<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST 9, 1996
U.S. $750,000,000
[LOGO]
U.S. $500,000,000 SECURED MEDIUM-TERM NOTES, SERIES H
(A SERIES OF FIRST MORTGAGE BONDS)
AND
U.S. $250,000,000 UNSECURED MEDIUM-TERM NOTES, SERIES U-1
EACH DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
PacifiCorp (the "Company") may from time to time offer its Secured
Medium-Term Notes, Series H (a series of its First Mortgage Bonds) (the "Secured
Notes"), in an aggregate principal amount of up to U.S. $500,000,000, and its
Unsecured Medium-Term Notes, Series U-1 (the "Unsecured Notes" and, together
with the Secured Notes, the "Notes"), in an aggregate principal amount of up to
U.S. $250,000,000, or, in either case, the equivalent thereof in other
currencies or composite currencies (each, a "Specified Currency"), subject to
reduction as a result of the concurrent sale of Euro Secured Medium-Term Notes,
Series H, and Euro Unsecured Medium-Term Notes, Series U-1. See "Foreign
Currency Notes." The Notes will be offered at varying maturities of nine months
or more from their dates of issue and may be subject to redemption at the option
of the Company or repurchase at the option of the holder prior to maturity. Each
Note will bear interest at a fixed rate (a "Fixed Rate Note") or at a floating
rate (a "Floating Rate Note") determined by reference to the Commercial Paper
Rate, LIBOR, the Treasury Rate, the CD Rate, the Prime Rate, the J.J. Kenny
Rate, the CMT Rate or any other Base Rate (as each such term is hereinafter
defined) set forth in a pricing supplement (each, a "Pricing Supplement") to
this Prospectus Supplement, as adjusted by the Spread or Spread Multiplier, if
any, applicable to such Note. See "Description of Notes."
The issue price, any applicable interest rate or interest rate formula, the
maturity, any interest payment dates, specific terms relating to Notes issued in
a Specified Currency, any redemption or repurchase provisions and any other
terms relating to each Note will be established at the time of issuance of such
Note and set forth therein and in the applicable Pricing Supplement.
Each Note will be represented by either a global security registered in the
name of The Depository Trust Company, as Depositary, a nominee thereof, or
another depositary (a "Book-Entry Note"), or a certificate issued in definitive
form (a "Certificated Note"), as set forth in the applicable Pricing Supplement.
Interests in Book-Entry Notes will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary and its
participants. See "Description of Notes--Book-Entry Notes."
The authorized denominations of U.S. dollar Notes will be U.S. $1,000 or any
larger amount that is an integral multiple of U.S. $1,000. Authorized
denominations of Notes issued in a Specified Currency will be set forth in the
applicable Pricing Supplement.
Unless otherwise indicated, interest on each Fixed Rate Note will accrue
from its date of issue and will be payable semi-annually on each April 1 and
October 1 and at maturity or upon earlier redemption, repayment or repurchase,
and interest on each Floating Rate Note will accrue from its date of issue and
will be payable monthly, quarterly, semi-annually or annually, as set forth in
the applicable Pricing Supplement, and at maturity or upon earlier redemption,
repayment or repurchase.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT, ANY PRICING SUPPLEMENT HERETO OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS'
PUBLIC (1) COMMISSION (2)
-------------------------- -------------------------------
<S> <C> <C>
Per Note....................................... 100.000% .125%-.875%
Total (4)...................................... U.S.$750,000,000 U.S.$937,500-
U.S.$6,562,500
<CAPTION>
PROCEEDS TO THE
COMPANY (2)(3)
--------------------------------------
<S> <C>
Per Note....................................... 99.875%-99.125%
Total (4)...................................... U.S.$749,062,500-
U.S.$743,437,500
</TABLE>
- ----------
(1) The Notes will be issued at 100% of their principal amount except as may be
provided in the applicable Pricing Supplement hereto.
(2) For Notes with maturities not greater than 40 years from their dates of
issue, the Company will pay a maximum commission to Goldman, Sachs & Co.,
Lehman Brothers, Lehman Brothers Inc., Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated,
Salomon Brothers Inc, or Smith Barney Inc., each as Agent (collectively, the
"Agents"), in the form of a discount, ranging from .125% to .875%, depending
upon the maturity of the Note, of the principal amount of any Note sold
through such Agent. For Notes with maturities greater than 40 years from
their dates of issue, commissions will be negotiated at the time of sale and
indicated in the applicable Pricing Supplement. See "Plan of Distribution of
Notes."
(3) Before deducting other expenses payable by the Company estimated to be U.S.
$475,000, including reimbursement of certain of the Agents' expenses. The
Company has agreed to indemnify each Agent against certain liabilities,
including certain liabilities under the Securities Act of 1933, as amended.
(4) Or the equivalent thereof in other currencies or composite currencies.
The Notes are being offered on a continuous basis by the Company through the
Agents, each of whom has agreed to use its reasonable best efforts to solicit
purchases of such Notes. In addition, the Notes may be sold to any Agent, as
principal, for resale to investors and other purchasers at a fixed public
offering price or at varying prices related to the prevailing market price at
the time of resale, in either case as determined by such Agent. The Company also
may sell the Notes directly to investors or other purchasers on its own behalf
or to or through such other agents as the Company shall designate from time to
time, provided that such Notes are sold on terms, including without limitation
any commissions payable with respect thereto, in substance identical to those
contained in the Selling Agency Agreement, dated September 4, 1996, by and
between the Company and the Agents. The Notes will not be listed on any
securities exchange, and there can be no assurance that the Notes offered by
this Prospectus Supplement will be sold or that there will be a secondary market
for any of the Notes. The Company reserves the right to withdraw, cancel or
modify the offer made hereby without notice. The Company or the Agent who
solicits any offer may reject such offer in whole or in part. See "Plan of
Distribution of Notes."
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
SMITH BARNEY INC.
The date of this Prospectus Supplement is September 4, 1996.
<PAGE>
DESCRIPTION OF NOTES
The information herein concerning the Notes should be read in conjunction
with the statements under "Description of Additional Bonds" and "Description of
Unsecured Debt Securities" in the accompanying Prospectus. The Secured Notes
will be a series of New Bonds and the Unsecured Notes will be a series of Debt
Securities, in each case as defined in the Prospectus. The following description
will apply to the Notes unless otherwise specified in the applicable Pricing
Supplement.
GENERAL
The Secured Notes will be a series of First Mortgage Bonds under the
Company's Mortgage and Deed of Trust, dated as of January 9, 1989, as amended
and supplemented (the "Mortgage"), with The Chase Manhattan Bank (formerly known
as Chemical Bank), as successor trustee (the "Mortgage Trustee"). The Secured
Notes will be equally and ratably secured with all other First Mortgage Bonds
issued or to be issued under the Mortgage. For further information concerning
the security for the Secured Notes, see "Description of Additional
Bonds--Security and Priority" in the accompanying Prospectus. The Unsecured
Notes will be a series of Debt Securities under the Company's Indenture, dated
as of September 1, 1996, as amended and supplemented (the "Indenture"), with The
Chase Manhattan Bank, as trustee (the "Indenture Trustee").
