<PAGE>
Pricing Supplement Dated September 24, 1997 Rule 424(b)(5)
No. 003 File No. 333-27909
(To Prospectus dated July 23, 1997)
MOUNTAIN FUEL SUPPLY COMPANY
Medium-Term Notes, Series C, Due From Nine Months
to 30 Years From Date of Issue
Fixed Rates Principal Amounts
6.89% US$ 2,000,000
- --------------------------------------------------------------------------------
Trade Date: September 24, 1997 Original Issue Date: September 29, 1997
Interest Rate: 6.89%
Issue Price: 100% of Principal Amount Stated Maturity: September 29, 2011
Regular Record Dates:
March 15 and September 15
Selling Agent's Discount Interest Payment Dates:
or Commission: $12,500 April 1 and October 1
Net Proceeds to Company: $1,987,500
- --------------------------------------------------------------------------------
Forms:
|X| Book-Entry
|_| Definitive
Redemption:
|X| The Notes cannot be redeemed prior to Stated Maturity
|_| The Notes may be redeemed prior to Stated Maturity
Redemption Commencement Date: Not Applicable
Redemption Percentage: Not Applicable
Annual Redemption Percentage: Not Applicable
Redemption Provisions: Not Applicable
Sinking Fund Redemption Dates: Not Applicable
Sinking Fund Amount: Not Applicable
Repayments:
|X| The Notes cannot be repaid prior to Stated Maturity
|_| The Notes may be repaid prior to Stated Maturity at the
option of the holders of the Notes
Repayment Dates: Not Applicable
Repayment Price: Not Applicable
Agents: Merrill Lynch & Co.
Other Provisions:
Terms are not completed for certain items above either because such
items are not applicable or because the terms are as specified in the
Prospectus.
2
<PAGE>
PROSPECTUS
$75,000,000
MOUNTAIN FUEL SUPPLY COMPANY
(a subsidiary of Questar Corporation)
MEDIUM-TERM NOTES, SERIES C
DUE FROM NINE MONTHS TO 30 YEARS FROM DATE OF ISSUE
------------------------
Mountain Fuel Supply Company (the 'Company') may offer from time to time up
to $75,000,000 aggregate initial offering amount of its Medium-Term Notes,
Series C (the 'Notes'). Each Note will mature on a Business Day (as hereinafter
defined) from nine months to 30 years from the date of issue, as selected by the
purchaser and agreed to by the Company. Redemption provisions, if any, for each
Note will be established by the Company at the date of issue and will be
specified therein and in the applicable Pricing Supplement hereto (the 'Pricing
Supplement'). Unless otherwise specified in the applicable Pricing Supplement,
the Notes will be issued only in denominations of $1,000 or any amount in excess
thereof which is an integral multiple of $1,000. See 'Description of Medium-Term
Notes.'
The interest rate or interest rate formula applicable to each Note and other
variable terms of the Notes will be established by the Company at the date of
issuance 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 Notes already issued or as to which offers to purchase have been
accepted by the Company. Unless otherwise specified in the applicable Pricing
Supplement, each Note will be issued in registered book-entry form (a
'Book-Entry Note') or in registered definitive form (a 'Definitive Note'), as
set forth in the applicable Pricing Supplement. Each Book-Entry Note will be
represented by a global security deposited with or on behalf of The Depository
Trust Company (or such other depositary as is identified in an applicable
Pricing Supplement) (the 'Depositary') and registered in the name of the
Depositary's nominee. Interests in Book-Entry Notes will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depositary (with respect to its participants) and the Depositary's participants
(with respect to beneficial owners).
Unless otherwise indicated in the applicable Pricing Supplement, the Notes
will bear interest at a fixed rate or rates (the 'Fixed Rate Notes'), or at a
rate or rates determined by reference to the Commercial Paper Rate (the
'Commercial Paper Rate Notes'), the Federal Funds Rate (the 'Federal Funds Rate
Notes'), LIBOR (the 'LIBOR Notes'), the Prime Rate (the 'Prime Rate Notes') or
the Treasury Rate (the 'Treasury Rate Notes') as adjusted by the Spread and/or
Spread Multiplier (each as hereinafter defined), if any, applicable to such
Notes. Commercial Paper Rate Notes, LIBOR Notes and Treasury Rate Notes are
collectively referred to herein as 'Floating Rate Notes.' The Company may also
issue Discount Notes. See 'Description of Medium-Term Notes.'
Interest on Fixed Rate Notes will accrue from their date of issue and,
unless otherwise specified in the applicable Pricing Supplement, will be payable
semiannually in arrears on each April 1 and October 1 of each year and at
Maturity. Unless otherwise specified in the applicable Pricing Supplement, the
rate of interest on each Floating Rate Note will be reset monthly, quarterly,
semi-annually or annually, as set forth therein and specified in the applicable
Pricing Supplement, and interest on each Floating Rate Note will accrue from its
date of issue and will be payable in arrears monthly, quarterly, semi-annually
or annually, as set forth therein and specified in the applicable Pricing
Supplement, and at Maturity. As of March 31, 1997, the amount of Company
indebtedness outstanding which was senior to or pari passu with the Notes was
$233,700,000.
------------------------
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 OR ANY
PRICING SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC (1) AND COMMISSIONS (2)(3) COMPANY (2)(4)
<S> <C> <C> <C>
Per Note.............................. 100% .125%-.750% 99.875%-99.250%
Total................................. $75,000,000 $93,750-$562,500 $74,906,250-$74,437,500
</TABLE>
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes will
be issued at 100% of their principal amount.
(2) The Company will pay a commission to Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Smith Barney Inc. (the 'Agents') in
the form of a discount, ranging from .125% to .750% of the principal amount
of any Note, depending upon its Stated Maturity, sold through such Agent,
and may sell Notes to either Agent, as principal, at a discount for resale
to investors or other purchasers at varying prices related to prevailing
market prices at the time of resale to be determined by such Agent. No
commission will be payable on any sales made directly by the Company.
(3) The Company has agreed to indemnify the Agents against 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 $225,000.
------------------------
The Notes are being offered on a continuing basis by the Company to or
through the Agents, who have agreed to use their reasonable efforts to solicit
offers to purchase the Notes. The Notes may also be sold by the Company to
either Agent at a discount for resale to one or more investors or other
purchasers at varying prices related to prevailing market prices at the time of
resale, as determined by such Agent. The Company may also sell the Notes
directly to investors on its own behalf in those jurisdictions where it is
authorized to do so or to or through other 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 all of the Notes offered
will be sold or that there will be a secondary market for the Notes. The Company
reserves the right to withdraw, cancel or modify the offer made hereby without
notice. The Company or an Agent, if it solicits the offer, may reject any offer
to purchase Notes in whole or in part. See 'Plan of Distribution.'
------------------------
MERRILL LYNCH & CO. SMITH BARNEY INC.
------------------------
THE DATE OF THIS PROSPECTUS IS JULY 23, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
'Commission') a Registration Statement on Form S-3 (which term shall encompass
all amendments, exhibits and schedules thereto (the 'Registration Statement'))
under the Securities Act of 1933, as amended (the 'Securities Act'), with
respect to the Notes being offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Notes being offered
hereby, reference is hereby made to such Registration Statement, including the
exhibits filed as part thereof.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), and in accordance
therewith files periodic reports and other information with the Commission. The
Registration Statement and the exhibits thereto filed by the Company with the
Commission, as well as the periodic reports and other information so filed under
the Exchange Act, may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as at the following regional offices:
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661;
and 7 World Trade Center, 13th Floor, Suite 1300, New York, New York 10048.
Copies of such information may also be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. In addition, such information may be accessed
electronically by means of the Commission's home page on the Internet
(http://www.sec.gov).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated into this Prospectus by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1996 as
amended by the Form 10-K/A dated July 22, 1997; and
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Notes 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 by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON TO WHOM A COPY OF
THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE, OTHER THAN
EXHIBITS TO SUCH DOCUMENTS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO:
CORPORATE SECRETARY, MOUNTAIN FUEL SUPPLY COMPANY, 180 EAST FIRST SOUTH STREET,
SALT LAKE CITY, UTAH 84145; TELEPHONE (801) 324-5202.
In connection with an offering of Notes purchased by one or more Agents as
principal on a fixed offering price basis, such Agent(s) may engage in
transactions that stabilize, maintain or otherwise affect the market price of
such Notes. For a description of these activities, see 'Plan of Distribution.'
THE COMPANY
The Company, a subsidiary of Questar Corporation ('Questar'), is a retail
natural gas distribution utility serving approximately 623,000 sales and
transportation customers in Utah, southwestern Wyoming and southeastern Idaho.
Between 1929 and the present, the Company gradually expanded the boundaries of
its distribution system to include over 90% of Utah's population. The principal
communities served by the Company
2
<PAGE>
include the Salt Lake City metropolitan area, Ogden, Provo, Price, Logan,
Richfield, Fillmore, Cedar City and St. George in Utah, Rock Springs, Green
River and Evanston in southwestern Wyoming and Preston in southeastern Idaho.
