<PAGE>
Filed pursuant to Rule 424(b)(3)
Registration No. 33-51163
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED DECEMBER 1, 1993
U.S. $500,000,000 SERIES G
[LOGO]
SECURED MEDIUM-TERM NOTES
(A SERIES OF FIRST MORTGAGE AND COLLATERAL TRUST BONDS)
DUE FROM NINE MONTHS TO ONE HUNDRED YEARS FROM DATE OF ISSUE
PacifiCorp (the "Company") may from time to time offer its Secured
Medium-Term Notes, Series G (the "Notes"), in an aggregate principal amount
(except that with respect to Notes sold at a discount, the initial offering
price will be used) of up to U.S. $500,000,000 or the equivalent thereof in
other currencies or composite currencies (each, a "Specified Currency"), subject
to reduction as a result of the concurrent sale of Euro Medium-Term Notes,
Series G. See "Foreign Currency Notes." The Notes will be offered at varying
maturities from nine months to one hundred years from their dates of issue and
may be subject to redemption at the option of the Company or repurchase at the
option of the holder prior to maturity. Each Note will bear interest at a fixed
rate (a "Fixed Rate Note") or at a floating rate (a "Floating Rate Note")
determined by reference to the Commercial Paper Rate, LIBOR, the Treasury Rate,
the CD Rate, the Prime Rate, the J.J. Kenny Rate, the CMT Rate or any other Base
Rate set forth in a pricing supplement (each a "Pricing Supplement") to this
Prospectus Supplement, as adjusted by the Spread or Spread Multiplier, if any,
applicable to such Note. See "Description of Secured Medium-Term Notes."
The issue price, any applicable interest rate or interest rate formula, the
maturity, any interest payment dates, specific terms relating to Notes issued in
a Specified Currency, any redemption or repurchase provisions and any other
terms relating to each Note will be established at the time of issuance of such
Note and set forth therein and in the Pricing Supplement.
Each Note will be represented by either a global security registered in the
name of The Depository Trust Company, as Depositary, a nominee thereof, or
another depositary (a "Book-Entry Note"), or a certificate issued in definitive
form (a "Certificated Note"), as set forth in the applicable Pricing Supplement.
Interests in Book-Entry Notes will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary and its
participants. See "Description of Secured Medium-Term Notes-Book-Entry Notes."
The authorized denominations of U.S. dollar Notes will be U.S. $2,000 or any
larger amount that is an integral multiple of U.S. $2,000. Authorized
denominations of Notes denominated in a Specified Currency will be set forth in
the applicable Pricing Supplement.
Unless otherwise indicated, interest on each Fixed Rate Note will accrue
from its date of issue and will be payable semi-annually on each April 1 and
October 1, at maturity or upon earlier redemption, and interest on each Floating
Rate Note will accrue from its date of issue and will be payable monthly,
quarterly, semi-annually or annually, as set forth in the applicable Pricing
Supplement, at maturity or upon earlier redemption.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
Price to Public Agents' Commission (2) Proceeds to the Company (2)(3)
<S> <C> <C> <C>
Per Note........................ 100.000% .125%-1.00% 99.875%-99.00%
Total (4)....................... U.S.$500,000,000 U.S.$625,000-U.S.$5,000,000 U.S.$499,375,000-U.S.$495,000,000
<FN>
(1) The Notes will be issued at 100% of their principal amount except as may be
provided in the applicable Pricing Supplement hereto.
(2) The Company will pay a maximum commission to Lehman Brothers, Lehman
Brothers Inc. (including its affiliate Lehman Government Securities Inc.),
Goldman, Sachs & Co., Kidder, Peabody & Co. Incorporated, Morgan Stanley &
Co. Incorporated or Salomon Brothers Inc, each as Agent (collectively, the
"Agents"), in the form of a discount, ranging from .125% to 1.000%,
depending upon the maturity of the Note, of the principal amount of any
Note sold through such Agent. See "Plan of Distribution of Notes."
(3) Before deducting other expenses payable by the Company estimated to be U.S.
$475,000, including reimbursement of certain of the Agents' expenses. The
Company has agreed to indemnify each Agent against certain liabilities,
including liabilities under the Securities Act of 1933.
(4) Or the equivalent thereof in other currencies or composite currencies.
</TABLE>
The Notes are being offered on a continuous basis by the Company through the
Agents, each of whom has agreed to use its reasonable best efforts to solicit
purchases of such Notes. In addition, the Notes may be sold to any Agent, as
principal, for resale to investors and other purchasers at a fixed public
offering price or at varying prices related to prevailing market price at the
time of resale, in either case as determined by such Agent. The Company also may
sell the Notes directly to investors on its own behalf or to or through such
other agents as the Company shall designate from time to time, provided that
such Notes are sold on terms, including, without limitation, any commissions
payable with respect thereto, in substance identical to those contained in the
Selling Agency Agreement, dated July 18, 1994 by and between the Company and the
Agents. The Notes will not be listed on any securities exchange, and there can
be no assurance that the Notes offered by this Prospectus Supplement will be
sold or that there will be a secondary market for any of the Notes. The Company
reserves the right to withdraw, cancel or modify the offer made hereby without
notice. The Company or the Agent who solicits any offer may reject such offer in
whole or in part. See "Plan of Distribution of Notes."
------------------------
LEHMAN BROTHERS
GOLDMAN, SACHS & CO.
KIDDER, PEABODY & CO.
INCORPORATED
MORGAN STANLEY & CO.
Incorporated
SALOMON BROTHERS INC
The date of this Prospectus Supplement is July 18, 1994.
<PAGE>
DESCRIPTION OF SECURED MEDIUM-TERM NOTES
The information herein concerning the Notes should be read in conjunction
with the statements under "Description of New Bonds" in the accompanying
Prospectus. The Notes will be a series of New Bonds as defined in the
Prospectus. The following description will apply to the Notes unless otherwise
specified in the applicable Pricing Supplement. At the date of this Prospectus
Supplement, additional approvals from regulatory authorities will be required
before the Company is able to issue Floating Rate Notes or Notes in currencies
or composite currencies other than U.S. dollars. This Prospectus Supplement
shall not constitute an offer to sell such Notes until such regulatory approvals
have been obtained.
GENERAL
The Notes will be a series of First Mortgage and Collateral Trust Bonds
under the Company's Mortgage and Deed of Trust, dated as of January 9, 1989, as
amended and supplemented ("Mortgage"), with Morgan Guaranty Trust Company of New
York, as trustee ("Trustee"). The Notes will be equally and ratably secured with
all other First Mortgage and Collateral Trust Bonds issued or to be issued under
the Mortgage. For further information concerning the security for the Notes, see
"Description of New Bonds" in the accompanying Prospectus.
The Notes are limited to an aggregate principal amount of U.S. $500,000,000,
or the equivalent thereof in Specified Currencies, subject to reduction as a
result of the concurrent sale of Euro Medium-Term Notes, Series G. See "Foreign
Currency Notes." The Notes may not be exchanged for Euro Medium-Term Notes.
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note in fully registered form without coupons. Except as set forth
under "Book-Entry Notes," Book-Entry Notes will not be issuable in certificated
form. It is currently contemplated that only Notes which are denominated in U.S.
dollars will be issued as Book-Entry Notes. See "Book-Entry Notes."
The Notes will be offered on a continuous basis and will mature at 100% of
the principal amount outstanding on any day from nine months to one hundred
years from the date of issue, as selected by the purchaser and agreed to by the
Company, and may be subject to redemption prior to maturity at the price or
prices specified in the applicable Pricing Supplement. The Notes may be subject
to prepayment or repurchase by the Company at the option of the holder at the
prices and during the periods specified in the applicable Pricing Supplement.
Each Note will bear interest at either (a) a fixed rate, or (b) a floating rate
determined by reference to the interest rate basis or combination of interest
rate bases (the "Base Rate") specified in the applicable Pricing Supplement that
may be adjusted by a Spread or Spread Multiplier (each as defined below).
The authorized denominations of the Notes denominated in U.S. dollars will
be U.S. $2,000 or any larger amount that is an integral multiple of U.S. $2,000.
The authorized denominations of Notes denominated in a Specified Currency will
be set forth in the applicable Pricing Supplement.
"Business Day" means any day, other than a Saturday or Sunday, that is (a)
neither a legal holiday nor a day on which banking institutions are generally
authorized or required by law or regulation to close (i) with respect to all
Notes, in The City of New York, and (ii) with respect to Foreign Currency Notes
(as herein defined), in the principal financial center of the country of the
Specified Currency (or, in the case of Foreign Currency Notes denominated in
European Currency Units, in Brussels, Belgium) and (b) with respect to LIBOR
Notes (as defined below), a London Banking Day. "London Banking Day" means any
day on which dealings in deposits in U.S. dollars are transacted in the London
interbank market.
The Pricing Supplement relating to each Note will describe the following
terms: (1) if the Note is denominated in a Specified Currency, the Specified
Currency, other terms relating to such Note, including the authorized
denominations, and applicable U.S. tax consequences to purchasers; (2) whether
such Note is a Fixed Rate Note or a Floating Rate Note; (3) the price (expressed
as a
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percentage of the aggregate principal amount thereof) at which such Note will be
issued (the "Issue Price"); (4) the date on which such Note will be issued (the
"Original Issue Date"); (5) the date on which such Note will mature (the
"Maturity Date"); (6) if such Note is a Fixed Rate Note, the rate per annum at
which such Note will bear interest; (7) if such Note is a Floating Rate Note,
the Base Rate, the Initial Interest Rate, the Interest Reset Period, the
Interest Reset Dates, the Interest Payment Period, the Interest Payment Dates,
the Index Maturity, the Maximum Interest Rate and the Minimum Interest Rate, if
any, and the Spread or Spread Multiplier, if any (all as defined below), and any
other terms relating to the particular method of calculating the interest rate
for such Note; (8) whether such Note may be redeemed or is subject to repayment
or repurchase prior to the Maturity Date and, if so, the provisions relating to
such redemption, repayment or repurchase; (9) whether such Note will be issued
as a Book-Entry or Certificated Note; and (10) any other terms of such Note not
inconsistent with the provisions of the Mortgage.
Investors should consult their own tax advisor in determining the federal,
state, local and any other tax consequences to them of the purchase, ownership
and disposition of the Notes.
PAYMENT OF PRINCIPAL AND INTEREST
Until the Notes are paid or payment thereof is provided for, the Company
will, at all times, maintain a paying agent (the "Paying Agent") in The City of
New York capable of performing the duties described herein to be performed by
the Paying Agent. The Company has initially appointed Morgan Guaranty Trust
Company of New York, 55 Exchange Place, Basement A, Corporate Trust Tellers, New
York, New York 10060-0023, as Paying Agent. The Company will notify the holders
of the Notes in accordance with the Mortgage of any change in the Paying Agent
or its address. Unless otherwise specified in the applicable Pricing Supplement,
principal and any premium and interest payable at maturity or upon earlier
redemption in respect of a Note will be paid in immediately available funds upon
surrender of such Note at the office of the Paying Agent.
Unless otherwise specified in the applicable Pricing Supplement, payments of
interest on Notes (other than Foreign Currency Notes (as hereinafter defined)
and Global Securities (as hereinafter defined) and other than interest payable
at maturity or upon earlier redemption) will be made by mailing a check to the
holder at the address of such holder appearing on the register maintained by the
Paying Agent on the applicable Record Date (as defined below). With respect to
Foreign Currency Notes or Notes other than Global Securities, if the Paying
Agent receives a written request from a holder of U.S. $1,000,000 or more (or
its equivalent in the specified currency, if other than U.S. dollars) in
aggregate principal amount of the Notes not later than the close of business on
(a) a Record Date pertaining to an Interest Payment Date or (b) the fifteenth
day prior to maturity or the date of redemption or repayment, if any, the Paying
Agent, will, subject to applicable laws and regulations, until it receives
notice to the contrary (but in the case of payments to be made at maturity or
upon earlier redemption or repayment, as the case may be), make all U.S. dollar
payments to such holder by wire transfer to the account designated in such
written request.
Except as provided below with respect to Floating Rate Notes, any payment
required to be made in respect of a Note on a date that is not a Business Day
for such Note need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on such date,
and no additional interest shall accrue as a result of such delayed payment.
Interest payable and punctually paid or duly provided for on any Interest
Payment Date will be paid to the person in whose name a Note is registered at
the close of business on the Record Date next preceding such Interest Payment
Date; provided, however, that the first payment of interest on any Certificated
Note with an Original Issue Date between a Record Date and an Interest Payment
Date will be made on such Interest Payment Date to the person in whose name the
Note is originally issued; provided, further, that interest payable at maturity
or upon earlier redemption will be payable to the person to whom principal shall
be payable. The first payment of interest on any Book-Entry Note with an
Original Issue Date between a Record Date and an Interest Payment Date will be
made on the Interest Payment Date following the next succeeding Record Date to
the registered owner on such
S-3
<PAGE>
next Record Date (unless the Company elects, in its sole discretion, to pay such
interest on the first Interest Payment Date after the Original Issue Date). The
"Record Date" with respect to any Interest Payment Date shall be the date
fifteen calendar days (unless otherwise specified in the applicable Pricing
Supplement) immediately preceding such Interest Payment Date whether or not such
date shall be a Business Day.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Original Issue Date at the
rate per annum stated on the face thereof until the principal amount thereof is
paid or made available for payment. Unless otherwise set forth in an applicable
Pricing Supplement, interest on each Fixed Rate Note will be payable
semi-annually each April 1 and October 1 (each an "Interest Payment Date") and
at maturity or upon earlier redemption. Each payment of interest in respect of
an Interest Payment Date shall include interest accrued to but excluding such
Interest Payment Date. Interest on Fixed Rate Notes will be computed on the
basis of a 360-day year of twelve 30-day months.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from its Original Issue Date at
rates determined by reference to the Base Rate plus or minus the Spread, if any,
or multiplied by the Spread Multiplier, if any (each as specified in the
applicable Pricing Supplement), until the principal thereof is paid or made
available for payment. The "Spread" is the number of basis points (one basis
point equals one-hundredth of a percentage point) specified in the applicable
Pricing Supplement as being applicable to such Floating Rate Note, and the
"Spread Multiplier" is the percentage specified in the applicable Pricing
Supplement as being applicable to such Note. Any Floating Rate Note may also
have either or both of the following: (a) a maximum numerical interest rate
limitation, or ceiling, on the rate of interest which may accrue during any
interest period (the "Maximum Interest Rate"); and (b) a minimum numerical
interest rate limitation, or floor, on the rate of interest which may accrue
during any interest period (the "Minimum Interest Rate"). The applicable Pricing
Supplement will designate one of the following Base Rates as applicable to each
Floating Rate Note: (1) the Commercial Paper Rate (a "Commercial Paper Rate
Note"), (2) LIBOR (a "LIBOR Note"), (3) the Treasury Rate (a "Treasury Rate
Note"), (4) the CD Rate (a "CD Rate Note"), (5) the Prime Rate (a "Prime Rate
Note"), (6) the J.J. Kenny Rate (a "J.J. Kenny Rate Note"), (7) the CMT Rate (a
"CMT Rate Note") or (8) such other Base Rate as is set forth in the Pricing
Supplement.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually (the "Interest Reset Period"), as
specified in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, the date or dates on which interest will be
reset (each an "Interest Reset Date") will be, in the case of Floating Rate
Notes that reset daily, each Business Day; in the case of Floating Rate Notes
(other than Treasury Rate Notes) that reset weekly, Wednesday of each week; in
the case of Treasury Rate Notes that reset weekly, Tuesday of each week (except
as set forth below); in the case of Floating Rate Notes that reset monthly, the
third Wednesday of each month; in the case of Floating Rate Notes that reset
quarterly, the third Wednesday of March, June, September and December; in the
case of Floating Rate Notes that reset semi-annually, the third Wednesday of the
two months specified in the applicable Pricing Supplement; and in the case of
Floating Rate Notes that reset annually, the third Wednesday of the month
specified in the applicable Pricing Supplement. If any Interest Reset Date for
any Floating Rate Note is not a Business Day, such Interest Reset Date shall be
postponed to the next day that is a Business Day, except, in the case of a LIBOR
Note, if such Business Day is in the next succeeding calendar month, such
Interest Reset Date shall be the immediately preceding Business Day. If an
auction falls on a day that is an Interest Reset Date for Treasury Rate Notes,
the Interest Reset Date shall be the following day that is a Business Day.