The Secured Notes are limited to an aggregate principal amount of U.S.
$500,000,000 and the Unsecured Notes are limited to an aggregate principal
amount of U.S. $250,000,000, or the equivalent thereof in Specified Currencies,
subject to reduction as a result of the concurrent sale of Euro Secured Medium-
Term Notes, Series H and Euro Unsecured Medium-Term Notes, Series U-1. See
"Foreign Currency Notes." The Notes may not be exchanged for Euro Medium-Term
Notes.
Each Note will be issued initially as either a Book-Entry Note or a
Certificated Note in fully registered form without coupons. Except as set forth
under "--Book-Entry Notes," Book-Entry Notes will not be issuable in
certificated form. It is currently contemplated that only Notes which are
denominated in U.S. dollars will be issued as Book-Entry Notes. See
"--Book-Entry Notes."
The Notes will be offered on a continuous basis and will mature at 100% of
the principal amount outstanding on any day nine months or more from the date of
issue, as selected by the initial purchaser and agreed to by the Company, and
may be subject to redemption prior to maturity at the price or prices specified
in the applicable Pricing Supplement. The Notes may be subject to prepayment or
repurchase by the Company at the option of the holder at the prices and during
the periods specified in the applicable Pricing Supplement. Each Note will bear
interest at either (a) a fixed rate, or (b) a floating rate determined by
reference to the interest rate basis or combination of interest rate bases (the
"Base Rate") specified in the applicable Pricing Supplement that may be adjusted
by a Spread or Spread Multiplier (each as herein defined).
The authorized denominations of the Notes denominated in U.S. dollars will
be U.S. $1,000 or any larger amount that is an integral multiple of U.S. $1,000.
The authorized denominations of Notes denominated in a Specified Currency will
be set forth in the applicable Pricing Supplement.
"Business Day" means any day, other than a Saturday or Sunday, that is (a)
neither a legal holiday nor a day on which banking institutions are generally
authorized or required by law, regulation or executive order to close (1) with
respect to all Notes, in The City of New York, and (2) with respect to Foreign
Currency Notes (as herein defined), in the principal financial center of the
country of the Specified Currency (or, in the case of Foreign Currency Notes
denominated in European Currency Units, in Brussels, Belgium) and (b) with
respect to LIBOR Notes (as herein defined), also a London Banking Day. "London
Banking Day" means any day on which dealings in deposits in U.S. dollars are
transacted in the London interbank market.
The Pricing Supplement relating to each Note will describe the following
terms: (1) whether such Note is a Secured Note or an Unsecured Note; (2) if the
Note is denominated in a Specified Currency (a "Foreign Currency Note"), the
Specified Currency, other terms relating to such Note, including the authorized
S-2
<PAGE>
denominations, and applicable U.S. tax consequences to purchasers; (3) whether
such Note is a Fixed Rate Note or a Floating Rate Note; (4) the price (expressed
as a percentage of the aggregate principal amount thereof) at which such Note
will be issued (the "Issue Price"); (5) the date on which such Note will be
issued (the "Original Issue Date"); (6) the date on which such Note will mature
(the "Maturity Date"); (7) if such Note is a Fixed Rate Note, the rate per annum
at which such Note will bear interest; (8) if such Note is a Floating Rate Note,
the Base Rate, the Initial Interest Rate, the Interest Reset Period, the
Interest Reset Dates, the Interest Payment Period, the Interest Payment Dates,
the Index Maturity, the Maximum Interest Rate and the Minimum Interest Rate, if
any, and the Spread or Spread Multiplier, if any (all as defined below), and any
other terms relating to the particular method of calculating the interest rate
for such Note; (9) whether such Note may be redeemed or is subject to repayment
or repurchase prior to the Maturity Date and, if so, the provisions relating to
such redemption, repayment or repurchase; (10) whether such Note will be issued
as a Book-Entry or Certificated Note; and (11) any other terms of such Note not
inconsistent with the provisions of the Mortgage or the Indenture, whichever is
applicable.
Investors should consult their own tax advisor in determining the federal,
state, local and any other tax consequences to them of the purchase, ownership
and disposition of the Notes.
PAYMENT OF PRINCIPAL AND INTEREST
Until the Notes are paid or payment thereof is provided for, the Company
will, at all times, maintain a paying agent with respect to the Secured Notes
and the Unsecured Notes (each, a "Paying Agent") in The City of New York capable
of performing the duties described herein to be performed by a Paying Agent. The
Company has initially appointed The Chase Manhattan Bank, 450 West 33rd Street,
New York, New York, as Paying Agent with respect to the Secured Notes and the
Unsecured Notes. The Company will notify the holders of the Notes in accordance
with the Mortgage or the Indenture, whichever is applicable, of any change in
the applicable Paying Agent or its address. Unless otherwise specified in the
applicable Pricing Supplement, principal and any premium and interest payable at
maturity or upon earlier redemption, repayment or repurchase in respect of a
Note will be paid in immediately available funds upon surrender of such Note at
the office of the applicable Paying Agent.
Unless otherwise specified in the applicable Pricing Supplement, payments of
interest on Notes (other than Foreign Currency Notes) and Global Securities (as
hereinafter defined) and other than interest payable at maturity or upon earlier
redemption, repayment or repurchase will be made by mailing a check to the
holder at the address of such holder appearing on the register maintained by the
applicable Paying Agent on the applicable Record Date (as defined below). With
respect to Foreign Currency Notes or Notes other than Global Securities, if the
applicable Paying Agent receives a written request from a holder of U.S.
$1,000,000 or more (or its equivalent in the Specified Currency, if other than
U.S. dollars) in aggregate principal amount of the Notes not later than the
close of business on (a) a Record Date pertaining to an Interest Payment Date or
(b) the fifteenth day prior to maturity or the date of redemption, repayment or
repurchase, if any, the applicable Paying Agent, will, subject to applicable
laws and regulations, until it receives notice to the contrary (but in the case
of payments to be made at maturity or upon earlier redemption, repayment or
repurchase, as the case may be, upon surrender of such Note to the Mortgage
Trustee or Indenture Trustee, as applicable), make all U.S. dollar payments to
such holder by wire transfer to the account designated in such written request.
Except as provided below with respect to Floating Rate Notes, any payment
required to be made in respect of a Note on a date that is not a Business Day
for such Note need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on such date,
and no additional interest shall accrue as a result of such delayed payment.