The natural gas distribution activities and facilities of the Company are
regulated by the Public Service Commission of Utah ('PSCU') and the Public
Service Commission of Wyoming ('PSCW') in their respective states. The PSCU also
regulates the Company's activities in southeastern Idaho pursuant to a contract
with the Public Utilities Commission of Idaho. The Company has significant
business relationships with certain affiliated companies, particularly Questar
Pipeline Company ('Questar Pipeline'), Wexpro Company ('Wexpro'), Questar Gas
Management Company and Questar InfoComm Inc.
The Company has been directly responsible for its gas acquisition
activities since September 1993. The Company has a balanced and diversified
portfolio of approximately 58 gas supply contracts with more than 28 suppliers
located in the Rocky Mountain states. The Company transports both its own
production and purchased gas on Questar Pipeline's transmission system and
purchases gas storage capacity at the Clay Basin storage facility and three
other storage facilities owned by Questar Pipeline. In 1996, the Company
satisfied approximately 54% of its total gas supply with volumes produced from
reserves owned by the Company on properties operated by Wexpro.
The population of the Company's service area is generally growing faster
than the national average, and the Company expects to add 22,000 customers in
1997 and 15,000-20,000 customers per year for the remainder of the century. The
Company's sales, particularly to general service customers, are seasonal with a
substantial portion of such sales made during the heating season. The Company's
natural gas sales and transportation services are made under rate schedules
approved by the PSCU and the PSCW for their respective states. The Company is
currently authorized to earn a rate of return on rate base of 10.22-10.34% in
Utah and 10.4% in Wyoming.
The Company and all other local distribution companies are faced with the
challenges and opportunities posed by the unbundling and restructuring of
traditional utility services. As a local distribution company, the Company owns
and controls the lines through which gas is delivered, is the only supplier of
natural gas to residential customers, measures the consumption of gas used by
its customers, and bills for consumption and related services. The services
provided by the Company are packaged and priced as a 'bundle.' Most unbundling
discussions focus on extending to residential and commercial customers the same
choices provided industrial customers, i.e., allowing them to separate the
commodity supply from the transportation service. (Industrial customers have
enjoyed the benefit of supplier choice for over 10 years.)
The State of Wyoming and the PSCW have asked utilities in the state to
consider filing proposals that will give residential and commercial customers in
the state more choice in their energy service. While the Company will continue
to offer full bundled service to residential and commercial customers in the
State of Wyoming, it intends to file, during 1997, for regulatory approval to
provide such customers the additional choice of transportation service. The
Company currently has approximately 21,350 residential and commercial customers
in southwestern Wyoming. The State of Utah and the PSCU are actively involved in
reviewing the restructuring and unbundling of telephone and electric utility
services. Given its attractive rates and high customer service ratings, the
Company does not believe that Utah regulators or residential customers will push
for rapid unbundling in Utah.
The Company's principal executive and business office is located at 180
East First South Street, P.O. Box 45360, Salt Lake City, Utah 84145 and its
telephone number is (801) 324-5555.
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be used to finance a
portion of the Company's capital expenditures, estimated to be $64.0 million for
1997, and to repay a portion of short-term debt which, at March 31, 1997,
totaled $58.7 million and had an interest rate of 5.48% per annum. Such
short-term debt was incurred for general corporate purposes including working
capital.
3
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997.
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------
AMOUNT PERCENTAGE
-------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt............................................................................ $175,000 42.5%
Redeemable cumulative preferred stock (1)................................................. 4,808 1.1%
Common shareholder's equity............................................................... 232,205 56.4%
-------- ----------
Total capitalization.................................................................... $412,013 100.0%
-------- ----------
-------- ----------
Short-term debt........................................................................... $ 58,700
--------
--------
</TABLE>
- ------------------
(1) The Company redeemed the cumulative preferred stock on July 1, 1997.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
12 MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------ ---------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges (1)........................... 2.98 3.08 2.90 2.80 3.48 3.84
</TABLE>
- ------------------
(1) For the purposes of this presentation, earnings represent income before
income taxes and fixed charges. Fixed charges consist of total interest
charges, amortization of debt issuance costs and debt discounts, and the
interest portion of rental costs.
DESCRIPTION OF MEDIUM-TERM NOTES
The Notes will be issued as a series of debt securities under an Indenture
(the 'Indenture'), dated as of May 1, 1992, between the Company and First
Security Bank, N.A. (as successor trustee to Citibank, N.A.), 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 form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. Capitalized terms
used but not defined herein have the meanings given to them in the Indenture or
the Notes, as the case may be. The term 'Securities,' as used under this
caption, refers to all debt securities issued and issuable from time to time
under the Indenture and includes the Notes. The terms and conditions set forth
below will apply to each Note unless otherwise specified in an applicable
Pricing Supplement.
GENERAL
The Indenture provides that, in addition to the Notes, additional
Securities in one or more series (including both interest bearing and original
issue discount securities) may be issued thereunder, without limitation as to
aggregate principal amount of all Securities issuable thereunder. The Notes will
be unsecured obligations of the Company and will rank in parity with all other
unsecured and unsubordinated indebtedness of the Company. Other than a
limitation on liens covenant, the Indenture does not contain restrictive
covenants which would require the Company to maintain certain financial ratios
or restrict the Company's ability to incur additional indebtedness. In addition,
the Indenture permits the issuance of Notes which do not pay interest for stated
periods of time and which are issued with original issue discount.
The Notes being offered hereby constitute a separate series of Securities
under the Indenture and are currently limited to $75,000,000 aggregate initial
offering amount. Such series may be reopened and the aggregate initial offering
amount of the Notes may be increased from time to time. The Notes will be
offered on a continuing basis, and each Note will mature on a Business Day (as
defined below), not less than nine months nor more than 30 years from its date
of issue, as selected by the initial purchaser and agreed to by the Company. The
Notes will be denominated and be payable in United States dollars.
The Pricing Supplement relating to any Note will set forth the principal
amount, interest rate, issue price and Agent's commission, original issue and
maturity dates, redemption and repayment provisions, if any, and other material
terms of such Note.
Unless otherwise specified in the applicable Pricing Supplement, each Note
will be issued in registered book-entry form (a 'Book-Entry Note') or in
registered definitive form (a 'Definitive Note'), in the denomination of $1,000
or any amount in excess thereof which is an integral multiple of $1,000.
Book-Entry
4
<PAGE>
Notes may be transferred or exchanged only through a participating member of The
Depository Trust Company (or such other depositary as is identified in an
applicable Pricing Supplement) (the 'Depositary'). See 'Book-Entry Notes; Global
Securities' below. Registration of transfers of Definitive Notes will be made at
the Corporate Trust Office of the Trustee. No service fee will be charged by the
Company, the Trustee 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 payable in connection
therewith (other than exchanges pursuant to Sections 304, 906 or 1107 of the
Indenture, not involving any transfer).
As used herein, 'Business Day,' means any day that is not a Saturday or
Sunday, and that in The City of New York is not a day on which banking
institutions are generally authorized or obligated by law or executive order to
close, and, with respect to any LIBOR Note, is a London Business Day. Unless
otherwise specified in the applicable Pricing Supplement, 'London Business Day'
means any day on which dealings in deposits in United States dollars are
transacted in the London interbank market.
As used herein, 'Maturity', when used with respect to any Note, means the
date on which the principal of such Note or an installment of principal becomes
due and payable as provided in the Note or the Indenture, whether at the Stated
Maturity or by declaration of acceleration, call for redemption, repayment at
the option of the Holder or otherwise.
As used herein, 'Stated Maturity', when used with respect to any Note or
any installment of principal thereof or interest thereon, means the date
specified in such Note as the fixed date on which the principal of such Note or
such installment of principal or interest is due and payable.
Under the Indenture, Notes may be issued at a discount from the stated
principal amount thereof or with such terms (such as contingent interest,
interest holidays, irregular accrual periods, interest payable in additional
Notes, stepped rates, rates based on multiple or non-conventional interest
indices or Notes on which payments are tied to the value of a single stock, a
basket of stocks, a commodity or a stock or commodities index) so as to cause
the Notes to be subject to the original issue discount rules of federal, state,
local or foreign tax laws. In the event Notes are issued at such a discount or
with such terms so as to cause original issue discount rules to apply, the terms
of such Notes and additional disclosure regarding the federal income tax
treatment of such Notes as well as certain other considerations will be provided
in the applicable Pricing Supplement relating thereto.
Unless otherwise indicated in a Pricing Supplement, the covenants contained
in the Indenture and the Notes would not necessarily afford Holders of the Notes
protection in the event of a highly leveraged or other transaction involving the
Company that may adversely affect Holders.
