<PAGE>
424(B)(3); FILE NO. 33-58569
PACIFICORP
OFFER TO EXCHANGE
8.55% QUARTERLY INCOME DEBT SECURITIES (QUIDS-SM-)
(JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES, SERIES B)
FOR
$1.98 NO PAR SERIAL PREFERRED STOCK, SERIES 1992
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON OCTOBER 4, 1995, UNLESS EXTENDED.
------------------------
PacifiCorp, an Oregon corporation (the "Company"), hereby offers, upon the
terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal (the "Letter of Transmittal," which, together
with this Prospectus, constitute the "Exchange Offer"), to exchange up to
$125,000,000 aggregate principal amount of debentures designated as its 8.55%
Junior Subordinated Deferrable Interest Debentures, Series B (the "Debentures")
for up to all of the outstanding shares of the $1.98 No Par Serial Preferred
Stock, Series 1992, of the Company (the "Series 1992 Preferred Stock"). The
Debentures are offered in minimum denominations of $25 and integral multiples
thereof, and the Series 1992 Preferred Stock has a liquidation preference of $25
per share. Consequently, the Exchange Offer will be effected on the basis of $25
principal amount of Debentures for each share of Series 1992 Preferred Stock
validly tendered and accepted for exchange in the Exchange Offer. The dividend
on the Series 1992 Preferred Stock payable on November 15, 1995 for the period
August 6, 1995 through November 5, 1995 will not be paid to holders of Series
1992 Preferred Stock accepted for exchange in the Exchange Offer (unless the
Company extends the Expiration Date (as defined herein) to a date that is after
October 20, 1995, which is the record date for shareholders entitled to receive
the November 15, 1995 dividend). In lieu thereof, holders of Debentures will be
entitled to interest from and including August 6, 1995, as described below.
Holders of Series 1992 Preferred Stock may participate in the Exchange Offer
by properly completing and signing the Letter of Transmittal and tendering their
shares of Series 1992 Preferred Stock as described in "The Exchange Offer --
Procedures for Tendering" in accordance with the instructions contained herein
and in the Letter of Transmittal prior to the Expiration Date.
The Company will accept for exchange Series 1992 Preferred Stock validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on October 4,
1995, or if extended by the Company, in its sole discretion, the latest date and
time to which extended (the "Expiration Date"). The Exchange Offer will expire
on the Expiration Date. Tenders of Series 1992 Preferred Stock may be withdrawn
at any time prior to the Expiration Date and, unless accepted for exchange by
the Company, may be withdrawn at any time after 40 business days after the date
of this Prospectus. The Company expressly reserves the right to (i) extend,
amend or modify the terms of the Exchange Offer in any manner and (ii) withdraw
or terminate the Exchange Offer and not accept for exchange any Series 1992
Preferred Stock, at any time for any reason, including (without limitation) if
fewer than 1,000,000 shares of Series 1992 Preferred Stock are tendered (which
condition may be waived by the Company). For a description of the other terms of
the Exchange Offer, see "The Exchange Offer -- Expiration Date; Extensions;
Amendments; Termination" and "-- Withdrawal of Tenders."
The Company will pay a solicitation fee of $0.50 per share for any Series
1992 Preferred Stock tendered and accepted for exchange pursuant to the Exchange
Offer to any Soliciting Dealer (as defined herein), provided that the applicable
Letter of Transmittal designates such Soliciting Dealer as having solicited and
obtained such tender. See "The Exchange Offer -- Fees and Expenses; Transfer
Taxes."
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN THE
DEBENTURES, INCLUDING IN THE CASE OF THE DEBENTURES THE PERIOD AND CIRCUMSTANCES
DURING AND UNDER WHICH PAYMENT OF INTEREST MAY BE DEFERRED AND CERTAIN RELATED
FEDERAL INCOME TAX CONSEQUENCES.
------------------------
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. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
(COVER CONTINUED ON NEXT PAGE)
------------------------
-SM-QUIDS is a service mark of Goldman, Sachs & Co.
------------------------
THE DEALER MANAGERS FOR THE EXCHANGE OFFER ARE:
GOLDMAN, SACHS & CO. SALOMON BROTHERS INC
------------------
The date of this Prospectus is September 6, 1995.
<PAGE>
The Debentures will mature on December 31, 2025 and will bear interest at an
annual rate of 8.55% from and including the first day following the Expiration
Date (the "Issue Date"). Interest will be payable quarterly in arrears on March
31, June 30, September 30 and December 31 of each year, commencing December 31,
1995, PROVIDED THAT, so long as the Company shall not be in default in the
payment of interest on the Debentures, the Company shall have the right, upon
prior notice by public announcement given in accordance with New York Stock
Exchange (the "NYSE") rules at any time during the term of the Debentures, to
extend the interest payment period at any time and from time to time for a
period not exceeding 20 consecutive calendar quarters (each such extended
period, an "Extension Period"). No interest shall be due and payable during an
Extension Period, but at the end of each Extension Period the Company shall pay
to the holders all interest then accrued and unpaid on the Debentures, together,
with interest thereon, compounded quarterly at the rate of interest on the
Debentures. Upon the termination of any Extension Period and the payment of all
interest then due, the Company may commence a new Extension Period. After prior
notice by public announcement given in accordance with NYSE rules, the Company
also may prepay at any time all or any portion of the interest accrued during an
Extension Period. Consequently, there could be multiple Extension Periods of
varying lengths throughout the term of the Debentures. In the event that the
Company exercises such right to extend, the Company may not declare or pay
dividends on, or redeem, purchase or acquire, any shares of its capital stock,
including the Series 1992 Preferred Stock, until deferred interest on the
Debentures is paid in full, subject to certain exceptions described herein.
Therefore, the Company believes that the extension of an interest payment period
on the Debentures is unlikely. However, should the Company determine to exercise
such right in the future, the market price of the Debentures is likely to be
adversely affected. See "Risk Factors" and "Description of Debentures --
Interest" and " -- Option to Extend Interest Payment Period."
In addition, unless the Company extends the Expiration Date to a date that
is after October 20, 1995, registered holders of the Debentures on December 15,
1995 will be entitled to interest at a rate of 7.92% per annum from and
including August 5, 1995 to and including the Expiration Date in lieu of
dividends accumulating after August 5, 1995 on their Series 1992 Preferred Stock
accepted for exchange, payable on December 31, 1995, which is the date of the
first interest payment on the Debentures ("Pre-Issuance Accrued Interest"). No
extension of an interest payment period will be permitted with respect to Pre-
Issuance Accrued Interest.
The Debentures are redeemable at the option of the Company at any time after
May 31, 1997 (which is the same date after which the Series 1992 Preferred Stock
is redeemable at the option of the Company), in whole or in part, at a
redemption price of 100% of the principal amount of the Debentures redeemed,
plus accrued and unpaid interest to the date fixed for redemption. The
Debentures will not be subject to mandatory redemption, and no sinking fund will
be established for the payment of the Debentures. See "Description of Debentures
- -- Optional Redemption." The Debentures are unsecured obligations of the Company
and will be subordinate to all existing and future Senior Indebtedness (as
defined herein) of the Company, but senior to preferred stock of the Company,
including the Series 1992 Preferred Stock, and to the Common Stock of the
Company. On June 30, 1995, approximately $3.6 billion of such Senior
Indebtedness was outstanding. As the Debentures will be issued by the Company,
the Debentures effectively will be subordinate to all obligations of the
Company's subsidiaries. See "Description of Debentures -- Subordination."
For United States federal income tax purposes, the exchange of Series 1992
Preferred Stock for Debentures will, depending upon each exchanging holder's
particular facts and circumstances, be treated as either an exchange in which
gain or loss is recognized or as a distribution taxable as a dividend, and the
Debentures will be treated as having been issued with original issue discount.
For a discussion of these and other United States federal income tax
considerations relevant to the Exchange Offer, see "Certain Federal Income Tax
Considerations" and "Certain Federal Tax Considerations for Non-United States
Persons."
The Series 1992 Preferred Stock is listed and principally traded on the
NYSE. On September 5, 1995, the last full day of trading prior to the first
public announcement of the Exchange Offer, the closing
2
<PAGE>
sales price of the Series 1992 Preferred Stock on the NYSE as reported on the
Composite Tape was $25 1/2 per share. Holders of Series 1992 Preferred Stock are
urged to obtain current market quotations therefor.
Application has been made to list the Debentures on the NYSE. To the extent
that Series 1992 Preferred Stock is tendered and accepted in the Exchange Offer,
a holder's ability to sell Series 1992 Preferred Stock not tendered for exchange
could be adversely affected. The Company does not believe that the Exchange
Offer has a reasonable likelihood of causing the Series 1992 Preferred Stock to
be delisted from the NYSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS SHOULD
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE RESPECTIVE DATES AS OF WHICH INFORMATION IS
GIVEN HEREIN. THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS BE
ACCEPTED FROM OR ON BEHALF OF) HOLDERS (AS DEFINED BELOW) OF SERIES 1992
PREFERRED STOCK IN ANY JURISDICTION IN WHICH THE MAKING OF THE EXCHANGE OFFER OR
THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION. HOWEVER, THE COMPANY MAY, AT ITS DISCRETION, TAKE SUCH ACTION AS
IT MAY DEEM NECESSARY TO MAKE THE EXCHANGE OFFER IN ANY SUCH JURISDICTION AND
EXTEND THE EXCHANGE OFFER TO HOLDERS OF SERIES 1992 PREFERRED STOCK IN SUCH
JURISDICTION. IN ANY JURISDICTION THE SECURITIES LAWS OR BLUE SKY LAWS OF WHICH
REQUIRE THE EXCHANGE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE
EXCHANGE OFFER IS BEING MADE ON BEHALF OF THE COMPANY BY THE DEALER MANAGERS (AS
DEFINED BELOW) OR ONE OR MORE REGISTERED BROKERS OR DEALERS WHICH ARE LICENSED
UNDER THE LAWS OF SUCH JURISDICTION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information (including
proxy and information statements) filed by the Company can be inspected and
copied at public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the following Regional
Offices of the Commission: New York Regional Office, 7 World Trade Center, 13th
Floor, New York, New York 10048, and Chicago Regional Office, 500 W. Madison
Street, 14th Floor, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of the prescribed rates. The
Common Stock of the Company is listed on the NYSE and the Pacific Stock
Exchange. Reports, proxy statements and other information concerning the Company
can be inspected at their respective offices: New York Stock Exchange, 20 Broad
Street, New York, New York 10005, and Pacific Stock Exchange, 301 Pine Street,
San Francisco, California 94104.
This Prospectus constitutes a part of a registration statement on Form S-4
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933, as amended (the "Securities Act"). This Prospectus does not contain all of
the information included in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
Statements contained herein concerning the provisions of any document are
qualified by reference to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Reference is made
to the Registration Statement, including the exhibits thereto, for further
information with respect to the Company and the securities offered hereby.
3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated in this Prospectus by reference:
(1) Annual Report on Form 10-K for the year ended December 31, 1994 (as
amended by Forms 10-K/A dated April 28 and June 22, 1995) (the "Annual Report on
Form 10-K");
(2) Quarterly Reports on Form 10-Q for the quarters ended March 31 and June
30, 1995; and
(3) Current Reports on Form 8-K dated March 9, March 31, April 11 and July
14, 1995.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
date on which the Exchange Offer is consummated 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").
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 INCORPORATED DOCUMENTS ARE NOT PRESENTED IN THIS PROSPECTUS OR DELIVERED
HEREWITH. THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH
PERSON, INCLUDING ANY BENEFICIAL OWNER OF SERIES 1992 PREFERRED STOCK, 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. THE COMPANY WILL SEND THE INCORPORATED DOCUMENTS BY
FIRST-CLASS MAIL OR OTHER EQUALLY PROMPT MEANS WITHIN ONE BUSINESS DAY OF
RECEIPT OF ANY SUCH REQUEST. REQUESTS SHOULD BE DIRECTED TO RICHARD T. O'BRIEN,
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, PACIFICORP, 700 NE MULTNOMAH,
SUITE 1600, PORTLAND, OREGON 97232, TELEPHONE NUMBER (503) 731-2000. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE INCORPORATED DOCUMENTS, ANY REQUEST SHOULD BE MADE
NOT LATER THAN FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE. 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.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information...................................................................................... 3
Incorporation of Certain Documents by Reference............................................................ 4
Prospectus Summary......................................................................................... 5
Risk Factors............................................................................................... 12
The Company................................................................................................ 14
Selected Financial Information............................................................................. 15
The Exchange Offer......................................................................................... 16
Price Range of Series 1992 Preferred Stock................................................................. 24
Description of Debentures.................................................................................. 24
Description of Capital Stock............................................................................... 31
Certain Federal Income Tax Considerations.................................................................. 33
Certain Federal Tax Considerations for Non-United States Persons........................................... 36
Experts.................................................................................................... 39
Legal Opinions............................................................................................. 39
</TABLE>
4
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY THE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS
OR BY DOCUMENTS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
THE COMPANY
PacifiCorp (the "Company") is an electric utility that conducts a retail
electric utility business through Pacific Power & Light Company and Utah Power &
Light Company, 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 86.6% of Pacific Telecom, Inc.
and 100% of each of Pacific Generation Company and PacifiCorp Financial
Services, Inc. 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. See "The Company."
RISK FACTORS
Holders should consider the following factors prior to making a decision
regarding the Exchange Offer (as defined below):
- The annual interest rate on the Debentures (as defined below) will be
8.55% as compared with the indicated annual dividend rate of 7.92% on the
Series 1992 Preferred Stock (as defined below). See " -- Comparison of
Debentures and Series 1992 Preferred Stock" below.
- The Debentures will rank senior to the Series 1992 Preferred Stock as to
payment in respect thereof and as to the distribution of assets upon
liquidation. However, the Debentures will be unsecured obligations of the
Company and will be (as the Series 1992 Preferred Stock is) subordinate in
right of payment to all existing and future Senior Indebtedness (as
defined below) of the Company. In addition, the Debentures will be (as the
Series 1992 Preferred Stock is) effectively subordinated to all
obligations of the Company's subsidiaries. See "Risk Factors --
Subordination of Debentures."
- Participation in the Exchange Offer will be a taxable event. The
consequences of the Exchange Offer and holding Debentures in lieu of
Series 1992 Preferred Stock may vary depending upon the holder's
particular facts and circumstances. Accordingly, holders are advised to
consult with their own tax advisors regarding the federal, state, local
and foreign tax consequences of the exchange of Series 1992 Preferred
Stock for Debentures and of the ownership and disposition of Debentures
received in the exchange in light of their own particular circumstances.
See "Risk Factors -- Exchange as Taxable Event."
- The interest payment period on the Debentures may be extended under
certain circumstances by the Company in its sole discretion for up to 20
consecutive quarters during which no interest would be payable thereon. In
the event an extension occurs, holders of the Debentures would continue to
accrue income on the Debentures for United States federal income tax
purposes. See "Risk Factors -- Right of Company to Defer Payment of
Interest," " -- Potential Market Volatility During Extension Period" and "
-- No Cash Payments During Extension Period to Pay Accrued Tax Liability."