Interest payable and punctually paid or duly provided for on any Interest
Payment Date will be paid to the person in whose name a Note is registered at
the close of business on the Record Date next preceding such Interest Payment
Date; PROVIDED, HOWEVER, that interest payable at maturity or upon earlier
redemption, repayment or repurchase will be payable to the person to whom
principal shall be payable. The first payment of interest on any Note with an
Original Issue Date between a Record Date and an Interest Payment Date will be
made on the Interest Payment Date following the next succeeding Record Date to
the registered
S-3
<PAGE>
owner on such next Record Date (unless the Company elects, in its sole
discretion, to pay such interest on the first Interest Payment Date after the
Original Issue Date, in which case such interest will be paid to the person in
whose name the Note is originally issued). The "Record Date" with respect to any
Interest Payment Date shall be the date fifteen calendar days (unless otherwise
specified in the applicable Pricing Supplement) immediately preceding such
Interest Payment Date whether or not such date shall be a Business Day.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Original Issue Date, unless
otherwise specified in the applicable Pricing Supplement, at the rate per annum
stated on the face thereof until the principal amount thereof is paid or made
available for payment. Unless otherwise set forth in the applicable Pricing
Supplement, interest on each Fixed Rate Note will be payable semi-annually each
April 1 and October 1 (each, an "Interest Payment Date") and at maturity or upon
earlier redemption, repayment or repurchase. Each payment of interest in respect
of an Interest Payment Date shall include accrued interest from and including
the Original Issue Date or from and including the last date in respect of which
interest has been paid, as the case may be, to but excluding such Interest
Payment Date. Interest on Fixed Rate Notes will be computed on the basis of a
360-day year of twelve 30-day months.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from its Original Issue Date at
rates determined by reference to the specified Base Rate plus or minus the
Spread, if any, or multiplied by the Spread Multiplier, if any (each as
specified in the applicable Pricing Supplement), until the principal amount
thereof is paid or made available for payment. The "Spread" is the number of
basis points (one basis point equals one-hundredth of a percentage point)
specified in the applicable Pricing Supplement as being applicable to such
Floating Rate Note, and the "Spread Multiplier" is the percentage specified in
the applicable Pricing Supplement as being applicable to such Floating Rate
Note. Any Floating Rate Note may also have either or both of the following: (a)
a maximum numerical interest rate limitation, or ceiling, on the rate of
interest that may accrue during any interest period (the "Maximum Interest
Rate"); and (b) a minimum numerical interest rate limitation, or floor, on the
rate of interest that may accrue during any interest period (the "Minimum
Interest Rate"). The applicable Pricing Supplement will designate one of the
following interest rate bases as applicable to each Floating Rate Note: (1) the
Commercial Paper Rate (a "Commercial Paper Rate Note"), (2) LIBOR (a "LIBOR
Note"), (3) the Treasury Rate (a "Treasury Rate Note"), (4) the CD Rate (a "CD
Rate Note"), (5) the Prime Rate (a "Prime Rate Note"), (6) the J.J. Kenny Rate
(a "J.J. Kenny Rate Note"), (7) the CMT Rate (a "CMT Rate Note") or (8) such
other Base Rate as is set forth in such Pricing Supplement.
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually (the "Interest Reset Period"), as
specified in the applicable Pricing Supplement. Unless otherwise indicated in
the applicable Pricing Supplement, the date or dates on which interest will be
reset (each an "Interest Reset Date") will be, in the case of Floating Rate
Notes that reset daily, each Business Day; in the case of Floating Rate Notes
(other than Treasury Rate Notes) that reset weekly, Wednesday of each week; in
the case of Treasury Rate Notes that reset weekly, Tuesday of each week (except
as described below); in the case of Floating Rate Notes that reset monthly, the
third Wednesday of each month; in the case of Floating Rate Notes that reset
quarterly, the third Wednesday of March, June, September and December; in the
case of Floating Rate Notes that reset semi-annually, the third Wednesday of the
two months specified in the applicable Pricing Supplement; and in the case of
Floating Rate Notes that reset annually, the third Wednesday of the month
specified in the applicable Pricing Supplement. If any Interest Reset Date for
any Floating Rate Note is not a Business Day, such Interest Reset Date shall be
postponed to the next day that is a Business Day, except, in the case of a LIBOR
Note, if such Business Day is in the next succeeding calendar month, such
Interest Reset Date shall be the immediately preceding Business Day. If an
auction falls on a day that is an Interest Reset Date for Treasury Rate Notes,
the Interest Reset Date shall be the following day that is a Business Day.
Interest on each Floating Rate Note will be payable monthly, quarterly,
semi-annually or annually (the "Interest Payment Period"). Except as provided
below or in the applicable Pricing Supplement, the date or
S-4
<PAGE>
dates on which interest will be payable (each an "Interest Payment Date") will
be, in the case of Floating Rate Notes with a monthly Interest Payment Period,
the third Wednesday of each month; in the case of Floating Rate Notes with a
quarterly Interest Payment Period, the third Wednesday of March, June, September
and December of each year; in the case of Floating Rate Notes with a semi-annual
Interest Payment Period, the third Wednesday of the two months specified in the
applicable Pricing Supplement; and in the case of Floating Rate Notes with an
annual Interest Payment Period, the third Wednesday of the month specified in
the applicable Pricing Supplement. If any Interest Payment Date (other than at
maturity or upon early redemption, repayment or repurchase) for any Floating
Rate Note would otherwise be a day that is not a Business Day, such Interest
Payment Date shall be postponed to the next day that is a Business Day, except
that in the case of a LIBOR Note, if such Business Day is in the next succeeding
calendar month, such Interest Payment Date shall be the immediately preceding
Business Day. If the date of maturity or early redemption, repayment or
repurchase of a Floating Rate Note falls on a day that is not a Business Day,
the required payment of principal, premium, if any, and interest will be made on
the next succeeding Business Day with the same force and effect as if made on
the date such payment was due, and no additional interest shall accrue as a
result of such delayed payment.
Interest payments on each Interest Payment Date for Floating Rate Notes will
include accrued interest from and including the Original Issue Date or from and
including the last date in respect of which interest has been paid, as the case
may be, to but excluding such Interest Payment Date. At maturity the interest
payable will include interest accrued from and including the Original Issue Date
or from and including the last date in respect of which interest has been paid,
as the case may be, to, but excluding, the Maturity Date. Accrued interest will
be calculated by multiplying the principal amount of a Floating Rate Note by an
accrued interest factor. This accrued interest factor will be computed by adding
the interest factors calculated for each day in the period for which accrued
interest is being calculated. Unless otherwise indicated in the applicable
Pricing Supplement, the interest factor (expressed as a decimal) for each such
day will be computed by dividing the interest rate applicable to such day by
360, in the case of Commercial Paper Rate Notes, LIBOR Notes, CD Rate Notes,
Prime Rate Notes and J.J. Kenny Rate Notes, and by the actual number of days in
the year, in the case of Treasury Rate Notes and CMT Rate Notes. The interest
rate in effect on each day will be (a) if such day is an Interest Reset Date,
the interest rate with respect to the Interest Determination Date (as defined
below) pertaining to such Interest Reset Date, and (b) if such day is not an
Interest Reset Date, the interest rate with respect to the Interest
Determination Date pertaining to the next preceding Interest Reset Date, subject
in either case to any Maximum or Minimum Interest Rate limitation referred to
above and to any adjustment by a Spread or a Spread Multiplier referred to
above; provided, however, that the interest rate in effect for the period from
the Original Issue Date to the first Interest Reset Date set forth in the
Pricing Supplement with respect to a Floating Rate Note will be the "Initial
Interest Rate" specified in the applicable Pricing Supplement. The interest rate
on the Floating Rate Notes will in no event be higher than the maximum rate
permitted by New York law. Under present New York law, the maximum interest rate
is 25% per annum on a simple interest basis. This limit may not apply to Notes
in which U.S.$2,500,000 or more has been invested.