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other factors, the aggregate principal amount of Notes
purchased in any single transaction. Notes with similar variable terms other
than interest rates, as well as Notes with different other variable terms, may
be offered concurrently to different investors. Interest rates or formulas and
other terms of Notes are subject to change by the Company from time to time, but
no such change will affect any Note previously issued or as to which an offer to
purchase has been accepted by the Company.
PAYMENTS
For Definitive Notes, payments of principal, premium, if any, and interest
payable at Maturity will be made in immediately available funds at the Corporate
Trust Office of the Trustee in Salt Lake City, Utah or at such other place as
the Company may designate, provided that the Definitive Note is presented to the
Trustee in time for the Trustee to make such payments in such funds in
accordance with its normal procedures. Interest (other than interest payable at
Maturity) will be paid by check mailed to the address of the Person entitled
thereto as it appears in the Security Register as of the Regular Record Dates
or, at the option of the Company, by wire transfer to an account maintained by
such Person with a bank located in the United States. Notwithstanding the
foregoing, a Holder of $10,000,000 or more in aggregate principal amount of
Notes having the same Interest Payment Dates (as defined below) shall be
entitled, upon written request received by the Trustee prior to the Regular
Record Date in respect of an interest payment, or the date which is fifteen days
before the Stated Maturity or date of redemption or repayment of the principal
of the Notes, as the case may be, to receive payments of principal, premium, if
any, and interest by wire transfer to an account maintained by such Holder with
a bank located in the United States; provided, however, that no payment of
principal and premium, if any, will be made without prior presentment and
surrender of the Notes. If any Stated Maturity or date of redemption or
repayment would otherwise be a day that is not a Business Day, payments due on
any such day need not be made on such day, but
5
<PAGE>
may be made on the next succeeding Business Day (or, in the case of a LIBOR
Note, if such day falls in the next succeeding calendar month, the immediately
preceding Business Day), with the same force and effect as if made on the due
date, and no interest shall accrue for the period from such due date to such
succeeding Business Day.
The total amount of any principal, premium, if any, or interest due on any
Global Security (as defined below) representing one or more Book-Entry Notes on
any Interest Payment Date or at Maturity will be made available to the Trustee
on such date. As soon as practicable thereafter, the Trustee will make such
payments to the Depositary in accordance with existing arrangements between the
Trustee and the Depositary. The Depositary will allocate such payments to each
Book-Entry Note represented by such Global Security and make payments to the
registered owners or Holders thereof in accordance with its existing operating
procedures. Neither the Company nor the Trustee shall have any responsibility or
liability for such payments by the Depositary. So long as the Depositary or its
nominee is the registered owner of any Global Security, the Depositary or its
nominee, as the case may be, will be considered the sole owner or Holder of the
Book-Entry Note or Book-Entry Notes represented by such Global Security for all
purposes under the Indenture.
REDEMPTION
Unless otherwise specified in an applicable Pricing Supplement, the Notes
will not be subject to any optional or mandatory sinking fund. If provided in an
applicable Pricing Supplement, the Notes may be subject to redemption, in whole
or in part, prior to their Stated Maturity at the option of the Company or
through operation of a mandatory or optional sinking fund or analogous
provisions. Such Pricing Supplement will set forth the detailed terms of such
redemption, including, but not limited to, the dates after or on which and the
price or prices (including premium, if any) at which such Notes may be redeemed.
REPAYMENT AT THE OPTION OF THE HOLDER
If provided in an applicable Pricing Supplement, Notes will be subject to
repayment at the option of the Holder thereof in accordance with the terms of
such Notes on their respective optional repayment dates, if any, as agreed upon
by the Company and the purchasers thereof at the time of sale (each, an
'Optional Repayment Date'). If no Optional Repayment Date is indicated with
respect to a Note, such Note will not be repayable at the option of the Holder
thereof prior to its Stated Maturity.
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, at the
discretion of the Company, be held, resold or surrendered to the Trustee for
cancellation.
INTEREST AND INTEREST RATES
General
Unless otherwise specified in an applicable Pricing Supplement, each Note
will bear interest from the date of original issue at the rate per annum or, in
the case of a Floating Rate Note, pursuant to the interest rate formula, stated
therein and in the applicable Pricing Supplement until the principal thereof is
paid or made available for payment. Interest will be payable in arrears on each
date specified in the applicable Pricing Supplement and in a Note on which an
installment of interest is due and payable (an 'Interest Payment Date') and at
Maturity. Interest will be payable generally to the person in whose name a Note
(or any Predecessor Security) is registered at the close of business on the
Regular Record Date next preceding the related Interest Payment Date; provided,
however, that interest payable at Maturity will be payable to the person to whom
principal shall be payable. Each interest payment shall be the amount of
interest accrued from and including the later of the date of original issue or
the most recent Interest Payment Date (in respect of which interest has been
paid or duly provided for with respect to such Note) to but excluding the next
succeeding Interest Payment Date (an 'Interest Accrual Period'). Unless
otherwise specified in the applicable Pricing Supplement, the first payment of
interest on any Note originally issued between a Regular Record Date and the
related Interest Payment Date will be made on the Interest Payment Date
immediately following the next succeeding Regular Record Date to the Holder on
such next succeeding Regular Record Date. Interest rates, interest rate formulae
and other terms of the Notes are subject to change by the Company from time to
time but no such change will affect any Notes already issued or as to which
offers to purchase have been accepted by the Company.
6
<PAGE>
Fixed Rate Notes
Unless otherwise specified in an applicable Pricing Supplement, the
Interest Payment Dates with respect to any Fixed Rate Note will be April 1 and
October 1 of each year, and the Regular Record Dates in respect of such Interest
Payment Dates will be the immediately preceding March 15 and September 15
(whether or not a Business Day), respectively. If any Interest Payment Date or
Maturity of a Fixed Rate Note falls on a day that is not a Business Day with
respect to such Fixed Rate Note, the payment due on such Interest Payment Date
or at Maturity will be made on the following day that is a Business Day with
respect to such Fixed Rate Note as if it were made on the date such payment was
due and no interest shall accrue on the amount so payable for the period from
and after such Interest Payment Date or Maturity, as the case may be. Unless
otherwise specified in the applicable Pricing Supplement, interest on each Fixed
Rate Note will be computed on the basis of a 360-day year of twelve 30-day
months.
Floating Rate Notes
Unless otherwise specified in an applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. Interest on Floating Rate Notes
will be determined by reference to a 'Base Rate,' which may be one or more of
(a) the Commercial Paper Rate (as defined below), in which case such Note will
be a 'Commercial Paper Rate Note;' (b) the Federal Funds Rate (as defined
below), in which case such Note will be a 'Federal Funds Rate Note;' (c) LIBOR
(as defined below), in which case such Note will be a 'LIBOR Note;' (d) the
Prime Rate (as defined below) in which case such Note will be a 'Prime Rate
Note;' (e) the Treasury Rate (as defined below), in which case such Note will be
a 'Treasury Rate Note;' or (f) such other interest rate formula as may be set
forth in the applicable Pricing Supplement and Floating Rate Note. In addition,
a Floating Rate Note may bear interest at the lowest of two or more Base Rates
determined in the same manner as the Base Rates are determined for the types of
Floating Rate Notes described above (except the interest rate for such Floating
Rate Notes will not be determined with reference to the Treasury Rate). Each
Floating Rate Note will specify the Base Rate or Rates applicable thereto.
The interest rate on each Floating Rate Note will be calculated by
reference to the specified Base Rate or the lowest of two or more specified Base
Rates, in either case plus or minus the applicable Spread, if any, and/or
multiplied by the applicable Spread Multiplier, if any. The 'Spread' is the
number of basis points to be added to or subtracted from the related Base Rate
or Rates applicable to such Floating Rate Note. The 'Spread Multiplier' is the
percentage of the related Base Rate or Rates applicable to such Floating Rate
Note by which said Base Rate or Rates are to be multiplied to determine the
applicable interest rate on such Floating Rate Note. The 'Index Maturity' is the
period to maturity of the instrument or obligation with respect to which the
related Base Rate or Rates are calculated. Each Floating Rate Note will specify
the Index Maturity and the Spread, if any, and/or Spread Multiplier, if any,
applicable thereto.
Each Floating Rate Note and the applicable Pricing Supplement will specify
whether the rate of interest on such Floating Rate Note will be reset monthly,
quarterly, semiannually, annually or otherwise (each, an 'Interest Reset
Period') and the date on which such interest rate will be reset (each, an
'Interest Reset Date'). Unless otherwise specified in a Floating Rate Note and
the applicable Pricing Supplement, the Interest Reset Date will be, in the case
of a Floating Rate Note which resets (a) monthly, the third Wednesday of each
month; (b) quarterly, the third Wednesday of each March, June, September and
December of each year; (c) semiannually, the third Wednesday of each of the two
months specified in such Pricing Supplement; and (d) annually, the third
Wednesday of the month specified in such 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 LIBOR Note (or a
Floating Rate Note for which LIBOR is an applicable Base Rate), if such Business
Day is in the next succeeding calendar month, such Interest Reset Date shall be
the last Business Day in the preceding month.