- The Debentures constitute a new series of securities with no established
trading market. While application has been made to list the Debentures on
the New York Stock Exchange (the "NYSE"), no assurance can be given as to
the liquidity of, or trading markets for, the Debentures or whether the
sales price of the Debentures on the NYSE at the time of issuance thereof
(or at any time thereafter) will be greater than or less than either the
stated principal amount thereof or the closing sales price of the Series
1992 Preferred Stock on the NYSE on the Expiration Date (as defined
below). See "Risk Factors -- No Established Trading Market for
Debentures."
5
<PAGE>
- For corporate holders, dividends on the Series 1992 Preferred Stock are
eligible for the dividends received deduction. Interest on the Debentures
will not be eligible for the dividends received deduction for corporate
holders. See " -- Comparison of Debentures and Series 1992 Preferred
Stock" below.
- Subject to the Company's right to extend payment of interest as described
herein, holders of Debentures will have the right to receive interest and
principal payments as and when due, but will not have any of the voting
rights of the Series 1992 Preferred Stock. See "Description of Capital
Stock -- Voting Rights."
- There are no terms of the Debentures that limit the Company's ability to
incur additional indebtedness, including indebtedness that would rank
senior to the Debentures. The Indenture (as defined below) does not
contain any cross-defaults to any other indebtedness of the Company and,
therefore, a default with respect to or the acceleration of, any such
indebtedness will not constitute an Event of Default (as defined below)
with respect to the Debentures. The Indenture does not (as the Series 1992
Preferred Stock does not) contain any provisions that afford holders
protection in the event of a highly leveraged transaction involving the
Company or in the event of a change in control of the Company. See "Risk
Factors -- No Limitation on Indebtedness; No Protection Against Highly
Leveraged Transaction or Change in Control."
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The principal purpose of the Exchange Offer is to improve the Company's
after-tax cash flow by replacing the Series 1992 Preferred Stock with the
Debentures. The potential cash flow benefit to the Company arises because
interest payable on the Debentures will be deductible by the Company (as it
accrues) for United States federal income tax purposes, while dividends payable
on the Series 1992 Preferred Stock are not deductible. See "The Exchange Offer
- -- Purpose of the Exchange Offer."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth herein and in the
accompanying Letter of Transmittal (the "Letter of Transmittal," which together
with this Prospectus, constitute the "Exchange Offer"), the Company hereby
offers to exchange up to $125,000,000 aggregate principal amount of debentures
designated as its 8.55% Junior Subordinated Deferrable Interest Debentures,
Series B (the "Debentures") for up to all of the outstanding shares of the $1.98
No Par Serial Preferred Stock, Series 1992, of the Company (the "Series 1992
Preferred Stock"). Exchanges will be effected on the basis of $25 principal
amount of Debentures (the minimum permitted denomination) for each share of
Series 1992 Preferred Stock (which has a liquidation preference of $25 per
share) validly tendered and accepted for exchange in the Exchange Offer. See
"The Exchange Offer -- Terms of the Exchange Offer." Shares of Series 1992
Preferred Stock exchanged pursuant to the Exchange Offer will revert to the
status of authorized but unissued shares of the Company's No Par Serial
Preferred Stock.
SECURITIES OFFERED
The Debentures will mature on December 31, 2025 and will bear interest at an
annual rate of 8.55% from and including the first day following the Expiration
Date (the "Issue Date"). Interest will be payable quarterly in arrears on March
31, June 30, September 30 and December 31 of each year, commencing December 31,
1995, PROVIDED THAT, so long as the Company shall not be in default in the
payment of interest on the Debentures, the Company shall have the right, upon
prior notice by public announcement given in accordance with NYSE rules at any
time during the term of the Debentures, to extend the interest payment period at
any time and from time to time for a period not exceeding 20 consecutive
calendar quarters (each such extended period, an "Extension Period"). In the
event that the Company exercises such right to extend, the Company may not
declare or pay dividends on, or redeem, purchase or acquire, any shares of its
capital stock (including the Series 1992 Preferred Stock) until deferred
interest on the Debentures is paid in full, subject to certain exceptions as
described herein. Therefore, the Company believes that the extension of an
interest payment period on the Debentures is unlikely.
6
<PAGE>
However, should the Company determine to extend such right in the future, the
market price of the Debentures is likely to be adversely affected. See "Risk
Factors" and "Description of Debentures -- Interest" and " -- Option to Extend
Interest Payment Period."
The Debentures are redeemable at the option of the Company at any time after
May 31, 1997 (which is the same date after which the Series 1992 Preferred Stock
is redeemable at the option of the Company), in whole or in part, at a
redemption price of 100% of the principal amount of the Debentures redeemed,
plus accrued and unpaid interest to the date fixed for redemption. The
Debentures will not be subject to mandatory redemption, and no sinking fund will
be established for the payment of the Debentures. See "Description of Debentures
- -- Optional Redemption."
The dividend on the Series 1992 Preferred Stock payable on November 15, 1995
for the period August 6, 1995 through November 5, 1995 will not be paid to
holders of Series 1992 Preferred Stock accepted for exchange in the Exchange
Offer (unless the Company extends the Expiration Date to a date that is after
October 20, 1995, which is the record date for shareholders entitled to receive
the November 15, 1995 dividend). In lieu thereof, registered holders of the
Debentures on December 15, 1995 will be entitled to interest at a rate of 7.92%
per annum from and including August 6, 1995 to and including the Expiration
Date, payable on December 31, 1995, which is the date of the first interest
payment on the Debentures ("Pre-Issuance Accrued Interest"). No extension of an
interest payment period will be permitted with respect to Pre-Issuance Accrued
Interest. The Debentures will be issued pursuant to an indenture dated as of May
1, 1995 between the Company and The Bank of New York, as trustee (the
"Trustee"), as supplemented by the First Supplemental Indenture thereto relating
to the Company's Junior Subordinated Deferrable Interest Debentures, Series A
(the "Series A Debentures") and the Second Supplemental Indenture thereto
relating to the Debentures (as so supplemented, the "Indenture"). See
"Description of Debentures."
EXPIRATION DATE; WITHDRAWALS
The Company will accept for exchange Series 1992 Preferred Stock, validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on October 4,
1995, or if extended by the Company, in its sole discretion, the latest date and
time to which extended (the "Expiration Date"). The Exchange Offer will expire
on the Expiration Date. Tenders of Series 1992 Preferred Stock pursuant to the
Exchange Offer may be withdrawn at any time prior to the Expiration Date and,
unless accepted for exchange by the Company, may be withdrawn at any time after
40 business days after the date of this Prospectus. See "The Exchange Offer --
Expiration Date; Extensions; Amendments; Termination" and "-- Withdrawal of
Tenders."
EXTENSIONS, AMENDMENTS AND TERMINATION
The Company expressly reserves the right to (i) extend, amend or modify the
terms of the Exchange Offer in any manner and (ii) withdraw or terminate the
Exchange Offer and not accept for exchange any Series 1992 Preferred Stock, at
any time for any reason, including (without limitation) if fewer than 1,000,000
shares of Series 1992 Preferred Stock are tendered (which condition may be
waived by the Company). See "The Exchange Offer -- Expiration Date; Extensions;
Amendments; Termination."
PROCEDURES FOR TENDERING
Each Holder (as defined below) of the Series 1992 Preferred Stock wishing to
accept the Exchange Offer must (i) unless an Agent's Message (as defined herein)
is utilized in connection with a book-entry transfer, properly complete and sign
the Letter of Transmittal or a facsimile thereof (all references in this
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) in accordance with the instructions contained herein and therein,
together with any required signature guarantees, and deliver the same to The
Bank of New York, as Exchange Agent (the "Exchange Agent"), at either of its
addresses set forth in "The Exchange Offer -- Exchange Agent and Information
Agent" and either (a) certificates for the Series 1992 Preferred Stock must be
received by the Exchange Agent at such address or (b) such Series 1992 Preferred
Stock must be transferred pursuant to the procedures for book-entry transfer
described herein and a confirmation of such book-entry transfer must be received
by
7
<PAGE>
the Exchange Agent, in each case prior to the Expiration Date, or (ii) comply
with the guaranteed delivery procedures described herein. See "The Exchange
Offer -- General" and " -- Procedures for Tendering."
In order to participate in the Exchange Offer, Holders of Series 1992
Preferred Stock must submit a Letter of Transmittal and comply with the other
procedures for tendering in accordance with the instructions contained herein
and in the Letter of Transmittal prior to the Expiration Date.
LETTERS OF TRANSMITTAL, SERIES 1992 PREFERRED STOCK AND ANY OTHER REQUIRED
DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, AND NOT TO THE COMPANY, THE
DEALER MANAGERS OR THE INFORMATION AGENT REFERRED TO HEREIN.
SPECIAL PROCEDURE FOR BENEFICIAL OWNERS
Any beneficial owner whose Series 1992 Preferred Stock is registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on its own behalf, such owner must, prior to
completing and executing a Letter of Transmittal and delivering its Series 1992
Preferred Stock, either make appropriate arrangements to register ownership of
the Series 1992 Preferred Stock in such owner's name or obtain a properly
completed stock power from the registered holder. The transfer of registered
ownership may take considerable time and may not be able to be completed prior
to the Expiration Date. See "The Exchange Offer -- Procedures for Tendering --
Signature Guarantees."
GUARANTEED DELIVERY PROCEDURES
If a Holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Series 1992 Preferred Stock to reach the Exchange Agent
before the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected in accordance with the
guaranteed delivery procedures set forth in "The Exchange Offer -- Procedures
for Tendering -- Guaranteed Delivery."
ACCEPTANCE OF SHARES AND DELIVERY OF DEBENTURES
Upon the terms and subject to the conditions of the Exchange Offer,
including the reservation by the Company of the right to withdraw, amend or
terminate the Exchange Offer and certain other rights, the Company will accept
for exchange all shares of Series 1992 Preferred Stock that are properly
tendered in the Exchange Offer and not withdrawn prior to the Expiration Date.
Subject to such terms and conditions, the Debentures issued pursuant to the
Exchange Offer will be issued as of the Issue Date and will be delivered as
promptly as practicable thereafter. See "The Exchange Offer -- Terms of the
Exchange Offer" and " -- Expiration Date; Extensions; Amendments; Termination."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Series 1992 Preferred Stock for Debentures pursuant to the
Exchange Offer will be a taxable event for exchanging shareholders. Depending on
each exchanging shareholder's particular facts and circumstances, the exchange
will be treated as (i) a transaction in which gain or loss will be recognized in
an amount equal to the difference between the fair market value of the
Debentures received in the exchange and the exchanging shareholder's tax basis
in the shares of Series 1992 Preferred Stock surrendered or (ii) a distribution
taxable as a dividend in an amount equal to the fair market value of the
Debentures received by such exchanging shareholder. In the case of a shareholder
who directly or constructively owns solely Series 1992 Preferred Stock, or not
more than one percent of the Series 1992 Preferred Stock outstanding and not
more than one percent of all other classes of outstanding stock of the Company,
an exchange of all or a part of such shareholder's Series 1992 Preferred Stock
for Debentures pursuant to the Exchange Offer should ordinarily be treated as an
exchange described in clause (i) of the previous sentence. See "Certain Federal
Income Tax Considerations" and "Certain Federal Tax Considerations for
Non-United States Persons."
8
<PAGE>
The Debentures will be treated as issued with "original issue discount" for
United States federal income tax purposes. Holders of Debentures will be
required to include such original issue discount in gross income as it accrues
on the Debentures in advance of the receipt of cash. In the event an Extension
Period occurs, this may cause holders of Debentures to recognize ordinary income
from the Debentures without a corresponding receipt of cash in the same tax
year. See "Risk Factors -- Differences In Amount Between Interest Payments and
Taxable Income" and "Certain Federal Income Tax Considerations -- Interest and
Original Issue Discount on Debentures."
No portion of the amounts received with respect to the Debentures will be
eligible for the dividends received deduction.
UNTENDERED SHARES
Holders of Series 1992 Preferred Stock who do not tender all their Series
1992 Preferred Stock in the Exchange Offer or whose Series 1992 Preferred Stock
is not accepted for exchange will continue to hold such Preferred Stock and will
be entitled to all the rights and preferences, and will be subject to all of the
limitations, applicable thereto. To the extent Series 1992 Preferred Stock is
tendered and accepted in the Exchange Offer, the terms on which untendered
Series 1992 Preferred Stock could subsequently be sold could be adversely
affected. See "Risk Factors -- Risk That Preferred Stock May Be Delisted or
Become Illiquid." The Company does not believe that the Exchange Offer has a
reasonable likelihood of causing the Series 1992 Preferred Stock to be delisted
from the NYSE. See "The Exchange Offer -- Listing and Trading of Debentures and
Series 1992 Preferred Stock; Transfer Restrictions."
EXCHANGE AGENT AND INFORMATION AGENT
The Bank of New York has been appointed as Exchange Agent in connection with
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to Georgeson &
Company Inc., which has been retained by the Company to act as Information Agent
for the Exchange Offer (the "Information Agent"). The addresses and telephone
numbers of the Exchange Agent and the Information Agent are set forth in "The
Exchange Offer -- Exchange Agent and Information Agent."
DEALER MANAGERS
Goldman, Sachs & Co. and Salomon Brothers Inc have been retained as Dealer
Managers to solicit exchanges of Series 1992 Preferred Stock for Debentures
(collectively, the "Dealer Managers"). Questions with respect to the Exchange
Offer may be directed to Goldman, Sachs & Co. at (800) 828-3182.
FEES AND EXPENSES; TRANSFER TAXES
The expenses of soliciting tenders of the Series 1992 Preferred Stock will
be borne by the Company. The Company will pay a solicitation fee of $0.50 per
share for any Series 1992 Preferred Stock tendered and accepted for exchange
pursuant to the Exchange Offer to any Soliciting Dealer (as defined herein),
provided that the applicable Letter of Transmittal designates such Soliciting
Dealer as having solicited and obtained such tender. The Company will pay all
transfer taxes, if any, applicable to the exchange of Series 1992 Preferred
Stock pursuant to the Exchange Offer. See "The Exchange Offer -- Fees and
Expenses; Transfer Taxes."
9
<PAGE>
COMPARISON OF DEBENTURES AND SERIES 1992 PREFERRED STOCK
The following is a brief summary comparison of certain of the principal
terms of the Debentures and the Series 1992 Preferred Stock.
<TABLE>
<CAPTION>
SERIES 1992
DEBENTURES PREFERRED STOCK
----------------------------------------------- -----------------------------------------------
<S> <C> <C>
Interest/ 8.55% annual interest from and including the 7.92% indicated annual dividend rate,
Dividend Rate Issue Date (7.92% per annum for the period from cumulative and payable quarterly out of funds
and including August 6, 1995 to and including legally available therefor on February 15, May
the Expiration Date) payable quarterly in 15, August 15 and November 15 of each year for
arrears on March 31, June 30, September 30 and the dividend periods ending on the fifth day of
December 31 of each year, commencing December each such month, when, as and if declared by
31, 1995, subject to the Company's right to the Company's Board of Directors. All dividends
extend the interest payment period at any time on the Series 1992 Preferred Stock have been
and from time to time for a period not paid to date and the Company has declared the
exceeding 20 consecutive calendar quarters, as dividend payable on November 15, 1995 to
described herein. Upon the exercise of such holders of record on October 20, 1995. In the
right to extend, and until payment in full of event dividends are not paid on a dividend
all accrued interest, compounded quarterly, the payment date in the future, holders would not
Company may not declare or pay dividends on, or be entitled to receive interest on any dividend
redeem, purchase or acquire, any shares of its arrearages.
capital stock (subject to certain exceptions).
