.M. London time, on such LIBOR 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 or if neither "LIBOR
Reuters" nor "LIBOR Telerate" is specified as the method for calculating
LIBOR, the rate for deposits in the Index Currency having the Index
Maturity designated in the applicable Pricing Supplement, commencing on the
second London Business Day immediately following such LIBOR Interest
Determination Date that appears on the Designated LIBOR Page specified in
the applicable Pricing Supplement as of 11:00 A.M., London time, on such
LIBOR Interest Determination Date. If fewer than two such offered rates
appear, or if no such rate appears, as applicable, LIBOR in respect of the
related LIBOR Interest Determination Date will be determined in accordance
with the provisions described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear, or no rate appears, as the case may
be, on the applicable Designated LIBOR Page as specified in clause (i)
above, 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, to provide the Calculation Agent with
its offered quotation for deposits in the Index Currency for the period of
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Business Day immediately following such
LIBOR Interest Determination Date, to prime banks in the
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London interbank market at approximately 11:00 A.M., London time, on such
LIBOR Interest Determination Date and in a principal amount that is
representative for 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 LIBOR Interest Determination Date will be the arithmetic
mean of such quotations. If fewer than two quotations are provided, LIBOR
determined on such LIBOR Interest Determination Date will be the arithmetic
mean of the rates quoted at approximately 11:00 A.M., in the applicable
Principal Financial Center (as defined below), on such LIBOR Interest
Determination Date by three major banks in such Principal Financial Center
selected by the Calculation Agent for loans in the Index Currency to
leading European banks, having the Index Maturity designated in the
applicable Pricing Supplement and in a principal amount that is
representative for a single transaction in such Index Currency in such
market at such time; provided, however, that if the banks so selected by
the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
determined as of such LIBOR Interest Determination Date will be LIBOR in
effect on such LIBOR Interest Determination Date.
"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 United States dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is specified 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 specified
in the applicable Pricing Supplement or neither "LIBOR Reuters" nor "LIBOR
Telerate" is specified as the method for calculating LIBOR, 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.
"Principal Financial Center" will generally be the capital city of the
country of the specified Index Currency, except that with respect to the United
States dollars, Deutsche Marks, Dutch Guilders, Italian Lire, Swiss Francs and
ECUs, the Principal Financial Center shall The City of New York, Frankfurt,
Amsterdam, Milan, Zurich and Luxembourg, respectively.
Prime Rate. Prime Rate Notes will bear interest at the rates (calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any) specified in such Prime Rate Notes and the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date relating to a Prime
Rate Note or any Floating Rate Note for which the interest rate is determined
with reference to the Prime Rate (a "Prime Rate Interest Determination Date"),
the rate on such date as such rate is published in H.15(519) under the heading
"Bank Prime Loan." If such rate is not published prior to 3:00 P.M., New York
City time, on the related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen NYMF Page (as defined below) as such bank's prime
rate or base lending rate as in effect for such Prime Rate Interest
Determination Date. If fewer than four such rates but more than one such rate
appear on the Reuters Screen NYMF Page for such Prime Rate Interest
Determination Date, the Prime Rate shall be the arithmetic mean of the prime
rates quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date by four major money center banks in The City of New York
selected by the Calculation Agent. If fewer than two such rates appear on the
Reuters Screen NYMF Page, the Prime Rate will be determined by the Calculation
Agent on the basis of the rates furnished in The City of New York by three
substitute banks or trust companies organized and doing business under the laws
of the United States, or any State thereof, having total equity capital of at
least $500 million and being subject to supervision or examination by Federal or
State authority, selected by the Calculation Agent to provide such rate or
rates; provided, however, that if the banks or trust companies selected as
aforesaid are not quoting as mentioned in this sentence, the Prime Rate
determined as of such Prime Rate Interest Determination Date will be the Prime
Rate in effect on such Prime Rate Interest Determination Date.
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"Reuters Screen NYMF Page" means the display designated as page "NYMF" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
NYMF page on that service for the purpose of displaying prime rates or base
lending rates of major United States banks).
Treasury Rate. Treasury Rate Notes will bear interest at the rates
(calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any) specified in such Treasury Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Rate Note or any Floating Rate Note for which the interest rate is
determined by reference to the Treasury Rate (a "Treasury Rate Interest
Determination Date"), the rate applicable to the most recent auction of direct
obligations of the United States ("Treasury Bills") having the Index Maturity
specified in the applicable Pricing Supplement, as such rate is published in
H.15(519) under the heading "Treasury Bills-auction average (investment)" or, if
not published by 3:00 P.M., New York City time, on the related Calculation Date,
the auction average rate (expressed as a bond equivalent on the basis of a year
of 365 or 366 days, as applicable, and applied on a daily basis) as otherwise
announced by the United States Department of the Treasury. In the event that the
results of the auction of Treasury Bills having the Index Maturity designated in
the applicable Pricing Supplement are not reported as provided by 3:00 P.M., New
York City time, on such Calculation Date, or if no such auction is held in a
particular week, then the Treasury Rate will be calculated by the Calculation
Agent and will be a yield to maturity (expressed as a bond equivalent on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily basis)
of the arithmetic mean of the secondary market bid rates, as of approximately
3:30 P.M., New York City time, on such Treasury Rate Interest Determination
Date, of three leading primary United States government securities dealers
(which may include the Agents or their affiliates) selected by the Calculation
Agent, for the issue of Treasury Bills with a remaining maturity closest to the
Index Maturity designated in the applicable Pricing Supplement; provided,
however, that if the dealers so selected by the Calculation Agent are not
quoting as mentioned in this sentence, the Treasury Rate determined as of such
Treasury Rate Interest Determination Date will be the Treasury Rate in effect on
such Treasury Rate Interest Determination Date.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the Notes, including the determination of an
Interest Rate Basis, the calculation of the interest rate applicable to a
Floating Rate Note, and the specification of one or more Interest Rate Bases,
the Interest Payment Dates, the Maturity Date or any other variable term
relating thereto, may be modified as specified under "Other Provisions" on the
face thereof or in an Addendum relating thereto, if so specified on the face
thereof and in the applicable Pricing Supplement.
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes. Unless otherwise
specified in the applicable Pricing Supplement, interest on each Amortizing Note
will be computed on the basis of a 360-day year of twelve 30-day months.
Payments with respect to Amortizing Notes will be applied first to interest due
and payable thereon and then to the reduction of the unpaid principal amount
thereof. Further information concerning additional terms and provisions of
Amortizing Notes will be specified in the applicable Pricing Supplement. A table
setting forth repayment information in respect of each Amortizing Note will be
included in the applicable Pricing Supplement and set forth in each such Note.
ORIGINAL ISSUE DISCOUNT NOTES
The Company may offer Original Issue Discount Notes from time to time. Such
Original Issue Discount Notes may currently pay no interest or interest at a
rate that at the time of issuance is below market rates. In the event of
redemption, repayment or acceleration of maturity in respect of an Original
Issue Discount Note, the amount payable to the holder of such Original Issue
Discount Note will be equal to (i) the Amortized Face Amount (as defined below)
as of the date of such event, plus (ii) with respect to any redemption of an
Original Issue Discount Note, the Initial Redemption Percentage specified in the
applicable Pricing
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Supplement (as adjusted by the Annual Redemption Percentage Reduction, if
applicable) minus 100% multiplied by the Issue Price specified in such Pricing
Supplement (the "Issue Price"), net of any portion of such Issue Price that has
been paid prior to the date of redemption, or the portion of the Issue Price (or
the net amount) proportionate to the portion of the unpaid principal amount to
be redeemed, plus (iii) any accrued interest to the date of such event the
payment of which would constitute qualified stated interest payments within the
meaning of Treasury Regulation 1.1273-1(c) under the Internal Revenue Code of
1986, as amended (the "Code"). The "Amortized Face Amount" of an Original Issue
Discount Note means an amount equal to (i) the Issue Price thereof plus (ii) the
aggregate portions of the original issue discount (the excess of the amounts
considered as part of the "stated redemption price at maturity" of such Original
Issue Discount Note within the meaning of Section 1273(a)(2) of the Code,
whether denominated as principal or interest, over the Issue Price) which shall
theretofore have accrued pursuant to Section 1272 of the Code (without regard to
Section 1272(a)(7) of the Code) from the date of issue of such Original Issue
Discount Note to the date of determination, minus (iii) any amount considered as
part of the "stated redemption price at maturity" of such Original Issue
Discount Note which has been paid from the date of issue to the date of
determination. Certain additional considerations relating to the offering of any
Original Issue Discount Notes may be set forth in the applicable Pricing
Supplement.
INDEXED NOTES
Notes may be issued with the amount of principal, premium, if any, and/or
interest payable in respect thereof to be determined with reference to the price
or prices of specified commodities or stocks, the exchange rate of one or more
specified currencies (including a composite currency such as the ECU) relative
to an indexed currency or such other price or exchange rate ("Indexed Notes"),
as set forth in the applicable Pricing Supplement. In certain cases, Holders of
Indexed Notes may receive a principal amount on the Maturity Date that is
greater than or less than the face amount of the Notes depending upon the
relative value on the Maturity Date of the specified indexed item. Information
as to the method for determining the amount of principal, premium, if any,
and/or interest payable in respect of Indexed Notes, certain historical
information with respect to the specified indexed item and tax considerations
associated with an investment in such Indexed Notes will be set forth in the
applicable Pricing Supplement.
BOOK-ENTRY NOTES
The following provisions assume that the Company has established a
depository arrangement with The Depository Trust Company (the "Depositary") with
respect to the Book-Entry Notes. Any additional or differing terms of the
depository arrangements with respect to the Book-Entry Notes will be described
in the applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes up to $150,000,000 aggregate principal
amount bearing interest (if any) at the same rate or pursuant to the same
formula and having the same date of issue, redemption provisions (if any),
repayment provisions (if any), Stated Maturity Date and other variable terms
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 and will be registered in the name of the Depository or a nominee of
the Depositary. No Global Security may be transferred except as a whole by the
Depositary to a nominee of the Depositary or a nominee of the Depository to the
Depository or to another nominee of the Depositary, or by the Depositary or any
such nominee to a successor of the Depositary or a nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a
Global Security, the Depositary or its nominee, as the case may be, will be the
sole Holder of the Book-Entry Notes represented thereby for all purposes under
the Indenture. Except as otherwise provided in this section, the beneficial
owners of the Global Security or Securities representing Book-Entry Notes will
not be entitled to receive physical delivery of Certificated Notes and will not
be considered the Holders thereof for any purpose under the Indenture, and no
Global Security representing Book-Entry Notes shall be exchangeable or
transferrable by the owners of beneficial interests. Accordingly, each person
owning a beneficial interest in a Global Security must rely on the procedures of
the Depositary and, if such person is not a Participant, on the procedures of
the Participant
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through which such person owns its interest in order to exercise any rights of a
Holder under the Indenture. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in
certificated form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Security representing Book-Entry Notes.
Unless otherwise specified in the applicable Pricing Supplement, each
Global Security representing Book-Entry Notes is exchangeable for Certificated
Notes of like tenor and terms and of differing authorized denominations
aggregating a like amount, only if (i) the Depositary notifies the Company that
it is unwilling or unable to continue as Depositary for the Global Securities
and a successor Depositary is not appointed by the Company within 90 days of
such notice, (ii) the Depositary ceases to be a clearing agency registered under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and a
successor Depositary is not appointed by the Company within 90 days after the
Company receives notice or otherwise becomes aware of such condition, (iii) the
Company in its sole discretion determines that the Global Securities shall be
exchangeable for Certificated Notes, or (iv) there shall have occurred and be
continuing an Event of Default under the Indenture with respect to the Notes.
Upon any such exchange, Certificated Notes shall be registered in the names of
the beneficial owners of the Global Security or Securities representing
Book-Entry Notes as provided by the Depositary's relevant Participants (as
identified by the Depositary).