Interest on each Floating Rate Note will be payable monthly, quarterly,
semi-annually or annually (the "Interest Payment Period"). Except as provided
below or in the applicable Pricing Supplement, the date or dates on which
interest will be payable (each an "Interest Payment Date") will be, in the
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<PAGE>
case of Floating Rate Notes with a monthly Interest Payment Period, the third
Wednesday of each month; in the case of Floating Rate Notes with a quarterly
Interest Payment Period, the third Wednesday of March, June, September and
December; in the case of Floating Rate Notes with a semi-annual Interest Payment
Period, the third Wednesday of the two months specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes with an annual
Interest Payment Period, the third Wednesday of the month specified in the
applicable Pricing Supplement. If any Interest Payment Date for any Floating
Rate Note would otherwise be a day that is not a Business Day, such Interest
Payment Date shall be postponed to the next day that is a Business Day, except
that in the case of a LIBOR Note, if such Business Day is in the next succeeding
calendar month, such Interest Payment Date shall be the immediately preceding
Business Day.
Interest payments on each Interest Payment Date for Floating Rate Notes
(except in the case of Floating Rate Notes which reset daily or weekly) will
include accrued interest from and including the Original Issue Date or from and
including the last date in respect of which interest has been paid, as the case
may be, to, but excluding, such Interest Payment Date. In the case of Floating
Rate Notes that reset daily or weekly, interest payments will include accrued
interest from and including the Original Issue Date or from but excluding the
last date in respect of which interest has been paid, as the case may be, to,
and including, the Record Date immediately preceding the applicable Interest
Payment Date. At maturity the interest payable will include interest accrued
from and including the Original Issue Date or from and including the last date
in respect of which interest has been paid (except in the case of Floating Rate
Notes that reset daily or weekly for which such last date is excluded), as the
case may be, to, but excluding, the Maturity Date. Accrued interest will be
calculated by multiplying the principal amount of a Floating Rate Note by an
accrued interest factor. This accrued interest factor will be computed by adding
the interest factors calculated for each day in the period for which accrued
interest is being calculated. The interest factor (expressed as a decimal) for
each such day will be computed by dividing the interest rate applicable to such
day by 360, in the case of Commercial Paper Rate Notes, LIBOR Notes, CD Rate
Notes, Prime Rate Notes and J.J. Kenny Rate Notes, or by the actual number of
days in the year, in the case of Treasury Rate Notes and CMT Rate Notes. The
interest rate in effect on each day will be (a) if such day is an Interest Reset
Date, the interest rate with respect to the Interest Determination Date (as
defined below) pertaining to such Interest Reset Date, or (b) if such day is not
an Interest Reset Date, the interest rate with respect to the Interest
Determination Date pertaining to the next preceding Interest Reset Date, subject
in either case to any Maximum or Minimum Interest Rate limitation referred to
above and to any adjustment by a Spread or a Spread Multiplier referred to
above; provided, however, that (i) the interest rate in effect for the period
from the Original Issue Date to the first Interest Reset Date set forth in the
Pricing Supplement with respect to a Floating Rate Note will be the "Initial
Interest Rate" specified in the applicable Pricing Supplement; and (ii) the
interest rate in effect for the ten calendar days immediately prior to maturity
will be that in effect on the tenth calendar day preceding such maturity. The
interest rate on the Floating Rate Notes will in no event be higher than the
maximum rate permitted by New York law. Under present New York law, the maximum
interest rate is 25% per annum on a simple interest basis. This limit may not
apply to Notes in which U.S. $2,500,000 or more has been invested.
The "Interest Determination Date" pertaining to an Interest Reset Date for a
Commercial Paper Rate Note, a CD Rate Note, a Prime Rate Note, a J.J. Kenny Rate
Note and a CMT Rate Note will be the second Business Day next preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a LIBOR Note will be the second London Banking Day next preceding
such Interest Reset Date. The Interest Determination Date pertaining to an
Interest Reset Date for a Treasury Rate Note will be the day of the week in
which such Interest Reset Date falls on which Treasury bills of the Index
Maturity specified on the face of the Treasury Rate Notes are auctioned.
Treasury bills are normally sold at auction on Monday of each week, unless that
day is a legal holiday, in which case the auction is normally held on the
following Tuesday, except that such auction may be held on the preceding Friday.
If, as the result of a legal holiday, an auction is so held on the preceding
Friday, such Friday will be the Interest Determination Date pertaining to the
Interest Reset Date occurring in the next succeeding week.
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The "Calculation Date," where applicable, pertaining to an Interest
Determination Date is the tenth calendar day after such Interest Determination
Date or if any such day is not a Business Day, the next succeeding Business Day.
Unless otherwise specified in the applicable Pricing Supplement, Morgan
Guaranty Trust Company of New York shall be the calculation agent (the
"Calculation Agent") with respect to the Floating Rate Notes. Upon request of
the holder of any Floating Rate Note, the Calculation Agent will provide the
interest rate then in effect and, if determined, the interest rate which will
become effective on the next Interest Reset Date with respect to such Floating
Rate Note.
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread or Spread
Multiplier, if any) specified in the Commercial Paper Rate Notes and in the
applicable Pricing Supplement.
"Commercial Paper Rate" means, with respect to any Interest Determination
Date, the Money Market Yield (as defined below) of the rate on that date for
commercial paper having the Index Maturity designated in the applicable Pricing
Supplement as published by the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board") in "Statistical Release H.15(519), Selected
Interest Rates," or any successor publication of the Federal Reserve Board
("H.15(519)"), under the heading "Commercial Paper." In the event that such rate
is not published by 9:00 a.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, then the Commercial Paper Rate
shall be the Money Market Yield of the rate on that Interest Determination Date
for commercial paper having the Index Maturity designated in the applicable
Pricing Supplement as published by the Federal Reserve Bank of New York in its
daily statistical release, "Composite 3:30 p.m. Quotations for U.S. Government
Securities" ("Composite Quotations") under the heading "Commercial Paper." If by
3:00 p.m., New York City time, on such Calculation Date such rate is not yet
published in Composite Quotations, the Commercial Paper Rate for that Interest
Determination Date shall be calculated by the Calculation Agent and shall be the
Money Market Yield of the arithmetic mean of the offered rates as of 11:00 a.m.,
New York City time, on that Interest Determination Date of three leading dealers
of commercial paper in The City of New York selected by the Calculation Agent
for such commercial paper having the Index Maturity designated in the applicable
Pricing Supplement placed for an industrial issuer whose bond rating is "AA", or
the equivalent, from a nationally recognized rating agency; provided, however,
that if the dealers selected as aforesaid by the Calculation Agent are not
quoting as mentioned in this sentence, the Commercial Paper Rate will be the
Commercial Paper Rate in effect on such Interest Determination Date.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
<TABLE>
<C> <C> <S>
D X 360
Money Market Yield = --------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the per annum rate for commercial paper, quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
LIBOR NOTES
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any) specified in the
LIBOR Notes and in the applicable Pricing Supplement.
With respect to LIBOR Notes indexed to the offered rates for U.S. dollar
deposits, "LIBOR" will be determined by the Calculation Agent in accordance with
the following provisions:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note, either, as specified in the applicable Pricing Supplement: (a) the
arithmetic mean of the offered rates for
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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 Interest Determination Date, that appear on
the Reuters Screen LIBO Page as of 11:00 A.M., London time, on the 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 Interest Determination Date, that appears on the Telerate
Page 3750 as of 11:00 A.M., London time, on that 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) and "Telerate Page 3750" means the
display designated as page "3750" on the Telerate Service (or such other
page as may replace the 3750 page on that service or such other service or
services as may be nominated by the British Bankers' Association for the
purpose of displaying London interbank offered rates for U.S. dollar
deposits). If neither LIBOR Reuters nor LIBOR Telerate is specified in the
applicable Pricing Supplement, LIBOR will be determined as if LIBOR Telerate
had been specified. In the case where (a) above applies, if fewer than two
offered rates appear on the Reuters Screen LIBO Page, or, in the case where
(b) above applies, if no rate appears on the Telerate Page 3750, as
applicable, LIBOR in respect of that Interest Determination Date will be
determined as if the parties had specified the rate described in (ii) below.
(ii) With respect to an Interest Determination Date on which this
provision applies, 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 Interest Determination Date by four major banks
("Reference Banks") in the London interbank market selected by the
Calculation Agent to prime banks in the London interbank market commencing
on the second London Business Day immediately following such 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 Interest Determination Date
will be the arithmetic mean of such quotations. If fewer than two quotations
are provided, LIBOR for such Interest Determination Date will be the
arithmetic mean of the rates quoted at approximately 11:00 A.M., New York
City time, on such Interest Determination Date by three major banks in The
City of New York selected by the Calculation Agent 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 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 will
be LIBOR then in effect on such Interest Determination Date.
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if any)
specified in the Treasury Notes and in the applicable Pricing Supplement.
"Treasury Rate" means, with respect to any Interest Determination Date, the
rate for the auction held on such Interest Determination Date of direct
obligations of the United States ("Treasury bills") having the Index Maturity
designated in the applicable Pricing Supplement as published in H.15(519) under
the heading "U.S. Government Securities-Treasury bills-auction average
(investment)" or, if not so published by 9:00 a.m., New York City time, on the
Calculation Date pertaining to
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such Interest Determination Date, the auction average rate (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) as otherwise announced by the United States Department
of the Treasury. In the event that the results of the auction of Treasury bills
having the Index Maturity designated in the applicable Pricing Supplement are
not published or reported as provided above by 3:00 p.m., New York City time, on
such Calculation Date or if no such auction is held 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
or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean
of the secondary market bid rates, as of approximately 3:30 p.m., New York City
time, on such Interest Determination Date, of three leading primary United
States government securities dealers selected by the Calculation Agent for the
issue of Treasury bills with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement; PROVIDED, HOWEVER, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Treasury Rate will be the Treasury Rate in
effect on such Interest Determination Date.
CD RATE NOTES
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any) as
specified in the CD Rate Notes and in the applicable Pricing Supplement.
"CD Rate" means, with respect to any Interest Determination Date, the rate
on such date for negotiable certificates of deposit having the Index Maturity
designated in the Pricing Supplement as made available and subsequently
published in H.15(519) under the heading "CDs (Secondary Market)." In the event
that such rate is not so made available by 3:00 P.M., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the CD Rate
will be the rate on such Interest Determination Date for negotiable certificates
of deposit of the Index Maturity designated in the Pricing Supplement as made
available and subsequently published in Composite Quotations under the heading
"CDs (Secondary Market)" prior to 3:00 P.M., New York City time. If such rate is
neither made available by the Federal Reserve Board nor made available by the
Federal Reserve Bank of New York by 3:00 P.M., New York time, on such
Calculation Date, then the CD Rate on such Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City time, on such
Interest Determination Date of three leading non-bank dealers in negotiable U.S.
dollar certificates of deposit in The City of New York selected by the
Calculation Agent for negotiable certificates of deposit of major United States
money market banks of the highest credit standing (in the market for negotiable
certificates of deposit) with a remaining maturity closest to the Index Maturity
designated in the Pricing Supplement in a denomination of $5,000,000; PROVIDED,
HOWEVER, that if the dealers selected as aforesaid by the Calculation Agent are
not quoting as mentioned in this sentence, the CD Rate with respect to such
Interest Determination Date will be the CD Rate in effect on such date.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread or Spread Multiplier, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
"Prime Rate" means, with respect to any Interest Determination Date, the
rate on such date as made available and subsequently published in H.15(519)
under the heading "Bank Prime Loan." In the event that such rate is not so made
available by 9:00 A.M., New York City time, on such Calculation Date, then the
Prime Rate will be determined by the Calculation Agent and will be the
arithmetic mean of the rates of interest publicly announced on the Reuters
Screen NYMF Page, at 9:00 A.M., New York City time, by three major money center
banks selected by the Calculation Agent as such bank's prime rate or base
lending rate on such Interest Determination Date. In the event such rate is not
so made available by the Federal Reserve Board by 9:00 A.M., New York City time,
on such Calculation Date, and fewer than three banks are quoting on the Reuters
Screen as provided above,
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the Prime Rate will be determined by the Calculation Agent on the basis of three
substitute banks or trust companies organized and doing business under the laws
of the United States, or any State thereof, having total equity capital of at
least $500,000,000 and being subject to supervision or examination by federal or
state authority, selected by the Calculation Agent to provide such rate or
rates; PROVIDED, HOWEVER, that if the banks selected as aforesaid are not
quoting as mentioned in this sentence, the Prime Rate with respect to such
Interest Determination Date will be the Prime Rate in effect on such date.
"Reuters Screen NYMF Page" means the display designated as page "NYMF" on the
Reuters Monitor Money Rates Service (or such other page as may replace the NYMF
page on that service for the purpose of displaying prime rates or base lending
rates of major United States banks).
J.J. KENNY RATE NOTES
J.J. Kenny Rate Notes will bear interest at the interest rates (calculated
with reference to the J.J. Kenny Rate and the Spread or Spread Multiplier, if
any) as specified in the J.J. Kenny Rate Notes and in the applicable Pricing
Supplement.