Therefore, the Company believes that any such
extension is unlikely.
Maturity December 31, 2025. There is no mandatory None. There is no mandatory redemption or
redemption or sinking fund. sinking fund.
Optional Redeemable at the option of the Company at any Redeemable at the option of the Company at any
Redemption time after May 31, 1997, in whole or in part, time after May 31, 1997, in whole or in part,
at a redemption price of 100% of the principal at a redemption price of $25 per share, in each
amount of the Debentures redeemed, in each case case plus accrued and unpaid dividends to the
plus accrued and unpaid interest to the date date fixed for redemption.
fixed for redemption.
Subordination Although senior to preferred stock of the Subordinate to claims of creditors, including
Company, including the Series 1992 Preferred holders of the Company's outstanding debt
Stock, and to the Common Stock of the Company, securities and the Debentures, but senior to
the Debentures are unsecured obligations of the the Common Stock of the Company. Effectively
Company and subordinated to all existing and subordinated to all obligations of the
future Senior Indebtedness. Effectively Company's subsidiaries.
subordinated to all obligations of the
Company's subsidiaries.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
SERIES 1992
DEBENTURES PREFERRED STOCK
----------------------------------------------- -----------------------------------------------
<S> <C> <C>
Voting Rights/ Subject to the Company's right to extend One-quarter vote per share on matters presented
Enforcement payment as described herein, holders have the to shareholders of the Company generally, with
right to receive interest and principal additional voting rights on certain matters. If
payments as and when due, but do not have any dividends shall be in arrears in an aggregate
voting rights. Holders may institute suit for amount equivalent to four full quarterly
the enforcement of any such payment after the payments, the Holders have the right (together
due date. with other classes of preferred stock ranking
on a parity with the Series 1992 Preferred
Stock either as to dividends or on the
distribution of assets upon liquidation) to
elect a majority of the full Board of
Directors.
Transfer The Debentures will be registered under the The Series 1992 Preferred Stock is registered
Restrictions; Securities Act and will be transferable to the under the Securities Act and is transferable to
New York Stock extent permitted thereunder. The Company has the extent permitted thereunder. The Series
Exchange Listing applied to list the Debentures on the NYSE. 1992 Preferred Stock is listed on the NYSE.
Dividends Interest will not be eligible for the dividends Dividends are eligible for the dividends
Received received deduction. received deduction (which is not applicable to
Deduction individual shareholders).
Dividend Interest may not be reinvested under the DRIP. Dividends on the Series 1992 Preferred Stock
Reinvestment and However, dividends on other shares of the may be reinvested in Common Stock of the
Stock Purchase Company's capital stock held by a tendering Company in accordance with the DRIP.
Plan ("DRIP") shareholder will remain eligible for
reinvestment under the DRIP.
</TABLE>
11
<PAGE>
RISK FACTORS
PROSPECTIVE EXCHANGING SHAREHOLDERS SHOULD CAREFULLY CONSIDER THE FOLLOWING
RISK FACTORS:
EXCHANGE AS TAXABLE EVENT
The exchange of Series 1992 Preferred Stock for Debentures pursuant to the
Exchange Offer will be a taxable event. Depending on each exchanging
shareholder's particular facts and circumstances, the exchange will be treated
as (i) a transaction in which gain or loss will be recognized in an amount equal
to the difference between the fair market value of the Debentures received in
the exchange and the exchanging shareholder's tax basis in the shares of Series
1992 Preferred Stock surrendered or (ii) a distribution taxable as a dividend in
an amount equal to the fair market value of the Debentures received by such
exchanging shareholder. See "Certain Federal Income Tax Considerations" and
"Certain Federal Tax Considerations for Non-United States Persons." All holders
of Series 1992 Preferred Stock are advised to consult their own tax advisors
regarding the federal, state, local and foreign tax consequences of the exchange
of Series 1992 Preferred Stock.
RIGHT OF COMPANY TO DEFER PAYMENT OF INTEREST
So long as the Company shall not be in default in the payment of interest on
the Debentures, the Company shall have the right under the Indenture, upon prior
notice by public announcement given in accordance with NYSE rules at any time
during the term of the Debentures, to extend the interest payment period at any
time and from time to time for a period not exceeding 20 consecutive calendar
quarters. No interest shall be due and payable during an Extension Period, but
on the interest payment date occurring at the end of each Extension Period the
Company shall pay to the holders of record on the record date for such interest
payment date (regardless of who the holders of record may have been on other
dates during the Extension Period) all accrued and unpaid interest on the
Debentures, together with interest thereon, compounded quarterly at the rate of
interest on the Debentures.
Upon the termination of any Extension Period and the payment of all interest
then due, the Company may commence a new Extension Period. After prior notice
given by public announcement in accordance with NYSE rules, the Company may also
prepay at any time all or a portion of the interest accrued during an Extension
Period. Consequently, there could be multiple Extension Periods of varying
lengths throughout the term of the Debentures. See "Description of Debentures --
Option to Extend Interest Payment Period."
POTENTIAL MARKET VOLATILITY DURING EXTENSION PERIOD
As described above, the Company has the right to extend an interest payment
period from time to time for a period not exceeding 20 consecutive calendar
quarters. In the event the Company determines to extend an interest payment
period, or in the event the Company thereafter extends an Extension Period or
prepays interest accrued during an Extension Period as described above, the
market price of the Debentures is likely to be adversely affected. In addition,
as a result of such rights, the market price of the Debentures may be more
volatile than other debt instruments with original issue discount that do not
have such rights. A holder that disposes of its Debentures during an Extension
Period, therefore, may not receive the same return on its investment as a holder
that continues to hold its Debentures. See "Description of Debentures -- Option
to Extend Interest Payment Period."
NO CASH PAYMENTS DURING EXTENSION PERIOD TO PAY ACCRUED TAX LIABILITY
In the event an Extension Period occurs, holders of the Debentures would
continue, under the original issue discount rules, to accrue income on the
Debentures for United States federal income tax purposes. As a result, a holder
that is subject to United States federal income tax ordinarily would include
such amounts in gross income in advance of the receipt of cash. A holder that
disposes of its Debentures prior to the record date for payment of interest at
the end of an Extension Period will not receive cash from the Company related to
such interest because such interest will be paid to the holder of record on such
record date, regardless of who the holders of record may have been on other
dates during the Extension Period. The extent to which such a holder will
receive a return on the Debentures for
12
<PAGE>
the period it held such Debentures will depend on the market for the Debentures
at the time of such disposition. See " -- Differences In Amount Between Interest
Payments and Taxable Income" below and "Certain Federal Income Tax
Considerations -- Interest and Original Issue Discount on Debentures."
DIFFERENCES IN AMOUNT BETWEEN INTEREST PAYMENTS AND TAXABLE INCOME
Because the original issue discount rules apply to the Debentures, even if
an Extension Period does not occur there may be differences in timing and amount
between the gross income recognized with respect to a Debenture and the interest
payable on such Debenture. The amount of original issue discount that an owner
of Debentures will be required to accrue over the term of such Debentures may be
greater than or less than the total amount of interest payable with respect to
such Debentures. If the fair market value of the Debentures at the time of their
issuance is less than their stated principal amount, the difference will be
included in income over the term of such Debentures. If the fair market value of
the Debentures at the time of their issuance is greater than their stated
principal amount, the amount of original issue discount included in income over
the term of the Debentures will be reduced by the difference. See "Certain
Federal Income Tax Considerations -- Interest and Original Issue Discount on
Debentures."
SUBORDINATION OF DEBENTURES
The Debentures are senior to preferred stock of the Company, including the
1992 Series Preferred Stock, and to the Common Stock of the Company, but will be
unsecured obligations of the Company and subordinate to all existing and future
Senior Indebtedness of the Company. On June 30, 1995, approximately $3.6 billion
of such Senior Indebtedness was outstanding. As the Debentures will be issued by
the Company, the Debentures effectively will be subordinate to all obligations
of the Company's subsidiaries. See "Description of Debentures -- Subordination."
NO ESTABLISHED TRADING MARKET FOR DEBENTURES
The Debentures constitute a new issue of securities with no established
trading market. While application has been made to list the Debentures on the
NYSE, there can be no assurance that an active market for the Debentures will
develop or be sustained in the future on the NYSE. In addition, because interest
on the Debentures will not be eligible for the dividends received deduction, it
is likely that fewer institutions will hold the Debentures than currently hold
the Series 1992 Preferred Stock. Accordingly, no assurance can be given as to
the liquidity of, or trading markets for, the Debentures or whether the sales
price of the Debentures on the NYSE at the time of issuance thereof (or at any
time thereafter) will be greater than or less than either the stated principal
amount thereof or the closing sales price of the Series 1992 Preferred Stock on
the NYSE on the Expiration Date.
RISK THAT PREFERRED STOCK MAY BE DELISTED OR BECOME ILLIQUID
Under the rules of the NYSE, preferred stock such as the Series 1992
Preferred Stock is subject to delisting if (i) the aggregate market value of
publicly-held shares is less than $2 million or (ii) the number of publicly-held
shares is less than 100,000. In the event that the number of shares of Series
1992 Preferred Stock tendered for exchange in the Exchange Offer (i.e., more
than 4,900,000 shares) would, if accepted by the Company, result in the risk
that the Series 1992 Preferred Stock to be outstanding following such acceptance
would be delisted, the Company will amend the Exchange Offer to decrease the
number of shares of Series 1992 Preferred Stock sought to such number as would
not result in delisting or to comply with Rule 13e-3 under the Exchange Act.
To the extent that less than all of the Series 1992 Preferred Stock is
exchanged for Debentures in the Exchange Offer, the liquidity and trading market
for the Series 1992 Preferred Stock to be outstanding following the Exchange
Offer, and the terms upon which such Series 1992 Preferred Stock could be sold,
could be adversely affected.
13
<PAGE>
NO VOTING RIGHTS
Subject to the Company's right to extend payment of interest as described
herein, holders of Debentures will have the right to receive interest and
principal payments as and when due, but will not have any of the voting rights
of the Series 1992 Preferred Stock. See "Description of Capital Stock -- Voting
Rights."
NO LIMITATION ON INDEBTEDNESS; NO PROTECTION AGAINST HIGHLY LEVERAGED
TRANSACTION OR CHANGE IN CONTROL
There are no terms of the Debentures that limit the Company's ability to
incur additional indebtedness, including indebtedness that would rank senior to
the Debentures. The Indenture does not contain any cross-defaults to any other
indebtedness of the Company and, therefore, a default with respect to, or the
acceleration of, any such indebtedness will not constitute an Event of Default
with respect to the Debentures. The Indenture does not contain any provisions
that afford holders of Debentures protection in the event of a highly leveraged
transaction involving the Company or in the event of a change in control of the
Company. See "Description of Debentures -- General."
THE COMPANY
The Company is an electric utility that conducts a retail electric utility
business through 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 86.6% of
Pacific Telecom, Inc. ("Pacific Telecom") and 100% of each of Pacific Generation
Company ("PGC") and PacifiCorp Financial Services, Inc. ("PFS"). Reference is
made to the Incorporated Documents for information concerning a proposed merger
transaction that would increase the Company's ownership interest in Pacific
Telecom to 100%.
The Company furnishes electric service in portions of seven western states:
California, Idaho, Montana, Oregon, Utah, Washington and Wyoming. 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 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. PGC is engaged in the independent power production
and cogeneration business. PFS plans to continue to sell portions of its 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.
14
<PAGE>
SELECTED FINANCIAL INFORMATION
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The following selected financial information for each of the three years in
the period ended December 31, 1994 and the six months ended June 30, 1994 and
1995 has been derived from the consolidated financial statements of the Company
for the respective periods. The consolidated financial statements for the
three-year period ended December 31, 1994 have been audited by Deloitte & Touche
LLP, independent auditors, and the reports of Deloitte & Touche LLP are
incorporated herein by reference. This selected financial information should be
read in conjunction with the financial statements and related notes thereto
included in the Incorporated Documents.
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- --------------------
1992 1993 1994 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues.................................................... $ 3,236 $ 3,405 $ 3,507 $ 1,701 $ 1,662
Income from Operations (1).................................. 704 969 1,022 470 482
Income from Continuing Operations........................... 150 423 468 210 208
Discontinued Operations (2)................................. (491) 52 -- -- --
Cumulative Effect on Prior Years of a Change in Accounting
for Income Taxes........................................... -- 4 -- -- --
Net Income (Loss)........................................... (341) 479 468 210 208
Preferred Stock Dividend Requirements....................... 37 39 40 20 20
Earnings (Loss) on Common Stock............................. (378) 440 428 190 188
Earnings (Loss) per Common Share:
Continuing Operations..................................... .42 1.40 1.51 0.67 0.66
Discontinued Operations................................... (1.84) .19 -- -- --
Cumulative Effect on Prior Years of a Change in Accounting
for Income Taxes......................................... -- .01 -- -- --
</TABLE>
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED DECEMBER 31,
------------------------------------- SIX MONTHS
1992 1993 1994 ENDED JUNE 30, 1995
----- ----- ----- ---------------------
<S> <C> <C> <C> <C>
Other Data:
Ratios of Earnings to Fixed Charges (3)............................. 1.6x 2.5x 3.0x 2.4x
Ratios of Earnings to Combined Fixed Charges and Preferred Stock
Dividends (4)...................................................... 1.4x 2.2x 2.6x 2.1x
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1995
----------------------------------------------------------------
AS ADJUSTED (5)
----------------------------------------------------------------
ASSUMING 50% ASSUMING 75%
EXCHANGE EXCHANGE
ACTUAL -------------------- --------------------
AMOUNT % AMOUNT % AMOUNT %
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Capital Structure:
Debt and Capital Lease Obligations (6)..................... $ 4,434 51% $ 4,436 51% $ 4,437 51%
Junior Subordinated Debt................................... 120 1 183 2 214 2
--------- --- --------- --- --------- ---
Total Debt and Capital Lease Obligations................. 4,554 52 4,619 53 4,651 53
Preferred Stock............................................ 367 4 304 3 273 3
Preferred Stock Subject to Mandatory Redemption............ 219 3 219 3 219 3
Common Equity.............................................. 3,501 41 3,501 41 3,501 41
--------- --- --------- --- --------- ---
Total...................................................... $ 8,641 100% $ 8,643 100% $ 8,644 100%
<FN>
- ------------------------
(1) Income before income taxes, interest, other nonoperating items,
discontinued operations and cumulative effect of a change in an accounting
principle. Certain amounts from prior years have been reclassified to
conform with the 1995 method of presentation. These reclassifications had
no effect on previously reported consolidated net income.
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
(2) Discontinued operations represents the Company's interests in NERCO, Inc.,
the disposition of which was completed pursuant to a merger in June 1993,
and an international communications subsidiary of Pacific Telecom, the
disposition of which was completed in September 1993.