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Book-Entry
Notes. The Book-Entry Notes will be issued as fully registered securities
registered in the name of Cede & Co. (the Depositary's partnership
nominee). One fully registered Global Security will be issued for each
issue of Book-Entry Notes, each in the aggregate principal amount of such
issue, and will be deposited with the Depositary. If, however, the
aggregate principal amount of any issue exceeds $150,000,000, one Global
Security will be issued with respect to each $150,000,000 of principal
amount and an additional Global Security will be issued with respect to any
remaining principal amount of such issue.
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. The Depositary holds securities that its
participants ("Participants") deposit with the Depositary. The Depositary
also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. "Direct Participants" include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other
organizations. The Depositary is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc.
Access to the Depositary's system is also available to others such as
securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules
applicable to the Depositary and its Participants are on file with the
Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be
made by or through Direct Participants, which will receive a credit for
such Book-Entry Notes on the Depositary's records. The ownership interest
of each actual purchaser of each Book-Entry Note represented by a Global
Security ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchase, but Beneficial Owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which such Beneficial Owner entered
into the transaction. Transfers of ownership interests in a Global Security
representing Book-Entry Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners of a Global Security representing Book-Entry Notes will not receive
Certificated Notes representing their ownership interests therein, except
in the event that use of the book-entry system for such Book-Entry Notes is
discontinued.
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To facilitate subsequent transfers, all Global Securities representing
Book-Entry Notes that are deposited with the Depositary are registered in
the name of the Depositary's nominee, Cede & Co. The deposit of Global
Securities with the Depositary and their registration in the name of Cede &
Co. effect no change in beneficial ownership. The Depositary has no
knowledge of the actual Beneficial Owners of the Global Securities
representing the Book-Entry Notes; the Depositary's records reflect only
the identity of the Direct Participants to whose account such Book-Entry
Notes are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct Participants and Indirect Participants to Beneficial Owners will
be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Book-Entry Notes within an issue are being redeemed, the Depositary's
practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither the Depositary nor Cede & Co. will consent or vote with
respect to the Global Securities representing the Book-Entry Notes. Under
its usual procedures, the Depositary mails an Omnibus Proxy to the Company
as soon as possible after the applicable record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Book-Entry Notes are credited on the
applicable record date (identified in a listing attached to the Omnibus
Proxy).
Principal, premium, if any, and interest payments on the Global
Securities representing the Book-Entry Notes will be made through the
Paying Agent to the Depositary. The Depositary's practice is to credit
Direct Participants' accounts on the applicable payment date in accordance
with their respective holdings shown on the Depositary's records unless the
Depositary has reason to believe that it will not receive payment on such
date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such Participant and
not of the Depositary, the Trustee, the Paying Agent or the Company,
subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of principal, premium, if any, and interest to
the Depositary is the responsibility of the Company or the Paying Agent,
disbursement of such payments to Direct Participants shall be the
responsibility of the Depositary, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
A Beneficial Owner shall give notice to elect to have its Book-Entry
Notes repaid by the Company, through its Participant, to the Paying Agent,
and shall effect delivery of such Book-Entry Notes by causing the Direct
Participant to transfer the Participant's interest in the Global Security
or Global Securities representing such Book-Entry Notes, on the
Depositary's records, to the Security Registrar. The requirement for
physical delivery of Book-Entry Notes in connection with a demand for
repayment will be deemed satisfied when the ownership rights in the Global
Security or Global Securities representing such Book-Entry Notes are
transferred by Direct Participants on the Depositary's records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Company or the Trustee. Under such circumstances,
in the event that a successor securities depository is not obtained,
Certificated Notes are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository.) In
that event, Certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes to
be reliable, but the Company takes no responsibility for the accuracy thereof.
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CERTAIN INVESTMENT CONSIDERATIONS
An investment in Notes indexed, as to principal, premium and/or interest,
to one or more values of currencies (including exchange rates between
currencies), commodities or interest rate indices entails significant risks that
are not associated with similar investments in a conventional fixed-rate debt
security. If the interest rate of such a Note is so indexed, it may result in an
interest rate that is less than that payable on a conventional fixed-rate debt
security issued at the same time, including the possibility that no interest
will be paid, and, if the principal of and/or premium on such a Note is so
indexed, the amount of principal and/or premium payable in respect thereof may
be less than the original purchase price of such Note if allowed pursuant to the
terms thereof, including the possibility that no such amount will be paid. The
secondary market for such Notes will be affected by a number of factors,
independent of the creditworthiness of the Company and the value of the
applicable currency, commodity or interest rate index, including the volatility
of the applicable currency, commodity or interest rate index, the time remaining
to the maturity of such Notes, the amount outstanding of such Notes and market
interest rates. The value of the applicable currency, commodity or interest rate
index depends on a number of interrelated factors, including economic, financial
and political events, over which the Company has no control. Additionally, if
the formula used to determine the amount of principal, premium, if any, and/or
interest payable with respect to such Notes contains a multiple or leverage
factor, the effect of any change in the applicable currency, commodity or
interest rate index will be increased. The historical experience of the relevant
currencies, commodities or interest rate indices should not be taken as an
indication of future performance of such currencies, commodities or interest
rate indices during the term of any Note. The credit ratings assigned to the
Company's medium-term note program are a reflection of the Company's credit
status and, in no way, are a reflection of the potential impact of the factors
discussed above, or any other factors, on the market value of the Notes.
Accordingly, prospective investors should consult their own financial and legal
advisors as to the risks entailed by an investment in such Notes and the
suitability of such Notes in light of their particular circumstances.
SPECIAL PROVISIONS AND RISKS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in other than United States dollars or ECUs will not be sold in, or
to residents of, the country issuing the Specified Currency in which the
particular Notes are denominated. The information set forth in this Prospectus
is directed to prospective purchasers who are United States residents and, with
respect to Foreign Currency Notes, is by necessity incomplete. The Company
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of and premium,
if any, and interest on the Notes. Such persons should consult their own
financial and legal advisors with regard to such matters.
THIS PROSPECTUS SUPPLEMENT DOES NOT DESCRIBE ALL RISKS OF AN INVESTMENT IN
FOREIGN CURRENCY NOTES THAT RESULT FROM SUCH NOTES BEING DENOMINATED OR PAYABLE
IN A SPECIFIED CURRENCY OTHER THAN UNITED STATES DOLLARS, EITHER AS SUCH RISKS
EXIST AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM
TIME TO TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND
LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN FOREIGN CURRENCY
NOTES. FOREIGN CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS
WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes entails significant risks that are
not associated with a similar investment in a debt security denominated in
United States dollars. Such risks include, without limitation, the possibility
of significant changes in the rate of exchange between the United States dollar
and the applicable
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Specified Currency and the possibility of the imposition or modification of
foreign exchange controls by either the United States or foreign governments.
Such risks generally depend on events over which the Company has no control,
such as economic and political events and the supply and demand for the relevant
currencies. In recent years, rates of exchange between the United States dollar
and certain foreign currencies have been highly volatile and such volatility may
be expected in the future. Fluctuations in any particular exchange rate that
have occurred in the past are not necessarily indicative, however, of
fluctuations in the rate that may occur during the term of any Foreign Currency
Note. Depreciation of the Specified Currency applicable to a Foreign Currency
Note against the United States dollar would result in a decrease in the United
States dollar-equivalent yield of such Note, in the United States
dollar-equivalent value of the principal and premium, if any, payable on the
Maturity Date of such Note, and, generally, in the United States
dollar-equivalent market value of such Note.
Governments have imposed from time to time exchange controls and may in the
future impose or revise exchange controls at or prior to the date on which any
payment of principal of or premium, if any, or interest on a Foreign Currency
Note is due, which could affect exchange rates as well as the availability of
the Specified Currency on such date. Even if there are no exchange controls, it
is possible that the Specified Currency for any particular Foreign Currency Note
would not be available on the applicable payment date due to other circumstances
beyond the control of the Company. In that event, the Company will make the
required payment in respect of such Foreign Currency Note in the United States
dollars on the basis of the Market Exchange Rate (as defined below). See
"Payment Currency."
GOVERNING LAW; JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. If an action based on Foreign Currency Notes were
commenced in a court of the United States, it is likely that such court would
grant judgment relating to such Notes only in United States dollars. It is not
clear, however, whether, in granting such judgment, the rate of conversion into
United States dollars would be determined with reference to the date of default,
the date judgment is rendered or some other date. Under current New York law, a
state court in the State of New York rendering a judgment on a Foreign Currency
Note would be required to render such judgment in the Specified Currency in
which such Foreign Currency Note is denominated, and such judgment would be
converted into United States dollars at the exchange rate prevailing on the date
of entry of the judgment. Accordingly, Holders of Foreign Currency Notes would
bear the risk of exchange rate fluctuations between the time the amount of the
judgment is calculated and the time such amount is converted from United States
dollars into the applicable specified Currency.
PAYMENT OF PRINCIPAL AND PREMIUM, IF ANY, AND INTEREST
The Company is obligated to make payments of principal of and premium, if
any, and interest on Foreign Currency Notes in the applicable Specified Currency
(or, if such Specified Currency is not at the time of such payment legal tender
for the payment of public and private debts, in dollars. However, unless
otherwise specified in the applicable Pricing Supplement, the Holder of a
Foreign Currency Note may elect to receive such payments in any other Currency
that may be designated as hereinafter described.
Any United States dollar amount to be received by a Holder of a Foreign
Currency Note will be based on the spot rate at noon local time in the relevant
market in which United States dollars could be purchased from major banks
located in New York City, London or other principal markets on the third
Business Day preceding the applicable payment date. All currency exchange costs
will be borne by the Holder of such Foreign Currency Note by deductions from
such payments.
Unless otherwise specified in the applicable Pricing Supplement, a Holder
of a Foreign Currency Note may elect to receive payment of the principal of and
premium, if any, and/or interest on such Note in the Specified Currency by
submitting a written request for such payment to the Paying Agent at its
principal office in The City of New York on or prior to the applicable Record
Date or no more than 16 calendar days prior to the Maturity Date, as the case
may be. Such written request may be mailed or hand delivered or sent by cable,
telex or other form of facsimile transmission. A Holder of a Foreign Currency
Note may elect to receive
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payment in a different Specified Currency for all such principal, premium, if
any, and interest payments and need not file a separate election for each
payment. Such election will remain in effect until revoked by written notice to
the Paying Agent, but written notice of any such revocation must be received by
the Paying Agent on or prior to the applicable Record Date or at least 16
calendar days prior to the Maturity Date, as the case may be. Holders of Foreign
Currency Notes whose Notes are to be held in the name of a broker or nominee
should contact such broker or nominee to determine whether and how an election
to receive payments in a different Specified Currency may be made.
Unless otherwise specified in the applicable Pricing Supplement, a
beneficial owner of a Global Security or Global Securities representing
Book-Entry Notes denominated in a Specified Currency other than United States
dollars which elects to receive payments of principal, premium, if any, and
interest in a Currency other than the Specified Currency of the Global Security
must notify the Participant through which its interest is held on or prior to
the applicable Record Date or at least 16 calendar days prior to the Maturity
Date, as the case may be (in each case, an "Election Date"), of such beneficial
owner's election to receive all or a portion of such payment in a different
Specified Currency. Such Participant must notify the Depositary of such election
on or prior to the third Business Day after the Election Date, and the
Depositary will notify the Paying Agent of such election on or prior to the
third business day after the Election Date. 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, then the
beneficial owner will receive payments in such elected Currency.