Unless otherwise indicated in the applicable Pricing Supplement, the
"Interest Determination Date" pertaining to an Interest Reset Date for a
Commercial Paper Rate Note, a CD Rate Note, a Prime Rate Note, a J.J. Kenny Rate
Note and a CMT Rate Note will be the second Business Day next preceding such
Interest Reset Date. Unless otherwise indicated in the applicable Pricing
Supplement, the Interest Determination Date pertaining to an Interest Reset Date
for a LIBOR Note will be the second London Banking Day next preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for a Treasury Rate Note will be the day of the week in which such
Interest Reset Date falls on which Treasury bills of the Index Maturity
specified on the face of the Treasury Rate Notes are auctioned. Treasury bills
are normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday. Unless otherwise
indicated in the applicable Pricing Supplement, if, as the result of a legal
holiday, an auction is so held on the preceding Friday, such Friday will be the
Interest Determination Date pertaining to the Interest Reset Date occurring in
the next succeeding week.
S-5
<PAGE>
Unless otherwise indicated in the applicable Pricing Supplement, the
"Calculation Date," where applicable, pertaining to an Interest Determination
Date is the earlier of (a) the tenth calendar day after such Interest
Determination Date, or if any such day is not a Business Day, the next
succeeding Business Day and (b) the Business Day preceding the applicable
Interest Payment Date or the date of maturity, as the case may be.
Unless otherwise indicated in the applicable Pricing Supplement, The Chase
Manhattan Bank shall be the calculation agent (the "Calculation Agent") with
respect to Floating Rate Notes that are Secured Notes and Floating Rate Notes
that are Unsecured Notes. All determinations of interest rates by the
Calculation Agent shall, in the absence of manifest error, be conclusive for all
purposes and binding on all holders of the Notes. The Calculation Agent will,
upon the request of the holder of any Floating Rate Note, provide the interest
rate then in effect and, if determined, the interest rate which will become
effective on the next Interest Reset Date with respect to such Floating Rate
Note.
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the rates (calculated with
reference to the Commercial Paper Rate and the Spread or Spread Multiplier, if
any) specified in the Commercial Paper Rate Notes and in the applicable Pricing
Supplement.
"Commercial Paper Rate" means, unless otherwise indicated in the applicable
Pricing Supplement, with respect to any Interest Determination Date, the Money
Market Yield (as defined below) of the rate on that date for commercial paper
having the Index Maturity designated in the applicable Pricing Supplement as
published by the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") in "Statistical Release H.15(519), Selected Interest Rates," or
any successor publication of the Federal Reserve Board ("H.15(519)"), under the
heading "Commercial Paper." In the event that such rate is not published by 3:00
p.m., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, then the Commercial Paper Rate shall be the Money Market
Yield of the rate on that Interest Determination Date for commercial paper
having the Index Maturity designated in the applicable Pricing Supplement as
published by the Federal Reserve Bank of New York in its daily statistical
release, "Composite 3:30 p.m. Quotations for U.S. Government Securities"
("Composite Quotations") under the heading "Commercial Paper." If by 3:00 p.m.,
New York City time, on such Calculation Date such rate is not yet published in
Composite Quotations, the Commercial Paper Rate for that Interest Determination
Date shall be calculated by the Calculation Agent and shall be the Money Market
Yield of the arithmetic mean of the offered rates as of 11:00 a.m., New York
City time, on that Interest Determination Date of three leading dealers of
commercial paper in The City of New York (which may include any of the Agents or
their affiliates) selected by the Calculation Agent for such commercial paper
having the Index Maturity designated in the applicable Pricing Supplement placed
for an industrial issuer whose senior unsecured bond rating is "AA", or the
equivalent, from a nationally recognized securities rating agency; provided,
however, that if the dealers selected as aforesaid by the Calculation Agent are
not quoting as mentioned in this sentence, the Commercial Paper Rate will be the
Commercial Paper Rate in effect on such Interest Determination Date, unless such
Interest Determination Date is with respect to the first Interest Reset Date set
forth in the applicable Pricing Supplement, in which case the interest rate will
be the Initial Interest Rate.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
<TABLE>
<S> <C> <C> <C> <C>
Money Market Yield = D x 360
--------------- x 100
360 - (DxM)
</TABLE>
where "D" refers to the per annum rate for the commercial paper, quoted on a
bank discount basis and expressed as a decimal; and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
LIBOR NOTES
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any) specified in the
LIBOR Notes and in the applicable Pricing Supplement.
S-6
<PAGE>
With respect to LIBOR Notes indexed to the offered rate for U.S. dollar
deposits, unless otherwise indicated in the applicable Pricing Supplement,
"LIBOR" will be determined by the Calculation Agent in accordance with the
following provisions:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note, either, as specified in the applicable Pricing Supplement: (a) the
arithmetic mean of the offered rates for deposits in U.S. dollars for the
period of the Index Maturity specified in the applicable Pricing Supplement,
commencing on the second London Banking Day immediately following that
Interest Determination Date, that appear on the Reuters Screen LIBO Page as
of 11:00 a.m., London time, on that Interest Determination Date, if at least
two such offered rates appear on the Reuters Screen LIBO Page ("LIBO
Reuters"), or (b) the rate for deposits in U.S. dollars having the Index
Maturity designated in the applicable Pricing Supplement, commencing on the
second London Banking Day immediately following that Interest Determination
Date, that appears on the Telerate Page 3750 as of 11:00 a.m., London time,
on that Interest Determination Date ("LIBOR Telerate"). Unless otherwise
indicated in the applicable Pricing Supplement, "Reuters Screen LIBO Page"
means the display designated as Page "LIBO" on the Reuters Monitor Money
Rate Service (or such other page as may replace the LIBO page on that
service or such other service or services as may be nominated by the British
Bankers' Association for the purpose of displaying London interbank offered
rates of major banks) and "Telerate Page 3750" means the display designated
as page "3750" on the Telerate Service (or such other page as may replace
the 3750 page on that service or such other service or services as may be
nominated by the British Bankers' Association for the purpose of displaying
London interbank offered rates for U.S. dollar deposits). If neither LIBO
Reuters nor LIBOR Telerate is specified in the applicable Pricing
Supplement, LIBOR will be determined as if LIBOR Telerate had been
specified. In the case where (a) above applies, if fewer than two offered
rates appear on the Reuters Screen LIBO Page, or, in the case where (b)
above applies, if no rate appears on the Telerate Page 3750, as applicable,
LIBOR in respect of that Interest Determination Date will be determined as
if the parties had specified the rate described in (ii) below.
(ii) With respect to an Interest Determination Date on which this
provision applies, LIBOR will be determined on the basis of the rates at
which deposits in U.S. dollars having the Index Maturity designated in the
applicable Pricing Supplement are offered at approximately 11:00 a.m.,
London time, on such Interest Determination Date by four major banks
("Reference Banks") in the London interbank market selected by the
Calculation Agent to prime banks in the London interbank market commencing
on the second London Banking Day immediately following such Interest
Determination Date and in a principal amount of not less than U.S.