(3) Ratios for 1990 and 1991 were 2.3x and 2.4x, respectively.
(4) Ratios for 1990 and 1991 were 2.2x and 2.2x, respectively.
(5) Adjusted to give effect to the issuance of the Debentures in exchange for
the Series 1992 Preferred Stock at the assumed acceptance rates of 50% and
75%, respectively.
(6) Includes Long-Term Debt, Current Maturities and Short-Term Debt.
</TABLE>
THE EXCHANGE OFFER
GENERAL
Participation in the Exchange Offer is voluntary and Holders should
carefully consider whether or not to accept. Neither the Board of Directors, the
Company nor the Dealer Managers makes any recommendation to Holders as to
whether or not to tender in the Exchange Offer. Holders of the Series 1992
Preferred Stock are urged to consult their financial and tax advisors in making
their own decisions on what action to take in light of their own particular
circumstances.
Unless the context requires otherwise, the term "Holder" with respect to the
Exchange Offer means (i) any person in whose name any Series 1992 Preferred
Stock is registered on the books of the Company, (ii) any other person who has
obtained a properly completed stock power from the registered holder or (iii)
any person whose Series 1992 Preferred Stock is held of record by The Depository
Trust Company ("DTC"), the Midwest Securities Trust Company ("MSTC") or the
Philadelphia Depository Trust Company ("PDTC") (each, a "Book-Entry Transfer
Facility") who desires to deliver such Series 1992 Preferred Stock by book-entry
transfer at such Book-Entry Transfer Facility.
PURPOSE OF THE EXCHANGE OFFER
The principal purpose of the Exchange Offer is to improve the Company's
after-tax cash flow by replacing the Series 1992 Preferred Stock with the
Debentures. The potential cash flow benefit to the Company arises because
interest payable on the Debentures (whether paid currently or deferred under the
terms of the Debentures) generally will be deductible by the Company as it
accrues for federal income tax purposes, while dividends payable on the Series
1992 Preferred Stock are not deductible. The extent of this cash flow benefit,
however, cannot be predicted because it depends upon the number of shares of
Series 1992 Preferred Stock exchanged pursuant to the Exchange Offer, upon the
Company's United States federal income tax position in any year and the period
of time the Debentures remain outstanding. Neither the Company's ability to
defer interest payments on the Debentures nor the lack of voting rights on the
part of holders of the Debentures is a purpose of the Company in making the
Exchange Offer.
Except in connection with the Exchange Offer, the Company has no present
plans or intention to make any acquisitions of or offers for the Series 1992
Preferred Stock. However, following the expiration of the Exchange Offer and
depending on the number of shares of Series 1992 Preferred Stock tendered in the
Exchange Offer, the Company will continue to monitor the market for the Series
1992 Preferred Stock and reserves the right, in its sole discretion, to acquire
and to make offers for Series 1992 Preferred Stock subsequent to the Expiration
Date for cash or in exchange for other securities, by optional redemption or
otherwise. The terms of any such acquisitions or offers may differ from the
terms of the Exchange Offer. Such acquisitions or offers, if any, would depend
upon, among other things, the price and availability of such shares and the
Company's tax position.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth herein and in the
Letter of Transmittal, the Company will exchange up to $125,000,000 aggregate
principal amount of Debentures for up to all of
16
<PAGE>
the outstanding shares of Series 1992 Preferred Stock. The Debentures are
offered in minimum denominations of $25 and integral multiples thereof, and the
Series 1992 Preferred Stock has a liquidation preference of $25 per share.
Consequently, the Exchange Offer will be effected on the basis of $25 principal
amount of Debentures for each share of Series 1992 Preferred Stock validly
tendered and accepted for exchange in the Exchange Offer. Upon the terms and
subject to the conditions set forth herein and in the Letter of Transmittal, the
Company will accept Series 1992 Preferred Stock validly tendered and not
withdrawn as promptly as practicable after the Expiration Date unless the
Exchange Offer has been withdrawn or terminated. The Company will not accept
Series 1992 Preferred Stock for exchange prior to the Expiration Date. The
Company expressly reserves the right, in its sole discretion, to delay
acceptance for exchange of Series 1992 Preferred Stock tendered under the
Exchange Offer or the exchange of the Debentures for the Series 1992 Preferred
Stock accepted for exchange (subject to Rules 13e-4 and 14e-1 under the Exchange
Act, which require that the Company consummate the Exchange Offer or return the
Series 1992 Preferred Stock deposited by or on behalf of the Holders thereof
promptly after the termination or withdrawal of the Exchange Offer), or to
withdraw or terminate the Exchange Offer and not accept any Series 1992
Preferred Stock at any time for any reason. In all cases, except to the extent
waived by the Company, delivery of Debentures in exchange for the Series 1992
Preferred Stock accepted for exchange pursuant to the Exchange Offer will be
made only after timely receipt by the Exchange Agent of Series 1992 Preferred
Stock (or confirmation of book-entry transfer thereof), a properly completed and
duly executed Letter of Transmittal and any other documents required thereby.
Partial tenders are permitted upon the terms and subject to the conditions set
forth herein and in the Letter of Transmittal.
As of September 6, 1995, there were 5,000,000 shares of Series 1992
Preferred Stock outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered Holders as of September 6, 1995.
Shares of Series 1992 Preferred Stock exchanged pursuant to the Exchange Offer
will revert to the status of authorized but unissued shares of the Company's No
Par Serial Preferred Stock.
The Company shall be deemed to have accepted validly tendered Series 1992
Preferred Stock (or defectively tendered Series 1992 Preferred Stock with
respect to which the Company has waived such defect) when, as and if the Company
has given oral or written notice thereof to the Exchange Agent. The Exchange
Agent will act as agent for the tendering Holders for the purpose of receiving
the Debentures from the Company and remitting such Debentures to tendering
Holders. Upon the terms and subject to the conditions of the Exchange Offer,
delivery of Debentures in exchange for Series 1992 Preferred Stock will be made
as promptly as practicable after the Expiration Date.
If any tendered Series 1992 Preferred Stock is not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, unless otherwise requested by the Holder under "Special
Delivery Instructions" in the Letter of Transmittal, such Series 1992 Preferred
Stock will be returned, without expense to the tendering Holder thereof (or in
the case of Series 1992 Preferred Stock tendered by book-entry transfer into the
Exchange Agent's account at a Book-Entry Transfer Facility, such Series 1992
Preferred Stock will be credited to an account maintained at such Book-Entry
Transfer Facility designated by the participant therein who so delivered such
Series 1992 Preferred Stock), as promptly as practicable after the Expiration
Date or the withdrawal or termination of the Exchange Offer.
Holders of Series 1992 Preferred Stock will not have any appraisal or
dissenters' rights under the Oregon Business Corporation Act (the "OBCA") in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission thereunder.
Holders who tender Series 1992 Preferred Stock in the Exchange Offer will
not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Series 1992 Preferred Stock for Debentures pursuant to the Exchange
Offer. See " -- Fees and Expenses; Transfer Taxes."
17
<PAGE>
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The Exchange Offer will expire on the Expiration Date. The term "Expiration
Date" shall mean 5:00 p.m., New York City time, on October 4, 1995, unless the
Company, in its sole discretion, extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended.
The Company reserves the right to extend the Exchange Offer in its sole
discretion at any time and from time to time by giving oral or written notice to
the Exchange Agent and by timely public announcement communicated, unless
otherwise required by applicable law or regulation, by making a release to the
Dow Jones News Service. During any extension of the Exchange Offer, all Series
1992 Preferred Stock previously tendered pursuant to the Exchange Offer and not
withdrawn will remain subject to the Exchange Offer.
The Company expressly reserves the right to (i) amend or modify the terms of
the Exchange Offer in any manner and (ii) withdraw or terminate the Exchange
Offer and not accept for exchange any Series 1992 Preferred Stock, at any time
for any reason, including (without limitation) if fewer than 1,000,000 shares of
Series 1992 Preferred Stock are tendered (which condition may be waived by the
Company).
If the Company makes a material change in the terms of the Exchange Offer or
if it waives a material condition of the Exchange Offer, the Company will extend
the Exchange Offer. The minimum period for which the Exchange Offer will be
extended following a material change or waiver, other than a change in the
amount of Series 1992 Preferred Stock sought for exchange, will depend upon the
facts and circumstances, including the relative materiality of the change or
waiver. With respect to a change in the amount of Series 1992 Preferred Stock
sought, the offer will be extended for a minimum of 10 business days following
public announcement of such change. Any withdrawal or termination of the
Exchange Offer will be followed as promptly as practicable by public
announcement thereof. In the event the Company withdraws or terminates the
Exchange Offer, it will give immediate notice to the Exchange Agent, and all
Series 1992 Preferred Stock theretofore tendered pursuant to the Exchange Offer
will be returned promptly to the tendering Holders thereof. See " -- Withdrawal
of Tenders."
ACCUMULATED DIVIDENDS AND INTEREST ON DEBENTURES
The Debentures will bear interest at an annual rate of 8.55% from and
including the Issue Date. The dividend on the Series 1992 Preferred Stock
payable on November 15, 1995 for the period August 6, 1995 through November 5,
1995 will not be paid to holders of Series 1992 Preferred Stock accepted for
exchange in the Exchange Offer (unless the Company extends the Expiration Date
(as defined herein) to a date that is after October 20, 1995, which is the
record date for shareholders entitled to receive the November 15, 1995
dividend). In lieu thereof, registered holders of Debentures on December 15,
1995 will be entitled to interest at a rate of 7.92% per annum (equal to the
indicated annual dividend rate on the Series 1992 Preferred Stock) from and
including August 6, 1995 to and including the Expiration Date, payable on
December 31, 1995, which is the date of the first interest payment on the
Debentures. See "Description of Debentures -- Interest."
PROCEDURES FOR TENDERING
The tender of Series 1992 Preferred Stock by a Holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between such
Holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Each Holder of the Series 1992 Preferred Stock wishing to accept the
Exchange Offer must (i) unless an Agent's Message is utilized in connection with
a book-entry transfer, properly complete and sign the Letter of Transmittal or a
facsimile thereof (all references in this Prospectus to the Letter of
Transmittal shall be deemed to include a facsimile thereof) in accordance with
the instructions contained herein and therein, together with any required
signature guarantees, and deliver the same to the Exchange Agent, at either of
its addresses set forth under " -- Exchange Agent and Information Agent" below
and either (a) certificates for the Series 1992 Preferred Stock must be received
by the Exchange
18
<PAGE>
Agent at such address or (b) such Series 1992 Preferred Stock must be
transferred pursuant to the procedures for book-entry transfer described under "
- -- Book Entry Transfer" below and a confirmation of such book-entry transfer
must be received by the Exchange Agent, in each case prior to the Expiration
Date, or (ii) comply with the guaranteed delivery procedures described under
"-- Guaranteed Delivery" below.
LETTERS OF TRANSMITTAL, SERIES 1992 PREFERRED STOCK AND ANY OTHER REQUIRED
DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, AND NOT TO THE COMPANY, THE
DEALER MANAGERS OR THE INFORMATION AGENT.
SIGNATURE GUARANTEES. If tendered Series 1992 Preferred Stock is registered
in the name of the signer of the Letter of Transmittal and the Debentures to be
issued in exchange therefor are to be issued (and any untendered Series 1992
Preferred Stock is to be reissued) in the name of the registered Holder (which
term, for the purposes described herein, shall include any participant in a
Book-Entry Transfer Facility whose name appears on a security listing as the
owner of Series 1992 Preferred Stock), the signature of such signer need not be
guaranteed. If the tendered Series 1992 Preferred Stock is registered in the
name of someone other than the signer of the Letter of Transmittal, such
tendered Series 1992 Preferred Stock must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed by
the registered Holder, and the signature on the endorsement or instrument of
transfer must be guaranteed by a financial institution (including most banks,
savings and loans associations and brokerage houses) that is a participant in
the Security Transfer Agents Medallion Program or The New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(any of the foregoing hereinafter referred to as an "Eligible Institution"). If
the Debentures and/or Series 1992 Preferred Stock not accepted for exchange are
to be delivered to an address other than that of the registered Holder appearing
on the register for the Series 1992 Preferred Stock, the signature in the Letter
of Transmittal must be guaranteed by an Eligible Institution. Any beneficial
owner whose Series 1992 Preferred Stock is registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact such registered holder promptly and instruct such registered
holder to tender on such beneficial owner's behalf. If such beneficial owner
wishes to tender on its own behalf, such owner must, prior to completing and
executing a Letter of Transmittal and delivering its Series 1992 Preferred
Stock, either make appropriate arrangements to register ownership of the Series
1992 Preferred Stock in such owner's name or obtain a properly completed stock
power from the registered holder. The transfer of registered ownership may take
considerable time and may not be able to be completed prior to the Expiration
Date.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL, SERIES 1992 PREFERRED
STOCK AND ALL OTHER DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER AND,
EXCEPT AS OTHERWISE PROVIDED HEREIN, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PRIOR INSURANCE BE OBTAINED,
AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT
DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
BOOK-ENTRY TRANSFER. The Company understands that the Exchange Agent will
make a request promptly after the date of this Prospectus to establish accounts
with respect to the Series 1992 Preferred Stock at each of the Book-Entry
Transfer Facilities for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in any Book-Entry Transfer Facility system may make book-entry
delivery of Series 1992 Preferred Stock by causing such Book-Entry Transfer
Facility to transfer such Series 1992 Preferred Stock into the Exchange Agent's
account with respect to the Series 1992 Preferred Stock in accordance with
procedures established by such Book-Entry Transfer Facility for such book-entry
transfers. However, the exchange for the Series 1992 Preferred Stock so tendered
will only be made after timely confirmation (a "Book-Entry Confirmation") of
such book-entry transfer of Series 1992 Preferred Stock into the Exchange
Agent's account at the applicable Book-Entry Facility, and, if applicable,
timely receipt by the Exchange Agent of an Agent's Message, and any other
documents required by the Letter of Transmittal. The term "Agent's
19
<PAGE>
Message" means a message, transmitted by a Book-Entry Transfer Facility and
received by the Exchange Agent and forming a part of a Book-Entry Confirmation,
which states that the Book-Entry Transfer Facility has received an express
acknowledgment from a participant tendering Series 1992 Preferred Stock that is
the subject of such Book-Entry Confirmation that such participant has received
and agrees to be bound by the terms of the Letter of Transmittal, and that the
Company may enforce such agreement against such participant.