PAYMENT CURRENCY
If the applicable Specified Currency is not available for the payment of
principal, premium, if any, or interest with respect to a Foreign Currency Note
due to the imposition of exchange controls or other circumstances beyond the
control of the Company, the Company will be entitled to satisfy its obligations
to the Holder of such Foreign Currency Note by making such payment to the Paying
Agent for payment to such Holders in United States dollars on the basis of the
Market Exchange Rate on the Conversion Date. The "Market Exchange Rate" for
converting a foreign Currency to United States dollars means the spot rate at
noon local time in the relevant market at which, in accordance with normal
banking procedures, dollars could be purchased with the specified Currency from
major banks located in the City of New York, London or any other principal
market for dollars. Any payment made under such circumstances in United States
dollars where the required payment is in a Specified Currency other than United
States dollars will not constitute an Event of Default under the Indenture with
respect to the Notes.
If payment in respect of a Foreign Currency Note is required to be made in
any currency unit (e.g., ECU), and such currency unit is unavailable due to the
imposition of exchange controls or other circumstances beyond the Company's
control, then the Company will be entitled to make any payments in respect of
such Note in United States dollars until such currency unit is again available.
The amount of each payment in United States dollars shall be computed on the
basis of the equivalent of the currency unit in United States dollars, which
shall be determined by the Exchange Rate Agent on the following basis. The
component currencies of the currency unit for this purpose (collectively, the
"Component Currencies" and each, a "Component Currency") shall be the currency
amounts that were components of the currency unit as of the last day on which
the currency unit was used. The equivalent of the currency unit in United States
dollars shall be calculated by aggregating the United States dollar equivalents
of the Component Currencies. The United States dollar equivalent of each of the
Component Currencies shall be determined by the Exchange Rate Agent and will be
obtained by converting the specified Component Currency into United States
dollars at the Market Exchange Rate the third business day before the payment
date.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any
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Component Currency is divided into two or more currencies, the amount of the
original Component Currency shall be replaced by the amounts of such two or more
currencies, the sum of which shall be equal to the amount of the original
Component Currency.
All determinations referred to above made by the Company or its agent
(including the Exchange Rate Agent) shall be at its sole discretion and shall,
in the absence of manifest error, be conclusive for all purposes and binding on
the Holders of the Foreign Currency Notes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal with
holders other than original purchasers (except where otherwise specifically
noted). Persons considering the purchase of Notes should consult their own tax
advisors concerning the application of United States Federal income tax laws to
their particular situations as well as any consequences of the purchase,
ownership and disposition of Notes arising under the laws of any other taxing
jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, or (iii) an estate or trust the income of which is subject
to United States Federal income taxation regardless of its source. As used
herein, the term "non-U.S. Holder" means a holder of a Note that is not a U.S.
Holder.
U.S. HOLDERS
Payments of Interest. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular method
of tax accounting).
Original Issue Discount. The following summary is a general discussion of
the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of Notes issued with original issue discount
("Discount Notes").
"Original issue discount" is defined as the excess of a Note's stated
redemption price at maturity over its issue price. A Note with a de minimis
amount of original issue discount (generally original issue discount that is
less than an amount equal to 1/4 of 1% of the Note's stated redemption price at
maturity multiplied by the number of complete years to its maturity from its
issue date) is treated as having no original issue discount. The issue price of
an issue of Notes equals the first price at which a substantial amount of such
Notes has been sold (ignoring sales to bond houses, brokers or similar persons
or organizations acting in the capacity of underwriters, placement agents or
wholesalers). The stated redemption price at maturity of a Note is the sum of
all payments required under the Note other than qualified stated interest
payments. The term "qualified stated interest" generally means stated interest
that is unconditionally payable in cash or property (other than debt instruments
of the issuer) at least annually at a single fixed rate. In addition, under the
applicable regulations (the "OID Regulations"), if a Note bears interest for one
or more accrual periods at a rate below the rate applicable for the remaining
term of such Note (e.g., Notes with teaser rates or interest holidays), and if
the greater of either the resulting foregone interest on such Note (i.e., an
amount equal to the interest that would have to be paid during the shortfall
period so all stated interest would be qualified stated interest) or any "true"
discount on such Note (i.e., the excess of the Note's stated principal amount
over its issue price) equals or exceeds a specified de minimis amount, then the
stated interest on the Note would be treated as
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original issue discount rather than qualified stated interest. Finally, any
original issue discount that is ignored because it is less than the de minimis
amount described above is treated as qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method, regardless of such U.S.
Holder's regular method of tax accounting or whether such U.S. Holder has
received any cash payments from the Company. In general, the amount of original
issue discount included in income by the initial U.S. Holder of a Discount Note
is the sum of the daily portions of original issue discount with respect to such
Discount Note for each day during the taxable year (or portion of the taxable
year) during which such U.S. Holder held such Discount Note. The "daily portion"
of original issue discount on any Discount Note is determined by allocating to
each day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An accrual period may be of any length and the
accrual periods may vary in length over the term of the Discount Note, provided
that each accrual period is no longer than one year and each scheduled payment
of principal or interest occurs either on the final day of an accrual period or
on the first day of an accrual period. The amount of original issue discount
allocable to each accrual period generally is equal to the difference between
(i) the product of the Discount Note's adjusted issue price at the beginning of
such accrual period and its yield to maturity (determined on the basis of
compounding at the close of each accrual period and appropriately adjusted to
take into account the length of the particular accrual period) and (ii) the
amount of any qualified stated interest payments allocable to such accrual
period. The adjusted issue price of a Discount Note at the beginning of any
accrual period is the sum of the issue price of the Discount Note plus the
amount of original issue discount allocable to all prior accrual periods minus
the amount of any prior payments on the Discount Note that were not qualified
stated interest payments. Under these rules, U.S. Holders generally will have to
include in income increasingly greater amounts of original issue discount in
successive accrual periods.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than the Note's adjusted issue price as of the purchase price as of the purchase
date and less than or equal to the sum of all amounts payable on the Discount
Note after the purchase date other than payments of qualified stated interest
will be considered to have purchased the Discount Note at an acquisition
premium. The amount of original issue discount that such a U.S. Holder must
include in its gross income with respect to such Discount Note for any taxable
year (or portion thereof during which the U.S. Holder holds the Discount Note)
will be reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period. Alternatively, a U.S. Holder may elect to
compute original issue discount accruals by treating the purchase as a purchase
at original issuance and applying the mechanics of the constant yield method.
The treatment of a Floating Rate Note will depend upon whether it qualifies
as a variable rate debt instrument or a contingent payment obligation. A
Floating Rate Note will qualify as a variable rate debt instrument if (a) its
issue price does not exceed the total noncontingent principal payments due under
the Floating Rate Note by more than a specified de minimis amount and (b) it
provides for stated interest, paid or compounded at least annually, at current
values of (i) one or more qualified floating rates, (ii) a single fixed rate and
one or more qualified floating rates, (iii) a single objective rate or (iv) a
single fixed rate and a single objective rate that is a qualified inverse
floating rate. A Floating Rate Note that does not qualify as a variable rate
debt instrument will be issued as a contingent payment obligation.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneously
variations in the cost of newly borrowed funds in the currency in which the
Floating Rate Note is denominated. Although a multiple of a qualified floating
rate generally will not itself constitute a qualified floating rate, a variable
rate equal to the product of a qualified floating rate and a fixed multiple that
is greater than zero but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than zero but not more than 1.35, increased or
decreased by a fixed rate, also will constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Floating Rate Note (e.g., two or more
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<PAGE> 23
qualified floating rates with values within 25 basis points of each other as
determined on the Floating Rate Note's issue date) will be treated as a single
qualified floating rate. A variable rate that would otherwise constitute a
qualified floating rate but which is subject to one or more restrictions such as
a maximum numerical limitation (i.e., a cap) or a minimum numerical limitation
(i.e., a floor) or restrictions on the amount of increase or decrease in the
stated interest rate (i.e., a governor) will be treated as a qualified floating
rate only in the case of (i) a cap, floor or governor that is fixed throughout
the term of the debt instrument or (ii) a cap, floor or governor that is not
reasonably anticipated as of the issue date to revise the yield on the debt
instrument to be significantly less, more or different than, as the case may be,
the expected yield determined without the restriction. An "objective rate" is a
rate that is not itself a qualified floating rate but that is determined using a
single fixed formula and that is based upon (i) one or more qualified floating
rates, (ii) one or more rates where each rate would be a qualified floating rate
for a debt instrument denominated in a currency other than the currency in which
the Floating Rate Note is denominated, (iii) either the yield or changes in the
price of one or more items of actively traded personal property (other than
stock or debt of the issuer or a related party) or (iv) a combination of
objective rates. The OID Regulations also provide that other variable interest
rates may be treated as objective rates if so designated by the Internal Revenue
Service ("IRS") in the future. Notwithstanding the foregoing, a variable rate of
interest on a Floating Rate Note will not constitute an objective rate if it is
reasonably expected that the average value of such rate during the first half of
the Floating Rate Note's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Floating Rate Note's term. A "qualified inverse floating rate" is any
objective rate where such rate is equal to a fixed rate minus a qualified
floating rate, as long as variations in the rate can reasonably be expected to
inversely reflect contemporaneous variations in the cost of newly borrowed
funds. The OID Regulations also provide that if a Floating Rate Note provides
for stated interest at a fixed rate for an initial period of less than one year
followed by a variable rate that is either a qualified floating rate or an
objective rate and if the variable rate on the Floating Rate Note's issue date
is intended to approximate the fixed rate (e.g., the value of the variable rate
on the issue date does not differ from the value of the fixed rate by more than
25 basis points), then the fixed rate and the variable rate together will
constitute either a single qualified floating rate or objective rate, as the
case may be.
If a Floating Rate Note that provides for stated interest at either a
single qualified floating rate or a single objective rate throughout the term
thereof qualifies as a variable rate debt instrument, then any stated interest
on such Note that is unconditionally payable in cash or property (other than
debt instruments of the issuer), or that will be constructively received, at
least annually will constitute qualified stated interest and will be taxed
accordingly. Thus, a Floating Rate Note that provides for stated interest at
either a single qualified floating rate or a single objective rate throughout
the term thereof and that qualifies as a variable rate debt instrument generally
will not be treated as having been issued with original issue discount unless
the Floating Rate Note is issued at a "true" discount (i.e., at a price below
the Note's stated principal amount) in excess of the specified de minimis
amount. Original issue discount on such a Floating Rate Note will be allocated
to an accrual period using the constant yield method described above by assuming
that the variable rate is a fixed rate equal to (i) in the case of a qualified
floating rate or qualified inverse floating rate, the value of the qualified
rate or qualified inverse floating rate as of the issue date or (ii) in the case
of an objective rate (other than a qualified inverse floating rate), a fixed
rate that reflects the yield that is reasonably expected for the Floating Rate
Note.
In general, any other Floating Rate Note that qualifies as a variable rate
debt instrument will be converted into an equivalent fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Floating Rate Note. The OID Regulations
generally require that such a Floating Rate Note be converted into an equivalent
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Floating
Rate Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Floating Rate
Note's issue date. Any objective rate (other than a qualified inverse floating
rate) provided for under the terms of the Floating Rate Note is converted into a
fixed rate that reflects the yield that is reasonably expected for the Floating
Rate Note. In the case of a Floating Rate Note that qualifies as a variable rate
debt instrument and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate initially is replaced
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<PAGE> 24
with a qualified floating rate (or a qualified inverse floating rate, if the
Floating Rate Note provides for a qualified inverse floating rate). The
qualified floating rate or qualified inverse floating rate that replaces the
fixed rate must be such that the fair market value of the Floating Rate Note as
of the Floating Rate Note's issue date is approximately the same as the fair
market value of an otherwise identical debt instrument that provides for either
the qualified floating rate or qualified inverse floating rate rather than the
fixed rate. After the fixed rate has been replaced with either a qualified
floating rate or a qualified inverse floating rate, the Floating Rate Note is
converted into an equivalent fixed rate debt instrument in the manner described
above.