The interest rate applicable to each Interest Reset Period commencing on
the Interest Reset Date or Dates with respect to such Interest Reset Period will
be the rate determined with respect to the applicable 'Interest Determination
Date.' Unless otherwise specified in an applicable Pricing Supplement, the
Interest Determination Date with respect to the Commercial Paper Rate, the
Federal Funds Rate and the Prime Rate will be the second Business Day preceding
each Interest Reset Date for the related Note. Unless otherwise specified in an
applicable Pricing Supplement, the Interest Determination Date with respect to
LIBOR will be the second London Business Day preceding each Interest Reset Date.
With respect to the Treasury Rate, unless otherwise specified in an
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applicable Pricing Supplement, the Interest Determination Date will be the day
in the week in which the Interest Reset Date falls on which day Treasury Bills
are normally auctioned (Treasury Bills are normally sold at auction on Monday of
each week, unless that day is a legal holiday, in which case the auction is
normally held on the following Tuesday, except that such auction may be held on
the preceding Friday); provided, however, that if, as a result of a legal
holiday, an auction is held on the Friday of the week preceding the Interest
Reset Date, the related Interest Determination Date shall be such preceding
Friday; and provided, further, that if an auction shall fall on any Interest
Reset Date, then the related Interest Reset Date shall instead be the first
Business Day immediately following such auction. Unless otherwise specified in
the applicable Pricing Supplement, the Interest Determination Date pertaining to
a Floating Rate Note the interest rate of which is determined with reference to
two or more Base Rates will be the first Business Day which is at least two
Business Days prior to such Interest Reset Date for such a Floating Rate Note on
which each Base Rate shall be determinable. Each Base Rate shall be determined
and compared on such date, and the applicable interest rate shall take effect on
the related Interest Reset Date.
Any Floating Rate Note may also specify either or both a maximum limit and
a minimum limit on the rate at which interest may accrue during any Interest
Accrual Period. In addition to any maximum interest rate that may be applicable
to any Floating Rate Note pursuant to the preceding sentence, 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 a Floating Rate Note which resets (a) monthly,
on the third Wednesday of each month; (b) quarterly, on the third Wednesday of
March, June, September and December of each year; (c) semiannually, on the third
Wednesday of the two months of each year specified in the applicable Pricing
Supplement; and (d) annually, on the third Wednesday of the month specified in
the applicable Pricing Supplement (each, an 'Interest Payment Date'); and, in
each case, at Maturity. If any Interest Payment Date for a Floating Rate Note
falls on a day that is not a Business Day with respect to such Floating Rate
Note, such Interest Payment Date will be the following day that is a Business
Day with respect to such Floating Rate Note, except that, in the case of a LIBOR
Note (or a Floating Rate Note for which LIBOR is an applicable Base Rate), if
such Business Day is in the next succeeding calendar month, such Interest
Payment Date shall be the immediately preceding day that is a Business Day with
respect to such Floating Rate Note. If the Maturity of a Floating Rate Note
falls on a day that is not a Business Day with respect to such Floating Rate
Note, the payment of principal, premium, if any, and interest will be made on
the next succeeding Business Day with respect to such Floating Rate Note, and no
interest on such payment shall accrue for the period from and after Maturity.
Unless otherwise specified in a Floating Rate Note and the applicable Pricing
Supplement, the Regular Record Date or Dates for interest payable on such
Floating Rate Note will be the fifteenth day (whether or not a Business Day)
immediately preceding the related Interest Payment Date or Dates.
The interest rate in effect with respect to a Floating Rate Note on each
day that is not an Interest Reset Date will be the interest rate determined as
of the Interest Determination Date pertaining to the immediately preceding
Interest Reset Date and the interest rate in effect on any day that is an
Interest Reset Date will be the interest rate determined as of the Interest
Determination Date pertaining to such Interest Reset Date, subject in either
case to applicable provisions of law and any maximum or minimum interest rate
limitation referred to in such Floating Rate Note; provided, however, that the
interest rate in effect with respect to a Floating Rate Note for the period from
the date of original issue to the first Interest Reset Date will be the rate
specified as such in the applicable Pricing Supplement and the related Floating
Rate Note (the 'Initial Interest Rate') and unless otherwise specified in the
applicable Pricing Supplement the interest rate in effect for the ten calendar
days immediately prior to a Maturity will be the interest rate in effect on the
tenth calendar day preceding such Maturity.
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Unless otherwise specified in the applicable Pricing Supplement, with
respect to each Floating Rate Note, accrued interest is calculated by
multiplying its face amount by an accrued interest factor. Such accrued interest
factor is computed by adding the interest factor calculated for each day from
the later of the date of issue, or from the last date to which interest has been
paid or duly provided for, to the date for which accrued interest is being
calculated. Unless otherwise specified in the applicable Pricing Supplement, the
interest factor for each such day is computed by dividing the interest rate
applicable to such day by 360, in the case of Commercial Paper Rate Notes,
Federal Funds Rate Notes, LIBOR Notes, or Prime Rate Notes or by the actual
number of days in the year, in the case of Treasury Rate Notes. Unless otherwise
specified in an applicable Pricing Supplement, the interest factor for Notes for
which the interest rate is calculated with reference to two or more Base Rates
will be calculated in each period in the same manner as if only the lowest of
the applicable Base Rates applied.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) will be rounded upward to 9.87655% (or. 0987655)), and
all dollar amounts used in or resulting from such calculation on Floating Rate
Notes will be rounded to the nearest cent (with one-half cent being rounded
upward).
Unless otherwise specified in an applicable Pricing Supplement, the Trustee
will be the 'Calculation Agent'. Upon the request of the holder of any Floating
Rate Note, the Calculation Agent will provide the interest rate then in effect
and, if determined, the interest rate that will become effective 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 an applicable Pricing
Supplement, the 'Calculation Date,' if applicable, pertaining to any Interest
Determination Date will be the earlier of (i) the tenth calendar day after such
Interest Determination Date or, if any such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day immediately preceding the
applicable Interest Payment Date or Maturity, as the case may be.
The interest rate in effect with respect to a Floating Rate Note from the
date of original issue to the first Interest Reset Date will be the Initial
Interest Rate. The interest rate for each subsequent Interest Reset Date will be
determined by the Calculation Agent as follows:
Commercial Paper Rate. Commercial Paper Rate Notes will bear interest
at the interest rates (calculated with reference to the Commercial Paper
Rate and the Spread and/or Spread Multiplier, if any) specified in such
Commercial Paper Rate Notes and in an applicable Pricing Supplement.
Unless otherwise specified in an applicable Pricing Supplement,
'Commercial Paper Rate' means, with respect to any Interest Determination
Date relating to a Commercial Paper Rate Note or any Interest Determination
Date for a Note for which the Commercial Paper Rate is one of the Base
Rates (a 'Commercial Paper Rate Interest Determination Date'), the Money
Market Yield (as defined below) on such date of the rate for commercial
paper 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 'Commercial Paper'
or, if unavailable, under such other heading representing commercial paper
issued by non-financial entities whose bond rating is 'AA', or the
equivalent, from a nationally recognized statistical rating organization.
In the event that such rate is not published by 3:00 P.M., New York City
time, on the Calculation Date pertaining to such Commercial Paper Rate
Interest Determination 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 by the Federal Reserve
Bank of New York in its daily statistical release 'Composite 3:30 P.M.
Quotations for U.S. Governmental Securities' or any successor publication
('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 thirty days or ninety days, respectively). If such
rate is not published in either H.15(519) or Composite Quotations by 3:00
P.M., New York City time, on such Calculation Date, then the Commercial
Paper Rate will be calculated by the Calculation Agent and will be the
Money Market Yield of the arithmetic mean of the offered rates, as of
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 one or more of the Agents or
their affiliates) selected by the Calculation Agent (after consultation
with the Company) for commercial paper having the specified Index Maturity
placed for an industrial issuer whose
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bond rating is 'AA,' or the equivalent, from a nationally recognized
statistical rating agency; provided, however, that if the dealers selected
as aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the Commercial Paper Rate determined as of such Commercial Paper
Interest Determination Date will be the Commercial Paper Rate in effect on
such Commercial Paper Rate Interest Determination Date.
'Money Market Yield' shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
[ D x 360 ]
Money Market Yield = [ 360-(D x M) ] x 100
where 'D' refers to the applicable per annum rate for commercial paper
quoted on a bank discount basis and expressed as a decimal and 'M' refers
to the actual number of days in the interest period for which interest is
being calculated.
Federal Funds Rate. Federal Funds Rate Notes will bear interest at
the interest 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 an 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 a 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 United States dollar 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 such rate is not
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 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 Interests Determination Date will be the Federal Funds
Rate in effect on such Federal Funds Rate Interest Determination Date.
LIBOR. LIBOR Notes will bear interest at the interest rates
(calculated with reference to LIBOR and the Spread and/or Spread
Multiplier, if any) specified in such LIBOR Notes and in an applicable
Pricing Supplement.