$1,000,000 that is representative for a single transaction in such market at
such time. The Calculation Agent will request the principal London office of
each of the Reference Banks to provide a quotation of its rate. If at least
two such quotations are provided, LIBOR for such Interest Determination Date
will be the arithmetic mean of such quotations. If fewer than two quotations
are provided, LIBOR for such Interest Determination Date will be the
arithmetic mean of the rates quoted at approximately 11:00 a.m., New York
City time, on such Interest Determination Date by three major banks in The
City of New York selected by the Calculation Agent for loans in U.S. dollars
to leading European banks having the specified Index Maturity designated in
the applicable Pricing Supplement commencing on the second London Banking
Day immediately following such Interest Determination Date and in a
principal amount equal to an amount of not less than U.S. $1,000,000 that is
representative for a single transaction in such market at such time;
provided, however, that if the banks selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, LIBOR will
be LIBOR in effect on such Interest Determination Date, unless such Interest
Determination Date is with respect to the first Interest Reset Date set
forth in the applicable Pricing Supplement, in which case the interest rate
will be the Initial Interest Rate.
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rates (calculated
with reference to the Treasury Rate and the Spread or Spread Multiplier, if any)
specified in the Treasury Rate Notes and in the applicable Pricing Supplement.
S-7
<PAGE>
"Treasury Rate" means, unless otherwise indicated in the applicable Pricing
Supplement, with respect to any Interest Determination Date, the rate for the
auction held on such Interest Determination Date of direct obligations of the
United States ("Treasury bills") having the Index Maturity designated in the
applicable Pricing Supplement as published in H.15(519) under the heading "U.S.
Government Securities-- Treasury bills--auction average (investment)" or, if not
so published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the auction average rate
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) for such auction as otherwise
announced by the United States Department of the Treasury. In the event that the
results of the auction of Treasury bills having the Index Maturity designated in
the applicable Pricing Supplement are not published or reported as provided
above by 3:00 p.m., New York City time, on such Calculation Date or if no such
auction is held in a particular week, then the Treasury Rate shall be calculated
by the Calculation Agent and shall be the yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 p.m., New York City time, on such Interest
Determination Date, of three leading primary United States government securities
dealers selected by the Calculation Agent for the issue of Treasury bills with a
remaining maturity closest to the Index Maturity designated in the applicable
Pricing Supplement; PROVIDED, HOWEVER, that if the dealers selected as aforesaid
by the Calculation Agent are not quoting as mentioned in this sentence, the
Treasury Rate will be the Treasury Rate in effect on such Interest Determination
Date, unless such Interest Determination Date is with respect to the first
Interest Reset Date set forth in the applicable Pricing Supplement, in which
case the interest rate will be the Initial Interest Rate.
CD RATE NOTES
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any) as
specified in the CD Rate Notes and in the applicable Pricing Supplement.
"CD Rate" means, unless otherwise indicated in the applicable Pricing
Supplement, with respect to any Interest Determination Date, the rate on such
date for negotiable certificates of deposit having the Index Maturity designated
in the Pricing Supplement as made available and subsequently published in
H.15(519) under the heading "CDs (Secondary Market)." In the event that such
rate is not so published by 3:00 p.m., New York City time, on the Calculation
Date pertaining to such Interest Determination Date, the CD Rate will be the
rate on such Interest Determination Date for negotiable certificates of deposit
of the Index Maturity designated in the Pricing Supplement as made available and
subsequently published in Composite Quotations under the heading "Certificates
of Deposit" prior to 3:00 p.m., New York City time. If such rate is neither
published in H.15 (519) or in Composite Quotations by 3:00 p.m., New York City
time, on such Calculation Date, then the CD Rate on such Interest Determination
Date will be calculated by the Calculation Agent and will be the arithmetic mean
of the secondary market offered rates as of 10:00 a.m., New York City time, on
such Interest Determination Date of three leading non-bank dealers in negotiable
U.S. dollar certificates of deposit in The City of New York (which may include
any of the Agents or their affiliates) selected by the Calculation Agent for
negotiable certificates of deposit of major United States money market banks (in
the market for negotiable certificates of deposit) with a remaining maturity
closest to the Index Maturity designated in the Pricing Supplement in a
denomination of $5,000,000 or other amount that is representative for a single
transaction in that market at that time; PROVIDED, HOWEVER, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the CD Rate with respect to such Interest Determination Date will
be the CD Rate in effect on such date, unless such Interest Determination Date
is with respect to the first Interest Reset Date set forth in the applicable
Pricing Supplement, in which case the interest rate will be the Initial Interest
Rate.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread or Spread Multiplier, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
S-8
<PAGE>
"Prime Rate" means, unless otherwise indicated in the applicable Pricing
Supplement, with respect to any Interest Determination Date, the rate on such
date as made available and subsequently published in H.15(519) under the heading
"Bank Prime Loan." In the event that such rate is not so published by 3:00 p.m.,
New York City time, on such Calculation Date, then the Prime Rate will be
determined by the Calculation Agent and will be the arithmetic mean of the rates
of interest publicly announced by each bank that appears on the Reuters Screen
USPRIME1 (as defined below) at 3:00 p.m., New York City time, as such bank's
prime rate or base lending rate on such Interest Determination Date. If fewer
than four such rates but more than one such rate appears on the Reuters Screen
USPRIME1 for such Interest Determination Date, the Prime Rate shall be the
arithmetic mean of the prime rates quoted on the basis of the actual number of
days in the year divided by 360 as of the close of business on such Interest
Determination Date by four major money center banks in The City of New York
selected by the Calculation Agent. If fewer than two such rates appear on the
Reuters Screen USPRIME1 as provided above, the Prime Rate will be determined by
the Calculation Agent on the basis of rates furnished in The City of New York by
three substitute banks or trust companies organized and doing business under the
laws of the United States, or any State thereof, having total equity capital of
at least $500,000,000 and being subject to supervision or examination by federal
or state authority, selected by the Calculation Agent to provide such rate or
rates; PROVIDED, HOWEVER, that if the banks selected as aforesaid are not
quoting as mentioned in this sentence, the Prime Rate with respect to such
Interest Determination Date will be the Prime Rate in effect on such date,
unless such Interest Determination Date is with respect to the first Interest
Reset Date set forth in the applicable Pricing Supplement, in which case the
interest rate will be the Initial Interest Rate. "Reuters Screen USPRIME1" means
the display designated as page "USPRIME1" on the Reuters Monitor Money Rates
Service (or such other pages as may replace the USPRIME1 page on that service
for the purpose of displaying prime rates or base lending rates of major United
States banks).
J.J. KENNY RATE NOTES
J.J. Kenny Rate Notes will bear interest at the interest rates (calculated
with reference to the J.J. Kenny Rate and the Spread or Spread Multiplier, if
any) as specified in the J.J. Kenny Rate Notes and in the applicable Pricing
Supplement.
"J.J. Kenny Rate" means, unless otherwise indicated in the applicable
Pricing Supplement, with respect to any Interest Determination Date, the rate
equal to the rate in the high grade weekly index (the "Weekly Index") on such
date made available by Kenny Information Systems ("Kenny") to the Calculation
Agent. The Weekly Index is, and shall be, based upon 30-day yield evaluations at
par of bonds, the interest of which is exempt from Federal income taxation under
the Internal Revenue Code of 1986, as amended, of not less than five high grade
component issuers selected by Kenny which shall include, without limitation,
issuers of general obligation bonds. The specific issuers included among the
component issuers may be changed from time to time by Kenny in its discretion.