Once the Floating Rate Note is converted into an equivalent fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
equivalent fixed rate debt instrument by applying the general original issue
discount rules to the equivalent fixed rate debt instrument. A U.S. Holder of
the Floating Rate Note will account for such original issue discount and
qualified stated interest as if the U.S. Holder held the equivalent fixed rate
debt instrument. Appropriate adjustments will be made to the amount of qualified
stated interest or original issue discount assumed to have been accrued or paid
with respect to the equivalent fixed rate debt instrument during each accrual
period in the event that such amounts differ from the actual amount of interest
accrued or paid on the Floating Rate Note during the accrual period.
A Floating Rate Note that does not qualify as a variable rate debt
instrument will be treated as a contingent payment debt obligation. The
treatment of contingent payment obligations under current law is not entirely
clear. The proper United States Federal income tax treatment of Floating Rate
Notes that are treated as contingent payment debt obligations will be more fully
described in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity (a "call option") and/or (ii) may be repayable at
the option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors because the tax consequences of owning
such Notes will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders generally may, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Short-Term Notes. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects to
do so. If such an election is not made, any gain recognized by the U.S. Holder
on the sale, exchange or maturity of the Short-Term Note will be ordinary income
to the extent of the original issue discount accrued on a straight-line basis,
or upon election under the constant yield method (based on daily compounding),
through the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States Federal income tax
purposes under the accrual method, and certain other holders including banks and
dealers in securities, are required to accrue original issue discount on a
Short-Term Note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
Market Discount. If a U.S. Holder purchases a Note, other than a Discount
Note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of a Discount Note, for an amount that is less than its adjusted issue price as
of the purchase date, the amount of the difference will be treated as market
discount, unless such difference is less than a specified de minimis amount.
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<PAGE> 25
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment (or, in the case of a Discount Note, any payment
that does not constitute qualified stated interest) on, or any gain realized on
the sale, exchange, retirement or other disposition of, a Note as ordinary
income to the extent of the lesser of (i) the amount of such payment or realized
gain or (ii) the accrued market discount with respect to such Note that the U.S.
Holder has not previously included in income. Market discount will be considered
to accrue ratably during the period from the date of acquisition to the maturity
date of the Note or, at the election of the U.S. Holder, under a constant yield
method. Notwithstanding the foregoing, a U.S. Holder may elect to include market
discount in income currently as it accrues (on either a ratable or semiannual
compounding basis). Generally, such currently included market discount is
treated as ordinary interest for United States Federal income tax purposes. A
U.S. Holder who does not elect to accrue market discount into income currently
will be required to defer the deduction of all or a portion of the interest paid
or accrued on any indebtedness incurred or maintained to purchase or carry a
Note with market discount until the maturity of the Note or its earlier
disposition in a taxable transaction to the extent such interest deductions
exceed interest income includible in income with respect to the Note.
Premium. Any amount paid by a U.S. Holder to purchase a Note in excess of
the Note's stated redemption price at maturity will constitute amortizable bond
premium. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the Note and may offset interest otherwise
required to be included in respect of the Note during any taxable year by the
amount of premium amortizable in such year. Special rules that may defer the
amortization of bond premium may apply to Notes that are subject to a call
option.
Disposition of a Note. A U.S. Holder generally will recognize taxable gain
or loss on the sale, exchange or retirement of a Note in an amount equal to the
difference between the consideration received (less any amount received in
respect of accrued interest, which will be taxable as such) and such U.S.
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in a
Note generally will equal such U.S. Holder's initial investment in the Note
increased by any original issue discount included in income (and any accrued
market discount the U.S. Holder has included in income) and decreased by the
amount of any payments, other than qualified stated interest payments, received
and bond premium amortized with respect to such Note. Except as discussed above
with respect to market discount, any such gain or loss generally will be long-
term capital gain or loss if the Note were held for more than one year.
Backup Withholding and Information Reporting. Backup withholding at a rate
of 31% and information reporting may apply to payments made to U.S. Holders in
respect of the Notes. This withholding and information reporting generally
applies only if the U.S. Holder (i) fails to furnish its social security or
other taxpayer identification number ("TIN"), (ii) furnishes an incorrect TIN,
(iii) fails to report properly interest or dividends or (iv) fails, under
certain circumstances, to provide a certified statement, signed under penalties
of perjury, that the TIN provided is correct and that it is not subject to
backup withholding. Any amount withheld from a payment to a U.S. Holder under
the backup withholding rules is allowable as a credit against such U.S. Holder's
Federal income tax liability, provided that certain information is furnished to
the IRS. U.S. Holders of Notes should consult their tax advisors as to their
qualification for exemption from backup withholding and information reporting
and the procedure for obtaining such an exemption. Prospective purchasers of
Notes will be required to provide the required information to the Company on a
completed Form W-9. A U.S. Holder who does not provide the Company with its
correct TIN also may be subject to penalties imposed by the IRS.
The Company will report to the U.S. holders of the Notes and the IRS the
amount of any "reportable payments" for each calendar year and the amount of tax
withheld, if any, with respect to payments on the Notes.
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<PAGE> 26
NOTES DENOMINATED OR ON WHICH INTEREST IS PAYABLE IN A FOREIGN CURRENCY
As used herein, "Foreign Currency" means a currency or currency unit other than
U.S. dollars.
Payments of Interest in a Foreign Currency
Cash Method. A U.S. Holder who uses the cash method of accounting for
United States Federal income tax purposes and who receives a payment of interest
on a Note (other than original issue discount or market discount) will be
required to include in income the U.S. dollar value of the Foreign Currency
payment (determined on the date such payment is received) regardless of whether
the payment is in fact converted to U.S. dollars at that time, and such U.S.
dollar value will be the U.S. Holder's tax basis in such Foreign Currency.
Accrual Method. A U.S. Holder who uses the accrual method of accounting for
United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the U.S.
dollar value of the amount of interest income (including original issue discount
or market discount and reduced by amortizable bond premium to the extent
applicable) that has accrued and is otherwise required to be taken into account
with respect to a Note during an accrual period. The U.S. dollar value of such
accrued income will be determined by translating such income at the average rate
of exchange for the accrual period or, with respect to an accrual period that
spans two taxable years, at the average rate for the partial period within the
taxable year. A U.S. Holder may elect, however, to translate such accrued
interest income using the rate of exchange on the last day of the accrual period
or, with respect to an accrual period that spans two taxable years, using the
spot rate of exchange on the last day of the taxable year. If the last day of an
accrual period is within five business days of the date of receipt or payment of
the accrued interest, a U.S. Holder may translate such interest using the spot
rate of exchange on the date of receipt or payment. The above election will
apply to other debt obligations held by the U.S. Holder and may not be changed
without the consent of the IRS. A U.S. Holder should consult a tax advisor
before making the above election. A U.S. Holder will recognize exchange gain or
loss (which will be treated as ordinary income or loss) with respect to accrued
interest income on the date such income is received. The amount of ordinary
income or loss recognized will equal the difference, if any, between the U.S.
dollar value of the Foreign Currency payment received (determined on the date
such payment is received) in respect of such accrual period and the U.S. dollar
value of interest income that has accrued during such accrual period (as
determined above).
Purchase, Sale and Retirement of Notes. A U.S. Holder who purchases a Note
with previously owned Foreign Currency will recognize ordinary income or loss in
an amount equal to the difference, if any, between such U.S. Holder's tax basis
in the Foreign Currency and the U.S. dollar fair market value of the Foreign
Currency used to purchase the Note, determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss generally will be capital gain or loss (except to the extent of any
accrued market discount not previously included in the U.S. Holder's income) and
will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by such U.S. Holder for more than one year. To
the extent the amount realized represents accrued but unpaid interest, however,
such amounts must be taken into account as interest income, with exchange gain
or loss computed as described in "Payments of Interest in a Foreign Currency"
above. If a U.S. Holder receives Foreign Currency on such a sale, exchange or
retirement the amount realized will be based on the U.S. dollar value of the
Foreign Currency on (i) the date of receipt of such Foreign Currency in the case
of a cash basis U.S. Holder and (ii) the date of disposition in the case of an
accrual basis U.S. Holder. In the case of a Note that is denominated in Foreign
Currency and is traded on an established securities market, a cash basis U.S.
Holder (or, upon election, an accrual basis U.S. Holder) will determine the U.S.
dollar value of the amount realized by translating the Foreign Currency payment
at the spot rate of exchange on the settlement date of the sale. A U.S. Holder's
adjusted tax basis in a Note will equal the cost of the Note to such holder,
increased by the amounts of any market discount or original issue discount
previously included in income by the holder with respect to such Note and
reduced by any amortized
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acquisition or other premium and any principal payments received by such holder.
A U.S. Holder's tax basis in a Note, and the amount of any subsequent
adjustments to such holder's tax basis, will be the U.S. dollar value of the
Foreign Currency amount paid for such Note, or of the Foreign Currency amount of
the adjustment, determined on the date of such purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that
is attributable to fluctuations in currency exchange rates will be ordinary
income or loss which will not be treated as interest income or expense. Gain or
loss attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date such payment is received or the Note is disposed
of, and the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date the U.S. Holder acquired the Note. Such Foreign
Currency gain or loss will be recognized only to the extent of the total gain or
loss realized by the U.S. Holder on the sale, exchange or retirement of the
Note.
Original Issue Discount. In the case of a Discount Note or Short-Term Note,
(i) original issue discount is determined in units of the Foreign Currency, (ii)
accrued original issue discount is translated into U.S. dollars as described in
"Payments of Interest in a Foreign Currency -- Accrual Method" above and (iii)
the amount of Foreign Currency gain or loss on the accrued original issue
discount is determined by comparing the amount of income received attributable
to the discount (either upon payment, maturity or an earlier disposition), as
translated into U.S. dollars at the rate of exchange on the date of such
receipt, with the amount of original issue discount accrued, as translated
above.
Premium and Market Discount. In the case of a Note with market discount,
(i) market discount is determined in units of the Foreign Currency, (ii) accrued
market discount taken into account upon the receipt of any partial principal
payment or upon the sale, exchange, retirement or other disposition of the Note
(other than accrued market discount required to be taken into account currently)
is translated into U.S. dollars at the exchange rate on such disposition date
(and no part of such accrued market discount is treated as exchange gain or
loss) and (iii) accrued market discount currently includible in income by a U.S.
Holder for any accrual period is translated into U.S. dollars on the basis of
the average exchange rate in effect during such accrual period, and the exchange
gain or loss is determined upon the receipt of any partial principal payment or
upon the sale, exchange, retirement or other disposition of the Note in the
manner described in "Payments of Interest in a Foreign Currency -- Accrual
Method" above with respect to computation of exchange gain or loss on accrued
interest.
With respect to a Note issued with amortizable bond premium, such premium
is determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. Although not entirely clear, a U.S. Holder should
recognize exchange gain or loss equal to the difference between the U.S. dollar
value of the bond premium amortized with respect to a period, determined on the
date the interest attributable to such period is received, and the U.S. dollar
value of the bond premium determined on the date of the acquisition of the Note.
Exchange of Foreign Currencies. A U.S. Holder will have a tax basis in any
Foreign Currency received as interest or on the sale, exchange or retirement of
a Note equal to the U.S. dollar value of such Foreign Currency, determined at
the time the interest is received or at the time of the sale, exchange or
retirement. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of Foreign Currency (including its exchange for U.S. dollars or its
use to purchase Notes) will be ordinary income or loss.