Unless otherwise specified in an 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 LIBOR is an applicable
Base Rate (a 'LIBOR Interest Determination Date'), either, as specified
in the applicable Pricing Supplement: (a) the arithmetic mean of the
offered rates for deposits in U.S. dollars for the period of the Index
Maturity specified in the applicable Pricing Supplement, commencing on
the second London Business Day immediately following such LIBOR Interest
Determination Date, which appear on the Reuters Screen LIBO Page as of
11:00 A.M., London time, on the LIBOR Interest Determination Date, if at
least two such offered rates appear on the Reuters Screen LIBO Page
('LIBOR Reuters'), or (b) the rate for deposits in U.S. dollars having
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Business Day immediately following that
LIBOR Interest Determination Date, that appears on the Telerate Page
3750 as of 11:00 A.M., London time, on that LIBOR Interest Determination
Date ('LIBOR Telerate'). Unless otherwise indicated in the applicable
Pricing Supplement, 'Reuters Screen LIBO Page' means the display
designated as Page 'LIBO' on the Reuters Monitor Money Rate Service (or
such other page as may replace the LIBO page on that service for the
purpose of displaying London interbank offered rates of major banks).
'Telerate Page 3750' means the display designated as page '3750' on the
Telerate Service (or such other page as may replace the 3750 page
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on that service or such other service or services as may be nominated by
the British Bankers' Association for the purpose of displaying London
interbank offered rates for U.S. dollar deposits). If neither LIBOR
Reuters nor LIBOR Telerate is specified in the applicable Pricing
Supplement, LIBOR will be determined as if LIBOR Telerate had been
specified. If fewer than two offered rates appear on the Reuters Screen
LIBO Page, or if no rate appears on the Telerate Page 3750, as
applicable, LIBOR in respect of that LIBOR Interest Determination Date
will be determined as if the parties had specified the rate described in
(ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear on the Reuters Screen LIBO Page, as
described in (i)(a) above, or on which no rate appears on the Telerate
Page 3750, as specified in (i)(b) above, as applicable, LIBOR will be
determined on the basis of the rates at which deposits in U.S. dollars
having the Index Maturity designated in the applicable Pricing
Supplement are offered at approximately 11:00 A.M., London time, on such
LIBOR Interest Determination Date by four major banks ('Reference
Banks') in the London interbank market selected by the Calculation Agent
(after consultation with the Company) to prime banks in the London
interbank market commencing on the second London Business Day
immediately following such LIBOR Interest Determination Date and in a
principal amount of not less than U.S. $1,000,000 that is representative
for a single transaction in such market at such time. The Calculation
Agent will request the principal London office of each of the Reference
Banks to provide a quotation of its rate. If at least two such
quotations are provided, LIBOR for such LIBOR Interest Determination
Date will be the arithmetic mean of such quotations. If fewer than two
quotations are provided, LIBOR for such LIBOR Interest Determination
Date will be the arithmetic mean of the rates quoted at approximately
11:00 A.M., New York City time, on such LIBOR Interest Determination
Date by three major banks (which may include the Agents or their
affiliates) in The City of New York selected by the Calculation Agent
(after consultation with the Company) for loans in U.S. dollars to
leading European banks having the specified Index Maturity designated in
the applicable Pricing Supplement commencing on the second London
Business Day immediately following such LIBOR Interest Determination
Date and in a principal amount equal to an amount of not less than U.S.
$1,000,000 that is representative for a single transaction in such
market at such time; provided, however, that if the banks selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR determined as of such LIBOR Interest Determination Date
will be LIBOR then in effect on such LIBOR Interest Determination Date.
Prime Rate. Prime Rate Notes will bear interest at the interest rates
(calculated with reference to the Prime Rate and the Spread and/or Spread
Multiplier, if any) specified in such Prime Rate Notes and in an applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Statement, 'Prime
Rate' means, with respect to any Interest Determination Date relating to a
Prime Rate Note or a 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 USPRIME1 Page (as hereinafter defined) 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 appear on the Reuters
Screen USPRIME1 Page for such Prime Rate Interest Determination Date, then
the Prime Rate shall be the arithmetic mean of the prime rates or base
lending rates quoted on the basis of the actual number of days in the year
divided by a 360-day year as of the close of business on such Prime Rate
Interest Determination Date by four major money center banks (which may
include affiliates of the Agents) in The City of New York selected by the
Calculation Agent. If fewer than four such quotations are so provided, then
the Prime Rate shall be the arithmetic mean of four 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 as furnished in The City of New York by the major money center banks,
if any, that have provided such quotations and by a reasonable number of
substitute banks or trust companies (which may include affiliates of the
Agents) to obtain four such prime rate quotations, provided such substitute
banks or trust companies are organized and doing business under the laws of
the United States, or any State thereof, each having total
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equity capital of at least $500 million and being subject to supervision or
examination by Federal or State authority.
'Reuters Screen USPRIME1 Page' means the display on the Reuter Monitor
Money Rates Service (or any successor service) on the 'USPRIME1' page (or
such other page as may replace the USPRIME1 page on such service) for the
purpose of displaying prime rates or base lending rates of major United
States banks.
Treasury Rate. Treasury Rate Notes will bear interest at the interest
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 an
applicable Pricing Supplement.
Unless otherwise specified in an 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 Calculation Date pertaining to such Treasury Rate
Interest Determination Date, the auction average rate (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) as otherwise announced by the United States
Department of the Treasury. In the event that the results of the auction of
Treasury Bills having the specified Index Maturity 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 shall
be calculated by the Calculation Agent and shall be a yield to maturity
(expressed as a bond equivalent on the basis of a year of 365 days 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 one or more of the Agents or their affiliates) selected by the
Calculation Agent (after consultation with the Company), for the issue of
Treasury Bills with a remaining maturity closest to the specified Index
Maturity; provided, however, that if the dealers selected as aforesaid 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 determination of a Base Rate, the
specification of a Base Rate, calculation of the interest rate applicable to a
Floating Rate Note, its Interest Payment Dates or any other matter relating
thereto may be modified by the terms as specified under 'Other Provisions' on
the face thereof or in an Addendum relating thereto, if so specified on the face
thereof and described in the applicable Pricing Supplement.
DISCOUNT NOTES
The Company may offer Notes ('Discount Notes') from time to time that have
an Issue Price (as specified in the applicable Pricing Supplement) that is less
than 100% of the principal amount thereof (i.e. par) by more than a percentage
equal to the product of 0.25% and the number of full years to the Stated
Maturity. Discount Notes may not bear any interest currently or may bear
interest at a rate that is below market rates at the time of issuance. The
difference between the Issue Price of a Discount Note and par is referred to
herein as the 'Discount.' In the event of redemption, repayment or acceleration
of maturity of a Discount Note, the amount payable to the Holder of such
Discount Note will be equal to the sum of (i) the Issue Price (increased by any
accruals of Discount) and, in the event of any redemption of such Discount Note
(if applicable), multiplied by the Redemption Percentage (as defined in the
Pricing Supplement) (as adjusted by the Annual Redemption Percentage Reduction
(as defined in the Pricing Supplement, if applicable) and (ii) any unpaid
interest accrued thereon to the date of such redemption, repayment or
acceleration of maturity, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any date
on which a redemption, repayment or acceleration of maturity occurs for a
Discount Note, such Discount will be accrued using a constant yield method. The
constant yield will be calculated using a 30-day month, 360-day year convention,
a compounding period that, except for the Initial
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Period (as hereinafter defined), corresponds to the shortest period between
Interest Payment Dates for the applicable Discount Note (with ratable accruals
within a compounding period), a coupon rate equal to the initial coupon rate
applicable to such Discount Note and an assumption that the maturity of such
Discount Note will not be accelerated. If the period from the date of issue to
the initial Interest Payment Date for a Discount Note (the 'Initial Period') is
shorter than the compounding period for such Discount Note, a proportionate
amount of the yield for an entire compounding period will be accrued. If the
Initial Period is longer than the compounding period, then such period will be
divided into a regular compounding period and a short period with the short
period being treated as provided in the preceding sentence. The accrual of the
applicable Discount may differ from the accrual of original issue discount for
purposes of the Internal Revenue Code of 1986, as amended (the 'Code'), certain
Discount Notes may not be treated as having original issue discount within the
meaning of the Code, and Notes other than Discount Notes may be treated as
issued with original issue discount for federal income tax purposes. In the
event Notes are issued at such a discount or with such terms so as to cause
original issue discount rules under federal tax laws to apply, the terms of such
Notes and additional disclosure regarding the federal income tax treatment of
such Notes as well as certain other considerations will be provided in the
applicable Pricing Supplement relating thereto.