"J.J. Kenny Rate" means, with respect to any Interest Determination Date,
the rate equal to the rate in the high grade weekly index (the "Weekly Index")
on such date made available by Kenny Information Systems ("Kenny") to the
Calculation Agent. The Weekly Index is, and shall be, based upon 30-day yield
evaluations at par of bonds, the interest of which is exempt from Federal income
taxation under the Internal Revenue Code of 1986, as amended, of not less than
five high grade component issuers selected by Kenny which shall include, without
limitation, issuers of general obligation bonds. The specific issuers included
among the component issuers may be changed from time to time by Kenny in its
discretion. The bonds, on which the Weekly Index is based, shall not include any
bonds on which the interest is subject to a minimum tax or similar tax under the
Internal Revenue Code of 1986, as amended, unless all tax-exempt bonds are
subject to such tax. In the event Kenny fails to make available such Weekly
Index prior to the relevant Calculation Date, a successor indexing agent will be
selected by the Calculation Agent, such index to reflect the prevailing rate for
bonds rated in the highest short-term rating category by Moody's Investors
Service, Inc. and Standard & Poor's Corporation in respect of issuers most
closely resembling the high grade component issuers selected by Kenny for its
Weekly Index, the interest on which is (A) variable on a weekly basis, (B)
exempt from Federal income taxation under the Internal Revenue Code of 1986, as
amended, and (C) not subject to a minimum tax or similar tax under the Internal
Revenue Code of 1986, as amended, unless all tax-exempt bonds are subject to
such tax. If such successor indexing agent is not available, the rate for any
Interest Determination Date shall be 67% of the rate determined if the Treasury
Rate option had been originally selected. The Calculation Agent shall calculate
the J.J. Kenny Rate in accordance with the foregoing. At the request of a holder
of a Floating Rate Note bearing interest at the J.J. Kenny Rate, the Calculation
Agent will provide such holder with the interest rate that will become effective
as of the next Interest Reset Date.
CMT RATE NOTES
CMT Rate Notes will bear interest at the interest rates (calculated with
reference to the CMT Rate and the Spread or Spread Multiplier, if any) as
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
"CMT Rate" means, with respect to any Interest Determination Date, the rate
displayed on the Designated CMT Telerate page (as defined below) under the
caption "...Treasury Constant Maturities... Federal Reserve Board Release
H.15... Mondays Approximately 3:45 P.M.," under the column for the Index
Maturity designated in the applicable Pricing Supplement for (i) if the
Designated CMT Telerate page is 7055, the rate for the applicable Interest
Determination Date and (ii) if the Designated CMT Telerate page is 7052, the
week, or the month, as applicable, ended immediately preceding the week in which
the related Interest Determination Date occurs. If such rate is no longer
displayed on the relevant page, or if not displayed by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate for such Interest
Determination Date will be such Treasury Constant Maturity rate for the Index
Maturity designated in the applicable Pricing Supplement as published in
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the relevant H.15(519). If such rate is no longer published, or if not published
by 3:00 P.M., New York City time, on the related Calculation Date, then the CMT
Rate for such Interest Determination Date will be such Treasury Constant
Maturity rate for the Index Maturity designated in the applicable Pricing
Supplement (or other United States Treasury rate for such Index Maturity for the
applicable Interest Determination Date with respect to such Interest Reset Date
as may then be published by either the Federal Reserve Board or the United
States Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in the relevant H.15(519). If such information is not provided by
3:00 P.M., New York City time, on the related Calculation Date, then the CMT
Rate for the applicable Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity, based on the arithmetic mean
of the secondary market closing offer side prices as of approximately 3:30 P.M.
(New York City time) on such Interest Determination Date reported, according to
their written records, by three leading primary United States government
securities dealers (each, a "Reference Dealer") in The City of New York selected
by the Calculation Agent (from five such Reference Dealers selected by the
Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for the most recently issued direct noncallable
fixed rate obligations of the United States ("Treasury Note") with an original
maturity of approximately the Index Maturity designated in the applicable
Pricing Supplement and a remaining term to maturity of not less than such Index
Maturity minus one year. If the Calculation Agent cannot obtain three such
Treasury Note quotations, the CMT Rate for such Interest Determination Date will
be calculated by the Calculation Agent and will be a yield to maturity based on
the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 P.M. (New York City time) on the applicable Interest
Determination Date of three Reference Dealers in The City of New York (from five
such Reference Dealers selected by the Calculation Agent and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for
Treasury Notes with an original maturity of the number of years that is the next
highest to the Index Maturity designated in the applicable Pricing Supplement
and a remaining term to maturity closest to such Index Maturity and in an amount
of at least $100 million. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; PROVIDED, HOWEVER, that if fewer than
three Reference Dealers selected by the Calculation Agent are quoting as
described herein, the CMT Rate will be the CMT rate in effect on the applicable
Interest Determination Date. If two Treasury Notes with an original maturity as
described in the third preceding sentence have remaining terms to maturity
equally close to the Index Maturity designated in the applicable Pricing
Supplement, the quotes for the Treasury Note with the shorter remaining term to
maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519) and
on the Book-Entry Note. If no such page is specified in the applicable Pricing
Supplement and on the Book-Entry Note, the Designated CMT Telerate Page shall be
7052, for the most recent week.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Note (other than an Amortizing Note
(as defined below)) will indicate whether the Company will have the option to
extend the Maturity of such Note for one or more periods up to but not beyond a
date set forth in such Pricing Supplement (an "Extendible Note"). If the Company
has such option with respect to any such Note, the procedures relating thereto
will be as set forth in the applicable Pricing Supplement.
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RENEWABLE NOTES
The Pricing Supplement relating to each Note (other than an Amortizing
Note), will indicate whether the term of all or any portion of any such Note may
be renewed in accordance with the procedures described in such Pricing
Supplement.
REDEMPTION AND REPURCHASE
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be redeemed prior to maturity or that such Note will be redeemable
at the option of the Company on a date or dates specified prior to maturity at a
price or prices, set forth in the applicable Pricing Supplement, together with
accrued interest to the date of redemption. The Notes will not be subject to any
sinking fund. The Company may redeem any of the Notes which are redeemable and
remain outstanding either in whole or from time to time in part, upon not less
than 30 nor more than 60 days' notice. If less than all of the Notes with like
tenor and terms are to be redeemed, the Notes to be redeemed shall be selected
by the Trustee by such method as the Trustee shall deem fair and appropriate.
Notes may be subject to prepayment or repurchase by the Company at the
option of the holder at the prices and during the periods specified in the
applicable Pricing Supplement and may otherwise be subject to repayment prior to
maturity as set forth therein.
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by the Company may be held or resold or, at the
discretion of the Company, may be surrendered to the Trustee for cancellation.
AMORTIZING NOTES
The Company may from time to time offer Notes for which payments of
principal and interest are made in installments over the life of the Note
("Amortizing Notes"). Interest on each Amortizing Note will be computed as set
forth in the Pricing Supplement relating to each Note. If so specified in such
Pricing Supplement, payments with respect to Amortizing Notes will be applied
first to interest due and payable thereon and then to the reduction of the
unpaid principal amount thereof. A table setting forth repayment information
with respect to each Amortizing Note and other information regarding such Notes
will be included in the applicable Pricing Supplement or will be provided to the
original purchaser of such Note and will be available, upon request, to the
subsequent holders thereof.
BOOK-ENTRY NOTES
Except for Foreign Currency Notes, upon issuance, the Notes will be
represented by one or more permanent global securities (each a "Global
Security"). Each Global Security will be deposited with, or on behalf of, The
Depository Trust Company, New York, New York ("DTC") and registered in the name
of a nominee of DTC or such other depositary as is specified in the Pricing
Supplement (the "Depositary"). Except under the limited circumstances described
below, Global Securities will not be exchangeable for definitive Certificated
Notes.
Ownership of beneficial interests in a Global Security will be limited to
institutions that have accounts with the Depositary or its nominee
("participants") or persons that may hold interests through participants. In
addition, ownership of beneficial interests by participants in such Global
Security will be evidenced only by, and the transfer of that ownership interest
will be effected only through, records maintained by the Depositary or its
nominee for such Global Security. Ownership of beneficial interests in such
Global Security by persons that hold through participants will be evidenced only
by, and the transfer of that ownership interest within such participant will be
effected only through, records maintained by such participant. The Depositary
has no knowledge of the actual beneficial owners of the Notes. Beneficial owners
will not receive written confirmation from the Depositary of their purchase, but
beneficial owners are expected to receive written confirmations
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providing details of the transaction, as well as periodic statements of their
holdings, from the participants through which the beneficial owners entered the
transaction. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in a Global
Security.
Upon the issuance of a Global Security, and the deposit of such Global
Security with DTC, DTC will immediately credit on its book-entry registration
and transfer system the respective principal amounts represented by such Global
Security to the accounts of participants.
Payment of principal of, and premium and interest, if any, on Notes
represented by a Global Security registered in the name of or held by the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner and holder of the Global Security
representing such Notes. Upon receipt of any payment of principal of, or premium
or interest, if any, on a Global Security, the Depositary will immediately
credit, on its book-entry registration and transfer system, accounts of
participants with payments in amounts proportionate to their respective
beneficial interests in the principal amount of such Global Security as shown in
the records of the Depositary. Payments by participants to owners of beneficial
interests in a Global Security held through such participants will be governed
by standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the sole responsibility of such participants, subject
to any statutory or regulatory requirements as may be in effect from time to
time.
None of the Company, the Trustee, or any other agent of the Company or the
Trustee will have any responsibility or liability for any aspect of the records
of the Depositary, any nominee, or any participant relating to or payments made
on account of beneficial interests in a Global Security or for maintaining,
supervising, or reviewing any of the records of the Depositary, any nominee, or
any participant relating to such beneficial interests.
A Global Security is exchangeable for definitive Notes registered in the
name of, and a transfer of a Global Security may be registered to, any person
other than the Depositary or its nominee, only if:
(a) the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for such Global Security or if at any time the
Depositary ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act");
(b) the Company in its sole discretion determines that such Global
Security shall be exchangeable for definitive Notes in registered form; or
(c) there shall have occurred and be continuing an event of default
under the Mortgage, as described in the accompanying Prospectus, and the
Depositary is notified by the Company, the applicable Trustee, or the
applicable Registrar and Paying Agent that such Global Security shall be
exchangeable for definitive Notes in registered form.
Any Global Security that is exchangeable pursuant to the preceding sentence
will be exchangeable in whole for definitive Notes in registered form, of like
tenor and of an equal aggregate principal amount as the Global Security, in
denominations of $2,000 and integral multiples thereof. Such definitive Notes
will be registered in the name or names of such person or persons as the
Depositary shall instruct the applicable Trustee. It is expected that such
instructions may be based upon directions received by the Depositary from its
participants with respect to ownership of beneficial interests in such Global
Security.
Except as provided above, owners of beneficial interests in a Global
Security will not be entitled to receive physical delivery of Notes in
definitive form and will not be considered the holders thereof for any purpose
under the Mortgage, and no Global Security shall be exchangeable, except for
another Global Security of like denomination and tenor to be registered in the
name of the Depositary or its nominee. Accordingly, each person owning a
beneficial interest in a Global Security must rely on the
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procedures of the Depositary and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a holder under the Mortgage.
The Company understands that, under existing industry practices, in the
event that the Company requests any action of holders, or an owner of a
beneficial interest in a Global Security desires to give or take any action that
a holder is entitled to give or take under the Mortgage, the Depositary would
authorize the participants holding the relevant beneficial interests to give or
take such action, and such participants would authorize beneficial owners owning
through such participants to give or take such action or would otherwise act
upon the instructions of beneficial owners owning through them.
The initial Depositary, DTC, is a limited purpose trust company organized
under the laws of the State of New York, 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 under the Exchange Act. DTC was created
to hold securities of its participants and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is owned by a number
of its 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 book-entry system is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. The rules
applicable to DTC and its participants are on file with the Securities and
Exchange Commission.
The information herein concerning DTC and DTC's procedures has been obtained
from sources (including DTC) that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
FOREIGN CURRENCY NOTES
Subject to the receipt of required regulatory approvals, Notes may be issued
in currencies or composite currencies other than U.S. dollars (each, a
"Specified Currency"). The Specified Currency will be set forth in the Pricing
Supplement applicable to such Note and the delivery of such a Pricing Supplement
by the Company shall constitute its confirmation that all required regulatory
approvals have been obtained. Notes issued in Specified Currencies will be in
such denominations, and contain such other specific terms, as are set forth in
the Pricing Supplement applicable to such Notes.
The Mortgage requires that the Company deposit with the Trustee, as security
for the Company's obligations in respect of Notes issued in Specified
Currencies, a currency exchange agreement which will permit the Company to
receive from a counterparty with a credit rating at least equal to that of the
Company the amounts necessary in the Specified Currency to pay the amounts
payable in respect of Notes issued in such currency. See "Description of New
Bonds" in the accompanying Prospectus. No assurance can be given that the
counterparty will make payments in Specified Currencies under such currency
exchange agreement and, therefore, in such event, and in the absence of other
available sources of the Specified Currency in the United States, the Company
would be required to make payments in respect of Notes issued in a Specified
Currency in U.S. dollars. The Company does not generate significant revenues in
currencies other than U.S. dollars. See "Payment Currency."
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in U.S. dollars and payments of principal of and premium and
interest, if any, on the Notes will be made in U.S. dollars. Unless otherwise
specified in the applicable Pricing Supplement, the following
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provisions shall apply to Foreign Currency Notes which are in addition to, and
to the extent inconsistent therewith replace, the description of general terms
and provisions of the Notes set forth in the accompanying Prospectus and
elsewhere in this Prospectus Supplement.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of Foreign Currency Notes will be made in immediately
available funds. Unless otherwise specified in the applicable Pricing
Supplement, Foreign Currency Notes will be issued only in certificated form,
without coupons.
CURRENCIES
Purchasers are required to pay for Foreign Currency Notes in the Specified
Currency as set forth in the Pricing Supplement applicable to such Notes. At the
present time there are limited facilities in the United States for conversion of
U.S. dollars into Specified Currencies and vice versa, and banks offer non-U.S.
dollar checking or savings account facilities in the United States only on a
limited basis. However, if requested by a prospective purchaser of Notes on or
prior to the fifth Business Day preceding the date of delivery of the Notes, or
by such other day as determined by the exchange rate agent appointed by the
Company in respect of such Notes and named in the Pricing Supplement relating
thereto (the "Exchange Rate Agent"), such Exchange Rate Agent is prepared to
arrange for the conversion of U.S. dollars into the Specified Currency set forth
in the applicable Pricing Supplement to enable the purchasers to pay for the
Foreign Currency Notes. Each such conversion will be made by the Exchange Rate
Agent on such terms and subject to such conditions, limitations, and charges as
such Exchange Rate Agent may from time to time establish in accordance with its
regular foreign exchange practices. All costs of exchange will be borne by the
purchasers of the Foreign Currency Notes.
Specific information about the currency or currency units in which a
particular Foreign Currency Note is denominated, including historical exchange
rates and a description of the currency and any exchange controls, will be set
forth in the applicable Pricing Supplement. The information therein concerning
exchange rates is furnished as a matter of information only and should not be
regarded as indicative of the range of or trends in fluctuations in currency
exchange rates that may occur in the future.
PAYMENT OF PRINCIPAL AND INTEREST
The principal and premium and interest payments, if any, on Foreign Currency
Notes are payable by the Company in the Specified Currency. However, except as
provided below, the Exchange Rate Agent will convert all payments of principal
of, and premium and interest, if any, on Foreign Currency Notes to U. S.
dollars. However, unless otherwise specified in the applicable Pricing
Supplement, the holder of a Foreign Currency Note may elect to receive such
payments in the Specified Currency as described below.