GUARANTEED DELIVERY. If a Holder desires to accept the Exchange Offer and
time will not permit a Letter of Transmittal or certificates for Series 1992
Preferred Stock to reach the Exchange Agent before the Expiration Date or the
procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if the Exchange Agent has received at its office prior to
the Expiration Date, a letter, telegram or facsimile transmission from an
Eligible Institution setting forth the name and address of the tendering Holder,
the name(s) in which the Series 1992 Preferred Stock is registered and, if the
Series 1992 Preferred Stock is held in certificated form, the certificate
number(s) of the Series 1992 Preferred Stock to be tendered, and stating that
the tender is being made thereby and guaranteeing that within five NYSE trading
days after the date of execution of such letter, telegram or facsimile
transmission by such Eligible Institution, the Series 1992 Preferred Stock in
proper form for transfer together with a properly completed and duly executed
Letter of Transmittal (and any other required documents), or a confirmation of
book-entry transfer of such Series 1992 Preferred Stock into the Exchange
Agent's account at a Book-Entry Transfer Facility, will be delivered by such
Eligible Institution. Unless the Series 1992 Preferred Stock being tendered by
the above-described method is deposited with the Exchange Agent (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), or a Book-Entry Confirmation (together with an Agent's Message) is
received by the Exchange Agent, in each case within the time period set forth
above, the Company may, at its option, reject the tender. Copies of a Notice of
Guaranteed Delivery which may be used by Eligible Institutions for the purposes
described in this paragraph are available from the Exchange Agent and the
Information Agent.
MISCELLANEOUS. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance for exchange of any tender of Series
1992 Preferred Stock will be determined by the Company, whose determination will
be final and binding. The Company reserves the absolute right to reject any or
all tenders not in proper form or the acceptance for exchange of which may, in
the opinion of the Company's counsel, be unlawful. The Company also reserves the
absolute right to waive any defect or irregularity in the tender of any Series
1992 Preferred Stock, and the Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding. None of the Company, the Exchange Agent,
the Dealer Managers, the Information Agent or any other person will be under any
duty to give notification of any defects or irregularities in tenders or incur
any liability for failure to give any such notification.
Tenders of Series 1992 Preferred Stock involving any irregularities will not
be deemed to have been made until such irregularities have been cured or waived.
Series 1992 Preferred Stock received by the Exchange Agent that is not validly
tendered and as to which the irregularities have not been cured or waived will
be returned by the Exchange Agent to the tendering Holder (or, in the case of
Series 1992 Preferred Stock tendered by book-entry transfer into the Exchange
Agent's account at a Book-Entry Transfer Facility, such Series 1992 Preferred
Stock will be credited to an account maintained at such Book-Entry Transfer
Facility designated by the participant therein who so delivered such Series 1992
Preferred Stock), unless otherwise requested by the Holder in the Letter of
Transmittal, as promptly as practicable after the Expiration Date or the
withdrawal or termination of the Exchange Offer.
LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Series 1992 Preferred Stock for exchange (the
"Transferor") exchanges, assigns and transfers the Series 1992 Preferred Stock
to the Company and irrevocably constitutes and appoints the Exchange Agent as
the Transferor's agent and attorney-in-fact to cause the Series 1992
20
<PAGE>
Preferred Stock to be assigned, transferred and exchanged. The Transferor
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Series 1992 Preferred Stock and to acquire
Debentures issuable upon the exchange of such tendered Series 1992 Preferred
Stock, and that, when the same are accepted for exchange, the Company will
acquire good and unencumbered title to the tendered Series 1992 Preferred Stock,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The Transferor also warrants that it will, upon
request, execute and deliver any additional documents deemed by the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Series 1992 Preferred Stock or transfer ownership of such Series 1992
Preferred Stock on the account books maintained by the Book-Entry Transfer
Facilities. All authority conferred by the Transferor will survive the death,
bankruptcy or incapacity of the Transferor and every obligation of the
Transferor shall be binding upon the heirs, personal representatives, successors
and assigns of such Transferor.
WITHDRAWAL OF TENDERS
Tenders of Series 1992 Preferred Stock pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date and, unless accepted for
exchange by the Company, may be withdrawn at any time after 40 business days
after the date of this Prospectus.
To be effective, a written notice of withdrawal delivered by mail, hand
delivery or facsimile transmission must be timely received by the Exchange Agent
at the address set forth in the Letter of Transmittal. The method of
notification is at the risk and election of the Holder. Any such notice of
withdrawal must specify (i) the Holder named in the Letter of Transmittal as
having tendered Series 1992 Preferred Stock to be withdrawn, (ii) if the Series
1992 Preferred Stock is held in certificated form, the certificate number(s) of
the Series 1992 Preferred Stock to be withdrawn, (iii) that such Holder is
withdrawing its election to have such Series 1992 Preferred Stock exchanged and
(iv) the name of the registered Holder of such Series 1992 Preferred Stock and
must be signed by the Holder in the same manner as the original signature on the
Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to the Company that the person withdrawing
the tender has succeeded to the beneficial ownership of the Series 1992
Preferred Stock being withdrawn. The Exchange Agent will return the properly
withdrawn Series 1992 Preferred Stock promptly following receipt of notice of
withdrawal. If Series 1992 Preferred Stock has been tendered pursuant to the
procedure for book-entry transfer, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Series 1992 Preferred Stock and otherwise comply
with such Book-Entry Transfer Facility's procedures. All questions as to the
validity of notice of withdrawal, including time of receipt, will be determined
by the Company, and such determination will be final and binding on all parties.
Withdrawals of tenders of Series 1992 Preferred Stock may not be rescinded and
any Series 1992 Preferred Stock withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer. Properly withdrawn Series 1992
Preferred Stock, however, may be retendered by following the procedures therefor
described elsewhere herein at any time prior to the Expiration Date. See " --
Procedures for Tendering."
ACCEPTANCE OF SHARES AND DELIVERY OF DEBENTURES
Upon the terms and subject to the conditions of the Exchange Offer,
including the reservation by the Company of the right to withdraw, amend or
terminate the Exchange Offer and certain other rights, the Company will accept
for exchange all shares of Series 1992 Preferred Stock that are properly
tendered in the Exchange Offer and not withdrawn prior to the Expiration Date.
Subject to such terms and conditions, the Debentures issued pursuant to the
Exchange Offer will be issued as of the Issue Date and will be delivered as
promptly as practicable thereafter. See " -- Terms of the Exchange Offer" and "
- -- Expiration Date; Extensions; Amendments; Termination."
21
<PAGE>
EXCHANGE AGENT AND INFORMATION AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer.
THE EXCHANGE AGENT:
The Bank of New York
<TABLE>
<S> <C>
BY HAND OR OVERNIGHT COURIER: BY MAIL:
The Bank of New York The Bank of New York
101 Barclay Street PO Box 11248
New York, NY 10286 Church Street Station
Attention: Tender and Exchange New York, NY 10286
Receive and Deliver Window, Street Level Attention: Tender and Exchange
</TABLE>
BY FACSIMILE:
(For Eligible Institutions Only)
(212) 815-6213
CONFIRM RECEIPT OF NOTICE OF GUARANTEED DELIVERY BY TELEPHONE:
(800) 507-9357
Georgeson & Company Inc. has been retained by the Company as the Information
Agent to assist in connection with the Exchange Offer. Questions and requests
for assistance regarding the Exchange Offer, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery may be directed to the Information Agent at Wall Street
Plaza, New York, New York 10005, telephone (800) 223-2064.
The Company will pay the Exchange Agent and the Information Agent reasonable
and customary fees for their services and will reimburse them for all their
reasonable out-of-pocket expenses in connection therewith.
DEALER MANAGERS
Goldman, Sachs & Co. and Salomon Brothers Inc, as Dealer Managers, have
agreed to solicit exchanges of Series 1992 Preferred Stock for Debentures. The
Company will pay the Dealer Managers a fee that is dependent on the number of
shares of Series 1992 Preferred Stock accepted pursuant to the Exchange Offer.
The maximum fee payable to the Dealer Managers is approximately $1,250,000. The
Company will also reimburse the Dealer Managers for certain reasonable
out-of-pocket expenses in connection with the Exchange Offer and will indemnify
the Dealer Managers against certain liabilities, including liabilities under the
Securities Act. Additional solicitation may be made by telecopier, telephone or
in person by officers and regular employees of the Company and its affiliates.
No additional compensation will be paid to any such officers and employees who
engage in soliciting tenders.
LISTING AND TRADING OF DEBENTURES AND SERIES 1992 PREFERRED STOCK; TRANSFER
RESTRICTIONS
There has not previously been any public market for the Debentures.
Application has been made to list the Debentures on the NYSE. The NYSE listing
requirements include requirements that there be at least 400 record or
beneficial holders of Debentures and at least 1,000,000 Debentures outstanding.
While the Company anticipates that a market will develop, there can be no
assurance that an active market for the Debentures will develop or be sustained
in the future on the NYSE. Although the Dealer Managers have indicated to the
Company that they intend to make a market in the Debentures as permitted by
applicable laws and regulations, they are not obligated to do so and may
discontinue any such market-making at any time without notice. Accordingly, no
assurance can be given as to the liquidity of, or trading markets for, the
Debentures.
The Series 1992 Preferred Stock has been registered under the Securities Act
and is transferable to the extent permitted thereunder. The Series 1992
Preferred Stock is listed on the NYSE. The Company does not believe that the
Exchange Offer has a reasonable likelihood of causing the Series 1992 Preferred
Stock to be delisted. Holders of Series 1992 Preferred Stock who do not tender
their Series 1992 Preferred Stock in the Exchange Offer or whose Series 1992
Preferred Stock is not accepted
22
<PAGE>
for exchange will continue to hold such Series 1992 Preferred Stock and will be
entitled to all the rights and preferences, and will be subject to all of the
limitations applicable thereto. See "Description of Capital Stock." Moreover, to
the extent that Series 1992 Preferred Stock is tendered and accepted in the
Exchange Offer, a holder's ability to sell Series 1992 Preferred Stock not
tendered for exchange could be adversely affected.
TRANSACTIONS AND ARRANGEMENTS CONCERNING THE SERIES 1992 PREFERRED STOCK
Except as described herein, there are no contracts, arrangements,
understandings or relationships in connection with the Exchange Offer between
the Company or any of its directors or executive officers and any person with
respect to any securities of the Company, including the Debentures and the
Series 1992 Preferred Stock.
FEES AND EXPENSES; TRANSFER TAXES
The expenses of soliciting tenders of the Series 1992 Preferred Stock will
be borne by the Company. For compensation to be paid to the Dealer Managers see
" -- Dealer Managers." The total cash expenditures to be incurred by the Company
in connection with the Exchange Offer, other than fees payable to the Dealer
Managers, but including the expenses of the Dealer Managers, printing,
accounting and legal fees, and the fees and expenses of the Exchange Agent, the
Information Agent and the Trustee under the Indenture, are estimated to be
approximately $2,900,000.
The Company will pay a solicitation fee of $0.50 per share of Series 1992
Preferred Stock for any Series 1992 Preferred Stock tendered and accepted for
exchange pursuant to the Exchange Offer covered by a Letter of Transmittal that
designates, as having solicited and obtained such tender, the name of any of the
following persons: (i) any broker or dealer in securities, including either of
the Dealer Managers in its capacity as a broker or dealer, which is a member of
any national securities exchange or of the National Association of Securities
Dealers, Inc. (the "NASD"), (ii) any foreign broker or dealer not eligible for
membership in the NASD which agrees to conform to the NASD's Rules of Fair
Practice in soliciting tenders outside the United States to the same extent as
though it were an NASD member or (iii) any bank or trust company (each of which
is referred to herein as a "Soliciting Dealer").
No such fee shall be payable to a Soliciting Dealer if such Soliciting
Dealer is required for any reason to transfer the amount of such fee to a
tendering holder (other than itself). Soliciting Dealers are not entitled to
receive such fees for any Series 1992 Preferred Stock tendered for their own
account. No broker, dealer, bank, trust company or fiduciary shall be deemed to
be the agent of the Company, the Exchange Agent, the Dealer Managers or the
Information Agent for purposes of the Exchange Offer.
The Company will also, upon request, reimburse Soliciting Dealers for
reasonable and customary handling and mailing expenses incurred by them in
forwarding materials relating to the Exchange Offer to their customers.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Series 1992 Preferred Stock pursuant to the Exchange Offer. If, however,
certificates representing Debentures, or shares of Series 1992 Preferred Stock
not tendered or not accepted for exchange, are to be delivered to, or are to be
issued in the name of, any person other than the registered Holder of the Series
1992 Preferred Stock tendered or if a transfer tax is imposed for any reason
other than the exchange of Series 1992 Preferred Stock pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered Holder or any other persons) will be payable by the tendering Holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering Holder.
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<PAGE>
PRICE RANGE OF SERIES 1992 PREFERRED STOCK
The Series 1992 Preferred Stock is listed and principally traded on the
NYSE. The following table sets forth, for each period shown, the high and low
sales prices of the Series 1992 Preferred Stock as reported on the NYSE
Composite Tape.
<TABLE>
<CAPTION>
PRICE RANGE
-------------------
HIGH LOW
------- -------
<S> <C> <C>
1993:
First Quarter......................... 26 1/2 24 1/4
Second Quarter........................ 26 3/4 25 1/8
Third Quarter......................... 26 7/8 25 1/2
Fourth Quarter........................ 27 25 1/8
1994:
First Quarter......................... 27 1/8 24 5/8
Second Quarter........................ 25 5/8 23 5/8
Third Quarter......................... 24 7/8 23 7/8
Fourth Quarter........................ 24 1/4 22 1/8
1995:
First Quarter......................... 25 1/2 23 1/4
Second Quarter........................ 25 7/8 24 5/8
Third Quarter (through September 5,
1995)................................ 25 3/4 25 1/8
</TABLE>
On September 5, 1995, the last full day of trading prior to the first public
announcement of the Exchange Offer, the closing sales price of the Series 1992
Preferred Stock on the NYSE as reported on the Composite Tape was $25 1/2 per
share. Holders are urged to obtain a current market quotation for the Series
1992 Preferred Stock.
DESCRIPTION OF DEBENTURES
GENERAL
The Debentures will be issued as a series of unsecured Junior Subordinated
Debentures (the "Junior Subordinated Debentures") under the Indenture. The
following summary is subject to the provisions of and is qualified by reference
to the Indenture, which is filed as an exhibit to the Registration Statement.
Whenever particular provisions or defined terms in the Indenture are referred to
herein, such provisions or defined terms are incorporated by reference herein.
Section and Article references used herein are references to provisions of the
Indenture unless otherwise noted.
The Debentures will be unsecured, subordinated obligations of the Company,
will be limited in aggregate principal amount to the aggregate principal amount
of Debentures issued in the Exchange Offer and will become due and payable,
together with any accrued and unpaid interest thereon, on December 31, 2025. The
Debentures will be issued only in fully registered form, without coupons, in
minimum denominations of $25 and integral multiples thereof and may be
transferred or exchanged at the offices described below.
The Indenture provides that Junior Subordinated Debentures may be issued
from time to time in one or more series pursuant to an indenture supplemental to
the Indenture or a resolution of the Company's Board of Directors (each, a
"Supplemental Indenture") (Section 2.01). The Indenture does not limit the
aggregate principal amount of Junior Subordinated Debentures which may be issued
thereunder. On May 31, 1995, the Company issued $120 million of the Series A
Debentures pursuant to the Indenture. The Company's Second Restated Articles of
Incorporation, as amended (the "Articles"), limit the amount of unsecured debt
that the Company may issue to the equivalent of 30% of the total of all secured
indebtedness and total equity. At June 30, 1995, approximately $814 million of
unsecured debt was outstanding and approximately $1.3 billion of additional
unsecured debt could have been issued
24
<PAGE>
under this provision. The Indenture does not contain any provisions that would
limit the ability of the Company to incur indebtedness or that afford holders of
Debentures protection in the event of a highly leveraged or similar transaction
involving the Company or in the event of a change of control.