BOOK-ENTRY NOTES; GLOBAL SECURITIES
Upon issuance, all Book-Entry Notes having the same original issue date,
Stated Maturity and otherwise having identical terms and provisions will be
represented by a single global security (each, a 'Global Security'). Each Global
Security representing Book-Entry Notes will be deposited with, or on behalf of,
the Depositary. Except as set forth below, a Global Security may not be
transferred except as a whole by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any nominee to a successor of the Depositary
or a nominee of such successor.
Upon the issuance by the Company of Book-Entry Notes represented by a
Global Security, the Depositary will credit, on its book-entry registration and
transfer system, the respective principal amounts of the Book-Entry Notes
represented by such Global Security to the accounts of participants. The
accounts to be credited shall be designated by the applicable Agent or the
underwriter of such Book-Entry Notes, as the case may be. Ownership of
beneficial interests in a Global Security will be limited to participants or
persons that hold interests through participants. Ownership of beneficial
interests in Book-Entry Notes represented by a Global Security will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by the Depositary (with respect to interest of participants in the
Depositary), or by participants in the Depositary or persons that may hold
interests through such participants (with respect to persons other than
participants in the Depositary). The laws of some states may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interest in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of the Global Security, the Depositary or its nominee, as the
case may be, will be considered the sole owner or Holder of the Book-Entry Notes
represented by such Global Security for all purposes under the Indenture. Except
as provided below, owners of beneficial interests in Book-Entry Notes
represented by a Global Security will not be entitled to have Book-Entry Notes
represented by such Global Security registered in their names, will not receive
or be entitled to receive or be entitled to receive physical delivery of
Book-Entry Notes in definitive form ('Certificated Notes') and will not be
considered the owners or Holders thereof under the Indenture.
Unless otherwise specified in the applicable Pricing Supplement, each
Global Security representing Book-Entry Notes will be exchanged for Certificated
Notes of like tenor and terms and of differing authorized denominations in a
like aggregate principal amount, only if (i) the Depositary notifies the Company
that it is unwilling or unable to continue as Depositary for the Global
Securities or the Company becomes aware that the Depositary has ceased to be a
clearing agency registered under the Exchange Act and, in any such case, the
Company shall not have appointed a successor to the Depositary within 90 days
after the Company receives such notice or becomes aware of such ineligibility or
(ii) the Company, in its sole discretion, determines that the Global Securities
shall be exchanged for Certificated Notes. Upon any such exchange, the
Certificated Notes shall be registered in the names of the Beneficial Owners (as
defined below) of the Global Security or Securities representing Book-Entry
Notes, which names shall be provided by the Depositary's relevant Participants
(as identified by the Depositary) to the Trustee.
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The Depository Trust Company, New York, New York ('DTC') will be the
initial Depositary with respect to the Book-Entry Notes. The following is based
on information furnished by DTC:
DTC 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. (DTC's partnership nominee). One
fully registered Global Security will be issued for each issue of
Book-Entry Notes having the same terms and provisions, each in the
aggregate principal amount of such issue, and will be deposited with
DTC. If, however, the aggregate principal amount of any issue exceeds
$200,000,000, one Global Security will be issued with respect to each
$200,000,000 of principal amount and an additional Global Security will
be issued with respect to any remaining principal amount of such issue.
DTC 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. DTC holds securities that is participants
('Participants') deposit with DTC. DTC 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 of physical movement of securities certificates. Direct
Participants of DTC ('Direct Participants') include securities brokers
and dealers (including the Agents), banks, trust companies, clearing
corporations and certain other organizations. DTC 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 DTC'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 DTC and its Participants are on file with the
Securities and Exchange Commission.
Purchases of Book-Entry Notes under DTC's system must be made by or
through Direct Participants, which will receive a credit for such
Book-Entry Notes on DTC'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 records of Direct
Participants and Indirect Participants. Beneficial Owners will not
receive written confirmation from DTC of their purchase, but Beneficial
Owners are expected to receive written confirmations providing details
of the transaction, as well as periodic statements of their holdings,
from the Direct Participants or Indirect Participants through which such
Beneficial Owner entered into the transaction. Transfer 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 limited
circumstances described above.
To facilitate subsequent transfers, all Global Securities
representing Book-Entry Notes which are deposited with, or on behalf of,
DTC are registered in the name of DTC's nominee, Cede & Co. The deposit
of Global Securities with, or on behalf of, DTC and their registration
in the name of Cede & Co. effect no change in beneficial ownership. DTC
has no knowledge of the actual Beneficial Owners of the Global
Securities representing the Book-Entry Notes; DTC's records reflect only
the identity of the Direct Participants to whose accounts such
Book-Entry Notes are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of
their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners will
be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Global Securities representing the Book-Entry Notes. Under its usual
procedures, DTC mails an Omnibus Proxy to the
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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 account 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/or interest, if any, payments on
the Global Securities representing the Book-Entry Notes will be made by
the Company through the Trustee in immediately available funds to DTC as
the registered owner of the Global Securities. DTC's practice is to
credit Direct Participants' accounts on the applicable payment date in
accordance with their respective holdings shown on DTC's records unless
DTC 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 DTC, the Trustee or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to
time. Payment of principal, premium, if any, and/or interest, if any, to
DTC is the responsibility of the Company and the Trustee, disbursement
of such payments to Direct Participants shall be the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners shall be
the responsibility of Direct Participants and Indirect Participants.
None of the Company, the Trustee, the Paying Agent or the Security
Registrar will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial
ownership interests of a Global Security or for maintaining, supervising
or reviewing any records relating to such beneficial ownership
interests.
If applicable, redemption notices shall be sent to Cede & Co. If
less than all of the Book-Entry Notes are being redeemed, DTC's practice
is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have
its Book-Entry Notes repaid by the Company, through its Participant, to
the Trustee, and shall effect delivery of such Book-Entry Notes by
causing the Direct Participant to transfer the Participant's interest in
the Global Security or Securities representing such Book-Entry Notes, on
DTC's records, to the Trustee. The requirement for physical delivery of
Book-Entry Notes in connection with a demand for repayment will be
deemed satisfied when the ownership rights in the Global Security or
Securities representing such Book-Entry Notes are transferred by Direct
Participants on DTC's records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time upon reasonable
notice to the Company or the Trustee. Under such circumstances, in the
event that a successor 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 a Depositary. In that event, Certificated Notes will be
printed and delivered.
The information in this section concerning DTC and DTC's system has been
obtained from sources that the Company believes to be reliable, but the Company
takes no responsibility for the accuracy thereof.
LIMITATIONS ON LIENS
Subject to certain exceptions, the Company will not, and will not permit
any Subsidiary to, create, assume or suffer to exist, otherwise than in favor of
the Company or a Subsidiary, any mortgage, pledge, lien, encumbrance, or
security interest (collectively, 'Liens') upon any of its properties or assets
or upon any income or profits therefrom unless the Notes shall be equally and
ratably secured. This prohibition will not apply to: (a) Liens existing as of
the date of the Indenture; (b) any purchase money mortgage or Lien created to
secure all or part of the purchase price of any property (or to secure a loan
made to the Company or any Subsidiary to enable it to acquire such property),
provided that such Lien shall extend only to the property so acquired,
improvements thereon, replacements thereof and the income or profits therefrom;
(c) Liens on any property at the time of the acquisition thereof, whether or not
assumed by the Company or a Subsidiary; provided that such Lien shall extend
only to the property so acquired, improvements thereon, replacements thereof and
income or profits therefrom; (d) Liens on property or any contract for the sale
of any product or service or any rights thereunder or
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any proceeds therefrom, acquired or constructed by the Company or a Subsidiary
and created within one year after the later of the completion of such
acquisition or construction or the commencement of operation of the project,
provided that such Lien shall extend only to the property so acquired or
constructed, improvements thereon, replacements thereof and income or profits
therefrom; (e) Liens of Subsidiaries outstanding at the time they become
Subsidiaries; (f) Liens created or assumed by the Company or a Subsidiary on
coal, geothermal, oil, natural gas, inert gas, other hydrocarbon or mineral
properties owned or leased by the Company or a Subsidiary to secure loans to the
Company or a Subsidiary, for the purpose of developing such properties; (g)
Liens on any investment (as defined in the Indenture) of the Company or a
Subsidiary in any Person other than a Subsidiary or on any security representing
any investment of the Company or a Subsidiary; (h) any Lien not otherwise
permitted by the Indenture, provided that after giving effect to such Liens the
sum of (1) all indebtedness of the Company and its Subsidiaries secured by Liens
not otherwise permitted by the Indenture and (2) all Attributable Debt of the
Company and its Subsidiaries (to the extent not included in (1) above) does not
exceed 10% of Consolidated Capitalization; (i) any refunding or extension of
maturity, in whole or in part, of any obligation or indebtedness secured by
certain permitted Liens, provided that the principal amount of the obligation or
indebtedness secured by such refunding or extension shall not exceed the
principal amount of the obligation or indebtedness then outstanding and shall be
limited in lien to the same or substituted property and after-acquired property
that secured the refunded or extended obligation or indebtedness; (j) Liens upon
any office equipment, data processing equipment or any motor vehicles, tractors
or trailers; (k) Liens of or upon or in current assets of the Company or a
Subsidiary created or assumed to secure indebtedness incurred in the ordinary
course of business; (l) any Lien which is payable, both with respect to
principal and interest, solely out of the proceeds of natural gas, oil, coal,
geothermal resources, inert gas, hydrocarbons or minerals to be produced from
the property subject thereto and to be sold or delivered by the Company or a
Subsidiary; (m) Liens to secure indebtedness incurred to finance advances made
by the Company or any Subsidiary to any third party for the purpose of financing
oil, natural gas, hydrocarbon, inert gas or other mineral exploration or
development, provided that such Liens shall extend only to the receivables of
the Company or such Subsidiary in respect of such advances; and (n) any rights
reserved in others to take or reserve any part of the natural gas, oil, coal,
geothermal resources, inert gas, hydrocarbons or minerals produced at any time
on any property of the Company or a Subsidiary. Also excepted from the general
prohibition are various other liens including, but not limited to: mechanics' or
materialmen's liens, certain governmental liens, certain leases, certain
judgment liens, and certain liens arising in connection with leases, easements
and rights-of-way for pipeline or distribution plant purposes.