The bonds, on which the Weekly Index is based, shall not include any bonds on
which the interest is subject to a minimum tax or similar tax under the Internal
Revenue Code of 1986, as amended, unless all tax-exempt bonds are subject to
such tax. In the event Kenny fails to make available such Weekly Index prior to
the relevant Calculation Date, a successor indexing agent will be selected by
the Calculation Agent after consultation with the Company, such index to reflect
the prevailing rate for bonds rated in the highest short-term rating category by
Moody's Investors Service, Inc. and Standard & Poor's in respect of issuers most
closely resembling the high grade component issuers selected by Kenny for its
Weekly Index, the interest on which is (a) variable on a weekly basis, (b)
exempt from Federal income taxation under the Internal Revenue Code of 1986, as
amended, and (c) not subject to a minimum tax or similar tax under the Internal
Revenue Code of 1986, as amended, unless all tax-exempt bonds are subject to
such tax. If such successor indexing agent is not available, the rate for any
Interest Determination Date shall be 67% of the rate determined if the Treasury
Rate option had been originally selected. The Calculation Agent shall calculate
the J.J. Kenny Rate in accordance with the foregoing. At the request of a holder
of a Floating Rate Note bearing interest at the J.J. Kenny Rate, the Calculation
Agent will provide such holder with the interest rate that will become effective
as of the next Interest Reset Date.
S-9
<PAGE>
CMT RATE NOTES
CMT Rate Notes will bear interest at the interest rates (calculated with
reference to the CMT Rate and the Spread or Spread Multiplier, if any) as
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
"CMT Rate" means, unless otherwise indicated in the applicable Pricing
Supplement, with respect to any Interest Determination Date, the rate displayed
on the Designated CMT Telerate page (as defined below) under the caption
"...Treasury Constant Maturities... Federal Reserve Board Release H.15...
Mondays Approximately 3:45 P.M.," under the column for the Index Maturity
designated in the applicable Pricing Supplement for (a) if the Designated CMT
Telerate page is 7055, the rate for the applicable Interest Determination Date
and (b) if the Designated CMT Telerate page is 7052, the week or the month, as
specified in the applicable Pricing Supplement, ended immediately preceding the
week in which the related Interest Determination Date occurs. If such rate is no
longer displayed on the relevant page, or if not displayed by 3:00 p.m., New
York City time, on the related Calculation Date, then the CMT Rate for such
Interest Determination Date will be such Treasury Constant Maturity rate for the
Index Maturity designated in the applicable Pricing Supplement as published in
the relevant H.15(519). If such rate is no longer published, or if not published
by 3:00 p.m., New York City time, on the related Calculation Date, then the CMT
Rate for such Interest Determination Date will be such Treasury Constant
Maturity rate for the Index Maturity designated in the applicable Pricing
Supplement (or other United States Treasury rate for such Index Maturity) as may
then be published by either the Federal Reserve Board or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in the relevant H.15(519). If such information is not provided by
3:00 p.m., New York City time, on the related Calculation Date, then the CMT
Rate for such Interest Determination Date will be calculated by the Calculation
Agent and will be a yield to maturity, based on the arithmetic mean of the
secondary market closing offer side prices as of approximately 3:30 p.m., New
York City time, on such Interest Determination Date reported, according to their
written records, by three leading primary United States government securities
dealers (each, a "Reference Dealer") in The City of New York selected by the
Calculation Agent (from five such Reference Dealers selected by the Calculation
Agent and eliminating the highest quotation (or, in the event of equality, one
of the highest) and the lowest quotation (or, in the event of equality, one of
the lowest)), for the most recently issued direct noncallable fixed rate
obligations of the United States ("Treasury Note") with an original maturity of
approximately the Index Maturity designated in the applicable Pricing Supplement
and a remaining term to maturity of not less than such Index Maturity minus one
year. If the Calculation Agent cannot obtain three such Treasury Note
quotations, the CMT Rate for such Interest Determination Date will be calculated
by the Calculation Agent and will be a yield to maturity based on the arithmetic
mean of the secondary market offer side prices as of approximately 3:30 p.m.,
New York City time, on such Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected by
the Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with an original maturity of
the number of years that is the next highest to the Index Maturity designated in
the applicable Pricing Supplement and a remaining term to maturity closest to
such Index Maturity and in an amount of at least $100 million. If three or four
(and not five) of such Reference Dealers are quoting as described above, then
the CMT Rate will be based on the arithmetic mean of the offer prices obtained
and neither the highest nor the lowest of such quotes will be eliminated;
PROVIDED, HOWEVER, that if fewer than three Reference Dealers selected by the
Calculation Agent are quoting as described herein, the CMT Rate with respect to
such Interest Determination Date will be the CMT rate in effect on such date,
unless such Interest Determination Date is with respect to the first Interest
Reset Date set forth in the applicable Pricing Supplement, in which case the
interest rate will be the Initial Interest Rate. If two Treasury Notes with an
original maturity as described in the third preceding sentence have remaining
terms to maturity equally close to the Index Maturity designated in the
applicable Pricing Supplement, the quotes for the Treasury Note with the shorter
remaining term to maturity will be used.
S-10
<PAGE>
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no such page is specified in the applicable Pricing Supplement and on the
Book-Entry Note, the Designated CMT Telerate Page shall be 7052, for the most
recent week.
EXTENSION OF MATURITY
The Pricing Supplement relating to each Note (other than an Amortizing Note
(as defined below)) will indicate whether or not the Company will have the
option to extend the Maturity of such Note for one or more periods up to but not
beyond a date set forth in such Pricing Supplement (an "Extendible Note"). If
the Company has such option with respect to any such Note, the procedures
relating thereto will be as set forth in the applicable Pricing Supplement.
RENEWABLE NOTES
The Pricing Supplement relating to each Note (other than an Amortizing
Note), will indicate whether or not the term of all or any portion of any such
Note may be renewed in accordance with the procedures described in such Pricing
Supplement.
REDEMPTION AND REPURCHASE
The Pricing Supplement relating to each Note will indicate either that such
Note cannot be redeemed prior to maturity or that such Note will be redeemable
at the option of the Company on a date or dates specified prior to maturity at a
price or prices, set forth in the applicable Pricing Supplement, together with
accrued interest to the date of redemption. The Notes will not be subject to any
sinking fund. The Company may redeem any of the Notes which are redeemable and
remain outstanding either in whole or from time to time in part, upon not less
than 30 nor more than 60 days' notice (which may be made subject to the deposit
of the redemption moneys with the paying agent on or before the date fixed for
redemption). If less than all of the Notes with like tenor and terms are to be
redeemed, the Notes to be redeemed shall be selected by the Mortgage Trustee or
the Indenture Trustee, as the case may be, by such method as the Mortgage
Trustee or the Indenture Trustee, as the case may be, shall deem fair and
appropriate.