The Junior Subordinated Debentures will be transferable or exchangeable at
the agency of the Company in The City of New York (which, unless changed, shall
be a corporate trust office or agency of the Trustee). The Junior Subordinated
Debentures may be transferred or exchanged without service charge, other than
any tax or governmental charge imposed in connection therewith. (Section 2.05)
OPTIONAL REDEMPTION
The Debentures will not be subject to any mandatory redemption, sinking fund
or other obligation of the Company to amortize, redeem or retire the Debentures,
and will not be redeemable prior to May 31, 1997. After such date, the Company
shall have the right to redeem the Debentures, in whole or in part, at any time
and from time to time, upon not less than 30 nor more than 60 days' notice, at a
redemption price of 100% of the principal amount of the Debentures redeemed,
together in each case with accrued and unpaid interest to the redemption date.
Any Debentures to be redeemed in part will be redeemed by lot or by any other
method utilized by the Trustee. (Section 2.01 of the Second Supplemental
Indenture)
In the event of any redemption in part, the Company shall not be required to
(i) issue, register the transfer of or exchange any Junior Subordinated
Debenture during a period beginning at the opening of business 15 days before
any selection for redemption of such Debentures and ending at the close of
business on the earliest date on which the relevant notice of redemption is
deemed to have been given to all holders of Junior Subordinated Debentures to be
redeemed and (ii) register the transfer of or exchange any Debentures so
selected for redemption, in whole or in part, except the unredeemed portion of
any Junior Subordinated Debenture being redeemed in part. (Section 2.05)
INTEREST
The Debentures will mature on December 31, 2025 and will bear interest at an
annual rate of 8.55% from and including the first day following the Expiration
Date. Interest will be payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, (each, an "Interest Payment Date")
commencing December 31, 1995, PROVIDED THAT, so long as the Company shall not be
in default in the payment of interest on the Debentures, the Company shall have
the right, upon prior notice by public announcement given in accordance with
NYSE rules at any time during the term of the Debentures, to extend the interest
payment period from time to time for a period not exceeding 20 consecutive
calendar quarters. Interest will continue to accrue on the Debentures during an
Extension Period and will compound quarterly, at the rate specified for the
Debentures. See " -- Option to Extend Interest Payment Period." Interest payable
on any Debenture that is punctually paid or duly provided for on any Interest
Payment Date shall be paid to the person in whose name such Debenture is
registered at the close of business on March 15, June 15, September 15 or
December 15, respectively, preceding such Interest Payment Date (each, a "Record
Date").
In addition, registered holders of the Debentures on December 15, 1995 will
be entitled to interest at a rate of 7.92% per annum from and including August
6, 1995 to and including the Expiration Date, in lieu of dividends accumulating
after August 5, 1995 on their Series 1992 Preferred Stock accepted for exchange,
payable on December 31, 1995, which is the date of the first interest payment on
the Debentures. No extension of an interest payment period described under " --
Option to Extend Interest Payment Period" below will be permitted with respect
to such Pre-Issuance Accrued Interest.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months and, for any period shorter than a
full calendar month, on the basis of the actual number of days elapsed in such
period. In the event that any date on which interest is payable on the
Debentures is not a Business Day (as defined below), then payment of the
interest payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case
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with the same force and effect as if made on such date. A "Business Day" shall
mean any day other than a day on which banking institutions in The City of New
York are authorized to close. (Section 1.04 of the Second Supplemental
Indenture)
Payments in respect of the Junior Subordinated Debentures will be made at
the office or agency of the Company maintained for that purpose in The City of
New York (which, unless changed, shall be a corporate trust office or agency of
the Trustee). However, at the option of the Company, payments on the Junior
Subordinated Debentures may be made (i) by checks mailed by the Trustee to the
holders entitled thereto at their registered addresses as specified in the
Register for the Junior Subordinated Debentures or (ii) to a holder of
$1,000,000 or more in aggregate principal amount of the Junior Subordinated
Debentures who has delivered a written request to the Trustee at least 14 days
prior to the relevant Interest Payment Date electing to have payments made by
wire transfer to a designated account in the United States, by wire transfer of
immediately available funds to such designated account; provided that, in either
case, the payment of principal with respect to any Junior Subordinated Debenture
will be made only upon surrender of such Debenture to the Trustee. Interest
payable on any Junior Subordinated Debenture that is not punctually paid or duly
provided for on any Interest Payment Date will forthwith cease to be payable to
the person in whose name such Debenture is registered on the relevant Record
Date, and such defaulted interest will instead be payable to the person in whose
name such Debenture is registered on the special record date determined in
accordance with the Indenture; PROVIDED, HOWEVER, that interest shall not be
considered payable by the Company on any Interest Payment Date falling within an
Extension Period unless the Company has elected to make a full or partial
payment of interest accrued on the Junior Subordinated Debentures on such
Interest Payment Date. (Section 2.03; Section 3.01 of the Second Supplemental
Indenture)
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as the Company shall not be in default in the payment of interest on
the Debentures, the Company shall have the right, upon prior notice by public
announcement given in accordance with NYSE rules at any time during the term of
the Debentures, prior to an Interest Payment Date as provided below, to extend
the interest payment period from time to time to another Interest Payment Date
by one or more quarterly periods, not to exceed 20 consecutive calendar quarters
from the last Interest Payment Date to which interest was paid in full. No
interest shall be due and payable during an Extension Period, but on the
Interest Payment Date occurring at the end of each Extension Period the Company
shall pay to the holders of record on the Record Date for such Interest Payment
Date (regardless of who the holders of record may have been on other dates
during the Extension Period) all accrued and unpaid interest on the Debentures,
together with interest thereon. Interest will continue to accrue on the
Debentures during an Extension Period and will compound quarterly, at the rate
of interest specified for the Debentures. Prior to the termination of any
Extension Period, the Company may pay all or any portion of the interest accrued
on the Debentures on any Interest Payment Date to holders of record on the
Record Date for such Interest Payment Date or from time to time further extend
the interest payment period, PROVIDED that any such Extension Period, together
with all such previous and further extensions thereof, may not exceed 20
calendar quarters. If the Company shall elect to pay all of the interest accrued
on the Debentures on an Interest Payment Date during an Extension Period, such
Extension Period shall automatically terminate on such Interest Payment Date.
Upon the termination of an Extension Period and the payment of all amounts of
interest then due, the Company may commence a new Extension Period, subject to
the above requirements. Consequently, there could be multiple Extension Periods
of varying lengths throughout the term of the Debentures.
The Company believes that the extension of an interest payment period on the
Debentures is unlikely. See " -- Certain Covenants of the Company" below for a
description of the restrictions on the Company's right to declare or pay
dividends on, or redeem, purchase or acquire, any shares of the Company's
capital stock if the Company exercises its right to extend any interest payment
period. However, in the event the Company determines to extend an interest
payment period, or in the event the Company thereafter extends an Extension
Period or prepays interest accrued during an Extension Period as described
above, the market price of the Debentures is likely to be adversely affected. In
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addition, as a result of such rights, the market price of the Debentures may be
more volatile than other debt instruments with original issue discount that do
not have such rights. A holder that disposes of Debentures during an Extension
Period, therefore, may not receive the same return on investment as a holder
that continues to hold Debentures. (Section 3.01 of the Second Supplemental
Indenture)
The Company shall give holders of the Debentures prior notice of (i) the
Company's election to initiate an Extension Period and the duration thereof,
(ii) the Company's election to extend any Extension Period beyond the Interest
Payment Date on which such Extension Period is then scheduled to terminate and
the duration of such extension and (iii) the Company's election to make a full
or partial payment of interest accrued on the Debentures on any Interest Payment
Date during any Extension Period and the amount of such payment. In no event
shall such notice be given less than five Business Days prior to the February 1,
May 1, August 1 or November 1 next preceding the applicable Interest Payment
Date. (Section 3.02 of the Second Supplemental Indenture)
SUBORDINATION
The Indenture provides that the Junior Subordinated Debentures are
subordinate and junior in right of payment to the prior payment in full of all
Senior Indebtedness of the Company as provided in the Indenture. No payment of
principal of (including redemption and sinking fund payments), or premium, if
any, or interest on, the Junior Subordinated Debentures may be made if any
Senior Indebtedness is not paid when due, any applicable grace period with
respect to such default has ended and such default has not been cured or waived,
or if the maturity of any Senior Indebtedness has been accelerated because of a
default. Upon payment by the Company or any distribution of assets of the
Company to creditors upon any dissolution, winding-up, liquidation or
reorganization, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due on all
Senior Indebtedness must be paid in full before the holders of the Junior
Subordinated Debentures are entitled to receive or retain any payment. The
rights of the holders of the Junior Subordinated Debentures will be subrogated
to the rights of the holders of Senior Indebtedness to receive payments or
distributions applicable to Senior Indebtedness until all amounts owing on the
Junior Subordinated Debentures are paid in full. (Sections 14.01 to 14.04)
The term "Senior Indebtedness" shall mean the principal of and premium, if
any, and interest on and any other payment due pursuant to any of the following,
whether outstanding at the date of execution of the Indenture or thereafter
incurred, created or assumed:
(a) all indebtedness of the Company evidenced by notes, debentures, bonds or
other securities sold by the Company for money;
(b) all indebtedness of others of the kinds described in the preceding
clause (a) assumed by or guaranteed in any manner by the Company or in effect
guaranteed by the Company through an agreement to purchase, contingent or
otherwise; and
(c) all renewals, extensions or refundings of indebtedness of the kinds
described in either of the preceding clauses (a) and (b);
unless, in the case of any particular indebtedness, renewal, extension or
refunding, the instrument creating or evidencing the same or the assumption or
guarantee of the same expressly provides that such indebtedness, renewal,
extension or refunding is not superior in right of payment to or is PARI PASSU
with the Debentures. Such Senior Indebtedness shall continue to be Senior
Indebtedness and entitled to the benefits of the subordination provisions
contained in the Indenture irrespective of any amendment, modification or waiver
of any term of such Senior Indebtedness. (Section 1.01)
The Indenture does not limit the aggregate amount of Senior Indebtedness
which may be issued. As of June 30, 1995, Senior Indebtedness of the Company
aggregated approximately $3.6 billion.
As the Junior Subordinated Debentures will be issued by the Company, the
Junior Subordinated Debentures effectively will be subordinate to all
obligations of the Company's subsidiaries, and the rights of the Company's
creditors, including holders of Junior Subordinated Debentures, to participate
in the
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assets of such subsidiaries upon liquidation or reorganization will be junior to
the rights of the holders of all preferred stock, indebtedness and other
liabilities of such subsidiaries, which may include trade payables, obligations
to banks under credit facilities, guarantees, pledges, support arrangements,
bonds, capital leases, notes and other obligations. With respect to Pacific
Telecom, the rights of the Company's creditors, including holders of Junior
Subordinated Debentures, will also be limited to the Company's ownership
interest in Pacific Telecom, which is currently 86.6%. Reference is made to the
Incorporated Documents for information concerning a proposed merger transaction
that would increase the Company's ownership interest in Pacific Telecom to 100%.
CERTAIN COVENANTS OF THE COMPANY
If there shall have occurred any event that would, with the giving of notice
or the passage of time, or both, constitute an Event of Default under the
Indenture, as described under " -- Events of Default" below, or the Company
exercises its option to extend the interest payment period for an Extension
Period as described under " -- Option to Extend Interest Payment Period" above,
the Company will not, until all defaulted interest on the Junior Subordinated
Debentures and all interest accrued on the Junior Subordinated Debentures during
an Extension Period and all principal and premium, if any, then due and payable
on the Junior Subordinated Debentures shall have been paid in full, (i) declare,
set aside or pay any dividend or distribution on any capital stock of the
Company, including the Series 1992 Preferred Stock and the Common Stock of the
Company, except for dividends or distributions in shares of its capital stock or
in rights to acquire shares of its capital stock, or (ii) repurchase, redeem or
otherwise acquire, or make any sinking fund payment for the purchase or
redemption of, any shares of its capital stock (except by conversion into or
exchange for shares of its capital stock and except for a redemption, purchase
or other acquisition of shares of its capital stock made for the purpose of an
employee incentive plan or benefit plan of the Company or any of its
subsidiaries and except for mandatory redemption or sinking fund payments with
respect to any series of preferred stock of the Company that are subject to
mandatory redemption or sinking fund requirements, provided that the aggregate
stated value of all such series outstanding at the time of any such payment does
not exceed five percent of the aggregate of (1) the total principal amount of
all bonds or other securities representing secured indebtedness issued or
assumed by the Company and then outstanding and (2) the capital and surplus of
the Company to be stated on the books of account of the Company after giving
effect to such payment); PROVIDED, HOWEVER, that any moneys deposited in any
sinking fund and not in violation of this provision may thereafter be applied to
the purchase or redemption of such preferred stock in accordance with the terms
of such sinking fund without regard to the restrictions contained in this
provision. (Section 4.06) As of June 30, 1995, the aggregate stated value of
such series of the Company's preferred stock outstanding was approximately $219
million, which represented approximately 3.2 percent of the aggregate of clauses
(1) and (2) above at such date.
PAYMENT AND PAYING AGENTS
The Company has appointed the Trustee to act as Paying Agent with respect to
the Junior Subordinated Debentures. The Company may at any time designate
additional Paying Agents or rescind the designation of any Paying Agents or
approve a change in the office through which any Paying Agent acts, except that
the Company will be required to maintain a Paying Agent in each Place of Payment
for each series of the respective Junior Subordinated Debentures. (Sections 4.02
and 4.03)
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or premium, if any, or interest on any Junior Subordinated
Debenture of any series that remain unclaimed at the end of two years after such
principal, premium, if any, or interest shall have become due and payable will
be repaid to the Company and the holder of such Junior Subordinated Debenture
will thereafter look only to the Company for payment thereof. (Section 11.06)
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AGREED TAX TREATMENT
The Indenture provides that each holder of a Junior Subordinated Debenture,
each person that acquires a beneficial ownership interest in a Junior
Subordinated Debenture and the Company agree that for United States federal,
state and local tax purposes it is intended that such Debenture constitute
indebtedness. (Section 13.12)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in principal amount
of the Junior Subordinated Debentures of each series which are affected by the
modification, to modify the Indenture or any supplemental indenture affecting
that series or the rights of the holders of that series of Junior Subordinated
Debentures; provided, that no such modification may, without the consent of the
holder of each outstanding Junior Subordinated Debenture affected thereby, (i)
extend the fixed maturity of any Junior Subordinated Debentures of any series,
or reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any premium payable upon the redemption
thereof or (ii) reduce the percentage of Junior Subordinated Debentures, the
holders of which are required to consent to any such supplemental indenture.