CERTAIN UNITED STATES TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of a Note that is a non-U.S. Holder will be subject to
the 30% United States Federal withholding tax that generally applies to payments
of interest on a registered form debt obligation issued by a United States
person, unless one of the following steps is taken to obtain an exemption from
or reduction of the tax:
(1) Exemption for non-U.S. Holders (IRS Form W-8). A non-U.S. Holder
(other than certain persons that are related to the Company through stock
ownership and certain banks as described below in
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clauses (1)(i), (ii) and (iii) under "Non-U.S. Holders--Income and
Withholding Tax") can generally obtain an exemption from the withholding
tax on non-contingent interest by providing a properly completed IRS Form
W-8 (Certificate of Foreign Status);
(2) Exemption for non-U.S. Holders with effectively connected income
(IRS Form 4224). A non-U.S. Holder, including a non-United States
corporation or bank with a United States branch, that conducts a trade or
business in the United States with which interest income on a Note is
effectively connected, can obtain an exemption from the withholding tax by
providing a properly completed IRS Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or Business
in the United States); or
(3) Exemption or reduced rate for non-U.S. Holders entitled to the
benefits of a treaty (IRS Form 1001). A non-U.S. Holder entitled to the
benefits of an income tax treaty to which the United States is a party can
obtain an exemption from or reduction of the withholding tax (depending on
the terms of the treaty) by providing a properly completed IRS Form 1001
(Ownership, Exemption or Reduced Rate Certificate).
United States Federal Income Tax Reporting Procedure. A beneficial owner of
a Note or, in certain cases, its agent, is required to submit the appropriate
IRS Form under applicable procedures to the person through which the owner
directly holds the Note. Each other person through which Notes are held must
submit, on behalf of the beneficial owner, the IRS Form (or in certain cases a
copy thereof) under applicable procedures to the person through which it holds
the Notes, until the IRS Form is received by the United States person who would
otherwise be required to withhold United States federal income tax from interest
on the Notes. Applicable procedures include additional certification
requirements, described below in clause (1)(v)(B) under "Non-U.S.
Holders -- Income and Withholding Tax," if a beneficial owner of a Note provides
an IRS Form W-8 to a securities clearing organization, bank or other financial
institution that holds the Notes on its behalf.
EACH NON-U.S. HOLDER OF A NOTE SHOULD BE AWARE THAT IF IT DOES NOT PROPERLY
PROVIDE THE REQUIRED IRS FORM, OR IF THE IRS FORM (OR, IF PERMISSIBLE, A COPY OF
SUCH FORM) IS NOT PROPERLY TRANSMITTED TO AND RECEIVED BY THE UNITED STATES
PERSON OTHERWISE REQUIRED TO WITHHOLD UNITED STATES FEDERAL INCOME TAX, INTEREST
ON THE NOTE MAY BE SUBJECT TO UNITED STATES WITHHOLDING TAX AT A 30% RATE. SUCH
TAX, HOWEVER, MAY IN CERTAIN CIRCUMSTANCES BE ALLOWED AS A REFUND OR AS A CREDIT
AGAINST SUCH HOLDER'S UNITED STATES FEDERAL INCOME TAX. THE FOREGOING DOES NOT
DEAL WITH ALL ASPECTS OF FEDERAL INCOME TAX WITHHOLDING THAT MAY BE RELEVANT TO
NON-U.S. HOLDERS OF THE NOTES. INVESTORS ARE THEREFORE ADVISED TO CONSULT THEIR
OWN TAX ADVISORS FOR SPECIFIC ADVICE CONCERNING THE OWNERSHIP AND DISPOSITION OF
NOTES.
NON-U.S. HOLDERS
Income and Withholding Tax. Payments of interest (including original issue
discount) on Notes that are beneficially owned by a non-U.S. Holder will not be
subject to United States Federal withholding tax on interest provided that:
(1)
(i) the beneficial owner 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 beneficial owner is not a bank receiving interest
described in Section 881(c)(3)(A) of the Code;
(iii) the beneficial owner is not a controlled foreign corporation
that is related to the Company through stock ownership;
(iv) such interest is not contingent interest within the meaning of
Section 871(h)(4) of the Code; and
S-28
<PAGE> 29
(v) either
(A) the beneficial owner of the Note certifies to the person
otherwise required to withhold United States Federal income tax from
such interest, under penalties of perjury, that it is not a United
States person and 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
Notes, certifies to the Company, under penalties of perjury, that
such statement has been received from the beneficial owner by it or
by a financial institution between it and the beneficial owner and
furnishes the payor with a copy thereof;
(2) the beneficial owner is entitled to the benefits of an income tax
treaty under which the interest is exempt from United States Federal
withholding tax and the beneficial owner of the Notes or such owner's agent
provides an IRS Form 1001 claiming the exemption; or
(3) the beneficial owner conducts a trade or business in the United
States to which the interest is effectively connected and the beneficial
owner of the Notes or such owner's agent provides an IRS Form 4224;
provided that, in each such case, none of the persons receiving the relevant
certification or IRS Form has actual knowledge that the certification or any
statement on the IRS Form is false.
Interest on Notes that is effectively connected with the conduct of a trade
or business in the United States by a holder of Notes who is a non-U.S. Holder,
although exempt from withholding tax, may be subject to United States Federal
income tax as if such interest was earned by a U.S. Holder.
Generally, a non-U.S. Holder will not be subject to United States Federal
income taxes on any amount that constitutes capital gain upon retirement or
disposition of a Note, provided the gain is not effectively connected with the
conduct of a trade or business in the United States by the non-U.S. Holder.
Certain other exceptions may be applicable, and a non-U.S. Holder should consult
its tax advisor in this regard.
Notes owned by an individual who, at the time of death, is neither a
citizen nor domiciliary of the United States will not be subject to United
States Federal estate tax as a result of such individual's death if the
individual 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
and the income on the Notes would not have been effectively connected with a
United States trade or business of the individual.
Backup Withholding and Information Reporting. Information reporting on IRS
Form 1099 and backup withholding will not apply to interest payments made by the
Company or the Paying Agent to a non-U.S. Holder if the IRS Form described above
in clauses (1)(v), (2) or (3) under "Non-U.S. Holders -- Income and Withholding
Tax" has been provided under applicable procedures, provided that the payer does
not have actual knowledge that the certifications are incorrect.
Payments of the proceeds from the sale of Notes to or through the United
States office of a broker will be subject to information reporting and backup
withholding unless the holder or beneficial owner certifies that it is a
non-U.S. Holder under penalties of perjury or otherwise establishes an exemption
from information reporting and backup withholding. Payments of proceeds from the
sale of Notes made to or through a foreign office of a broker generally will not
be subject to information reporting or backup withholding; however, if a broker
is (1) a United States person, (2) a controlled foreign corporation, or (3) a
foreign person that derives 50% or more of its gross income from the conduct of
a trade or business in the United States, such payment will be subject to
information reporting (but currently not backup withholding, although the issue
of whether backup withholding should apply is under consideration by the IRS)
unless such broker has documentary evidence in its records that the holder is a
non-U.S. Holder under penalties of perjury or the Holder otherwise establishes
an exemption.
S-29
<PAGE> 30
Backup withholding is not a separate tax, but is allowed as a refund or
credit against the Holder's United States Federal income tax, provided the
necessary information is furnished to the IRS. Interest on Notes that is
beneficially owned by a non-U.S. Holder will be reported annually by the Company
on IRS Form 1042S, which must be filed with the IRS and furnished to such
beneficial owner.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis for sale by the Company,
through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Salomon Brothers Inc and Wertheim Schroder & Co. Incorporated (the "Agents"),
who will purchase the Notes, as principal, from the Company from time to time,
for resale to investors and other purchasers at varying prices relating to
prevailing market prices at the time of resale as determined by the Agents or,
if so specified in the applicable Pricing Supplement, for resale at a fixed
public offering price. Unless otherwise specified in the applicable Pricing
Supplement, any Note sold to an Agent as principal will be purchased by such
Agent at a price equal to 100% of the principal amount thereof less a percentage
of the principal amount equal to the commission applicable to an agency sale (as
described below) of a Note of identical maturity. If agreed to by the Company
and an Agent, such Agent may utilize its reasonable efforts on an agency basis
to solicit offers to purchase the Notes at 100% of the principal amount thereof,
unless otherwise specified in the applicable Pricing Supplement. The Company
will pay a commission to the Agents, ranging from .125% to .750% of the
principal amount of each Note, depending upon its stated maturity, sold through
the Agents. Commissions with respect to Notes with stated maturities in excess
of 30 years that are sold through the Agents will be negotiated between the
Company and the Agents at the time of such sale.
Each Agent may sell Notes it has purchased from the Company as principal to
other dealers for resale to investors and other purchasers, and may allow any
portion of the discount received in connection with such purchase from the
Company to such dealers. After the initial public offering of Notes, the public
offering price (in the case of Notes to be resold at a fixed public offering
price), the concession and the discount may be changed.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject orders in whole or in part (whether placed
directly with the Company or through the Agents). The Agents will have the
right, in its discretion reasonably exercised, to reject in whole or in part any
offer to purchase Notes received by it on an agency basis.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in the applicable Specified Currency in The City of New York on
the date of settlement. See "Description of Notes -- General."
Upon issuance, the Notes will not have an established trading market. The
Notes will not be listed on any securities exchange. The Agents may from time to
time purchase and sell Notes in the secondary market, but the Agents are not
obligated to do so, and there can be no assurance that there will be a secondary
market for the Notes or liquidity in the secondary market if one develops. From
time to time, the Agents may make a market in the Notes, but the Agents are not
obligated to do so and may discontinue any market-making activity at any time.
Each Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company has
agreed to indemnify the Agents against certain liabilities (including
liabilities under the Securities Act), or to contribute to payments the Agents
may be required to make in respect thereof. The Company has agreed to reimburse
the Agents for certain other expenses.
Concurrently with the offering of Notes described herein, the Company may
issue other Debt Securities described in the accompanying Prospectus pursuant to
the Indenture.
S-30
<PAGE> 31
VALIDITY OF NOTES
Certain matters with respect to the validity of the Notes offered hereby
will be passed upon for the Company by Jenkens & Gilchrist, a Professional
Corporation, Dallas, Texas, and for the Agents by Andrews & Kurth L.L.P.,
Houston Texas. Henry Gilchrist, the Secretary and an Advisory Director of the
Company, is a shareholder of Jenkens & Gilchrist, a Professional Corporation.
Jenkens & Gilchrist, a Professional Corporation will rely on Andrews & Kurth
L.L.P. as to matters of New York law.
S-31
<PAGE> 32
KIRBY CORPORATION
DEBT SECURITIES
---------------------
Kirby Corporation (the "Company") may offer at any time, or from time to
time, its debt securities consisting of debentures, notes and/or other unsecured
evidences of indebtedness (the "Debt Securities") with an aggregate initial
offering price not to exceed $250,000,000. The Company will offer the Debt
Securities to the public on terms determined by market conditions. The Debt
Securities may be offered separately or together, in separate series, in
amounts, at prices and on terms to be determined at the time of sale and to be
set forth in supplements to this Prospectus. The Debt Securities may be sold for
U.S. dollars or one or more foreign or composite currencies and the principal
of, premium, if any, and interest, if any, on the Debt Securities may likewise
be payable in U.S. dollars or one or more foreign or composite currencies.
The terms of the Debt Securities, including where applicable the specific
designation, aggregate principal amount, denominations, maturity, rate (which
may be fixed or variable) and time of payment of interest, if any, purchase
price, any terms for mandatory redemption or redemption at the option of the
Company or the holder, the initial public offering price, and the names of any
underwriters or agents and any other terms in connection with the offering and
sale of the Debt Securities in respect of which this Prospectus is being
delivered, will be set forth in the accompanying Prospectus Supplement (the
"Prospectus Supplement").
The Debt Securities may be offered through underwriters, agents or dealers,
or directly to purchasers by the Company. If an underwriter, agent or dealer is
involved in the offering of any Debt Securities, the underwriter's discount,
agent's commission or dealer's purchase price will be described in an applicable
Prospectus Supplement, and the net proceeds to the Company from such offering
will be the public offering price of the offered Debt Securities less such
discount in the case of an underwriter, the purchase price of the offered Debt
Securities in the case of a dealer, and less, in each case, the other expenses
of the Company associated with the issuance and distribution of such Debt
Securities. See "Plan of Distribution."