CERTAIN DEFINITIONS
Certain terms used in the Indenture are defined and are used in this
Prospectus as follows:
'Attributable Debt' means, as of the date of determination, the
present value of net rent for the remaining term of a capital lease,
determined in accordance with generally accepted accounting principles
('GAAP'), which is part of a Sale and Leaseback Transaction (as defined),
including any periods for which the lessee has the right to renew or extend
the lease. For purposes of the foregoing, 'net rent' means the sum of
capitalized rental payments required to be paid by the lessee, other than
amounts required to be paid by the lessee for maintenance, repairs,
insurance, taxes, assessments, energy, fuel, utilities and similar charges.
In the case of a capital lease which is terminable by the lessee upon the
payment of a penalty, such net amount shall also include the amount of such
penalty, but no rent shall be considered to be required to be paid under
such lease subsequent to the first date upon which it may be so terminated.
'Consolidated Capitalization' means, without duplication, the sum of
(a) the principal amount of Consolidated Funded Debt of the Company and its
Subsidiaries at the time outstanding, (b) the total capital represented by
the capital stock of the Company and its Subsidiaries at the time
outstanding based, in the case of stock having par value, upon its par
value, and in the case of stock having no par value, upon the value stated
on the books of the Company, (c) the total amount of (or less than the
amount of any deficit in) retained earnings and paid-in capital of the
Company and its Subsidiaries, (d) reserves for deferred federal and state
income taxes arising from timing differences and (e) Attributable Debt, all
as shown on a consolidated balance sheet of the Company and its
Subsidiaries prepared in accordance with GAAP; provided that in determining
the consolidated retained earnings and paid-in capital of the Company and
its Subsidiaries no effect shall be given to any unrealized write-up or
write-down in the value of assets or any
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amortization thereof, except for accumulated provisions for depreciation,
depletion, amortization and property retirement which shall have been
created by charges made by the Company or any of its Subsidiaries on its
books.
'Consolidated Funded Debt' means the Funded Debt of the Company and
its Subsidiaries, consolidated in accordance with GAAP.
'Funded Debt' means all Indebtedness that will mature, pursuant to a
mandatory sinking fund or prepayment provision or otherwise, and all
installments of Indebtedness that will fall due, more than one year from
the date of determination. In calculating the maturity of any Indebtedness,
there shall be included the term of any unexercised right of the debtor to
renew or extend such Indebtedness existing at the time of determination.
'Indebtedness' means all items of indebtedness for borrowed money
(other than unamortized debt discount and premium) which would be included
in determining total liabilities as shown on the liability side of a
balance sheet prepared in accordance with GAAP as of the date as of which
Indebtedness is to be determined, and shall include indebtedness for
borrowed money (other than unamortized debt discount and premium) with
respect to which the Company or any Subsidiary customarily pays interest
secured by any mortgage, pledge or other lien or encumbrance of or upon, or
any security interest in, any properties or assets owned by the Company or
any Subsidiary, whether or not the Indebtedness secured thereby shall have
been assumed, and shall also include guarantees of Indebtedness of others;
provided that in determining Indebtedness of the Company or any Subsidiary
there shall be included the aggregate liquidation preference of all
outstanding securities of any Subsidiary senior to its Common Stock that
are not owned by the company or a Subsidiary; and provided, further, that
Indebtedness of any Person shall not include the following:
(a) any indebtedness evidence of which is held in treasury (but the
subsequent resale of such indebtedness shall be deemed to constitute the
creation thereof); or
(b) any particular indebtedness if, upon or prior to the maturity
thereof, there shall have been deposited with a depository (or set aside
and segregated, if permitted by the instrument creating such
indebtedness), in trust, money (or evidence of such indebtedness as
permitted by the instrument creating such indebtedness) in the necessary
amount to pay, redeem or satisfy such indebtedness; or
(c) any indebtedness incurred to finance oil, natural gas,
hydrocarbon, inert gas or other mineral exploration or development to
the extent that the issuer thereof has outstanding advances to finance
oil, natural gas, hydrocarbon, inert gas or other mineral exploration or
development, but only to the extent such advances are not in default; or
(d) any indebtedness incurred without recourse to the Company or
any Subsidiary; or
(e) any indebtedness incurred to finance advance payments for gas
(pursuant to take-or-pay provisions or otherwise), but only to the
extent that such advance payments are pursuant to gas purchase contracts
entered into in the normal course of business; or
(f) any amount (whether or not included in determining total
liabilities as shown on the liability side of a balance sheet prepared
in accordance with GAAP) representing capitalized rent under any lease;
or
(g) any indirect guarantees or other contingent obligations in
respect of indebtedness of other Persons, including agreements,
contingent or otherwise, with such other Persons or with third parties
with respect to, or to permit or assure the payment of, obligations of
such other Persons, including, without limitation, agreements to
purchase or repurchase obligations of such other Persons, to advance or
supply funds to, or to invest in, such other Persons, or to pay for
property, products or services of such other Persons (whether or not
conveyed, delivered or rendered); demand charge contracts, through-put,
take-or-pay, keep-well, make-whole or maintenance of working capital or
similar agreements; or guarantees with respect to rental or similar
periodic payments to be made by such other Persons.
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'Sale and Leaseback Transaction' means an arrangement in which the
Company or a Subsidiary sells any of its property which was placed into
service more than 120 days prior to such sale to a Person and leases it
back from that Person within 180 days of the sale.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Nothing contained in the Indenture or in any of the Notes shall prevent any
consolidation or merger of the Company with or into any other Person (whether or
not affiliated with the Company), or successive consolidations or mergers in
which the Company or its successor shall be a party, or shall prevent any
transfer or lease of the property of the Company as an entirety or substantially
as an entirety, to any other Person (whether or not affiliated with the
Company); provided, however, that:
(a) in case of such a transaction, the entity formed by such
consolidation or into which the Company is merged or the Person which
acquires or leases the properties and assets of the Company substantially
as an entirety shall be a Corporation organized under the laws of the
United States of America, any state thereof or the District of Columbia and
shall expressly assume the due and punctual payment of the principal of,
premium, if any, and interest on all the Notes and the performance of every
other covenant of the Indenture;
(b) immediately after giving effect to such transaction, no event
which, after notice or lapse of time, would become an Event of Default,
shall have occurred and be continuing; and
(c) each of the Company and the successor Person shall have delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that such transaction complies with the above paragraphs (a) and
(b) and that all conditions precedent relating to such transaction have
been complied with.
EVENTS OF DEFAULT
The following are Events of Defaults under the Indenture with respect to
any Notes: (a) failure to pay the principal of (or premium, if any, on) any Note
when due; (b) failure to make any mandatory sinking fund payment on any Note
when due or failure to pay any interest installment on any Note when due, in
each case, continued for 30 days; (c) failure to perform any other covenant of
the Company, continued for 90 days after written notice as provided in the
Indenture; (d) the occurrence of an event of default in other indebtedness of
the Company (including Securities other than the Notes) resulting in
indebtedness in excess of $10,000,000 principal amount being due and payable
prior to maturity and such acceleration shall not have been rescinded or
annulled or such indebtedness shall not have been discharged after written
notice as provided in the Indenture; and (e) certain events of bankruptcy,
insolvency or reorganization.
If an Event of Default with respect to Notes at the time outstanding shall
occur and be continuing, then and in every such case (unless the principal of
all the Notes shall have already become due and payable) the Trustee or the
Holders of at least 33 1/3% in principal amount of the outstanding Notes may
declare to be due and payable immediately, by a notice in writing to the Company
(and to the Trustee if given by Holders), the entire principal amount of all the
outstanding Notes. At any time after such declaration of acceleration has been
made, but before a judgment or decree for payment of the money due has been
obtained by the Trustee, the Holders of a majority in principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may, in
certain circumstances, rescind and annul such declaration.