Notes may be subject to prepayment or repurchase by the Company at the
option of the holder at the prices and during the periods specified in the
applicable Pricing Supplement and may otherwise be subject to repayment prior to
maturity as set forth therein.
The Company may at any time purchase Notes at any price in the open market
or otherwise. Notes so purchased by the Company may be held or resold or, at the
discretion of the Company, may be surrendered to the Mortgage Trustee or the
Indenture Trustee, as the case may be, for cancellation.
AMORTIZING NOTES
The Company may from time to time offer Notes for which payments of
principal and interest are made in installments over the life of the Notes
("Amortizing Notes"). Interest on each Amortizing Note will be computed as set
forth in the applicable Pricing Supplement. If so specified in such Pricing
Supplement, payments with respect to Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. A table setting forth repayment information with
respect to each Amortizing Note and other information regarding such Note will
be included in the applicable Pricing Supplement.
BOOK-ENTRY NOTES
Except for Foreign Currency Notes, upon issuance, the Secured Notes and the
Unsecured Notes will each be represented by one or more permanent global
securities (each a "Global Security"). Each Global Security will be deposited
with, or on behalf of, The Depository Trust Company, New York, New York ("DTC")
and registered in the name of a nominee of DTC or such other depositary as is
specified in the Pricing Supplement (the "Depositary"). Except under the limited
circumstances described below, Global Securities will not be exchangeable for
definitive Certificated Notes.
S-11
<PAGE>
Ownership of beneficial interests in a Global Security will be limited to
institutions that have accounts with the Depositary or its nominee
("participants") or persons that may hold interests through participants. In
addition, ownership of beneficial interests by participants in such Global
Security will be evidenced only by, and the transfer of that ownership interest
will be effected only through, records maintained by the Depositary or its
nominee for such Global Security. Ownership of beneficial interests in such
Global Security by persons that hold through participants will be evidenced only
by, and the transfer of that ownership interest within such participant will be
effected only through, records maintained by such participant. The Depositary
will have no knowledge of the actual beneficial owners of the Notes. Beneficial
owners will not receive written confirmation from the Depositary of their
purchase, but beneficial owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the participants through which the beneficial owners entered the
transaction. The laws of some jurisdictions may require that certain purchasers
of securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in a Global
Security.
The Company expects that, upon the issuance of a Global Security and the
deposit of such Global Security with DTC, DTC will immediately credit on its
book-entry registration and transfer system the respective principal amounts
represented by such Global Security to the accounts of participants.
Payment of principal of, and premium and interest, if any, on Notes,
represented by a Global Security registered in the name of or held by the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner and holder of the Global Security
representing such Notes. Upon receipt of any payment of principal of, or premium
or interest, if any, on, a Global Security, the Company expects that the
Depositary will immediately credit, on its book-entry registration and transfer
system, accounts of participants with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Security
as shown in the records of the Depositary. Payments by participants to owners of
beneficial interests in a Global Security held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name" and will be the sole responsibility of such participants,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
None of the Company, the Mortgage Trustee, the Indenture Trustee or any
other agent of the Company or the Mortgage Trustee or the Indenture Trustee will
have any responsibility or liability for any aspect of the records of the
Depositary, any nominee, or any participant relating to or payments made on
account of beneficial interests in a Global Security or for maintaining,
supervising, or reviewing any of the records of the Depositary, any nominee, or
any participant relating to such beneficial interests.
A Global Security is exchangeable for definitive Notes registered in the
name of, and a transfer of a Global Security may be registered to, any person
other than the Depositary or its nominee, only if:
(a) the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for such Global Security or if at any time the
Depositary ceases to be registered or in good standing under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and a successor
Depositary is not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such condition, as the case may be;
(b) the Company in its sole discretion determines that such Global
Security shall be exchangeable for definitive Notes in registered form;
(c) there shall have occurred and be continuing an event of default
under the Mortgage or the Indenture, as described in the accompanying
Prospectus, and payment of principal thereof and interest thereon has been
accelerated and the Depositary is notified by the Company, the applicable
Trustee, or the applicable Registrar and Paying Agent that such Global
Security shall be exchangeable for definitive Notes in registered form; or
(d) the Company specifies with respect to the Notes of a series that an
owner of a beneficial interest in a Global Security representing Notes of
such series may receive Notes in definitive form.
S-12
<PAGE>
Any Global Security that is exchangeable pursuant to the preceding sentence
will be exchangeable in whole for definitive Notes in registered form, of like
tenor and of an equal aggregate principal amount as the Global Security, in
denominations of $1,000 and integral multiples thereof. Such definitive Notes
will be registered in the name or names of such person or persons as the
Depositary shall instruct the applicable Trustee. It is expected that such
instructions may be based upon directions received by the Depositary from its
participants with respect to ownership of beneficial interests in such Global
Security.
Except as provided above, owners of beneficial interests in a Global
Security will not be entitled to receive physical delivery of Notes in
definitive form and will not be considered the holders thereof for any purpose
under the Mortgage or the Indenture, as the case may be, and no Global Security
shall be exchangeable, except for another Global Security of like denomination
and tenor to be registered in the name of the Depositary or its nominee.
Accordingly, each person owning a beneficial interest in a Global Security must
rely on the procedures of the Depositary and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a holder under the Mortgage or the
Indenture, as the case may be.
The Company understands that, under existing industry practices, in the
event that the Company requests any action of holders, or an owner of a
beneficial interest in a Global Security desires to give or take any action that
a holder is entitled to give or take under the Mortgage or the Indenture, as the
case may be, the Depositary would authorize the participants holding the
relevant beneficial interests to give or take such action, and such participants
would authorize beneficial owners owning through such participants to give or
take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
The initial Depositary, DTC, is a limited purpose trust company organized
under the laws of the State of New York, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered under the Exchange Act. DTC was created
to hold securities of its participants and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers (including the Agents),
banks, trust companies, clearing corporations, and certain other corporations.
DTC is owned by a number of its participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to DTC's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly. The rules applicable to DTC and its participants are on file with
the Securities and Exchange Commission.
The information herein concerning DTC and DTC's procedures has been obtained
from sources (including DTC) that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
FOREIGN CURRENCY NOTES
Subject to the receipt of required regulatory approvals, Notes may be issued
in currencies or composite currencies other than U.S. dollars (each, a
"Specified Currency"). The Specified Currency will be set forth in the Pricing
Supplement applicable to such Note and the delivery of such a Pricing Supplement
by the Company shall constitute its confirmation that all required regulatory
approvals have been obtained. Notes issued in Specified Currencies will be in
such denominations, and contain such other specific terms, as are set forth in
the Pricing Supplement applicable to such Notes.
The Mortgage requires that the Company deposit with the Mortgage Trustee, as
security for the Company's obligations in respect of Secured Notes issued in
Specified Currencies, a currency exchange agreement which will permit the
Company to receive from a counterparty with a credit rating at least equal to
that of the Company the amounts necessary in the Specified Currency to pay the
amounts payable in respect of Secured Notes issued in such currency. See
"Description of Additional Bonds" in the accompanying Prospectus. No assurance
can be given that the counterparty will make payments in Specified Currencies
S-13
<PAGE>
under such currency exchange agreement and, therefore, in such event, and in the
absence of other available sources of the Specified Currency in the United
States, the Company would be required to make payments in respect of Secured
Notes issued in a Specified Currency in U.S. dollars. Under the Indenture, the
Company is not required to deposit with the Indenture Trustee any security for
its obligations in respect of Unsecured Notes issued in Specified Currencies.