---------------------
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 the Debt Securities
unless accompanied by a Prospectus Supplement.
---------------------
The Date of this Prospectus is December 2, 1994.
<PAGE> 33
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, therefore, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
at its New York Regional Office, Seven World Trade Center, New York, New York
10048; and at its Chicago Regional Office, Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained at prescribed rates, by writing to the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. Such material
can also be inspected at the American Stock Exchange, 86 Trinity Place, New
York, New York 10006, on which the Company's Common Stock is listed.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments, supplements and exhibits thereto, the
"Registration Statement") filed by the Company with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus omits
certain of the information set forth in the Registration Statement (in
accordance with the rules and regulations of the Commission), and reference is
hereby made to the Registration Statement and related exhibits for further
information with respect to the Company and the Debt Securities.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
are incorporated in and made a part of this Prospectus:
(i) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1994, June 30, 1994 and September 30, 1994; and
(ii) Annual Report on Form 10-K for the year ended December 31, 1993.
All documents filed by the Company 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 made hereby shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained herein or in a document incorporated
or deemed to be incorporated herein by reference shall be deemed to be modified
or superseded for purposes of the Registration Statement and this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document which also is, or is deemed to be, incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of the Registration Statement or this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, including any beneficial owner of shares of Common
Stock, on the written or oral request of such person, a copy of any or all of
the documents incorporated by reference herein (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
such documents). Request for such copy or copies should be directed to G.
Stephen Holcomb, Vice President, Kirby Corporation, P.O. Box 1745, Houston,
Texas 77251-1745; telephone (713) 629-9370.
2
<PAGE> 34
THE COMPANY
GENERAL
Kirby Corporation ("Kirby" or the "Company") is primarily a marine
transportation company engaged, through its subsidiaries, in the operation of
vessels on the inland waterway system of the United States and in United States
coastwise and foreign trade. Kirby is also engaged, through subsidiaries, in
diesel repair and property and casualty insurance.
The Company's principal executive offices are located at 1775 St. James
Place, Suite 300, Houston, Texas 77056-3453 and its telephone number is (713)
629-9370. The Company's mailing address is P.O. Box 1745, Houston, Texas
77251-1745.
MARINE TRANSPORTATION
The Company's marine transportation business is conducted through three
divisions, organized around the markets they serve: the Inland Chemical
Division, engaged in the inland transportation of industrial chemicals and
agricultural chemicals by tank barges; the Inland Refined Products Division,
engaged in the inland transportation of refined petroleum products by tank
barges; and the Offshore Division, engaged in the offshore transportation of
petroleum products by ocean-going tank barges and tankers and dry bulk,
container and palletized cargo by ocean-going barges and break-bulk and
container ships. The Company's marine transportation divisions are strictly
providers of transportation services and do not assume ownership of any of the
products they transport.
The Inland Chemical Division serves industrial chemical companies by
delivering petrochemical feedstocks, processed chemicals, lube oils and
agricultural chemicals to industry users. The Inland Refined Products Division
serves Gulf Coast refineries by transporting gasoline, diesel fuel and jet fuel
to waterfront terminals. Each division operates inland tank barges to
destinations along the Gulf Intracoastal Waterway, the Houston Ship Channel, the
Mississippi River and its tributaries and the Ohio River. As of November 30,
1994, the combined fleet of these divisions consisted of 499 tank barges, 113
towing vessels and seven harbor tugboats.
The Offshore Division transports petroleum products, dry bulk, container
and palletized cargos, including agricultural commodities, to markets worldwide,
with particular emphasis on ports in the Gulf of Mexico, along the Atlantic
Seaboard, in the Caribbean Basin, South America, West Africa and Europe. As of
November 30, 1994, offshore movements of primarily refined petroleum products
were provided by ten tankers and two ocean-going tank barge and tug units. Dry
bulk cargo movements were provided by six ocean-going barge and tug units and
containers and palletized cargo movements were provided by three break-bulk and
container ships and one ocean-going barge and tug unit.
DIESEL REPAIR
The Company's diesel repair business is engaged in the overhaul and repair
of diesel engines and related parts sales in two distinct markets: the marine
market, serving vessels powered by large diesel engines utilized in the various
inland and offshore marine industries; and the locomotive market, serving the
shortline and industrial railroad markets.
The marine market has five service facilities that serve the Gulf Coast,
the East Coast, the Midwest, the West Coast and the Pacific Northwest markets.
Customers in this market include the inland and offshore barge industries,
offshore petroleum and well service industry, offshore commercial fishing
industry and the United States Government.
The locomotive market is served through a facility in Nashville, Tennessee.
As an exclusive distributor for the Electromotive Division of General Motors
Corporation, the locomotive business provides replacement parts, service and
support for locomotives serving shortline and industrial railroads within the
continental United States.
3
<PAGE> 35
PROPERTY AND CASUALTY INSURANCE
The Company's property and casualty insurance business is engaged in the
writing of property and casualty insurance primarily through Universal Insurance
Company ("Universal") in the Commonwealth of Puerto Rico. A full service
property and casualty insurer, with emphasis on the property lines of business,
Universal is ranked third among Puerto Rico insurance companies in terms of
policyholders' surplus and admitted assets.
On September 25, 1992, Universal merged with Eastern America Insurance
Company ("Eastern America"), a property and casualty insurance company in Puerto
Rico, with Universal being the surviving entity. As of October 25, 1994, the
Company owned approximately 58% of Universal's voting common stock with the
remaining approximately 42% owned by Eastern America Financial Group, Inc.
("Eastern America Group"), the former parent of Eastern America. The Company
owns 100% of the non-voting common and preferred stocks of Universal. In
accordance with a 1992 shareholder agreement among Universal, the Company and
Eastern America Group, through options and redemption rights, Universal has the
right to purchase the Company's interest in Universal over a period of up to 12
years, the result of which would be Eastern America Group becoming the sole
owner of Universal's stock. Since December 1992, the Company has received
$15,000,000 from the redemption by Universal of its capital stock. In August
1994, Eastern America Group purchased additional voting common stock from
Universal for a purchase price of $7,000,000.
RECENT DEVELOPMENTS
On July, 1, 1994, the Company purchased a single hull U.S. flag tanker from
Tosco Refining Company. After undergoing extensive capitalized restorations and
modifications, the tanker was placed in service in September 1994 in the
carriage of refined petroleum products in United States coastwise trade and will
operate under a three-year charter. The tanker has a capacity of 266,000 barrels
and a deadweight tonnage of 37,750 and is scheduled to be retired from service
in accordance with the Oil Pollution Act of 1990 ("OPA") on January 1, 1999. The
Company's established bank revolving credit agreement provided funding for the
transaction.
On July 21, 1994, the Company purchased three U.S. flag tankers from OMI
Corp. for $23,750,000. The single hull tankers will transport refined petroleum
products primarily between the United States Gulf Coast, Florida and the
mid-Atlantic states. Currently, one of the tankers is operating under a
six-month charter effective October 1994 and one is chartered effective November
1994 for a one year period. The remaining tanker operates in the spot market.
Both of the charters have option periods. Each of the tankers has a total
capacity of 266,000 barrels and a deadweight tonnage of 37,853. In accordance
with the OPA, the three tankers will be retired from service on January 1, 2000.
Funding for the transaction was provided through the Company's established bank
revolving credit agreement.
On August 1, 1994, the Board of Directors authorized the Company to
purchase up to 2,000,000 shares of its own common stock. Prior authorization for
the repurchase of the Company common stock was superseded by this authorization.
The Company is authorized to purchase the common stock on the American Stock
Exchange and in privately negotiated transactions. When purchasing common stock,
the Company is subject to price, trading volume and other market considerations.
Shares repurchased may be used for reissuance upon the exercise of stock
options, in future acquisitions for stock or for other appropriate corporate
purposes. To date, the Company has not purchased any common stock under this
authorization.
On August 24, 1994, the Company discontinued its direct, all-water
containership service from central United States (Memphis) to Mexico and Central
America. The service was provided by the Company's wholly owned subsidiary,
Americas Marine Express, Inc. The service was met with aggressive pricing from
its competitors and the prospects for future profitability did not warrant
continuation of the service. Since inception in February 1994, the operation
incurred operating losses and anticipated shut-down expenses of approximately
$2,350,000 ($1,500,000 after taxes or $.05 per share).
On November 16, 1994, the Company completed the purchase from The Dow
Chemical Company ("Dow") of 65 inland tank barges, one river towboat and two
shifting boats for approximately $24 million in
4
<PAGE> 36
cash. Also, the Company assumed from Dow the lease of an additional 31 inland
tank barges and two towboats. In addition, the Company entered into a contract
with Dow to provide for Dow's inland bulk liquid marine transportation
requirements for a period of ten years. Dow is a major manufacturer of
petrochemicals, industrial chemicals and related bulk liquid products and
historically has used its own barges and outside towing resources to service its
inland marine transportation requirements. Dow produces its products at its
Freeport, Texas manufacturing complex, other plants in Louisiana and at various
other United States locations. A number of the Dow plants, as well as their
suppliers and customers, rely extensively on water transportation for moving
products between Dow's manufacturing facilities, for shipment to the ultimate
users and to move certain raw materials purchased by Dow. Funding for the
transaction was provided through the Company's established bank revolving credit
agreement.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of the Company's consolidated
earnings to fixed charges for all periods presented.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
- ---------------------------------------------- ----------------
1993 1992 1991 1990 1989 1994 1993
- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
4.70x 2.80x 3.84x 3.86x 3.07x 4.34x 3.19x
</TABLE>
For the purpose of computing the ratio of earnings to fixed charges,
"earnings" consists of earnings before taxes on income. "Fixed charges" include
interest expense on debt and one-third of the operating lease expenses, which is
considered to be representative of the interest factor. A statement setting
forth the computation of the ratio of earnings to fixed charges for each of the
periods presented above is filed as an exhibit to the Registration Statement of
which this Prospectus is a part.
USE OF PROCEEDS
The net proceeds from the sale of the Debt Securities offered hereby will
be used for general corporate purposes, which may include without limitation,
the repayment of indebtedness and funding future acquisitions and working
capital requirements.
DESCRIPTION OF DEBT SECURITIES
The following description summarizes certain general terms and provisions
of the Debt Securities. The particular terms of the Debt Securities, including
the nature of any variations from the following general provisions, will be
described in the Prospectus Supplement relating to such Debt Securities.
The Debt Securities may be issued in one or more series under an Indenture
between the Company and Texas Commerce Bank National Association, as Trustee
(the "Trustee"), dated on or about December 2, 1994 (the "Indenture"). The
Indenture has been filed with the Commission as an exhibit to the Registration
Statement of which this Prospectus constitutes a part and is incorporated by
reference herein.
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all provisions of the Indenture, including the definition therein
of certain terms. All article and section references appearing herein are to
articles and sections of the Indenture. Unless otherwise defined herein, all
capitalized terms shall have the definitions set forth in the Indenture.
GENERAL
The Debt Securities to be issued under the Indenture will be unsecured
general obligations of the Company and will rank pari passu with all other
unsecured and unsubordinated indebtedness of the Company from time to time
outstanding. The Debt Securities are currently limited to $250,000,000 aggregate
initial
5
<PAGE> 37
offering price, or the equivalent thereof in one or more foreign or composite
currencies. The Debt Securities will not be convertible into the common stock or
any other securities of the Company.
The Debt Securities are obligations exclusively of the Company, which is a
holding company. Since the operations of the Company are currently conducted
principally through wholly-owned subsidiaries, the cash flow of the Company, and
therefore its ability to service its debt, including the Debt Securities, is
dependent in part upon the earnings of such subsidiaries and the distribution of
those earnings to the Company or upon other payments of funds to the Company by
such subsidiaries. The payment of dividends and the provision of certain loans
and advances to the Company by such subsidiaries may be subject to certain
statutory or contractual restrictions, including financial and other restrictive
covenants contained in agreements relating to indebtedness of the Company or its
subsidiaries.