No Holder of any Notes shall have any right to institute any proceeding
with respect to the Indenture or for any remedy thereunder, unless such Holder
previously shall have given to the Trustee written notice of a default and
unless also the Holders of at least 25% of the principal amount of outstanding
Notes shall have made written request upon the Trustee, and have offered
reasonable indemnity, to institute such proceeding as the Trustee may request,
and the Trustee shall not have received direction inconsistent with such request
in writing by the Holders of a majority in principal amount of outstanding Notes
and shall have neglected or refused to institute such proceeding within 60 days.
However, the rights of any Holder of any Notes to enforce the payment of
principal, premium, if any, and interest due on such Notes on or after the dates
expressed in such Notes may not be impaired or affected.
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WAIVER, MODIFICATION AND AMENDMENT
The Holders of a majority in principal amount of the outstanding Notes may
waive certain past defaults, except a default in the payment of the principal of
(or premium, if any) or interest on any Note or in respect of any covenant or
provision in the Indenture which under the terms of the Indenture cannot be
modified without the consent of all Holders of outstanding Notes. The Holders of
a majority in aggregate principal amount of outstanding Notes may waive the
Company's compliance with certain restrictive provisions.
Modification and amendment of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of majority in aggregate principal
amount of the outstanding Notes provided that no such modification or amendment
may, without the consent of the Holder of each Note affected thereby, (a) change
the Stated Maturity of the principal of, or any installment of principal of, or
interest on, any Note; (b) reduce the principal amount of, or the rate of
interest, if any, on, or any premium payable upon the redemption of any Note;
(c) change the Place of Payment or change the currency of payment of principal,
premium, if any, or interest on any Note; (d) impair the right to institute suit
for the enforcement of any payment on or with respect to any Note; (e) reduce
the percentages of Holders of outstanding Notes specified in this or the
preceding paragraph; or (f) effect certain other modifications or amendments
described in the Indenture.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may elect either (A) to defease and
be discharged from any and all obligations with respect to the Notes
('defeasance') or (B) to be released from its obligations with respect to such
Notes described above under 'Limitations on Liens' and 'Consolidation, Merger
and Sale of Assets' ('covenant defeasance'), upon the irrevocable deposit with
the Trustee, in trust for such purpose, of money, and/or U.S. Government
Obligations (as defined in the Indenture) which through the payment of principal
and interest in accordance with their terms will provide money, in an amount
sufficient to pay the principal of, and premium, if any, and interest on such
Notes, and any mandatory sinking fund or analogous payments thereon, on the
scheduled due date therefor. Unless otherwise specified in the applicable
Pricing Supplement, defeasance and covenant defeasance are each conditioned upon
the Company's delivery to the Trustee of an Opinion of Counsel to the effect
that the Holders of the Notes will have no federal income tax consequences as a
result of such deposit. The applicable Pricing Supplement may further describe
the provisions, if any, permitting such defeasance or covenant defeasance with
respect to the related Notes (including any modifications to the provisions
described above) and the effect of such defeasance or covenant defeasance under
federal tax law.
CONCERNING THE TRUSTEE
First Security Bank, N.A. is the Trustee under the Indenture. The Indenture
contains certain limitations on the rights of the Trustee, should it become a
creditor of the Company, to obtain payment of claims in certain cases or to
realize on certain property received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other transactions with
the Company; however, if it acquires a conflicting interest it must eliminate
such conflict or resign or otherwise comply with the Trust Indenture Act of
1939, as amended. The Indenture also provides that the Company will indemnify
the Trustee against loss, liability or expense incurred without negligence or
bad faith on the part of the Trustee arising out of or in connection with the
trust under the Indenture.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis for sale by the Company
through the Agents, who have agreed to use their reasonable efforts to solicit
offers to purchase the Notes, and the Company may also sell the Notes to an
Agent, as principal, for resale to investors and other purchasers at varying
prices related to prevailing market prices at the time of resale to be
determined by such Agent. The Company also reserves the right to sell Notes
directly on its own behalf or through additional agents, acting either as agent
or principal, on substantially identical terms as those applicable to the
Agents. The Company reserves the right to withdraw, cancel or modify the offer
made hereby without notice and may reject orders, in whole or in part, whether
placed directly with the Company or through one of the Agents. The Agents will
have the right, in their discretion reasonably exercised, to reject in whole or
in part any offer to purchase Notes received by them.
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The Company will pay the Agents, in the form of a discount or otherwise, a
commission which, depending on the Stated Maturity of the Note, will range from
.125% to .750% of the principal amount of any Note sold through the Agents.
In addition, the Agents may offer the Notes they have purchased as
principal to other dealers. The Agents may sell Notes to any dealer at a
discount and, unless otherwise specified in the applicable Pricing Supplement,
such discount allowed to any dealer will not be in excess of the discount to be
received by such Agent from the Company. Unless otherwise indicated in the
applicable Pricing Supplement, any Note sold to an Agent as principal will be
purchased by such Agent at a price equal to 100% of the principal amount thereof
less a percentage equal to the commission applicable to any agency sale of a
Note of identical maturity, and may be resold by the Agent to investors and
other purchasers from time to time in one or more transactions, including
negotiated transactions, at varying prices determined at the time of sale or, if
so agreed, at a fixed public offering price. After the initial public offering
of Notes to be resold to investors and other purchasers, the public offering
price (if resold on a fixed public offering price basis), concession and
discount may be changed.
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 New York City on the date of settlement.
In connection with the offering of the Notes purchased by one or more
Agents as principal on a fixed price basis, the Agents are permitted to engage
in certain transactions that stabilize the price of the Notes. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Notes. If the Agents create a short position in the Notes in
connection with the offering i.e., if they sell Notes in an aggregate principal
amount exceeding that set forth in the applicable Pricing Supplement, the Agents
may reduce that short position by purchasing Notes in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither the Company nor any of the Agents makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither the
Company nor any of the Agents makes any representation that the Agents will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
The Notes are a new issue of securities with no established trading market.
Unless otherwise specified in the applicable Pricing Supplement, the Notes will
not be listed on any securities exchange. Each of the Agents may from time to
time purchase and sell Notes in the secondary market, but no Agent is obligated
to do so, and there can be no assurance that there will be a secondary market
for the Notes or liquidity in the secondary market if one develops. From time to
time, each of the Agents may make a market in the Notes.
Each Agent may be deemed to be an 'underwriter' within the meaning of the
Securities Act. The Company has agreed to indemnify each of the Agents against,
or to make contributions relating to, certain civil liabilities, including civil
liabilities under the Securities Act. The Company has agreed to reimburse each
of the Agents for certain expenses.
Each of the Agents has provided and will provide from time to time certain
financial advisory services to the Company and Questar.
LEGAL OPINIONS
Certain legal matters will be passed upon for the Company by Gary G.
Sackett, Esq., Vice President and General Counsel of Questar, 180 East First
South Street, Salt Lake City, Utah 84145, and by Skadden, Arps, Slate, Meagher &
Flom LLP, 919 Third Avenue, New York, New York 10022. Brown & Wood LLP, 555
California Street, San Francisco, California 94104, will act as counsel for the
underwriters or Agents. In rendering their opinion, Brown & Wood LLP may rely
upon the opinion of Mr. Sackett as to all matters governed by Utah law. As of
March 31, 1997, Mr. Sackett beneficially owned 31,888 shares of Common Stock of
Questar (inclusive of currently exercisable options to purchase 8,500 shares of
Common Stock of Questar).
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EXPERTS
The financial statements of Mountain Fuel Supply Company appearing in the
Company's Annual Report (Form 10-K/A) for the year ended December 31, 1996 have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such 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 OR ANY PROSPECTUS
SUPPLEMENT (INCLUDING THE APPLICABLE PRICING SUPPLEMENT)
IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND
SUCH PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR
ANY AGENT. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT (INCLUDING THE APPLICABLE PRICING
SUPPLEMENT) NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THEREOF. THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT (INCLUDING THE APPLICABLE PRICING SUPPLEMENT)
SHALL 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
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information............................. 2
Incorporation of Certain Documents by
Reference....................................... 2
The Company....................................... 2
Use of Proceeds................................... 3
Capitalization.................................... 4
Ratio of Earnings to Fixed Charges................ 4
Description of Medium-Term Notes.................. 4
Plan of Distribution.............................. 19
Legal Opinions.................................... 20
Experts........................................... 21
</TABLE>
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- ---------------------------------------------------------
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$75,000,000
MOUNTAIN FUEL
SUPPLY COMPANY
(a subsidiary of Questar Corporation)
[MOUNTAIN FUEL LOGO]
MEDIUM-TERM NOTES
------------------------
PROSPECTUS
------------------------
MERRILL LYNCH & CO.
SMITH BARNEY INC.
JULY 23, 1997
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- ---------------------------------------------------------