Any U.S. dollar amount to be received by a holder of a Foreign Currency Note
will be based on the highest bid quotation in The City of New York received by
the Exchange Rate Agent at approximately 11:00 a.m., New York City time, on the
second Business Day preceding the applicable Interest Payment Date from three
recognized foreign exchange dealers (one of which may be the Exchange Rate
Agent) for the purchase by the quoting dealer of the Specified Currency for U.
S. dollars for settlement on such payment date, in an amount equal to the
aggregate amount of the Specified Currency payable to all holders of Notes not
electing to receive the Specified Currency on such payment date and at which the
applicable dealer commits to execute a contract. If such bid quotations are not
available, payments will be made in the Specified Currency. All currency
exchange costs will be borne by the holder of the Foreign Currency Note by
deductions from such payments.
Unless otherwise specified in the applicable Pricing Supplement, a holder of
a Foreign Currency Note may elect to receive payment of the principal of, and
premium and interest, if any, on the Foreign Currency Note in the Specified
Currency by transmitting a written request for such payment to the principal
offices of the Paying Agent prior to the Record Date immediately preceding any
Interest
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Payment Date and at least fifteen days prior to maturity or the date of
redemption or repayment, if any, in the case of payments to be made at maturity
or upon earlier redemption or repayment. Such request may be in writing (mailed
or hand delivered) or by cable, telex, or other form of facsimile transmission.
A holder of a Foreign Currency Note may elect to receive payment in the
Specified Currency for all payments of principal and premium and interest, if
any, and need not file a separate election for each payment. Such election will
remain in effect until revoked by written notice to the Paying Agent, but
written notice of any such revocation must be received by the Paying Agent on or
prior to the Record Date in the case of any payment of interest or at least
fifteen days prior to maturity or the date of redemption or repayment, if any,
in the case of the payment of principal and premium, if any. Holders of Foreign
Currency Notes whose Foreign Currency Notes are to be held in the name of a
broker or nominee should contact such broker or nominee to determine whether and
how an election to receive payments in the Specified Currency may be made.
Unless otherwise specified in the applicable Pricing Supplement, the payment
of the principal of, and premium and interest, if any, on each Foreign Currency
Note to be made in U. S. dollars will be made in the manner specified under
"Description of Secured Medium-Term Notes -- Payment of Principal and Interest."
Unless otherwise specified in the applicable Pricing Supplement, the payment of
principal of, and premium and interest, if any, on each Foreign Currency Note to
be made in the Specified Currency will be made as set forth below. The payment
of interest on a Foreign Currency Note (other than interest payable to the
holder thereof, if any, at maturity or upon earlier redemption or repayment) to
be made in the Specified Currency will be paid by bank draft mailed to the
person in whose name the Note is registered at the close of business on the
applicable Record Date. The principal of and premium, if any, on such Foreign
Currency Note and any interest payable to the holder thereof when the principal
of such Foreign Currency Note is payable will be paid by bank draft upon
surrender of such Note at the corporate trust office of the Paying Agent in The
City of New York. Specified Currency drafts will be drawn on a bank office
located outside the United States. If the Paying Agent receives a written
request from a holder of the equivalent of U. S. $1,000,000 or more in aggregate
principal amount of the Foreign Currency Notes not later than the close of
business on a Record Date for an interest payment or the fifteenth day prior to
maturity or the date of redemption or repayment, if any, the Paying Agent will,
subject to applicable laws and regulations, until it receives notice to the
contrary (but, in the case of payments to be made at maturity or earlier
redemption or repayment only after the surrender of the Note or Notes in The
City of New York, not later than one Business Day prior to the maturity or the
date of redemption or repayment, as the case may be), make all Specified
Currency payments to such holder by wire transfer to an account (i) designated
in such written request and (ii) maintained in the country of the Specified
Currency.
OUTSTANDING FOREIGN CURRENCY NOTES
For purposes of calculating the principal amount of any Foreign Currency
Note payable in a Specified Currency for any purpose under the Mortgage, the
principal amount of such Foreign Currency Note at any time outstanding shall be
the Company's U.S. dollar obligation therefor in the applicable currency
exchange agreement as described above, pursuant to the Mortgage.
PAYMENT CURRENCY
If a Specified Currency is not available for the payment of principal of,
and premium and interest, if any, with respect to a Foreign Currency Note due to
the imposition of exchange controls or other circumstances beyond the control of
the Company, or is no longer used by the government of the country issuing such
currency or for the settlement of transactions by public authorities of or
within the international banking community, the Company will be entitled to
satisfy its obligations to holders of Foreign Currency Notes by making such
payment in U.S. dollars on the basis of the noon buying rate in The City of New
York for cable transfers of the Specified Currency as certified for customs
purposes by the Federal Reserve Bank of New York (the "Market Exchange Rate") on
the second day prior to such payment, or if such Market Exchange Rate is not
then available, on the basis of the most
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recently available Market Exchange Rate or as otherwise specified in an
applicable Pricing Supplement. Any payment made under such circumstances in U.S.
dollars where required payment is in a Specified Currency will not constitute a
default under the Mortgage.
If payment on a Foreign Currency Note is required to be made in European
Currency Units ("ECU") and ECU are unavailable due to the imposition of exchange
controls or other circumstances beyond the Company's control, or are no longer
used in the European Monetary System, all payments due on that date with respect
to such Foreign Currency Note shall be made in U.S. dollars. The amount so
payable on any date in ECU shall be converted into U.S. dollars, at a rate
determined by the Exchange Rate Agent as of the second Business Day prior to the
date on which such payment is due on the following basis. The component
currencies of the ECU for this purpose (the "Components") shall be the currency
amounts that were components of the ECU as of the last date on which ECU were
used in the European Monetary System. The equivalent of ECU in U.S. dollars
shall be calculated by aggregating the U.S. dollar equivalents of the
Components. The U.S. dollar equivalent of each of the Components shall be
determined by the Paying Agent on the basis of the most recently available
Market Exchange Rate, or as otherwise specified in the applicable Pricing
Supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be multiplied or divided in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into two
or more currencies, the amount of that currency as a Component shall be replaced
by amounts of such two or more currencies, each of which shall have a value on
the date of division equal to the amount of the former component currency
divided by the number of currencies into which that currency was divided.
All determinations referred to above by the Exchange Rate Agent or Paying
Agent shall be at its sole discretion (except to the extent expressly provided
herein that any determination is subject to approval by the Company) and, in the
absence of manifest error, shall be conclusive for all purposes and binding on
holders of the Notes and the Exchange Rate Agent or Paying Agent, as the case
may be, shall have no liability therefor. Any payment made in U.S. dollars under
the aforementioned circumstances where required payment is in a Specified
Currency will not constitute a default under the Mortgage.
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CURRENCY RISKS
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND PRICING
SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED
IN A CURRENCY (INCLUDING ANY COMPOSITE CURRENCY) OR NOTES DENOMINATED IN OTHER
THAN U.S. DOLLARS AND THE COMPANY DISCLAIMS ANY RESPONSIBILITY TO ADVISE
PROSPECTIVE INVESTORS OF SUCH RISKS AS THEY EXIST AT THE DATES THEREOF OR AS
SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE INVESTORS SHOULD CONSULT
THEIR OWN FINANCIAL, TAX AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN
INVESTMENT IN SUCH NOTES. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR
INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in the Foreign Currency Notes entails significant risks that
are not associated with a similar investment in a security denominated in U.S.
dollars. Such risks include, without limitation, the possibility of significant
changes in rates of exchange between the U.S. dollar and the Specified Currency
and the possibility of the imposition or modification of foreign exchange
controls by either the U.S. or foreign governments. Such risks generally depend
on economic and political events over which the Company has no control. In
recent years, rates of exchange between the U.S. dollar and certain foreign
currencies have been highly volatile and such volatility may be expected in the
future. The exchange rate between the U.S. dollar and a foreign currency or
currency unit is in most cases established principally by the supply of and
demand for such currencies, and changes in the rate result over time from the
interaction of many factors, among which are rates of inflation, interest rate
levels, balances of payments, and the extent of governmental surpluses or
deficits in the countries of such currencies. These factors are in turn
sensitive to, among other things, the monetary, fiscal, and trade policies
pursued by such governments and those of other countries important to
international trade and finance. Fluctuations in any particular exchange rate
that have occurred in the past are not necessarily indicative, however, of
fluctuations in the rate that may occur during the term of any Note.
Depreciation of the Specified Currency in a Foreign Currency Note against the
U.S. dollar would result in a decrease in the U.S. dollar-equivalent yield of
such Note below its coupon rate, and in certain circumstances could result in a
loss to the investor on a U.S. dollar basis.
Foreign exchange rates can either be fixed by sovereign governments or
float. Exchange rates of most economically developed nations are permitted to
fluctuate in value relative to the U.S. dollar. National governments, however,
rarely voluntarily allow their currencies to float freely in response to
economic forces. Sovereign governments in fact use a variety of techniques, such
as intervention by a country's central bank or imposition of regulatory controls
or taxes, to affect the exchange rate of their currencies. Governments may also
issue a new currency to replace an existing currency or alter the exchange rate
or relative exchange characteristics by devaluation or revaluation of a
currency. Thus, a special risk in purchasing Foreign Currency Notes is that
their U.S. dollar-equivalent yields could be affected by governmental actions,
which could change or interfere with theretofore freely determined currency
valuation, fluctuations in response to other market forces, and the movement of
currencies across borders. There will be no adjustment or change in the terms of
such Notes in the event that exchange rates should become fixed, or in the event
of any devaluation or revaluation or imposition of exchange or other regulatory
controls or taxes, or in the event of other developments, affecting the U.S.
dollar or any applicable currency or currency unit.
Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at a Note's maturity or when payment of interest
thereon is due. There can be no assurance that exchange controls will not
restrict or prohibit payments in any currency or currency unit. Even if there
are no actual exchange controls, it is possible that the Specified Currency for
any particular Note that would otherwise be payable in such Specified Currency
would not be available at such Note's maturity. In
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that event, the Company will make required payments in U.S. dollars on the basis
of the Market Exchange Rate on the second day prior to such payment, or if such
Market Exchange Rate is not then available, on the basis of the most recently
available Market Exchange Rate. See "Foreign Currency Notes -- Payment
Currency."
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in foreign currencies will not be sold in, or to residents of, the
country of the Specified Currency in which particular Notes are denominated.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Company
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding, or receipt of payments of principal of, and
premium and interest, if any, on the Notes. Such persons should consult their
own counsel with regard to such matters.
JUDGMENTS
Courts in the United States generally grant or enforce a judgment relating
to an action based on the Foreign Currency Notes only in U.S. dollars, and the
date used to determine the rate of conversion of foreign currencies into U.S.
dollars will depend on various factors, including which court renders the
judgment. Section 27 of the Judiciary Law of the State of New York provides that
a New York State court would be required to enter a judgment in the Specified
Currency of the underlying obligation; such judgment would then be converted
into U.S. dollars at the rate of exchange prevailing on the date of entry of the
judgment.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary, which was prepared by Stoel Rives Boley Jones & Grey,
counsel to the Company, describes certain United States federal income tax
consequences of the ownership of Notes as of the date hereof. Except where
noted, it deals only with Notes held by initial purchasers as capital assets
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the "Code"), and does not deal with special situations, such as those
of dealers in securities, financial institutions, life insurance companies,
United States Holders (as defined below) whose "functional currency" is not the
U.S. dollar, tax exempt organizations, persons holding Notes as a hedge against
currency risks or as a position in a "straddle," or persons owning (actually or
constructively) ten percent or more of the combined voting power of all classes
of voting stock of the Company. In addition, the discussion below must be read
in conjunction with the discussion of certain federal income tax consequences
which may appear in the applicable Pricing Supplement for such Notes. The
discussion below is based upon the provisions of the Code and Treasury
Regulations (including proposed Treasury Regulations), rulings, and judicial
decisions thereunder as of the date hereof. Such authorities may be amended,
repealed, revoked, modified or, in the case of proposed Treasury Regulations,
withdrawn or finalized in a form different from such proposed Treasury
Regulations, so as to result in federal income tax consequences different from
those discussed below. THIS SUMMARY DOES NOT PURPORT TO COVER ALL THE POSSIBLE
TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES, AND IT IS
NOT INTENDED AS TAX ADVICE. THIS SUMMARY DOES NOT DISCUSS THE TAX CONSEQUENCES
UNDER STATE, LOCAL, OR FOREIGN TAX LAWS. PERSONS CONSIDERING THE PURCHASE,
OWNERSHIP, OR DISPOSITION OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR
SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER
TAXING JURISDICTION.
This summary is based on the assumption that the Notes are issued in
"registered" form for United States federal income tax purposes and are not
convertible into non-registered form. If any Notes are issued in, or are
convertible into, non-registered or bearer form, the applicable Pricing
Supplement will discuss the special tax considerations that may apply.
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UNITED STATES HOLDERS
As used herein, a "United States Holder" of a Note means a holder that is
(i) a citizen or resident of the United States, (ii) a corporation created or
organized in or under the laws of the United States or any political subdivision
thereof, or (iii) an estate or trust that is otherwise subject to United States
federal income taxation on a net income basis in respect of a Note. A
"Non-United States Holder" is a holder that is not a United States Holder.
PAYMENTS OF INTEREST. Except as set forth below, interest on a Note will
generally be taxable to a United States Holder as ordinary income from domestic
sources at the time it is received or accrued in accordance with the United
States Holder's method of accounting for tax purposes.
ORIGINAL ISSUE DISCOUNT. The following is a summary of the principal United
States federal income tax consequences of the ownership of Original Issue
Discount Notes (as defined below) by United States Holders. Additional rules
applicable to Original Issue Discount Notes which are denominated in or
determined by reference to a Specified Currency are described under "Foreign
Currency Notes" below.
A Note may be issued for an amount that is less than its stated redemption
price at maturity (the sum of all payments to be made on the Note other than
"qualified stated interest" payments). The difference between the stated
redemption price at maturity of the Note and its "issue price," if such
difference is at least 0.25 percent of the stated redemption price at maturity
multiplied by the number of complete years to maturity, will be "original issue
discount" ("OID"). The "issue price" of each Note will be the initial offering
price to the public at which a substantial amount of the particular offering is
sold.
Generally, a "qualified stated interest" payment is stated interest that is
unconditionally payable at least annually at a single fixed rate, or, at a rate
("Variable Rate") which varies among payment periods if such rate can reasonably
be expected to measure contemporaneous variations in the cost of newly borrowed
funds or which is based upon the changes in the yield or price of certain
actively traded property or a combination thereof. A rate that reflects a fixed
rate minus such Variable Rate (an "Inverse Floating Rate") also constitutes a
Variable Rate. Interest is payable at a single fixed rate only if the rate
appropriately takes into account the length of the interval between payments.
Notes that may be redeemed prior to their maturity date at the option of the
issuer shall be treated from the time of issuance as having a maturity date for
federal income tax purposes on such redemption date if such redemption would
result in a lower yield to maturity. Notice will be given in the applicable
Pricing Supplement when the Company issues Notes that are redeemable prior to
maturity and determines that such Notes will be deemed to have a maturity date
for federal income tax purposes prior to their maturity.