In addition, the rights of the Company to participate in any distribution
of assets of any subsidiary upon its liquidation or reorganization or otherwise
(and thus the ability of Holders of the Debt Securities to benefit from such
distribution) are subject to the prior claims of creditors of the subsidiary,
except to the extent that the Company may itself be a creditor with recognized
claims against that subsidiary, and to the prior claims of holders of preferred
stock, if any, issued by the Company's subsidiaries. Claims on the Company's
subsidiaries by creditors may include claims of holders of indebtedness and
claims of creditors in the ordinary course of business, including claims for
trade payables and claims for damages by tort claimants. As of September 30,
1994, the Company's total consolidated indebtedness was approximately $146.3
million, of which approximately $111.8 million consisted of indebtedness of the
Company's subsidiaries. The amount of claims on the Company's subsidiaries by
holders of indebtedness, other creditors and tort claimants may increase or
decrease, and additional claims may be incurred in the future. The Indenture
does not limit the ability of the Company's subsidiaries to incur indebtedness
or issue preferred stock.
The loan agreement relating to the Company's revolving credit facility
provides that, upon a default under such agreements, the Company will pledge to
the lenders thereunder all of the Company's equity interest in, and all claims
for payment with respect to intercompany indebtedness of, the principal
subsidiaries of the Company. In the event of such a pledge, the rights of the
Company to participate in any distribution of assets of any such subsidiary upon
its liquidation or bankruptcy or otherwise (and thus the ability of Holders of
Debt Securities to benefit from such distribution) would be subject to the prior
claims of such lenders, except to the extent that the Company may itself be a
creditor with other recognized claims against such subsidiary, if any, issued by
such subsidiary.
The Prospectus Supplement will describe the following terms of the Debt
Securities being offered: (1) the title of the Debt Securities; (2) any limit on
the aggregate principal amount of the Debt Securities; (3) the date or dates on
which the Debt Securities may be issued and the date or dates (or the method of
determination thereof) on which the principal of (and premium, if any, on) the
Debt Securities are or will be payable; (4) the rate or rates (which may be
fixed or variable) at which the Debt Securities will bear interest, if any, or
the method by which such rate or rates shall be determined, the date or dates
from which such interest, if any, will accrue, and the basis on which interest
shall be calculated if other than on the basis of a 360-day year of twelve
30-day months; (5) the date or dates on which such interest, if any, on the Debt
Securities will be payable and the Regular Record Dates for any such Interest
Payment Dates; and the extent to which, or the manner in which, any interest
payable on a global Debt Security ("Global Notes") on an Interest Payment Date
will be paid if other than in the manner described under "Book-Entry System"
below; (6) each office or agency where, subject to the terms of the Indenture as
described below under "Payment and Paying Agents," the principal of, and
premium, if any, and any interest on the Debt Securities will be payable and
each office or agency where, subject to the terms of the Indenture as described
below under "Denominations, Registration and Transfer," the Debt Securities may
be presented for registration of transfer or exchange; (7) the period or periods
within which, the price or prices at which and the terms and conditions upon
which the Debt Securities may be redeemed at the option of the Company; (8) the
obligation, if any, of the Company to redeem, to repay or purchase the Debt
Securities at the option of a Holder thereof and the period or periods within
which, the price or prices at which and the terms and conditions upon which the
Debt Securities will redeemed, repaid or purchased pursuant to any such
obligation; (9) whether the Debt Securities are to be issued with original issue
discount within the meaning of Section 1273(a) of the Internal
6
<PAGE> 38
Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder;
(10) whether the Debt Securities are to be issued in whole or in part in the
form of one or more Global Notes and, if so, the identity of the depositary, if
any, for such Global Note or Notes; (11) if other than Dollars, the Foreign
Currency or Currencies or Foreign Currency Units in which the principal of, and
premium, if any, and any interest on the Debt Securities shall or may be paid
and, if applicable, whether at the election of the Company and/or the Holder,
and the conditions and manner of determining the exchange rate or rates; (12)
any index used to determine the amount of payment of principal of and premium,
if any, and any interest on the Debt Securities; (13) any addition to, or
modification or deletion of, any Events of Default or covenants provided for
with respect to the Debt Securities; and (14) any other detailed terms and
provisions of the Debt Securities that are not inconsistent with the Indenture
(Section 301). Any such Prospectus Supplement will also describe any special
provisions for the payment of additional amounts with respect to the Debt
Securities.
The Debt Securities may be issued as Discount Securities to be sold at a
substantial discount below their principal amount. "Discount Securities" means
any Debt Securities issued with original issue discount for purposes of the
Code. Special United States income tax and other considerations applicable to
Discount Securities will be described in the Prospectus Supplement relating
thereto. Discount Securities may provide for the declaration or acceleration of
the Maturity of an amount less than the principal amount thereof upon the
occurrence of an Event of Default and the continuation thereof (Sections 101,
502).
The Indenture provides that the Debt Securities may be issued in one or
more series thereunder, in each case as authorized from time to time by the
Board of Directors of the Company. The Indenture also provides that there may be
more than one Trustee under the Indenture, each with respect to one or more
different series of Debt Securities. At a time when two or more Trustees are
acting, each with respect to only certain series, the term "Debt Securities" as
used herein shall mean the one or more series with respect to which each
respective Trustee is acting. In the event there is more than one Trustee under
the Indenture, the powers and trust obligations of each Trustee as described
herein shall extend only to the one or more series of Debt Securities for which
it is Trustee. If more than one Trustee is acting under the Indenture, then the
Debt Securities (whether of one or more than one series) for which each Trustee
is acting shall in effect be treated as if issued under separate indentures.
The Indenture does not contain any provisions that would limit the ability
of the Company to incur indebtedness. Reference is made to the Prospectus
Supplement related to the series of Debt Securities offered thereby for
information with respect to any deletions from, modifications of or additions to
the Events of Default or covenants of the Company applicable to such Debt
Securities that are described herein.
Under the Indenture, the Company will have the ability, in addition to the
ability to issue Debt Securities with terms different from those of Debt
Securities previously issued, without the consent of the Holders, to reopen a
previous issue of a series of Debt Securities and issue additional Debt
Securities of such series, in an aggregate principal amount determined by the
Company.
The Company will initially appoint Texas Commerce Bank National Association
to serve as Trustee under the Indenture and Chemical Bank as Paying Agent and
Security Registrar. Texas Commerce Bank National Association, in its capacity as
Trustee, will be responsible for, among other things, transmitting to the
Company any notices or other communications from Holders and transmitting to the
Holders notice of the occurrence of any Event of Default (as defined below) as
soon as practicable after obtaining knowledge thereof. Chemical Bank, in its
capacity as Paying Agent and Security Registrar, will be responsible for, among
other things, maintaining a record of the registration of ownership, exchange
and transfer of the Debt Securities and accepting Debt Securities for exchange
and transfer and ensuring that payments of the principal and premium, if any,
and interest received from the Company in respect of the Debt Securities are
duly paid to the registered Holders thereof.
DENOMINATIONS, REGISTRATION AND TRANSFER
The Debt Securities of a series may be issuable in whole or in part in the
form of one or more Global Notes, as described below under "Book-Entry System."
Unless otherwise provided in an applicable Prospectus Supplement with respect to
a series of Debt Securities, the Debt Securities will be issuable in fully
registered
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<PAGE> 39
form and in denominations of $1,000 or any multiple thereof. One or more Global
Notes will be issued in a denomination or aggregate denominations equal to the
aggregate principal amount of Outstanding Debt Securities of the series to be
represented by such Global Note or Notes (Sections 201, 301, 302, 304).
The Debt Securities of any series (other than a Global Note) will be
exchangeable for other Debt Securities of the same series and of a like
aggregate principal amount and tenor of different authorized denominations. The
Debt Securities may be presented for exchange as provided above, and Debt
Securities (other than a Global Note) may be presented for registration of
transfer (with the form of transfer endorsed thereon duly executed), at the
office of the Security Registrar or co-Security Registrar designated by the
Company for such purpose with respect to any series of Debt Securities and
referred to in an applicable Prospectus Supplement, without service charge and
upon payment of any taxes and other governmental charges as described in the
Indenture. Such transfer or exchange will be effected upon the Security
Registrar or co-Security Registrar being satisfied with the documents of title
and identity of the person making the request.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of, and premium, if any, and any interest on the Debt Securities
will be made at the office of such Paying Agent or Paying Agents as the Company
may designate from time to time. 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 Security Register or (ii) in certain circumstances described in
the applicable Prospectus Supplement, by wire transfer to an account maintained
by the Person entitled thereto (Section 307). Payment of any installment of
interest on the 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 (Section 307).
Unless otherwise indicated in an applicable Prospectus Supplement, Chemical
Bank will act as the Company's sole Paying Agent through its office in the
Borough of Manhattan, The City of New York, with respect to the Debt Securities.
Any Paying Agents outside the United States and other Paying Agents in the
United States initially designated by the Company for the Debt Securities being
offered will be named in the accompanying Prospectus Supplement. The Company may
at any time designate additional Paying Agents or rescind the designation of any
Paying Agent or approve a change in the office through which any Paying Agent
acts.
All moneys paid by the Company to the Trustee or a Paying Agent for the
payment of principal of, and premium, if any, and any interest on any Debt
Securities that remain unclaimed at the end of two years after such principal,
premium or interest shall have become due and payable will, upon request of the
Company as provided in the Indenture, be repaid to the Company, and the Holder
of such Debt Security may thereafter look only to the Company for payment
thereof (Section 1103).
BOOK-ENTRY SYSTEM
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Notes that will be deposited with or on behalf of a
depositary located in the United States (a "Depository") identified in the
Prospectus Supplement relating to such series.
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will apply
to all depositary arrangements.
Unless otherwise specified in an applicable Prospectus Supplement, Debt
Securities that are to be represented by a Global Note to be deposited with or
on behalf of a Depositary will be represented by a Global Note registered in the
name of such Depositary or its nominee. Upon the issuance of a Global Note in
registered form, the Depositary for such Global Note will credit on its
book-entry registration and transfer system the respective principal amounts of
the Debt Securities represented by such Global Note to the accounts of
institutions that have accounts with such Depositary or its nominee
("participants"). The
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<PAGE> 40
accounts to be credited shall be designated by the underwriters or agents of
such Debt Securities or by the Company, if such Debt Securities are offered and
sold directly by the Company. Ownership of beneficial interests in such Global
Notes will be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests by participants in such Global
Notes will be shown on, and the transfer of that ownership interest will be
effected only through, records maintained by the Depositary or its nominee for
such Global Note. Ownership of beneficial interests in Global Notes by persons
that hold through participants will be shown on, and the transfer of that
ownership interest within such participant will be effected only through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery and such securities
in definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Note.
So long as the Depositary for a Global Note, or its nominee, is the
registered owner of such Global Note, the Depositary or its nominee, as the case
may be, will be the sole Holder of the Global Notes represented thereby for all
purposes under the Indenture. Except as otherwise provided in this section, the
beneficial owners of such Global Notes will not be entitled to receive physical
delivery of Certificated Notes and will not be considered the Holders thereof
for any purpose under the Indenture, and no Global Notes shall be exchangeable
or transferrable by the owners of beneficial interests. Accordingly, each person
owning a beneficial interest in a Global Note must rely on the procedures of the
Depositary and, if such person is not a participant, on the procedures of the
participant through which such person owns its interest in order to exercise any
rights of a Holder under the Indenture.