(Section 9.02)
In addition, the Company and the Trustee may execute, without the consent of
any holder of Debentures, any supplemental indenture for certain other usual
purposes, including the creation of any new series of Junior Subordinated
Debentures. (Sections 2.01, 9.01 and 10.01)
EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of Default"
with respect to each series of Junior Subordinated Debentures:
(a) failure for 10 days to pay interest on the Junior Subordinated
Debentures of that series when due; or
(b) failure to pay principal of or premium, if any, on the Junior
Subordinated Debentures of that series when due whether at maturity, upon
redemption, by declaration or otherwise, or to make any sinking or analogous
fund payment established with respect to that series; or
(c) failure to observe or perform any other covenant (other than those
specifically relating to one or more other series) contained in the Indenture
for 90 days after notice; or
(d) a decree or order by a court having jurisdiction in the premises shall
have been entered adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking liquidation or reorganization of the Company
under the Federal Bankruptcy Code or any other similar applicable federal or
state law, and such decree or order shall have continued unvacated and unstayed
for a period of 90 days; an involuntary case shall be commenced under such Code
in respect of the Company and shall continue undismissed for a period of 90 days
or an order for relief in such case shall have been entered; or a decree or
order of a court having jurisdiction in the premises shall have been entered for
the appointment on the ground of insolvency or bankruptcy of a receiver,
custodian, liquidator, trustee or assignee in bankruptcy or insolvency of the
Company or of its property, or for the winding up or liquidation of its affairs,
and such decree or order shall have remained in force unvacated and unstayed for
a period of 90 days; or
(e) the Company shall institute proceedings to be adjudicated a voluntary
bankrupt, shall consent to the filing of a bankruptcy proceeding against it,
shall file a petition or answer or consent seeking liquidation or reorganization
under the Federal Bankruptcy Code or other similar applicable federal or state
law, shall consent to the filing of any such petition or shall consent to the
appointment on the ground of insolvency or bankruptcy of a receiver or custodian
or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its
property, or shall make an assignment for the benefit of creditors. (Section
6.01)
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The holders of a majority in aggregate outstanding principal amount of any
series of the Junior Subordinated Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee for that series. (Section 6.06) The Trustee or the holders of not less
than 25% in aggregate outstanding principal amount of any particular series of
the Junior Subordinated Debentures may declare the principal due and payable
immediately upon an Event of Default with respect to such series, but the
holders of a majority in aggregate outstanding principal amount of such series
may annul such declaration and waive such Event of Default if it has been cured
and a sum sufficient to pay all matured installments of interest and principal
and any premium has been deposited with the Trustee. (Sections 6.01 and 6.06)
The holders of a majority in aggregate outstanding principal amount of all
series of the Junior Subordinated Debentures affected thereby may, on behalf of
the holders of all the Junior Subordinated Debentures of such series, waive any
past default, except a default in the payment of principal, premium, if any, or
interest. (Section 6.06.) The Company is required to file annually with the
Trustee a certificate as to whether or not the Company is in compliance with all
the conditions and covenants under the Indenture. (Section 5.03(d))
CONSOLIDATION, MERGER AND SALE
The Indenture does not contain any covenant which restricts the Company's
ability to merge or consolidate with or into any other corporation, sell or
convey all or substantially all of its assets to any person, firm or corporation
or otherwise engage in restructuring transactions. (Section 10.01)
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, the Company will be discharged from any
and all obligations under the Indenture in respect of the Junior Subordinated
Debentures of any series (except in each case for certain obligations to
register the transfer or exchange of Junior Subordinated Debentures, replace
stolen, lost or mutilated Junior Subordinated Debentures, maintain paying
agencies and hold moneys for payment in trust) if the Company deposits with the
Trustee, in trust, moneys or Government Obligations, in an amount sufficient to
pay all the principal of, and interest on, the Junior Subordinated Debentures of
such series on the dates such payments are due in accordance with the terms of
such Junior Subordinated Debentures and, if, among other things, such Junior
Subordinated Debentures are not due and payable, or are to be called for
redemption, within one year, the Company delivers to the Trustee an Opinion of
Counsel to the effect that the holders of Junior Subordinated Debentures of such
series will not recognize income, gain or loss for federal income tax purposes
as a result of such deposit and discharge and will be subject to federal income
tax on the same amount and in the same manner and at the same times as would
have been the case if such deposit and discharge had not occurred. In addition
to discharging certain obligations under the Indenture as stated above, if the
Company delivers to the Trustee an Opinion of Counsel (in lieu of the Opinion of
Counsel referred to above) to the effect that (a) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling or (b)
since the date of the Indenture there has been a change in applicable federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the holders of Junior Subordinated
Debentures of such series will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit, defeasance and discharge and
will be subject to federal income tax on the same amount and in the same manner
and at the same times, as would have been the case if such deposit, defeasance
and discharge had not occurred, and (c) the trust resulting from the defeasance
is a valid trust and will not constitute a regulated investment company under
the Investment Company Act of 1940, as amended, then, in such event, the Company
will be deemed to have paid and discharged the entire indebtedness on the Junior
Subordinated Debentures. In the event of any such defeasance and discharge of
Junior Subordinated Debentures of such series, holders of Junior Subordinated
Debentures of such series would be able to look only to such trust fund for
payment of principal of (and premium, if any) and interest, if any, on the
Junior Subordinated Debentures of such series. (Sections 11.01, 11.02 and 11.03)
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GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by,
and construed in accordance with, the laws of the State of New York. (Section
13.04)
INFORMATION CONCERNING THE TRUSTEE
The Trustee, prior to default, undertakes to perform only such duties as are
specifically set forth in the Indenture and, after default, shall exercise the
same degree of care as a prudent individual would exercise in the conduct of his
or her own affairs. (Section 7.01) Subject to such provision, the Trustee is
under no obligation to exercise any of the powers vested in it by the Indenture
at the request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. (Section 7.02) The Trustee is not required to
expend or risk its own funds or otherwise incur personal financial liability in
the performance of its duties if the Trustee reasonably believes that repayment
or adequate indemnity is not reasonably assured to it. (Section 7.01)
The Bank of New York serves as trustee and agent under agreements involving
the Company and its affiliates.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly-owned subsidiary
of the Company; provided that, in the event of any such assignment, the Company
will remain liable for all such obligations. Subject to the foregoing, the
Indenture will be binding upon and inure to the benefit of the parties thereto
and their respective successors and assigns. The Indenture provides that it may
not otherwise be assigned by the parties thereto. (Section 13.11)
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; and 750,000,000
shares of Common Stock ("Common Stock").
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 Articles, a copy of which is an exhibit to the Registration
Statement.
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, respectively, 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 Company's 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
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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 the audited consolidated financial statements included in the
Company's Annual Report on Form 10-K incorporated by reference 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, 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 Series 1992 Preferred Stock 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 Stocks.
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. Holders of the Series 1992 Preferred Stock have
one-quarter vote per share on matters presented to shareholders of the Company
generally. 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 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 (as defined below), 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
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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 a fair market value per share at
least equal to, or in the opinion of a majority of the Continuing Directors (as
defined in the Articles) at least equivalent to, the highest per-share price
paid by the Related Person for an Voting Stock acquired by it;
(c) 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 transaction is approved by 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 the directors is required to
remove a director without cause, and at least two-thirds of the votes entitled
to be cast at an election of directors are required to remove a director for
cause. Any amendment of this provision requires the approval of at least 80% of
the votes entitled to be cast at an election of directors.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of the material United States federal
income tax considerations relevant to an exchange of Series 1992 Preferred Stock
for Debentures and the ownership and disposition of Debentures by persons
acquiring Debentures pursuant to the Exchange Offer. To the extent it relates to
matters of law or legal conclusion, this summary constitutes the opinion of
Stoel Rives, counsel to the Company. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations (including
Proposed Regulations and Temporary Regulations) promulgated thereunder, Internal
Revenue Service ("IRS") rulings, official pronouncements and judicial decisions,
all as in effect on the date hereof and all of which are subject to change,
possibly with retroactive effect, or different interpretations. This summary is
applicable only to holders of Series 1992 Preferred Stock who are United States
persons for United States federal income tax purposes, who hold their Series
1992 Preferred Stock as a capital asset and who will hold Debentures as capital
assets ("Investors"). For a discussion of certain material United States federal
income and estate tax considerations that may be relevant to non-United States
persons, see "Certain Federal Tax Considerations for Non-United States Persons."
This summary does not discuss all the tax consequences that may be relevant
to a particular Investor in light of the Investor's particular circumstances and
it is not intended to be applicable in all respects to all categories of
holders, some of whom -- such as insurance companies, tax-exempt persons,
financial institutions, regulated investment companies, dealers in securities or
currencies, persons that hold Series 1992 Preferred Stock or the Debentures
received in the exchange as a position in a "straddle," as part of a "synthetic
security," "hedge," "conversion transaction" or other integrated investment or
persons whose functional currency is other than United States dollars -- may be
subject
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to different rules not discussed below. In addition, this summary does not
address any state, local or foreign tax considerations that may be relevant to
an Investor's decision to exchange Series 1992 Preferred Stock for Debentures
pursuant to the Exchange Offer.
ALL SERIES 1992 PREFERRED STOCK HOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
EXCHANGE OF SERIES 1992 PREFERRED STOCK FOR DEBENTURES AND OF THE OWNERSHIP AND
DISPOSITION OF DEBENTURES RECEIVED IN THE EXCHANGE OFFER IN LIGHT OF THEIR OWN
PARTICULAR CIRCUMSTANCES.
EXCHANGE OF SERIES 1992 PREFERRED STOCK FOR DEBENTURES
The exchange of Series 1992 Preferred Stock for Debentures pursuant to the
Exchange Offer will be a taxable event for the exchanging Investors. Whether the
exchange will be treated as a transaction in which capital gain or loss is
recognized or as a distribution taxable as a dividend with respect to a
particular Investor will depend on such Investor's particular facts and
circumstances. If, with respect to a particular Investor, the exchange of Series
1992 Preferred Stock for Debentures satisfies one of the tests set forth in
Section 302(b) of the Code described below, it will be treated as a transaction
in which capital gain or loss is recognized. In that case, the difference
between the fair market value of the Debentures received in the exchange and
such Investor's adjusted tax basis in the Series 1992 Preferred Stock
surrendered therefor generally will be capital gain or loss. Such capital gain
or loss will be long-term capital gain or loss if, at the time of the exchange,
the Investor has held the Series 1992 Preferred Stock surrendered in the
exchange for more than one year. The Investor's tax basis in the Debentures
received in the exchange will equal the fair market value of the Debentures at
the time of the exchange, and the holding period for such Debentures will begin
on the day after the day on which the Investor acquires the Debentures.
Pursuant to Section 302(b) of the Code, a particular Investor's exchange of
Series 1992 Preferred Stock for Debentures will be treated as a transaction in
which capital gain or loss is recognized if, after giving effect to the
constructive ownership rules of Section 318 of the Code, the exchange (i)
represents a "complete redemption" of such Investor's stock interest in the
Company, (ii) is "substantially disproportionate" with respect to such Investor
or (iii) is "not essentially equivalent to a dividend" with respect to such
Investor. A "complete redemption" of the Investor's stock interest will occur
if, pursuant to the Exchange Offer, the Company acquires all of such Investor's
Series 1992 Preferred Stock and such Investor does not own directly or
constructively any other stock of the Company (or, if such Investor does
constructively own other stock of the Company, such Investor waives constructive
ownership under procedures established in Section 302(c) of the Code). An
exchange will be "not essentially equivalent to a dividend" as to a particular
Investor if it results in a "meaningful reduction" in such Investor's interest
in the Company (after application of the constructive ownership rules of Section
318 of the Code). In the case of an Investor who directly or constructively owns
not more than one percent of the Series 1992 Preferred Stock outstanding and not
more than one percent of all other classes of outstanding stock of the Company,
an exchange of all of such Investor's Series 1992 Preferred Stock, actually and
constructively owned, for Debentures pursuant to the Exchange Offer should
ordinarily constitute a "meaningful reduction" of such Investor's interest in
the Company and, therefore, should be "not essentially equivalent to a
dividend." The rules for this test, however, as well as those governing
"substantially disproportionate" exchanges, are complex. Investors who, directly
or constructively, own stock in the Company that will not be exchanged for
Debentures should consult their tax advisors for an explanation of such rules as
they relate to their own circumstances. Section 318 of the Code sets forth rules
under which a person is considered to constructively own stock owned by certain
other persons and entities with which such person has a family or close business
relationship. Investors should consult their tax advisors to determine whether
they constructively own stock in the Company. No assurance can be given that an
Investor's exchange of Series 1992 Preferred Stock for Debentures will satisfy
any of the tests set forth in Section 302(b) of the Code. INVESTORS SHOULD
CONSULT THEIR OWN TAX ADVISORS, BEFORE THE EXCHANGE, AS TO THEIR ABILITY TO
SATISFY ANY OF THE FOREGOING TESTS IN LIGHT OF THEIR OWN PARTICULAR
CIRCUMSTANCES.
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If a particular Investor's exchange of Series 1992 Preferred Stock does not
satisfy one of the tests of Section 302(b), discussed above, it will be treated
as a distribution to which Section 301 of the Code applies. Such Investor (i)
will not recognize any loss on the exchange and (ii) generally will recognize
ordinary income in an amount equal to the fair market value of the Debentures
received (without regard to such Investor's basis in the Series 1992 Preferred
Stock surrendered in the exchange), to the extent of such Investor's
proportionate share of the Company's current or accumulated earnings and
profits. The Company believes that it has current or accumulated earnings and
profits in an amount that should be sufficient to characterize as a dividend the
fair market value of all of the Debentures received from all Investors for whom
the exchange did not result in a capital gain or loss. The amount treated as a
dividend will qualify for the 70% dividends received deduction for corporate
shareholders, subject to the minimum holding period requirement under Section
246(c) of the Code and other applicable requirements. Section 1059 of the Code,
however, may require a corporate shareholder to reduce its tax basis (and
possibly to recognize gain) in any stock of the Company held by it by the
nontaxed portion of any such dividend.
An Investor whose receipt of Debentures is treated as a distribution taxable
as a dividend will generally have a tax basis in the Debentures equal to the
fair market value of such Debentures at the time of the exchange (without regard
to such Investor's basis in the Series 1992 Preferred Stock surrendered in the
exchange). The Investor's adjusted tax basis in its Series 1992 Preferred Stock
surrendered in the exchange will be transferred to any remaining Series 1992
Preferred Stock held by such Investor or, if such Investor does not retain any
Series 1992 Preferred Stock, to other stock in the Company owned by such
Investor. If the Investor does not own any stock in the Company following the
exchange, it is possible that the Investor's basis in the stock surrendered in
the exchange would be transferred to stock attributed to such Investor under
Section 318 of the Code. The holding period for the Debentures will begin on the
day after the day on which the Debentures are acquired by the exchanging
Investor.
INTEREST AND ORIGINAL ISSUE DISCOUNT ON DEBENTURES
The following discussion addresses only the tax treatment of holders of
Debentures that acquired the Debentures pursuant to the Exchange Offer and,
thus, does not address the tax treatment of holders of Debentures who purchase
the Debentures in the secondary market. In accordance with Sections 1271 through
1275 of the Code and the final Treasury Regulations promulgated thereunder (the
"OID Regulations"), a debt instrument bears original issue discount ("OID") if
its "stated redemption price at maturity" exceeds its "issue price" by more than
a de minimis amount. Assuming that the Debentures are listed on the NYSE , the
issue price of the Debentures will be their fair market value on the Issue Date.