In certain cases (E.G., where interest payments are deemed not to be
qualified stated interest payments), Notes that bear interest from a non-tax
standpoint may be deemed instead to be Original Issue Discount Notes for federal
income tax purposes, with the result that the inclusion of interest in income
for federal income tax purposes may vary from the actual payments of interest
made on such Notes, generally accelerating income for cash method taxpayers. For
those purposes, the Treasury Regulations provide rules for determining whether
payments on a Note with a Variable Rate will be treated as payments of qualified
stated interest. The Pricing Supplement for any series of Notes will specify
whether they are Original Issue Discount Notes.
United States Holders of Original Issue Discount Notes with a maturity upon
issuance of more than one year must, in general, include OID in income in
advance of the receipt of some or all of the related cash payments. The amount
of OID includible in income with respect to the Note is the sum of the "daily
portions" of OID with respect to the Note for each day during the taxable year
or portion of the taxable year in which such United States Holder held such Note
("accrued OID"). The daily portion is determined by allocating to each day in
any "accrual period" a pro rata portion of the OID allocable to that accrual
period. Accrual periods may be of any length and may vary in length over the
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term of the Note provided that each accrual period is no longer than one year
and each scheduled payment of principal or interest occurs at the beginning or
the end of an accrual period. The amount of OID allocable to any accrual period
is an amount equal to the excess (if any) of (a) the product of the Note's
"adjusted issue price" at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each accrual
period and properly adjusted for the length of the accrual period) over (b) the
sum of any qualified stated interest allocable to the accrual period. In
determining OID allocable to an accrual period, if an interval between payments
of qualified stated interest contains more than one accrual period the amount of
qualified stated interest payable at the end of the interval is allocated on a
pro rata basis to each accrual period in the interval and the adjusted issue
price at the beginning of each accrual period in the interval must be increased
by the amount of any qualified stated interest that has accrued prior to the
beginning of the first day of the accrual period but is not payable until the
end of the interval. If all accrual periods are of equal length, except for an
initial short accrual period, the amount of OID allocable to the initial short
accrual period may be computed under any reasonable method. The adjusted issue
price of the Note at the start of any accrual period is equal to its issue price
increased by the accrued OID for each prior accrual period and reduced by any
prior payments on such Note that did not constitute qualified stated interest
payments. Under these rules, a United States Holder generally will have to
include in income increasingly greater amounts of OID in successive accrual
periods. The Company is required to report the amount of OID accrued on Notes
held of record by persons other than corporations and other exempt holders.
In the case of Original Issue Discount Notes having a term of one year or
less ("Short-Term Original Issue Discount Notes"), OID is included in income
currently either on a straight-line basis or, if the United States Holder so
elects, under the constant yield method used generally for OID as described
above. However, certain categories of United States Holders (such as individual
cash method taxpayers) are not required to include accrued OID on Notes of this
type in their income currently unless they elect to do so. If such a United
States Holder that does not elect to currently include the OID in income
subsequently recognizes a gain upon the disposition of the Note, such gain will
be treated as ordinary interest income to the extent of the accrued OID to the
date of disposition. Furthermore, such United States Holder may be required to
defer deductions for a portion of such United States Holder's interest expense
with respect to any indebtedness incurred or maintained to purchase or carry
such Note.
AMORTIZATION OF PREMIUM. A Note may be considered to have been issued at a
"premium" to the extent that the United States Holder's tax basis in the Note
exceeds the amount payable at maturity. A United States Holder generally may
elect to amortize the premium over the remaining term of the Note on a constant
yield method. Any such election shall apply to all debt securities (other than
debt securities the interest on which is excludible from gross income) held by
the United States Holder at the beginning of the first taxable year to which the
election applies (or thereafter acquired by the United States Holder) and is
irrevocable without the consent of the Internal Revenue Service ("IRS"). The
amount amortized in any year will be treated as a reduction of the United States
Holder's interest income from the Note. Bond premium on a Note held by a United
States Holder that does not make such an election will decrease the gain or
increase the loss otherwise recognized on disposition of the Note.
ACQUISITION PREMIUM. An initial purchaser of Original Issue Discount Notes
that pays more than the issue price therefor will have acquisition premium. If a
United States Holder purchases an Original Issue Discount Note at a premium
(I.E., an amount in excess of the stated redemption price at maturity), it does
not include any OID in gross income. A Note purchased in the initial offering
for more than the issue price but less than the stated redemption price at
maturity possesses acquisition premium. The daily portion of accrued OID on such
a Note is reduced by the product of the daily portion of OID (determined without
regard to this adjustment) and a fraction the numerator of which is the excess
described in the preceding sentence and the denominator of which is all payments
to be made on the Note other than qualified stated interest.
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ELECTION TO TREAT ALL INTEREST AS OID. A cash or accrual basis United
States Holder may elect to treat all interest on any Note as OID and calculate
the amount includible in gross income under the constant yield method described
above. For the purposes of this election, interest includes stated interest,
acquisition discount, OID, de minimis OID, market discount, de minimis market
discount and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium. If a United States Holder makes this election for a Note
with amortizable bond premium, the election is treated as an election under the
amortizable bond premium provisions described above and the electing United
States Holder will be required to amortize bond premium for all of the holder's
other debt instruments with amortizable bond premium. The election is to be made
for the taxable year in which the United States Holder acquires the Note, and
may not be revoked without the consent of the IRS. United States Holders should
consult with their own tax advisors about this election.
SALE, EXCHANGE, AND RETIREMENT OF NOTES. A United States Holder's tax basis
in a Note will, in general, be the United States Holder's cost therefor,
increased by all accrued OID and reduced by any amortized premium and any cash
payments on the Note other than qualified stated interest payments. Upon the
sale, exchange, or retirement of a Note, a United States Holder will recognize
gain or loss equal to the difference between the amount realized upon the sale,
exchange, or retirement and the adjusted tax basis of the Note. Except as
described above with respect to certain Short-Term Original Issue Discount
Notes, and except with respect to gain or loss attributable to changes in
exchange rates as described below with respect to certain Foreign Currency
Notes, such gain or loss will be capital gain or loss and will be long-term
capital gain or loss if at the time of sale, exchange, or retirement the Note
has been held for more than one year. Under current law, net capital gains are,
under certain circumstances, taxed at lower rates than ordinary income. The
deductibility of capital losses is subject to limitations.
EXTENDIBLE NOTES. A Note may provide that the Company has the option to
reset the interest rate, in the case of a Fixed Rate Note, or the Spread or
Spread Multiplier, in the case of a Floating Rate Note, on an Interest Reset
Date or to extend the maturity of a Note at maturity. Pursuant to proposed
Treasury Regulations issued on December 2, 1992, which could differ materially
from the final Treasury Regulations, the treatment of a United States Holder of
Notes with respect to which such an option has been exercised who does not elect
to have the Company repay such Notes on the applicable Optional Reset Date or
Original Stated Maturity (or has no right to so elect) will depend on the terms
established for such Notes by the Company pursuant to the exercise of such
option (the "Revised Terms"). Such holder may be treated for federal income tax
purposes as having exchanged such Notes (the "Old Notes") for new Notes with
Revised Terms (the "New Notes"). If the holder is treated as having exchanged
Old Notes for New Notes, such exchange may be treated as either a taxable
exchange or a tax-free recapitalization.
If the exercise of the option by the Company is not treated as an exchange
of Old Notes for New Notes, no gain or loss will be recognized by a United
States Holder as a result thereof. If the exercise of the option is treated as a
taxable exchange of Old Notes for New Notes, a United States Holder would
recognize gain or loss equal to the difference between the issue price of the
New Notes and the holder's adjusted tax basis in the Old Notes. If the exercise
of the option is treated as a tax-free recapitalization, no loss would be
recognized by a United States Holder as a result thereof and gain, if any, would
be recognized to the extent of the fair market value of the excess, if any, of
the principal amount of securities received over the principal amount of
securities surrendered. Although, in this regard, the meaning of the term
"principal amount" is not clear, such term could be interpreted to mean "issue
price" with respect to securities that are received and "adjusted issue price"
with respect to securities that are surrendered.
FOREIGN CURRENCY NOTES. The following is a summary of the principal United
States federal income tax consequences to a United States Holder of the
ownership of a Note denominated in a Specified Currency other than the U.S.
dollar ("Foreign Currency Notes") and deals only with Foreign Currency Notes
that are not treated, for federal income tax purposes, as an integrated economic
transaction in conjunction with one or more spot contracts, futures contracts or
similar financial
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instruments. Persons considering the purchase of Foreign Currency Notes should
consult their own tax advisors with regard to the application of the United
States federal income tax laws to their particular situations, as well as any
consequences arising under the laws of any other taxing jurisdiction.
If interest payments are made in a Specified Currency to a United States
Holder who is not required to accrue such interest prior to its receipt, such
holder will be required to include in income the U.S. dollar value of the amount
received (determined by translating the Specified Currency received at the "spot
rate" for such Specified Currency on the date such payment is received),
regardless of whether the payment is in fact converted into U.S. dollars. No
exchange gain or loss is recognized with respect to the receipt of such payment.
A United States Holder who is required to accrue interest on a Foreign
Currency Note prior to receipt of such interest will be required to include in
income for each taxable year the U.S. dollar value of the interest that has
accrued during such year, determined by translating such interest at the average
rate of exchange for the period or periods during which such interest accrued.
The average rate of exchange for an interest accrual period is the simple
average of the exchange rates for each business day of such period (or such
other average that is reasonably derived and consistently applied by the
holder). An accrual basis holder may elect to translate interest income at the
spot rate on the last day of the accrual period (or last day of the taxable year
in the case of an accrual period that straddles the holder's taxable year) or on
the date the interest payment is received if such date is within five days of
the end of the accrual period. Any such election shall apply to all debt
securities held by the United States Holder at the beginning of the first
taxable year to which the election applies (or thereafter acquired by the United
States Holder) and is irrevocable without the consent of the IRS. Upon receipt
of an interest payment on such Note or on disposition of the Note, such holder
will recognize ordinary income or loss in an amount equal to the difference
between the U.S. dollar value of such payment (determined by translating any
Specified Currency received at the spot rate for such Specified Currency on the
date received or on the date of disposition) and the U.S. dollar value of the
interest income that such holder has previously included in income with respect
to such payment. Any such gain or loss generally will not be treated as interest
income or expense, except to the extent provided in Treasury Regulations or
administrative pronouncements of the IRS.
OID on a Note that is also a Foreign Currency Note will be determined for
any accrual period in the applicable Specified Currency and then translated into
U.S. dollars in the same manner as interest income accrued by a holder on the
accrual basis, as described above. Likewise, a United States Holder will
recognize exchange gain or loss when the OID is paid to the extent of the
difference between the U.S. dollar value of the accrued OID (determined in the
same manner as for accrued interest) and the U.S. dollar value of such payment
(determined by translating any Specified Currency received at the spot rate for
such Specified Currency on the date of payment). For this purpose, all receipts
on a Note will be viewed first as the receipt of any periodic interest payments
called for under the terms of the Note, second as receipts of previously accrued
OID (to the extent thereof), with payments considered made for the earliest
accrual periods first, and thereafter as the receipt of principal.
A United States Holder's tax basis in a Foreign Currency Note will be the
U.S. dollar value of the Specified Currency amount paid for such Foreign
Currency Note determined at the spot rate at the time of such purchase. In the
case of a Note which is denominated in a foreign currency and is traded on an
established securities market, a cash basis taxpayer (or, if it elects, an
accrual basis taxpayer) will determine the U.S. dollar value of the cost of such
Note by translating the amount paid at the spot rate of exchange on the
settlement date of the purchase. A United States Holder who purchases a Note
with any previously owned Specified Currency will recognize exchange gain or
loss at the time of purchase attributable to the difference at the time of
purchase, if any, between his tax basis in such Specified Currency and the fair
market value of the Note in U.S. dollars on the date of purchase. Such gain or
loss will be ordinary income or loss.
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For purposes of determining the amount of any gain or loss recognized by a
United States Holder on the sale, exchange, or retirement of a Foreign Currency
Note, the amount realized upon such sale, exchange, or retirement will be the
U.S. dollar value of the amount realized in Specified Currency (other than
amounts attributable to accrued but unpaid interest not previously included in
the holder's income), determined at the time of the sale, exchange, or
retirement and in accordance with the holder's method of accounting. In the case
of a Note which is denominated in a foreign currency and is traded on an
established securities market, a cash basis taxpayer (or, if it elects, an
accrual basis taxpayer) will determine the U.S. dollar value of the amount
realized by translating such amount at the spot rate of exchange on the
settlement date of the sale.
A United States Holder will recognize exchange gain or loss attributable to
the movement in exchange rates between the time of purchase and the time of
disposition (including the sale, exchange or retirement) of a Foreign Currency
Note. Such gain or loss will be treated as ordinary income or loss. Such gain or
loss may be required to be netted against any non-exchange gain or loss in
calculating overall gain or loss on a Note. Under proposed Treasury Regulations
issued on March 17, 1992, which could differ materially from the final Treasury
Regulations, if a Foreign Currency Note is denominated in one of certain
hyperinflationary currencies, generally (i) exchange gain or loss would be
realized with respect to movements in the exchange rate between the beginning
and end of each taxable year (or such shorter period) that such Note was held
and (ii) any such exchange loss would be treated as an offset to the accrued
interest income on (and an adjustment to the holder's tax basis in) the Foreign
Currency Note. To the extent such loss exceeds the interest income or there is
exchange gain, it will generally be treated as ordinary loss or gain,
respectively.
A United States Holder's tax basis in any Specified Currency received as
interest on (or OID with respect to), or received on the sale or retirement of,
a Foreign Currency Note will be the U.S. dollar value thereof at the spot rate
at the time the holder received such Specified Currency. Generally, any gain or
loss recognized by a United States Holder on a sale, exchange, or other
disposition of Specified Currency will be ordinary income or loss and will not
be treated as interest income or expense, except to the extent provided in
Treasury Regulations or administrative pronouncements of the IRS.
NON-UNITED STATES HOLDERS
Non-United States Holders generally will not be subject to United States
federal withholding tax on the interest income (including any OID and income
with respect to Foreign Currency Notes) on any Note, provided that (i) the
Non-United States Holder does not actually or constructively own 10% or more of
the voting stock of the Company, (ii) the Non-United States Holder is not a
controlled foreign corporation related to the Company through stock ownership,
and (iii) the Non-United States Holder provides the correct certification of
non-United States Holder status (which may generally be satisfied by providing
an IRS Form W-8 certifying that the beneficial owner is not a United States
Holder and providing the name and address of the beneficial owner).
A Non-United States Holder generally will not be subject to United States
federal income tax on gain realized from the sale or exchange of a Note. Under
certain conditions, a non-United States Holder may be subject to United States
federal income taxes on gain and interest received with respect to a Note (even
if no withholding of taxes is required). Such income taxation may occur, for
example, if the non-United States Holder (i) is engaged in a trade or business
in the United States and gain and interest on a Note are effectively connected
with the conduct of that trade or business or (ii) is an individual present in
the United States for 183 days or more during the taxable year. Such taxation is
beyond the scope of this summary and should be discussed with a tax advisor. If
interest is effectively connected with the conduct of a trade or business in the
United States by a non-United States Holder, withholding of United States
federal income tax may be required unless the non-United States Holder files
with the Company or its Paying Agent an Internal Revenue Service form to the
effect that the interest is so effectively connected.