Payment of principal of, premium, if any, and any interest on Debt
Securities registered in the name of or held by a Depositary or its nominee will
be made to the Depositary or its nominee, as the case may be, as the registered
owner or the holder of the Global Note representing such Debt Securities. None
of the Company, the Trustee, any Paying Agent or the Security 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
interests in a Global Note 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 Debt Securities of a series,
upon receipt of any payment of principal, premium or interest in respect of a
permanent Global Note, will credit immediately participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Note as shown on the records of such
Depositary. The Company also expects that payments will be governed by standing
instructions and customary practices, as is now the case with the securities
held for the accounts of customers registered in "street name," and will be the
responsibility of such participants and not the Company.
A Global Note may not be transferred except as a whole by the Depositary
for such Global Note to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any such nominee to a successor of such Depositary or a nominee of
such successor (Section 304). If a Depositary for Debt Securities of a series is
at any time unwilling or unable to continue as Depositary or ceases to be a
clearing agency registered under the Exchange Act and a successor Depositary is
not appointed by the Company within 90 days after the Company receives notice
from the Depositary or otherwise becomes aware of such condition or if there
shall have occurred and be continuing an Event of Default under the Indenture
with respect to the series of Debt Securities, the Company will issue Debt
Securities in definitive registered form in exchange for the Global Note or
Notes representing such Debt Securities. In addition, the Company may at any
time and in its sole discretion determine not to have any Debt Securities
represented by one or more Global Notes and, in such event, will issue Debt
Securities in definitive registered form in exchange for all the Global Notes
representing such Debt Securities. In any such instance, an owner of a
beneficial interest in a Global Note will be entitled to physical delivery in
definitive form of Debt Securities of the series represented by such Global Note
equal in principal amount to such beneficial interest and to have such Debt
Securities registered in its name.
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<PAGE> 41
COVENANTS
The Indenture requires the Company to maintain its corporate existence and
maintain an office or agency where Debt Securities may be presented or
surrendered for payment, transfer or exchange.
The Indenture does not contain any financial performance covenants.
Consequently, the Company is not required under the Indenture to meet any
financial tests such as those that measure the Company's working capital,
interest coverage, fixed charge coverage, amount of indebtedness or net worth in
order to maintain compliance with the terms of the Indenture.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to the
Debt Securities: (a) failure to pay principal of or any premium on any Debt
Security of that series when due; (b) failure to pay any interest on any Debt
Security of that series when due, continued for 30 days; (c) failure to perform
any other covenant of the Company in the Indenture (other than a covenant
included in the Indenture solely for the benefit of a series of Debt Securities
other than the series), continued for 60 days after written notice as provided
in the Indenture; (d) certain events in bankruptcy, insolvency or
reorganization; (e) failure to pay indebtedness for borrowed money of the
Company or any Significant Subsidiary aggregating in excess of $5,000,000,
continued for 30 days; and (f) any other Event of Default provided with respect
to Debt Securities of that series (Section 501). If any Event of Default, other
than bankruptcy, insolvency and reorganization Events of Default, with respect
to Debt Securities of any series at any time Outstanding occurs and is
continuing, either the Trustee or the Holders of at least 25% in aggregate
principal amount of the Outstanding Debt Securities of that series may declare
the principal amount (or, if the Debt Securities of that series are 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. If any bankruptcy, insolvency or reorganization Event of
Default provided with respect to Debt Securities of any series at any time
Outstanding occurs and is continuing, the principal amount (or, if such the Debt
Securities of that series are 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 shall be immediately due and payable without any
declaration, notice or act of the Trustee or any Holder. At any time after a
declaration of acceleration with respect to Debt Securities of any series has
been made, but before a judgment or decree based on acceleration has been
obtained, the Holders of a majority in aggregate principal amount of Outstanding
Debt Securities of that series may, under certain circumstances, rescind and
annul such acceleration (Section 502).
The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity (Section 603). Subject to such
provisions for the indemnification of the Trustee and certain time limits which
may be imposed by the Company pursuant to the terms of the Indenture, the
Holders of a majority in aggregate principal amount of the Outstanding Debt
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the Debt
Securities of that series (Sections 512, 701).
The Company is required to furnish the Trustee annually with a statement as
to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance (Section 1105).
MODIFICATION AND WAIVER
Modifications of and amendments to the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Debt Securities of each series
affected by such modification or amendment; provided, however, that no such
modification or amendment may without the consent of the Holder of each
Outstanding Debt Security affected thereby, (a) change the Stated Maturity of
the principal of, or any installment of interest, if any, on,
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<PAGE> 42
any Debt Security, (b) reduce the principal amount of, or any premium or
interest on, any Debt Security, (c) reduce the amount of principal of Discount
Debt Securities payable upon acceleration of the maturity thereof, (d) change
the currency payment of principal of, or any premium or interest on, any Debt
Security, (e) adversely affect the right of repayment or repurchase, if any, at
the option of the Holder, (f) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security, (g) certain
modifications to Sections 513, 1002 and 1105 of the Indenture, or (h) reduce the
percentage in principal amount of Outstanding Debt Securities of any series, the
consent of whose Holders is required for modification or amendment of the
Indenture or for waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults (Section 1002).
The Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of each series may, on behalf of all Holders of Debt Securities
of that series, waive any past default under the Indenture with respect to Debt
Securities of that series, except (i) a default in the payment of principal or
any premium or interest or (ii) a covenant or provision that cannot be modified
or amended without the consent of the Holders of each Outstanding Debt Security
affected thereby (Section 513).
CONSOLIDATION, MERGER, SALE OR LEASE OF ASSETS
The Company shall not, without the consent of the Holders of the
Outstanding Debt Securities under the Indenture, consolidate with or merge into,
or transfer or lease its assets substantially as an entirety to any Person
unless (i) the successor Person is a corporation organized under the laws of any
domestic jurisdiction, (ii) the successor corporation assumes the Company's
obligations on the Debt Securities and under the Indenture, (iii) immediately
after giving effect to the transactions no Event of Default, and no event which,
after notice or lapse of time, or both, would become an Event of Default, shall
have occurred and be continuing, and (iv) certain other conditions are met
(Section 901).
DEFEASANCE
If so specified in the Prospectus Supplement with respect to Debt
Securities of any series, the Company will be discharged from any and all
obligations in respect of the Debt Securities of such series (except for certain
obligations to register the transfer or exchange of Debt Securities of such
series, replace stolen, lost or mutilated Debt Securities of such series,
maintain paying agencies and hold moneys for payment in trust) if the Company
deposits with the Trustee, in trust, money or U.S. Government Obligations (as
defined in the indenture) 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, premium, if any, and interest on the Debt
Securities of such series on the dates such payments are due in accordance with
the terms of such Debt Securities. To exercise any such option, the Company is
required, among other things, to deliver to the Trustee an opinion of counsel to
the effect that (1) the deposit, related defeasance and, if applicable,
discharge would not cause the Holders of the Debt Securities of such series to
recognize income, gain or loss for United States income tax purposes and will be
subject to federal income tax on the same amount, in the same manner and at the
same times as would have been the case if such deposit, defeasance and, if
applicable, discharge had not occurred and (2) if the Debt Securities of such
series are then listed on any national securities exchange, such Debt Securities
would not be delisted from such exchange as a result of the exercise of such
option (Article Thirteen).
NOTICES
Notices to Holders will be given by mail to the addresses of such Holders
as they appear in the Security Register (Section 105).
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York (Section 111).
CONCERNING THE TRUSTEE
The Trustee has normal banking relationships with the Company.
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<PAGE> 43
PLAN OF DISTRIBUTION
GENERAL
The Company may sell Debt Securities to or through underwriters or a group
of underwriters, directly to other purchasers, or through dealers or agents. The
distribution of the Debt Securities may be effected from time to time in one or
more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. Each Prospectus Supplement will describe
the method of distribution, and time and place of delivery, of the offered Debt
Securities. The Company also may, from time to time, authorize dealers, acting
as the Company's agents, to solicit offers to purchase the offered Debt
Securities upon the terms and conditions set forth in any Prospectus Supplement.
In connection with the sale of Debt Securities, underwriters, dealers or
agents may receive compensation from the Company or from purchasers of Debt
Securities for whom they may act as agents, in the form of discounts,
concessions or commissions. Underwriters, dealers and agents that participate in
the distribution of Debt Securities may be deemed to be "underwriters," and any
discounts or commissions received by them and any profit on the resale of Debt
Securities by them may be deemed to be underwriting discounts and commissions,
under the Securities Act. Any such underwriter, dealer or agent will be
identified, and any such compensation will be described, in the Prospectus
Supplement relating to the offered Debt Securities.
Under agreements that may be entered into by the Company, underwriters,
dealers and agents that participate in the distribution of Debt Securities may
be entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act.
Each issuance of a series of Debt Securities will constitute a new issue of
securities with no established trading market. In the event that Debt Securities
of a series offered hereunder are not listed on a national securities exchange,
certain broker-dealers may make a market in the Debt Securities, but will not be
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given that any broker-dealer will make a market in
the Debt Securities of any series or as to the liquidity of the trading market
for such Debt Securities.
DELAYED DELIVERY ARRANGEMENT
If so indicated in the Prospectus Supplement relating to offered Debt
Securities, the Company will authorize dealers or other persons acting as the
Company's agents to solicit offers by certain institutions to purchase Debt
Securities from the Company pursuant to contracts providing for payment and
delivery on a future date. Institutions with which such contracts may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and others, but in
all cases such institutions must be approved by the Company. The obligations of
any purchaser under any such contract will be subject to the condition that the
purchase of Debt Securities shall not at the time of delivery be prohibited
under the laws of the jurisdiction to which such purchaser is subject. The
dealers and such other agents will not have any responsibility in respect of the
validity or performance of such contracts.
LEGAL OPINIONS
Certain matters with respect to the validity of the Debt Securities offered
hereby will be passed upon for the Company by Jenkens & Gilchrist, a
Professional Corporation, Dallas, Texas, and for any underwriters, dealers or
agents, as the case may be, by Andrews & Kurth L.L.P., Houston, Texas. Henry
Gilchrist, the Secretary and an Advisory Director of the Company, is a
shareholder of Jenkens & Gilchrist, a Professional Corporation. Jenkens &
Gilchrist, a Professional Corporation will rely on Andrews & Kurth L.L.P. as to
matters of New York law.
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EXPERTS
The financial statements and schedules of the Company and consolidated
subsidiaries as of December 31, 1992 and 1993 and for the years then ended,
incorporated by reference in this Prospectus, have been incorporated by
reference herein in reliance upon the reports of KPMG Peat Marwick LLP and
Deloitte & Touche LLP, independent auditors, incorporated by reference herein,
and upon the authority of said firms as experts in accounting and auditing. The
reports of KPMG Peat Marwick LLP refer to changes in the methods of accounting
for income taxes, postretirement benefits other than pensions, certain
investments in debt and equity securities and accounting and reporting for
reinsurance of short-duration and long-duration contracts.
The financial statements and schedules of the Company and consolidated
subsidiaries as of December 31, 1991 and for the year then ended, incorporated
by reference in this Prospectus, have been incorporated by reference herein in
reliance upon the report of Deloitte & Touche LLP, independent auditors,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING
SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS
PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS NOR
ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO OR TO ANYONE TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of Notes................ S-2
Certain Investment Considerations... S-18
Special Provisions and Risks
Relating to Foreign Currency
Notes............................. S-18
Certain United States Federal Income
Tax Considerations................ S-21
Plan of Distribution................ S-30
Validity of Notes................... S-31
PROSPECTUS
Available Information............... 2
Incorporation of Certain Documents
by Reference...................... 2
The Company......................... 3
Ratio of Earnings to Fixed
Charges........................... 5
Use of Proceeds..................... 5
Description of Debt Securities...... 5
Plan of Distribution................ 12
Legal Opinions...................... 12
Experts............................. 13
</TABLE>
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$250,000,000
KIRBY CORPORATION
MEDIUM-TERM NOTES
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
SALOMON BROTHERS INC
WERTHEIM SCHRODER & CO.
INCORPORATED
DECEMBER 2, 1994
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