The Company will not elect to exclude Pre-Issuance Accrued Interest from the
issue price. The stated redemption price at maturity of a debt instrument
generally includes all amounts payable other than "qualified stated interest"
(i.e., payments that are unconditionally required to be paid at least annually
at a single fixed rate over the term of the instrument). Because of the
Company's option to extend the interest payment period, none of the amounts
payable on the Debentures will be qualified stated interest. Thus, the
Debentures will have OID in an amount equal to the excess of all payments
required to be made under the Debentures over their issue price. That amount of
OID should approximately equal the aggregate amounts of stated interest paid or
accrued on the Debentures. However, if the issue price of the Debentures is less
than their stated principal amount, the difference will be treated as additional
OID to be accrued over the term of the Debentures (notwithstanding that such
difference might otherwise be considered "de minimis") and a holder of
Debentures will include in income an amount exceeding the stated interest
received or accrued on the Debentures. If the issue price of the Debentures is
greater than their stated principal amount, the amount of OID to be included in
income will be less than the stated interest received or accrued on the
Debentures.
A holder of a Debenture will be required to include OID in income, based on
a constant yield method, regardless of such holder's regular method of
accounting. As a result, during any period in which the Company has elected to
extend the interest payment period, a holder generally would be required to
include OID in income but would not receive cash from the Company sufficient to
pay tax thereon. As explained above, it is also possible that the OID included
in income during other periods will
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not match the interest payments received from the Company. A holder of
Debentures will not recognize any income upon the receipt of a payment of stated
interest on the Debentures; instead, the holder will recognize income as OID
accrues. A holder's basis in the Debentures will be increased by the amount of
OID includible in income and decreased by all payments made on the Debentures,
however denominated.
The amount of OID includible in income is the sum of the daily portions of
OID with respect to a Debenture for each day during the taxable year during
which the holder held such Debenture. The daily portion of OID on a Debenture is
determined by allocating to each day in any "accrual period" a ratable portion
of the OID allocable to such accrual period. The term "accrual period" means a
period of any length selected by the holder, provided that each accrual period
must be no longer than one year and each scheduled payment date of principal or
interest on a Debenture must occur either on the final day of an accrual period
or the first day of an accrual period. The amount of OID allocable to an accrual
period is the product of the "adjusted issue price" at the beginning of the
accrual period and the "yield to maturity" of the Debenture, adjusted to reflect
the length of the accrual period. For the first accrual period, the adjusted
issue price of the Debentures will be their issue price. Thereafter, the
adjusted issue price of a Debenture generally will be its issue price increased
by any OID previously includible in the gross income of the holder and decreased
by any payment previously made on the Debenture.
Under the OID Regulations, in computing the yield to maturity of an
instrument, the issuer is deemed to elect to exercise any unconditional option
available to it under the instrument if doing so would minimize the yield on the
instrument. If the issuer does not exercise such option, then, solely for
purposes of the accrual of OID, the yield and maturity of the instrument are
redetermined by treating the instrument as reissued for an amount equal to its
adjusted issue price. Because the issue price of the Debentures may be different
from their stated principal amount, it is possible that the yield to maturity
would be lower if the Company exercised its option to extend the interest
payment period than if it did not. If that were the case, then it may be
assumed, for purposes of calculating OID, that the Company would exercise the
option. If, on the other hand, the exercise of the option would not decrease the
yield to maturity, it would be assumed that the Company would not exercise the
option. If there were a change in circumstances (i.e., the Company acted
contrary to the applicable assumption), the OID Regulations would require that
OID accrual be computed as if the Debentures were reissued on the date of the
change in circumstances for an amount equal to their adjusted issue price on
that date.
The Company will provide each non-corporate holder of Debentures with
reports of the amount of OID includable in income on Form 1099-OID.
SALE OR REDEMPTION OF DEBENTURES
Generally, a sale or redemption of Debentures will result in taxable gain or
loss equal to the difference between the amount realized and the holder's tax
basis in the Debentures. Such gain or loss would be long-term capital gain or
loss if the Debentures were held for more than one year.
BACKUP WITHHOLDING
A holder of Series 1992 Preferred Stock or a Debenture may be subject to
backup withholding at a rate of 31% with respect to dividends or interest
(including OID) on, or the proceeds of a sale, exchange, or redemption of, such
Series 1992 Preferred Stock or Debenture, as the case may be, unless such holder
(i) is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (ii) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with applicable backup withholding rules.
CERTAIN FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES PERSONS
The following is a general summary of the material United States federal
income and estate tax considerations relevant to the exchange of Series 1992
Preferred Stock for Debentures by non-United
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States persons and the ownership and disposition of Debentures by non-United
States persons acquiring Debentures pursuant to the Exchange Offer. As used
herein, "non-United States person" means any person who, for United States
federal income tax purposes, is neither (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or any state or of any of the territories
or possessions of the United States, or (iii) a domestic trust or estate. To the
extent it relates to matters of law or legal conclusion, this summary
constitutes the opinion of Stoel Rives, counsel to the Company. This summary is
based on the Code, Treasury Regulations (including Proposed Regulations and
Temporary Regulations) promulgated thereunder, IRS rulings, official
pronouncements and judicial decisions, all as in effect on the date hereof and
all of which are subject to change, possibly with retroactive effect, or
different interpretations. This summary does not discuss all the tax
consequences that may be relevant to a particular holder that is a non-United
States person in light of the holder's particular circumstances and it is not
intended to be applicable in all respects to all categories of non-United States
persons, some of whom -- such as foreign governments and certain international
organizations -- may be subject to special rules not discussed below. In
addition, this summary does not address any state, local or foreign tax
considerations that may be relevant to a holder's decision to exchange Series
1992 Preferred Stock for Debentures pursuant to the Exchange Offer. For a
discussion of certain United States federal income tax considerations, some of
which may also be relevant to non-United States persons, see "Certain Federal
Income Tax Considerations."
ALL SERIES 1992 PREFERRED STOCK HOLDERS THAT ARE NON-UNITED STATES PERSONS
ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES OF THE EXCHANGE OF SERIES 1992 PREFERRED
STOCK FOR DEBENTURES AND OF THE OWNERSHIP AND DISPOSITION OF DEBENTURES RECEIVED
IN THE EXCHANGE OFFER IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
EXCHANGE OF SERIES 1992 PREFERRED STOCK FOR DEBENTURES
Subject to the discussion of backup withholding below, if a holder that is a
non-United States person proves, in a manner and under arrangements satisfactory
to the Company or other withholding agent, that the exchange of Series 1992
Preferred Stock for Debentures by such holder qualifies under Section 302(b) of
the Code as a transaction in which gain or loss is recognized, rather than as a
distribution taxable as a dividend (see "Certain Federal Income Tax
Considerations -- Exchange of Series 1992 Preferred Stock for Debentures,"
above), the Company or such withholding agent will not withhold United States
federal withholding tax on the issuance of Debentures to such holder. The holder
of such Series 1992 Preferred Stock generally will not be subject to United
States federal income tax in respect of gain recognized on such exchange.
However, such a holder will be subject to United States federal income tax in
respect of such gain if no treaty exception is available and (i) such gain is
effectively connected with a trade or business conducted by such non-United
States person within the United States (in which case the branch profits tax may
also apply if the holder is a foreign corporation), (ii) in the case of a
non-United States person that is an individual, such holder is present in the
United States for a period or periods aggregating 183 days or more in the
taxable year of the exchange and certain other conditions are satisfied or (iii)
such holder owns, directly or constructively, more than five percent of the
Series 1992 Preferred Stock and the Company is or has been a "United States real
property holding corporation" for United States federal income tax purposes
within the five-year period ending on the date of the exchange and certain other
conditions are satisfied.
If a holder that is a non-United States person who exchanges Series 1992
Preferred Stock for Debentures does not prove, in a manner satisfactory to the
Company or other withholding agent, that such exchange qualifies as a
transaction in which gain or loss is recognized, United States federal
withholding tax will be withheld from the gross proceeds to such holder in an
amount equal to 30% of such proceeds (including Debentures that such holder
would otherwise have received) unless such holder is eligible for a reduced tax
treaty rate (or an exemption) with respect to dividend income and establishes
that it is subject to such reduced rate (or is exempt from such tax) by
providing the
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appropriate form, in which case the tax will be withheld at the reduced rate (or
will not be withheld, if exempt). Except as may be otherwise provided in an
applicable income tax treaty, a holder that is a non-United States person, whose
receipt of Debentures is treated as a distribution taxable as a dividend, will
be taxed at ordinary federal income tax rates on a net income basis if such
dividend is effectively connected with the conduct of a trade or business of
such holder within the United States (in which case the branch profits tax may
also apply if the holder is a foreign corporation) and will not be subject to
the withholding tax described in the preceding sentence. A holder that is a
non-United States person may be eligible to obtain from the IRS a refund of tax
withheld if such holder meets one of the three tests of Section 302(b) described
above under "Certain Federal Income Tax Considerations -- Exchange of Series
1992 Preferred Stock for Debentures" or is otherwise able to establish that no
tax (or a reduced amount of tax) was due.
PAYMENTS ON DEBENTURES
Subject to the discussion of backup withholding below, payments on a
Debenture by the Company or its agent (in its capacity as such) to a beneficial
owner that is a non-United States person will not be subject to United States
federal withholding tax; provided that (a) such person does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote, (b) such person is not a controlled
foreign corporation that is related to the Company actually or constructively
through stock ownership, (c) such person is not a bank that acquired its
Debenture in consideration of an extension of credit made pursuant to a loan
agreement entered into in the ordinary course of business, and (d) either (i)
the beneficial owner certifies to the Company or its agent, under penalties of
perjury, in a suitable form that it is not a United States person and provides
its name and address or (ii) a qualifying securities clearing organization, bank
or other financial institution that holds customers securities in the ordinary
course of its trade or business and that holds the Debenture certifies to the
Company or its agent under penalties of perjury that such statement has been
received from the beneficial owner in a suitable form by it or by a qualifying
intermediary and furnishes the payor with a copy thereof.
If a beneficial owner of a Debenture who is a non-United States person is
engaged in a trade or business within the United States and interest (including
OID) and premium, if any, on the Debenture is effectively connected with the
conduct of such trade or business, such beneficial owner may be subject to
United States federal income tax on such interest (including OID) and premium at
ordinary federal income tax rates on a net basis (in which case the branch
profits tax may also apply if the holder is a foreign corporation).
SALE OR EXCHANGE OF DEBENTURES
Subject to the discussion of backup withholding below, any capital gain
realized upon a sale or exchange of a Debenture (including upon retirement of a
Debenture) by a beneficial owner who is a non-United States person ordinarily
will not be subject to United States federal income tax unless (i) such gain is
effectively connected with a trade or business conducted by such non-United
States person within the United States (in which case the branch profits tax may
also apply if the holder is a foreign corporation) or (ii) in the case of a
non-United States person that is an individual, such holder is present in the
United States for a period or periods aggregating 183 days or more in the
taxable year of the sale or exchange and certain other conditions are met.
FEDERAL ESTATE TAXES
Debentures beneficially owned by an individual who at the time of death is
neither a citizen nor a resident of the United States will not be subject to
United States federal estate tax as a result of such individual's death,
provided that at the time of death the income from the Debentures was not or
would not have been effectively connected with the conduct by such individual of
a trade or business within the United States and that such individual could have
qualified for the exemption from United States federal withholding tax (without
regard to the certification requirements) on premium and interest that is
described above under " -- Payments on Debentures."
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BACKUP WITHHOLDING AND INFORMATION REPORTING
Information reporting on IRS Form 1099 and backup withholding at a rate of
31% will not apply to payments of principal, premium (if any) and interest
(including original issue discount) made by the Company or a paying agent to a
non-United States person on a Debenture if the certification described in clause
(d) under " -- Payments on Debentures" above is received, provided that the
payor does not have actual knowledge that the holder is a United States person.
However, interest (including original issue discount) on a Debenture owned by a
holder that is a non-United States person may be required to be reported
annually.
Payments of the proceeds from the sale by a holder that is a non-United
States person of a Debenture made to or through a foreign office of a broker
will not be subject to information reporting or backup withholding, except that
if the broker is a United States person, a controlled foreign corporation for
United States tax purposes or a foreign person 50% or more of whose gross income
is effectively connected with a United States trade or business for a specified
three-year period, information reporting may apply to such payments. Payments of
the proceeds from the sale of a Debenture to or through the United States office
of a broker is subject to information reporting and backup withholding unless
the holder certifies as to its non-United States status or otherwise establishes
an exemption from information reporting and backup withholding.
EXPERTS
The audited consolidated financial statements of the Company and
supplemental schedules incorporated by reference in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports included in or incorporated by reference in the Company's Annual Report
on Form 10-K incorporated by reference herein (which reports express an
unqualified opinion and include an explanatory paragraph relating to changes
adopted in accounting for income taxes and other postretirement benefits), 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 LLP 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 LLP are not subject to the liability provisions of Section 11
of the 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.
LEGAL OPINIONS
Certain legal matters in connection with the Debentures, including the
validity of the Indenture and the Debentures, will be passed upon for the
Company by Stoel Rives, Portland, Oregon, and for the Dealer Managers by
Winthrop, Stimson, Putnam & Roberts, New York, New York. Certain tax matters in
connection with the Exchange Offer will be passed upon for the Company by Stoel
Rives. John M. Schweitzer and John Detjens III, who are assistant secretaries of
PacifiCorp, are partners in the firm of Stoel Rives.
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Facsimile copies of the Letter of Transmittal will be accepted. Letters of
Transmittal, certificates representing shares of Series 1992 Preferred Stock and
any other required documents should be sent by each Holder of Series 1992
Preferred Stock or such holder's broker, dealer, commercial bank, trust company
or other nominee to the Exchange Agent at one of the addresses as set forth
below:
The Exchange Agent is:
The Bank of New York
BY HAND OR OVERNIGHT COURIER: BY MAIL:
The Bank of New York The Bank of New York
101 Barclay Street PO Box 11248
New York, NY 10286 Church Street Station
Attention: Tender and Exchange New York, NY 10286
Receive and Deliver Window, Street Attention: Tender and Exchange
Level
BY FACSIMILE TRANSMISSION
(for Eligible Institutions only):
(212) 815-6213
Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
(800) 507-9357
The Information Agent is:
GEORGESON
& COMPANY INC.
Wall Street Plaza
New York, NY 10005
Banks and Brokers call collect (212) 440-9800
CALL TOLL FREE: (800) 223-2064
Any questions or requests for assistance or additional copies of this Prospectus
and the Letter of Transmittal may be directed to the Information Agent or the
Exchange Agent at the telephone numbers and locations set forth above. You may
also contact your broker, dealer, commercial bank or trust company or other
nominee for assistance concerning the Exchange Offer.
THE DEALER MANAGERS FOR THE EXCHANGE OFFER ARE:
Goldman, Sachs & Co. Salomon Brothers Inc
Liability Management Group Liability Management Group
85 Broad Street, 26th Floor 7 World Trade Center
New York, New York 10004 New York, New York 10048
(800) 828-3182 (Toll-Free) (800) 558-3745 (Toll-Free)