A Note held by an individual who is not a citizen or resident of the United
States at the time of such holder's death will not be subject to United States
federal estate tax, provided that any interest
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received on the Note, if received by the holder at the time of the holder's
death, would not be effectively connected with the conduct of a trade or
business in the United States and the individual does not own, actually or
constructively, at the date of death, 10% or more of the voting stock of the
Company.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, if a United States Holder fails to furnish a correct taxpayer
identification number, fails to report dividend and interest income in full, or
fails to certify that such holder has provided a correct taxpayer identification
number and that the holder is not subject to withholding, the Company may
withhold a 31 percent federal backup withholding tax on amounts paid to the
holder. An individual's taxpayer identification number is such person's social
security number.
Payments in respect of a Note made within the United States by the Company
or any of its paying agents are generally subject to backup withholding at a
rate of 31 percent. Information reporting and backup withholding do not apply to
payments made on a Note if the certification described in clause (iii) under
"Non-United States Holders" above is received, provided the payor does not have
actual knowledge that the holder is a United States person. Special rules may
apply with respect to the payment of the proceeds from the sale of a Note to or
through foreign offices of certain brokers.
The backup withholding tax is not an additional tax and may be credited
against a holder's regular federal income tax liability or refunded by the IRS
where applicable.
PLAN OF DISTRIBUTION OF NOTES
The Notes are being offered on a continuous basis by the Company through
Lehman Brothers, Lehman Brothers Inc. (including its affiliate Lehman Government
Securities Inc.), Goldman, Sachs & Co., Kidder, Peabody & Co. Incorporated,
Morgan Stanley & Co. Incorporated and Salomon Brothers Inc (the "Agents"), each
of whom has agreed to use its reasonable best efforts to solicit purchases of
the Notes. The Company will pay each Agent a maximum commission of .125% to
1.000% of the principal amount of each Note, depending on its maturity, sold
through such Agent on an agency basis. The Company may also sell Notes to an
Agent, acting as principal, for resale to investors and other purchasers. 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 an agency sale of a Note of identical maturity. Any such Note may
be resold by such Agent to one or more investors or other purchasers, including
other dealers, from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
related to prevailing market prices at the time of resale. Unless otherwise
indicated in the applicable Pricing Supplement, if any Note is resold by an
Agent to any dealer at a discount, such discount will not be in excess of the
discount received by such Agent from the Company. After the initial public
offering of any Notes to be resold by an Agent to investors and other purchasers
at a fixed public offering price, the public offering price and discounts may be
changed. The Company has agreed to reimburse the Agents for certain expenses in
connection with the offering of the Notes.
The Notes may also be sold by the Company directly to investors or to or
through such other agents as the Company shall designate from time to time,
provided that such Notes are sold on terms, including, without limitation, any
commissions payable with respect thereto, in substance identical to those
contained in the Selling Agency Agreement, dated July 18, 1994 by and between
the Company and the Agents. No commission will be payable on Notes sold directly
to investors by the Company.
The Company will have the sole right to accept offers to purchase Notes and
may reject any proposal to purchase Notes in whole or in part. Each Agent will
have the right, in its discretion reasonably exercised, to reject any offer to
purchase Notes received by it in whole or in part.
In addition to offering Notes through the Agents as described herein, the
Company may concurrently offer Euro Medium-Term Notes, Series G, described in a
separate Prospectus Supplement that
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may have terms identical or similar to the terms of the Notes offered hereby and
which will be issued in bearer or registered form. The Euro Medium-Term Notes
may be offered on a continuous basis outside the United States and, in the case
of Euro Medium-Term Notes in bearer form, during a 40-day restricted period,
only to persons who are not United States Persons other than foreign branches of
U.S. financial institutions that agree in writing to comply with the
requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of
1986, as amended, and the regulations thereunder or purchase during the
restricted period only for resale to non-United States Persons outside the
United States pursuant to a selling agency agreement with Lehman Brothers
International Limited, Goldman Sachs International Limited, Kidder, Peabody
International Limited, Morgan Stanley International Limited and Salomon Brothers
International Limited, acting as Agents. Pursuant to such selling agency
agreement, Lehman Brothers International Limited, Goldman Sachs International
Limited, Kidder, Peabody International Limited, Morgan Stanley International
Limited and Salomon Brothers International Limited may not, during the
restricted period, offer or sell any such Euro Medium-Term Notes in bearer form
in the United States or to United States Persons (other than financial
institutions described above) nor deliver such Euro Medium-Term Notes in bearer
form within the United States; however they may purchase such Euro Medium-Term
Notes as principals for their own accounts for resale (but not for resale
directly or indirectly to a United States Person or to a person within the
United States), and the Company may sell such Notes directly to investors on its
behalf or to other dealers for resale to investors subject to the same
restrictions on offers, sales and deliveries in the United States or to United
States Persons. For this purpose, the term "United States" means the United
States of America (including the States and the District of Columbia), its
territories, its possessions (including the Commonwealth of Puerto Rico) and
other areas subject to its jurisdiction and the term "United States Person"
means any person who is a citizen or resident of the United States, or any
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, or any estate
or trust which is subject to United States federal income tax regardless of the
source of its income. Any Euro Medium-Term Notes so offered and sold will reduce
correspondingly the maximum aggregate principal amount of Notes that may be
offered by this Prospectus Supplement.
The Notes will not have an established trading market when issued. The Notes
will not be listed on any securities exchange. Each Agent may make a market in
the Notes, but such Agent is not obligated to do so and may discontinue any
market-making at any time without notice. There can be no assurance of a
secondary market for any Notes, or that the Notes will be sold.
The Agents and certain affiliates thereof engage in transactions with and
perform services for the Company and its affiliates in the ordinary course of
business.
The Company has agreed to indemnify each Agent against certain liabilities,
including certain liabilities under the Securities Act of 1933, as amended (the
"Securities Act"), or to contribute to payments such Agent may be required to
make in respect thereof. Each Agent (and each other dealer, if any, who
purchases Notes for resale to the public) may be deemed to be an "underwriter"
within the meaning of the Securities Act with respect to Notes sold through it.
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FIRST MORTGAGE AND COLLATERAL TRUST BONDS
COMMON STOCK
PacifiCorp (Company) may offer from time to time (i) First Mortgage and
Collateral Trust Bonds (New Bonds) and (ii) shares of its Common Stock
(Additional Common Stock) at prices and on terms to be determined at the time of
sale. The New Bonds and the Additional Common Stock may be issued in one or more
series or issuances and the aggregate initial offering price thereof will not
exceed $850,000,000. The New Bonds and Additional Common Stock are collectively
referred to herein as the "Securities."
This Prospectus will be supplemented by a prospectus supplement or
supplements (Prospectus Supplement) that will set forth, in the case of any New
Bonds, the form in which such New Bonds are to be issued, their aggregate
principal amount, rate or rates and times of payment of interest, maturity or
maturities, the initial public offering price or prices, redemption or
repurchase provisions, if any, and other specific terms of such New Bonds in
respect of which this Prospectus is being delivered and, in the case of any
Additional Common Stock, the number of shares of such Additional Common Stock,
their purchase price and the initial public offering price or prices and other
specific terms of such Additional Common Stock in respect of which this
Prospectus is being delivered. See "Description of New Bonds" and "Description
of Capital Stock" herein.
The Common Stock of the Company is listed on the New York Stock Exchange and
the Pacific Stock Exchange (Symbol: PPW). The Additional Common Stock will be
listed, subject to notice of issuance, on those exchanges. See "Common Stock
Dividends, Price Range and Book Value" herein.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECU-
RITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Company may sell the Securities through underwriters, dealers or agents,
or directly to one or more purchasers. The Prospectus Supplement will set forth
the names of underwriters or agents, if any, any applicable commissions or
discounts and the net proceeds to the Company from any such sale. See "Plan of
Distribution" for possible indemnification arrangements for underwriters,
dealers and agents.
The date of this Prospectus is December 1, 1993
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CLASS OR SERIES
OF SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE APPLICABLE
EXCHANGES, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (Exchange Act), and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (SEC). Such reports, proxy statements and other information
can be inspected and copied at the offices of the SEC at 450 Fifth Street, N.W.,
Washington, D.C.; Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Ill.; and 7 World Trade Center, 13th Floor, New York, N.Y. Copies
of this material can also be obtained at prescribed rates from the Public
Reference Section of the SEC at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Common Stock of the Company is listed on the New
York and Pacific Stock Exchanges. Reports, proxy statements and other
information concerning the Company can be inspected and copied at the respective
offices of these exchanges at 20 Broad Street, New York, New York and 301 Pine
Street, San Francisco, California.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the SEC pursuant to the
Exchange Act are incorporated in this Prospectus by reference:
(1) The Company's Annual Report on Form 10-K for the year ended December
31, 1992;
(2) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 1993;
(3) The Company's Current Reports on Form 8-K dated February 18, March
22, April 1, June 2, September 23, October 29 and November 19, 1993; and
(4) The description of the Common Stock contained in the Company's
registration under Section 12 of the Exchange Act, including any amendment
or report updating such description.
All documents filed by the Company pursuant to Section 13, 14 or 15(d) of
the Exchange Act after the date of this Prospectus and prior to the termination
of this offering 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
(such documents, and the documents enumerated above, being hereinafter referred
to as "Incorporated Documents"; provided, however, that all documents filed by
the Company pursuant to Section 13 or 14 of the Exchange Act in each year during
which the offering made by this Prospectus is in effect prior to the filing with
the SEC of the Company's Annual Report on Form 10-K covering such year shall not
be Incorporated Documents or be incorporated by reference in this Prospectus or
be a part hereof from and after such filing of such Annual Report on Form 10-K).
Any statement contained in an Incorporated Document 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 Incorporated
Document modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON TO
WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, ON THE WRITTEN OR ORAL
REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE INCORPORATED DOCUMENTS,
OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE THEREIN. REQUESTS SHOULD BE DIRECTED TO INVESTOR
RELATIONS DEPARTMENT,
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PACIFICORP, 700 NE MULTNOMAH, SUITE 1600, PORTLAND, OREGON 97232, TELEPHONE
NUMBER (503) 731-2000. THE INFORMATION RELATING TO THE COMPANY CONTAINED IN THIS
PROSPECTUS DOES NOT PURPORT TO BE COMPREHENSIVE AND SHOULD BE READ TOGETHER WITH
THE INFORMATION CONTAINED IN THE INCORPORATED DOCUMENTS.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR IN ANY PROSPECTUS SUPPLEMENT,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY OR THEREBY
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN
SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT NOR
ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR ITS
SUBSIDIARIES SINCE THE DATE OF THIS PROSPECTUS OR THE DATE OF THE LATEST
PROSPECTUS SUPPLEMENT, AS THE CASE MAY BE.
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THE COMPANY
The Company is an electric utility that conducts a retail electric utility
business through two divisions, Pacific Power & Light Company (Pacific Power)
and Utah Power & Light Company (Utah Power), and engages in power production and
sales on a wholesale basis under the name PacifiCorp. The Company is the
indirect owner, through PacifiCorp Holdings, Inc. (a wholly-owned subsidiary),
of 87% of Pacific Telecom, Inc. (Pacific Telecom) and 100% of PacifiCorp
Financial Services, Inc. (PacifiCorp Financial Services).
Pacific Power furnishes electric service in portions of six western states:
Oregon, Wyoming, Washington, Idaho, California and Montana. Utah Power furnishes
electric service in portions of three western states: Utah, Wyoming and Idaho.
Pacific Telecom, through its subsidiaries, provides local telephone service and
access to the long distance network in Alaska, seven other western states and
three midwestern states, provides intrastate and interstate long distance
communication services in Alaska, provides cellular mobile telephone services,
and is engaged in sales of capacity in and operation of a submarine fiber optic
cable between the United States and Japan. PacifiCorp Financial Services offers
certain specialized financial services and manages certain loan, leasing and
real estate investments.
The principal executive offices of the Company are located at 700 NE
Multnomah, Suite 1600, Portland, Oregon 97232; the telephone number is (503)
731-2000.
USE OF PROCEEDS
Except as may otherwise be set forth in any Prospectus Supplement, the net
proceeds to be received by the Company from the issuance and sale of the
Securities will initially become part of the general funds of the Company and
will be used to repay all or a portion of the Company's short-term borrowings
outstanding at the time of issuance of the Securities or may be applied to
utility asset purchases, new construction or other corporate purposes, including
the refunding of long-term debt. Reference is made to the Incorporated Documents
with respect to the Company's capital requirements and its general financing
plans.
DESCRIPTION OF NEW BONDS
GENERAL. The New Bonds are to be issued under the Company's Mortgage and
Deed of Trust, dated as of January 9, 1989, with Morgan Guaranty Trust Company
of New York (Morgan Guaranty), as Trustee (Trustee), as amended and
supplemented, referred to herein as the "Mortgage."
As herein summarized, bonds now or hereafter issued under the Mortgage
(Bonds) will be secured by first mortgage bonds issued under the Mortgages and
Deeds of Trust, as supplemented, of Pacific Power & Light Company (Pacific
Mortgage) and Utah Power & Light Company (Utah Mortgage) (collectively, the
Class "A" Mortgages) and deposited with the Trustee, and/or by a first mortgage
Lien of the Mortgage on certain property not subject to the Class "A" Mortgages.
First lien property not subject to the Class "A" Mortgages could include
electric utility property acquired by the Company of the type described below
that is not a renewal, replacement or extension of or an addition to the
existing Pacific Power or Utah Power system. Bonds issued under the Mortgage
will be equally secured and pari passu.
The Company assumed the Pacific and Utah Mortgages as the surviving
corporation in its 1989 merger with PacifiCorp, a Maine corporation, and Utah
Power & Light Company, a Utah corporation. The first mortgage bonds issued under
these Class "A" Mortgages (Class "A" Bonds) are secured by a first mortgage lien
on certain properties owned by the particular company prior to the merger and on
improvements, extensions and additions to, and renewals and replacements of,
such properties.
The Mortgage provides that in the event of the merger or consolidation of
another electric utility company with or into the Company or the conveyance or
transfer to the Company by another such
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company of all or substantially all of such company's property that is of the
same character as Property Additions under the Mortgage, an existing mortgage
constituting a first lien on operating properties of such other company may be
designated by the Company as an additional Class "A" Mortgage. (Mortgage, Sec.
11.06.) Bonds thereafter issued pursuant to such additional mortgage would be
Class "A" Bonds and could provide the basis for the issuance of Bonds under the
Mortgage.
The Mortgage and the Class "A" Mortgages are exhibits to the Registration
Statement of which this Prospectus is a part. The statements herein concerning
Bonds, the New Bonds and such mortgages are merely an outline and do not purport
to be complete. Such statements include terms defined in such mortgages and are
qualified in their entirety by reference to such mortgages.
The Company expects to issue New Bonds upon the basis, dollar for dollar, of
the deposit with the Trustee of Class "A" Bonds. Such New Bonds will be issuable
in the form of fully registered bonds and, except as may be set forth in any
Prospectus Supplement relating to such New Bonds, will be issuable in
denominations of $2,000 and any multiple thereof. They may be transferred
without charge, other than for applicable taxes or other governmental charges,
at Morgan Guaranty, New York, New York.
MATURITY AND INTEREST PAYMENTS. Reference is made to the Prospectus
Supplement relating to any New Bonds for the date or dates on which such New
Bonds will mature; the rate or rates per annum at which such New Bonds will bear
interest; and the times at which such interest will be payable. These terms and
conditions, as well as the terms and conditions relating to redemption and
purchase referred to under "Redemption or Purchase of New Bonds" below, will be
as established in or pursuant to Resolutions of the Board of Directors of the
Company at the time of issuance of the New Bonds.
REDEMPTION OR PURCHASE OF NEW BONDS. The New Bonds may be redeemable, in
whole or in part, on not less than 30 days' notice either at the option of the
Company or as required by the Mortgage. The New Bonds may be subject to
repurchase at the option of the holder.
Reference is made to the Prospectus Supplement relating to any New Bonds for
the redemption or repurchase terms and other specific terms of such New Bonds.
If, at the time notice of redemption is given, the redemption moneys are not
held by the Trustee, the redemption may be made subject to their receipt on or
before the date fixed for redemption and such notice shall be of no effect
unless such moneys are so received.
While the Mortgage contains provisions for the maintenance of the Mortgaged
and Pledged Property, the Mortgage does not permit redemption of Bonds pursuant
to these provisions. There is no sinking or analogous fund in the Mortgage.
Cash deposited under any provisions of the Mortgage may be applied (with
certain exceptions) to the redemption or repurchase of Bonds of any series.
(Mortgage, Arts. XII and XIII.)
SECURITY AND PRIORITY. The Bonds issued under the Mortgage will be secured
by Class "A" Bonds held by the Trustee and/or by a first mortgage Lien of the
Mortgage on certain property of the Company. Presently, most of the Company's
property, while subject to the Lien of the Mortgage, is subject to the
respective first Liens of the Class "A" Mortgages. The Bonds will have the
benefit of first mortgage Liens of the Class "A" Mortgages on such property to
the extent of the aggregate principal amount thereof issued on the basis of
Class "A" Bonds held by the Trustee.
The Lien of the Mortgage and Liens of the Class "A" Mortgages are subject to
Excepted Encumbrances, including tax and construction liens, purchase money
liens and certain other exceptions.
There are excepted from the Lien of the Mortgage all cash and securities
(except those specifically deposited); equipment, materials or supplies held for
sale or other disposition; any fuel and similar consumable materials and
supplies; automobiles, other vehicles, aircraft and vessels; timber, minerals,
mineral rights and royalties; receivables, contracts, leases and operating
agreements; electric
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energy, gas, water, steam, ice and other products for sale, distribution or
other use; natural gas wells; gas transportation lines or other property used in
the sale of natural gas to customers or to a natural gas distribution or
pipeline company, up to the point of connection with any distribution system;
the Company's interest in the Wyodak Facility; and all properties that have been
released from the Pacific Mortgage or the Utah Mortgage and that PacifiCorp, a
Maine corporation, or Utah Power & Light Company, a Utah corporation, contracted
to dispose of, but title to which had not passed at the date of the Mortgage.
The Class "A" Mortgages have similar, but not identical, exceptions. The Company
has reserved the right, without any consent or other action by holders of Bonds
of the Eighth Series or any subsequently created series of Bonds (including the
New Bonds), to amend the Mortgage in order to except from the Lien of the
Mortgage allowances allocated to steam-electric generating plants owned by the
Company, or in which the Company has interests, pursuant to Title IV of the
Clean Air Act Amendments of 1990, as now in effect or as hereafter supplemented
or amended.
The Mortgage contains provisions subjecting after-acquired property to the
Lien thereof. These provisions may be limited, at the option of the Company, in
the case of consolidation or merger (whether or not the Company is the surviving
corporation), conveyance or transfer of all or substantially all of the utility
property of another electric utility company to the Company or sale of
substantially all of the Company's assets. In addition, after-acquired property
may be subject to a Class "A" Mortgage, purchase money mortgages and other liens
or defects in title. (Mortgage, Sec. 18.03.)
The Mortgage provides that the Trustee shall have a lien upon the mortgaged
property, prior to the holders of Bonds, for the payment of its reasonable
compensation and expenses and for indemnity against certain liabilities.
(Mortgage, Sec. 19.09.)
ISSUANCE OF ADDITIONAL BONDS. The maximum principal amount of Bonds which
may be issued under the Mortgage is not limited. Bonds of any series may be
issued from time to time on the basis of: (1) Class "A" Bonds (which need not
bear interest) delivered to the Trustee; (2) 70% of qualified Property Additions
after adjustments to offset retirements; (3) retirement of Bonds or certain
prior lien bonds; and/or (4) deposits of cash. With certain exceptions in the
case of (1) and (3) above, the issuance of Bonds is subject to Adjusted Net
Earnings of the Company for 12 consecutive months out of the preceding 15
months, before income taxes, being at least twice the Annual Interest
Requirements on all Bonds at the time outstanding, including the additional
issue of New Bonds, all outstanding Class "A" Bonds held other than by the
Trustee or by the Company, and all other indebtedness secured by a lien prior to
the Lien of the Mortgage. In general, interest on variable interest bonds, if
any, is calculated using the rate then in effect. (Mortgage, Arts. IV through
VII.)
Property Additions generally include electric, gas, steam and/or hot water
utility property but not fuel, securities, automobiles, other vehicles or
aircraft, or property used principally for the production or gathering of
natural gas. (Mortgage, Sec. 1.04.)
Additional Class "A" Bonds may only be issued as the basis of the issuance
of additional Bonds. Class "A" Bonds may be issued under the Pacific Mortgage or
the Utah Mortgage on the basis of (1) 60% of qualified Property Additions after
adjustments to offset retirements; (2) retirement of Class "A" Bonds or certain
prior lien bonds; and/or (3) deposits of cash with the particular Class "A"
Mortgage trustee. The issuance of Class "A" Bonds is subject to earnings tests
which in application are less restrictive than the Adjusted Net Earnings test
under the Mortgage.
Property Additions under the Class "A" Mortgages are similar, but not
identical, to Property Additions under the Mortgage.
The Class "A" Mortgages currently have maintenance funds and sinking and
improvement funds applicable to certain series of bonds outstanding thereunder,
none of which would permit the redemption of any of the Bonds. As these funds
cease to be in effect, any Property Additions previously used to satisfy their
requirements would become available to issue Class "A" Bonds.
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The issuance of Bonds and Class "A" Bonds on the basis of Property Additions
subject to prior liens is restricted. Bonds may, however, be issued against the
deposit of Class "A" Bonds. (Mortgage, Secs. 1.04 to 1.07 and 4.01 to 7.01.)
RELEASE AND SUBSTITUTION OF PROPERTY. Property subject to the Lien of the
Mortgage may be released upon the basis of: (1) the release of such property
from the Lien of a Class "A" Mortgage; (2) the deposit of cash or, to a limited
extent, purchase money mortgages; (3) Property Additions, after making
adjustments for certain prior lien bonds outstanding against Property Additions;
and/or (4) waiver of the right to issue Bonds. Cash may be withdrawn upon the
bases stated in (1), (3) and (4) above. Property that does not constitute Funded
Property may be released without funding other property. Similar provisions are
in effect as to cash proceeds of such property. The Mortgage contains special
provisions with respect to certain prior lien bonds deposited and disposition of
moneys received on deposited prior lien bonds. (Mortgage, Secs. 1.05, 7.02,
7.03, 9.05, 10.01 to 10.04 and 13.03 to 13.09.) Property may be released from
the Class "A" Mortgages on similar but not identical bases.
DIVIDEND RESTRICTIONS. The Mortgage provides that the Company may not
declare or pay dividends (other than dividends payable solely in shares of its
common stock) on any shares of its common stock if, after giving effect to such
declaration or payment, the Company would not be able to pay its debts as they
become due in the usual course of business. (Mortgage, Sec. 9.07.) The Pacific
and Utah Mortgages contain provisions restricting payment of cash dividends and
other distributions on common stock. The amount restricted is subject to being
increased or decreased on the basis of various factors. At September 30, 1993,
approximately $240,000,000 was available for these purposes. Reference is made
to the Notes to Consolidated Financial Statements included in the Company's
Annual Report on Form 10-K incorporated herein by reference for information
relating to other restrictions.
FOREIGN CURRENCY DENOMINATED BONDS. The Mortgage authorizes the issuance of
Bonds denominated in foreign currencies, provided that the Company deposits with
the Trustee a currency exchange agreement with an entity having, at the time of
such deposit, a financial rating at least as high as that of the Company that in
the opinion of an independent expert gives the Company at least as much
protection against currency exchange fluctuation as is usually obtained by
similarly situated borrowers. The Company believes that such a currency exchange
agreement will provide effective protection against currency exchange
fluctuations. However, if the other party to the exchange agreement defaults and
the foreign currency is valued higher at the date of maturity than at the date
of issuance of the relevant Bonds, holders of such Bonds would have a claim on
the assets of the Company which is greater than that to which holders of
dollar-denominated Bonds issued at the same time would be entitled.
THE TRUSTEE. Morgan Guaranty acts as lender and agent under loan agreements
with the Company and affiliates of the Company, and serves as trustee under
indentures and other agreements involving the Company and its affiliates. Morgan
Guaranty is also the trustee under the Pacific and Utah Mortgages.
MODIFICATION. The rights of bondholders may be modified with the consent of
holders of 60% of the Bonds, or, if less than all series of Bonds are adversely
affected, the consent of the holders of 60% of the Bonds adversely affected. In
general, no modification of the terms of payment of principal, premium, if any,
or interest and no modification affecting the Lien or reducing the percentage
required for modification is effective against any bondholder without the
consent of such holder. (Mortgage, Art. XXI.)
The rights of the holders of present Class "A" Bonds may be modified with
the consent of the holders of 70% of the Class "A" Bonds under the applicable
Class "A" Mortgage and, if less than all series of Class "A" Bonds are adversely
affected, the consent also of the holders of 70% of the Class "A" Bonds of each
series so affected. The foregoing percentages may be reduced to 66 2/3% (in the
case of the Pacific Mortgage) or 60% (in the case of the Utah Mortgage) in the
future without the consent of the Trustee as holder of Class "A" Bonds. In
general, no modification of the terms of
7
<PAGE>
payment of principal, premium, if any, or interest, no modification affecting
the Lien or reducing the percentage required for modification and no
modification of certain other covenants is effective against any holder of Class
"A" Bonds without the consent of such holder.
The Trustee is, unless there is a Default under the Mortgage, generally
required to vote Class "A" Bonds held by it with respect to any amendment of the
applicable Class "A" Mortgage proportionately with the vote of the holders of
all Class "A" Bonds then actually voting, except that the Trustee must vote in
favor of certain amendments to the Pacific Mortgage and the Utah Mortgage as
specified in Exhibits X and Y to the Mortgage. (Mortgage, Sec. 11.03.)
DEFAULTS AND NOTICE THEREOF. Defaults are defined in the Mortgage as:
default in payment of principal; default for 60 days in payment of interest or
an installment of any fund required to be applied to the purchase or redemption
of any Bonds; default in payment of principal or interest with respect to
certain prior lien bonds; certain events in bankruptcy, insolvency or
reorganization; default in other covenants for 90 days after notice; and the
existence of any "Default" as defined under the Pacific Mortgage or the Utah
Mortgage or any default under another Class "A" Mortgage which permits the
declaration of the principal of all of the bonds secured by such Class "A"
Mortgage and the interest accrued thereupon due and payable. (Mortgage, Sec.
15.01.) An effective default under any Class "A" Mortgage or under the Mortgage
will result in an effective default under all such mortgages. The Trustee may
withhold notice of default (except in payment of principal, interest or funds
for retirement of Bonds) if it determines that it is not detrimental to the
interests of the bondholders. (Mortgage, Sec. 15.02.)
"Defaults" under the Pacific Mortgage and Utah Mortgage are similar, but not
identical, to Defaults under the Mortgage. The trustee under a Class "A"
Mortgage may withhold notice of default (except in payment of principal,
interest or funds for retirement of Class "A" Bonds) if it determines that it is
in the interest of the holders of Class "A" Bonds issued under such Class "A"
Mortgage.
The Trustee or the holders of 25% of the Bonds may declare the principal and
interest due and payable on Default, but a majority may annul such declaration
if such Default has been cured. (Mortgage, Sec. 15.03.) No holder of Bonds may
enforce the Lien of the Mortgage without giving the Trustee written notice of a
Default and unless the holders of 25% of the Bonds have requested the Trustee to
act and offered it reasonable opportunity to act and indemnity satisfactory to
it against the costs, expenses and liabilities to be incurred thereby and the
Trustee shall have failed to act. (Mortgage, Sec. 15.16.) The holders of a
majority of the Bonds may direct the time, method and place of conducting any
proceedings for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. (Mortgage, Sec. 15.07.) The Trustee is not
required to risk its funds or incur personal liability if there is reasonable
ground for believing that repayment is not reasonably assured. (Mortgage, Sec.
19.08.)
EVIDENCE TO BE FURNISHED TO THE TRUSTEE. Compliance with Mortgage
provisions is evidenced by written statements of Company officers or persons
selected or paid by the Company. In certain cases, opinions of counsel and
certification of an engineer, accountant, appraiser or other expert (who in some
cases must be independent) must be furnished. The Company must give the Trustee
an annual statement as to whether or not the Company has fulfilled its
obligations under the Mortgage throughout the preceding calendar year.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of three classes of
preferred stock (Preferred Stock): 126,533 shares of 5% Preferred Stock of the
stated value of $100 per share (5% Preferred Stock), 3,500,000 shares of Serial
Preferred Stock of the stated value of $100 per share (Serial Preferred Stock),
16,000,000 shares of No Par Serial Preferred Stock (No Par Serial Preferred
Stock); and 750,000,000 shares of Common Stock (Common Stock).
8
<PAGE>
Following is a brief summary of the relative rights and preferences of the
various classes of the Company's capital stock, which does not purport to be
complete. For a complete description of the relative rights and preferences of
the various classes of the Company's capital stock, reference is made to Article
III of the Company's Second Restated Articles of Incorporation, as amended
(Articles), a copy of which is an exhibit to the Registration Statement of which
this Prospectus is a part.
GENERAL. The Company's Articles provide that the Serial Preferred Stock and
the No Par Serial Preferred Stock each may be issued in one or more series and
that all such series of each such class shall constitute one and the same class
of stock, shall be of equal rank and shall be identical in all respects except
as to the designation thereof and except that each series may vary, as fixed and
determined by the Board of Directors at the time of its creation and expressed
in a resolution, as to (a) the dividend rate or rates, which may be subject to
adjustment, (b) the date or dates from which dividends shall be cumulative, (c)
the dividend payment dates, (d) the amount to be paid upon redemption, if
redeemable, or in the event of voluntary liquidation, dissolution or winding up
of the Company, (e) the rights of conversion, if any, into shares of Common
Stock and the terms and conditions of any such conversion, (f) provisions, if
any, for the redemption or purchase of shares, which may be at the option of the
Company or upon the happening of a specified event or events, including the
times, prices or rates, which may be subject to adjustment, and (g) with respect
to the No Par Serial Preferred Stock, voting rights.
DIVIDENDS. The No Par Serial Preferred Stock, the 5% Preferred Stock and
the Serial Preferred Stock are entitled, pari passu with each other and in
preference to the Common Stock, to accumulate dividends at the rate or rates,
which may be subject to adjustment, determined in accordance with the Articles
at the time of creation of each series. Subject to the prior rights of the
several Preferred Stocks (and to the rights of any other classes of stock
hereafter authorized), the Common Stock alone is entitled to all dividends other
than those payable in respect of the several Preferred Stocks.
For certain restrictions on the payment of dividends, reference is made to
the Notes to Consolidated Financial Statements included in the Company's Annual
Report on Form 10-K incorporated herein by reference and to "Description of New
Bonds -- Dividend Restrictions" herein.
LIQUIDATION RIGHTS. Upon involuntary liquidation of the Company, each class
of Preferred Stock is entitled, pari passu with each other class and in
preference to the Common Stock, to the stated value thereof or, in the case of
the No Par Serial Preferred Stock, the amount fixed as the consideration
therefor in the resolution creating the series of No Par Serial Preferred Stock,
in each case plus accrued dividends to the date of distribution.
Upon voluntary liquidation of the Company, each outstanding series of No Par
Serial Preferred Stock (other than the $7.70 Series and the $7.48 Series which
are entitled to $100 per share and the $1.98 Series 1992 which is entitled to
$25 per share) and Serial Preferred Stock (other than the 7.00%, 6.00%, 5.00%
and 5.40% Series which are entitled to $100 per share) is entitled to an amount
equal to the then current redemption price for such series and the 5% Preferred
Stock is entitled to $110 per share, in each case plus accrued dividends to the
date of distribution, pari passu with each other and in preference to the Common
Stock.
Subject to the rights of the several Preferred Stocks (and to the rights of
any other class of stock hereafter authorized), the Common Stock alone is
entitled to all amounts available for distribution upon liquidation of the
Company other than those to be paid on the Preferred Stock.
VOTING RIGHTS. The holders of the 5% Preferred Stock, Serial Preferred
Stock and Common Stock are entitled to one vote for each share held on matters
presented to shareholders generally. The holders of the No Par Serial Preferred
Stock are entitled to such voting rights as are set forth in the Articles upon
creation of each series. Certain series of No Par Serial Preferred Stock may not
be entitled to vote on matters presented to shareholders generally, including
the election of directors. During any periods when dividends on the 5% Preferred
Stock or any series of Serial Preferred Stock or No Par Serial Preferred Stock
are in default in an amount equal to four full quarterly payments or
9
<PAGE>
more per share, the holders of the Preferred Stock, voting as one class
separately from the holders of the Common Stock, have the right to elect a
majority of the full Board of Directors. No Preferred Stock dividends are in
arrears at the date of this Prospectus.
Holders of the outstanding shares of any class of Preferred Stock are
entitled to vote as a class on certain matters, such as changes in the aggregate
number of authorized shares of the class and certain changes in the
designations, preferences, limitations or relative rights of the class. The vote
of holders of at least two-thirds of each class of Preferred Stock is required
prior to creating any new stock ranking prior thereto or altering its express
terms to its prejudice. The vote of holders of a majority of all classes of
Preferred Stock, voting as one class separately from the holders of the Common
Stock, is required prior to merger or consolidation and prior to making certain
unsecured borrowings and certain issuances of 5% Preferred Stock, Serial
Preferred Stock and No Par Serial Preferred Stock.
The shares of the Company do not have cumulative voting rights, which means
that the holders of more than 50% of all outstanding shares entitled to vote for
the election of directors can elect 100% of the directors if they choose to do
so, and, in such event, the holders of the remaining less than 50% of the shares
will not be able to elect any person or persons to the Board of Directors.
The holders of the Company's shares have no preemptive rights.
VOTING ON CERTAIN TRANSACTIONS. Under the Articles, certain business
transactions with a Related Person, including a merger, consolidation or plan of
exchange of the Company or its subsidiaries, or certain recapitalizations, or
the sale or exchange of a substantial part of the assets of the Company or its
subsidiaries, or any issuance of voting securities of the Company, will require
in addition to existing voting requirements, approval by at least 80% of the
outstanding Voting Stock (for purposes of this provision, Voting Stock is
defined as all of the outstanding shares of capital stock of the Company
entitled to vote generally in the election of directors, considered as one
class). A Related Person includes any shareholder that is, directly or
indirectly, the beneficial owner of 20% or more of the Voting Stock. The 80%
voting requirement will not apply in the following instances:
(a) The Related Person has no direct or indirect interest in the proposed
transaction except as a shareholder;
(b) The shareholders, other than the Related Person, will receive
consideration for their Voting Stock having, in the opinion of a majority of the
Continuing Directors (as defined in the Articles), a fair market value per share
at least equal to, or at least equivalent to, the highest per-share price paid
by the Related Person for any Voting Stock acquired by it;
(c) At least two-thirds of the Continuing Directors expressly approved in
advance the acquisition of the Voting Stock that caused such Related Person to
become a Related Person; or
(d) The proposed transaction is approved by at least two-thirds of the
Continuing Directors.
This provision of the Articles may be amended or replaced only upon the
approval of the holders of at least 80% of the Voting Stock.
Classification of Board; Removal. The Board of Directors of the Company is
divided into three classes, designated Class I, Class II and Class III, each
class as nearly equal in number as possible. The directors in each class serve
staggered three-year terms, such that one-third (or as close thereto as
possible) of the Board of Directors is elected each year. A vote of at least 80%
of the votes entitled to be cast at an election of directors is required to
remove a director without cause, and at least two-thirds of such votes are
required to remove a director for cause. Any amendment or revision of this
provision requires the approval of at least 80% of the votes entitled to be cast
at an election of directors.
RATIOS OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for the years ended December 31,
1988 through 1992 and for the nine months ended September 30, 1993, calculated
as required by the SEC, are 2.3x, 2.3x, 2.3x,
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<PAGE>
2.4x, 1.6x and 2.5x, respectively. Excluding the effect of special charges in
1992, the ratio was 1.9x. For the purpose of computing such ratios, "earnings"
represents the aggregate of (a) income from continuing operations, (b) taxes
based on income from continuing operations, (c) minority interest in the income
of majority-owned subsidiaries that have fixed charges, (d) fixed charges and
(e) undistributed losses (income) of less than 50% owned affiliates without loan
guarantees. "Fixed charges" represents consolidated interest charges, an
estimated amount representing the interest factor in rents and preferred stock
dividend requirements of majority-owned subsidiaries, and excludes discontinued
operations.
COMMON STOCK DIVIDENDS, PRICE RANGE AND BOOK VALUE
The Company has paid cash dividends on its Common Stock since 1947. Future
dividends will depend upon the Company's earnings, its financial condition and
other factors. (See "Description of New Bonds -- Dividend Restrictions" and
"Description of Capital Stock -- Dividends.")
The outstanding Common Stock is listed on the New York and Pacific Stock
Exchanges and the Additional Common Stock will be so listed upon notice of
issuance. The following table indicates the high and low sales prices of the
Common Stock during the respective periods indicated, as reported in THE WALL
STREET JOURNAL, and the dividends declared per share:
<TABLE>
<CAPTION>
PRICE RANGE DIVIDENDS
------------------ ------------------
HIGH LOW QUARTERLY ANNUAL
------- ------- ------- -------
<S> <C> <C> <C> <C>
1991:
First Quarter........................... 23 20 3/8 .36
Second Quarter.......................... 23 20 1/2 .375
Third Quarter........................... 23 1/4 20 7/8 .375
Fourth Quarter.......................... 25 1/4 22 1/4 .375 $ 1.485
1992:
First Quarter........................... 25 1/4 21 1/8 .375
Second Quarter.......................... 23 3/8 21 1/4 .385
Third Quarter........................... 23 5/8 22 1/8 .385
Fourth Quarter.......................... 23 1/8 18 1/8 .385 $ 1.53
1993:
First Quarter........................... 20 5/8 16 7/8 .27
Second Quarter.......................... 19 1/8 17 1/2 .27
Third Quarter........................... 20 3/4 18 3/8 .27
Fourth Quarter (through November 19,
1993).................................. 20 1/8 18 1/4 .27 $ 1.08
</TABLE>
The reported last sale price of the Common Stock on the New York Stock
Exchange Composite Tape on November 19, 1993 was $19.25. At September 30, 1993,
the book value per share of the Common Stock was $11.49.
LEGALITY
The legality of the securities to which this Prospectus relates will be
passed upon for the Company by Stoel Rives Boley Jones & Grey, counsel to the
Company, 700 NE Multnomah, Suite 950, Portland, Oregon 97232, and for any
underwriters, dealers or agents by Winthrop, Stimson, Putnam & Roberts, One
Battery Park Plaza, New York, New York 10004. John M. Schweitzer and John
Detjens, III, who are assistant secretaries of the Company, are partners in the
firm of Stoel Rives Boley Jones & Grey.
EXPERTS
The audited consolidated financial statements of the Company and
subsidiaries and supplemental schedules incorporated by reference in this
Prospectus have been audited by Deloitte & Touche, independent auditors, as
stated in their reports included in or incorporated by reference in the
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<PAGE>
Company's Annual Report on Form 10-K incorporated by reference herein, and have
been so incorporated herein in reliance upon such reports given upon the
authority of that firm as experts in accounting and auditing.
With respect to any unaudited interim financial information that is
incorporated herein by reference, Deloitte & Touche have applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their reports included in any Quarterly
Reports on Form 10-Q incorporated by reference herein, they did not audit and
they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
Deloitte & Touche are not subject to the liability provisions of Section 11 of
the Securities Act of 1933, as amended (Securities Act), for their reports on
the unaudited interim financial information because those reports are not
"reports" or a "part" of the Registration Statement to which this Prospectus is
a part prepared or certified by an accountant within the meaning of Sections 7
and 11 of the Securities Act.
PLAN OF DISTRIBUTION
The Company may sell the Securities through underwriters, dealers or agents,
or directly to one or more purchasers. A Prospectus Supplement with respect to
the Securities offered thereby will set forth the terms of the offering of such
Securities, including the name or names of any underwriters, dealers or agents,
the purchase price of such Securities and the proceeds to the Company from such
sale, any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers. Any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time. Only underwriters named in a Prospectus Supplement
are deemed to be underwriters in connection with the Securities offered thereby.
If underwriters are involved in the sale, the Securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
underwriter or underwriters with respect to a particular underwritten offering
of Securities will be named in the Prospectus Supplement relating to such
offering and, if an underwriting syndicate is used, the managing underwriter or
underwriters will be set forth on the cover page of such Prospectus Supplement.
Unless otherwise set forth in such Prospectus Supplement, the obligations of the
underwriters to purchase the Securities will be subject to certain conditions
precedent, and the underwriters will be obligated to purchase all such
Securities if any is purchased.
The Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any such agent, who may be deemed
to be an underwriter as that term is defined in the Securities Act, involved in
the offer or sale of any of the Securities will be named, and any commissions
payable by the Company to such agent will be set forth, in the Prospectus
Supplement relating to such offer or sale. Unless otherwise indicated in such
Prospectus Supplement, any such agent will be acting on a best efforts basis for
the period of its appointment.
If sold through agents, the Additional Common Stock may be sold from time to
time through such agents, by means of (i) ordinary brokers' transactions, (ii)
block transactions (which may involve crosses) in accordance with the rules of
the New York Stock Exchange, the Pacific Stock Exchange or other stock exchanges
on which the Common Stock is admitted to trading privileges (Exchanges), in
which such agent may attempt to sell the Additional Common Stock as agent but
may position and resell all or a portion of the blocks as principal, (iii)
"fixed price offerings" off the floor of the Exchanges or "exchange
distributions" and "special offerings" in accordance with the rules of the
Exchanges or (iv) a combination of any such methods of sale, in each case at
market prices prevailing at the time of sale in the case of transactions on the
Exchanges and at negotiated prices related to prevailing market prices in the
case of transactions off the floor of the Exchanges. In connection
12
<PAGE>
therewith, distributors' or sellers' commissions may be paid or allowed that
will not exceed those customary in the types of transactions involved. If an
agent purchases Additional Common Stock as principal, such stock may be resold
by any of the methods of sale described above.
From time to time an agent may conduct a "fixed price offering" of
Additional Common Stock covered by this Prospectus off the floor of the
Exchanges. In such case, such agent would purchase a block of shares from the
Company and would form a group of selected dealers to participate in the resale
of the shares. Any such offering would be described in a Prospectus Supplement
setting forth the terms of the offering and the number of shares being offered.
It is also possible that an agent may conduct from time to time "special
offerings" or "exchange distributions" in accordance with the rules of the
Exchange. Any such offering or distribution would be described in a Prospectus
Supplement at the time thereof.
If a dealer is used in the sale of the Securities, the Company would sell
such Securities to the dealer, as principal. The dealer could then resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale. The name of any dealer involved in a particular offering of
Securities and any discounts or concessions allowed or reallowed or paid to the
dealer will be set forth in the Prospectus Supplement relating to such offering.
If so indicated in any applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Offered Bonds from the Company at the public offering
price set forth in such Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in the future.
Such contracts will be subject to those conditions set forth in such Prospectus
Supplement and such Prospectus Supplement will set forth the commission payable
for solicitation of such contracts.
Subject to certain conditions, the Company may agree to indemnify the
several underwriters, agents or dealers and their controlling persons against
certain civil liabilities, including certain liabilities under the Securities
Act, or to contribute to payments any such person may be required to make in
respect thereof. Agents, underwriters and dealers may engage in transactions
with or perform services for the Company and its subsidiaries in the ordinary
course of business.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION SET FORTH HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF.
---------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
Page
---
<S> <C>
Description of Secured Medium-Term
Notes................................. S-2
Foreign Currency Notes.................. S-13
Currency Risks.......................... S-17
Certain United States Federal Income Tax
Consequences.......................... S-18
Plan of Distribution of Notes........... S-24
<CAPTION>
PROSPECTUS
<S> <C>
Available Information................... 2
Incorporation of Certain Documents by
Reference............................. 2
The Company............................. 4
Use of Proceeds......................... 4
Description of New Bonds................ 4
Description of Capital Stock............ 8
Ratio of Earnings to Fixed Charges...... 10
Common Stock Dividends, Price Range and
Book Value............................ 11
Legality................................ 11
Experts................................. 11
Plan of Distribution.................... 12
</TABLE>
U.S. $500,000,000 SERIES G
[LOGO]
SECURED MEDIUM-TERM NOTES,
(A SERIES OF FIRST MORTGAGE
AND COLLATERAL TRUST BONDS)
DUE FROM NINE MONTHS
TO ONE HUNDRED YEARS
FROM DATE OF ISSUE
-------------------
PROSPECTUS SUPPLEMENT
-------------------
LEHMAN BROTHERS
GOLDMAN, SACHS & CO.
KIDDER, PEABODY & CO.
INCORPORATED
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
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