The Company does not generate significant revenues in currencies other than U.S.
dollars. See "--Payment Currency."
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Notes other
than Foreign Currency Notes will be denominated in U.S. dollars and payments of
principal of and premium and interest, if any, on the Notes will be made in U.S.
dollars. Unless otherwise specified in the applicable Pricing Supplement, the
following provisions shall apply to Foreign Currency Notes, which are in
addition to, and to the extent inconsistent therewith replace, the description
of general terms and provisions of the Notes set forth in the accompanying
Prospectus and elsewhere in this Prospectus Supplement.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of Foreign Currency Notes will be made in immediately
available funds. Unless otherwise specified in the applicable Pricing
Supplement, Foreign Currency Notes will be issued only in certificated form,
without coupons.
CURRENCIES
Purchasers are required to pay for Foreign Currency Notes in the Specified
Currency as set forth in the Pricing Supplement applicable to such Notes. At the
present time there are limited facilities in the United States for conversion of
U.S. dollars into Specified Currencies and vice versa, and banks offer non-U.S.
dollar checking or savings account facilities in the United States only on a
limited basis. However, if requested by a prospective purchaser of Notes on or
prior to the third Business Day preceding the date of delivery of the Notes, or
by such other day as determined by the exchange rate agent appointed by the
Company in respect of such Notes and named in the Pricing Supplement relating
thereto (the "Exchange Rate Agent"), the Exchange Rate Agent is expected to be
prepared to arrange for the conversion of U.S. dollars into the Specified
Currency set forth in the applicable Pricing Supplement to enable the purchasers
to pay for the Foreign Currency Notes. Each such conversion will be made by the
Exchange Rate Agent on such terms and subject to such conditions, limitations,
and charges as the Exchange Rate Agent may from time to time establish in
accordance with its regular foreign exchange practices. All costs of exchange
will be borne by the purchasers of the Foreign Currency Notes.
Specific information about the currency or currency units in which a
particular Foreign Currency Note is denominated, including historical exchange
rates and a description of the currency and any exchange controls, will be set
forth in the applicable Pricing Supplement. The information therein concerning
exchange rates is furnished as a matter of information only and should not be
regarded as indicative of the range of or trends in fluctuations in currency
exchange rates that may occur in the future.
PAYMENT OF PRINCIPAL AND INTEREST
The principal of and premium and interest payments, if any, on Foreign
Currency Notes are payable by the Company in the Specified Currency. However,
except as provided below, the Exchange Rate Agent will convert all payments of
principal of and premium and interest, if any, on Foreign Currency Notes to U.S.
dollars, provided that, unless otherwise specified in the applicable Pricing
Supplement, the holder of a Foreign Currency Note may elect to receive such
payments in the Specified Currency as described below.
Any U.S. dollar amount to be received by a holder of a Foreign Currency Note
will be based on the highest bid quotation in The City of New York received by
the Exchange Rate Agent at approximately 11:00 a.m., New York City time, on the
second Business Day preceding the applicable Interest Payment Date from three
recognized foreign exchange dealers (one of which may be the Exchange Rate
Agent) for the purchase by the quoting dealer of the Specified Currency for U.S.
dollars for settlement on such payment date, in an amount equal to the aggregate
amount of the Specified Currency payable to all holders of Notes not electing to
receive the Specified Currency on such payment date and at which the applicable
dealer
S-14
<PAGE>
commits to execute a contract. If such bid quotations are not available,
payments will be made in the Specified Currency. All currency exchange costs
will be borne by the holder of the Foreign Currency Note by deductions from such
payments.
Unless otherwise specified in the applicable Pricing Supplement, a holder of
a Foreign Currency Note may elect to receive payment of the principal of and
premium and interest, if any, on the Foreign Currency Note in the Specified
Currency by transmitting a written request for such payment to the principal
offices of the Paying Agent prior to the Record Date immediately preceding any
Interest Payment Date and at least fifteen days prior to maturity or the date of
redemption, repayment or repurchase, if any, in the case of payments to be made
at maturity or upon earlier redemption, repayment or repurchase. Such request
may be in writing (mailed or hand delivered) or by cable, telex, or other form
of facsimile transmission. A holder of a Foreign Currency Note may elect to
receive payment in the Specified Currency for all payments of principal and
premium and interest, if any, and need not file a separate election for each
payment. Such election will remain in effect until revoked by written notice to
the Paying Agent, but written notice of any such revocation must be received by
the Paying Agent on or prior to the Record Date in the case of any payment of
interest or at least fifteen days prior to maturity or the date of redemption or
repayment, if any, in the case of the payment of principal and premium, if any.
Holders of Foreign Currency Notes whose Foreign Currency Notes are to be held in
the name of a broker or nominee should contact such broker or nominee to
determine whether and how an election to receive payments in the Specified
Currency may be made.
Unless otherwise specified in the applicable Pricing Supplement, the payment
of the principal of and premium and interest, if any, on each Foreign Currency
Note to be made in U.S. dollars will be made in the manner specified under
"Description of Notes--Payment of Principal and Interest." Unless otherwise
specified in the applicable Pricing Supplement, the payment of principal of and
premium and interest, if any, on each Foreign Currency Note to be made in the
Specified Currency will be made as set forth below. The payment of interest on a
Foreign Currency Note (other than interest payable to the holder thereof, if
any, at maturity or upon earlier redemption, repayment or repurchase) to be made
in the Specified Currency will be paid by bank draft mailed to the person in
whose name the Note is registered at the close of business on the applicable
Record Date. The principal of and premium, if any, on such Foreign Currency Note
and any interest payable to the holder thereof when the principal of such
Foreign Currency Note is payable will be paid by bank draft upon surrender of
such Note at the corporate trust office of the Paying Agent in The City of New
York. Specified Currency drafts will be drawn on a bank office located outside
the United States. If the Paying Agent receives a written request from a holder
of the equivalent of U.S. $1,000,000 or more in aggregate principal amount of
the Foreign Currency Notes not later than the close of business on a Record Date
for an interest payment or the fifteenth day prior to maturity or the date of
redemption or repayment, if any, the Paying Agent will, subject to applicable
laws and regulations, until it receives notice to the contrary (but, in the case
of payments to be made at maturity or earlier redemption or repayment only after
the surrender of the Note or Notes in The City of New York, not later than one
Business Day prior to the maturity or the date of redemption, repayment or
repurchase, as the case may be), make all Specified Currency payments to such
holder by wire transfer to an account (a) designated in such written request and
(b) maintained in the country of the Specified Currency.
OUTSTANDING FOREIGN CURRENCY NOTES
For purposes of calculating the principal amount of any Foreign Currency
Note payable in a Specified Currency for any purpose under the Mortgage, the
principal amount of such Foreign Currency Note at any time outstanding shall be
the Company's U.S. dollar obligation therefor in the applicable currency
exchange agreement as described above, pursuant to the Mortgage.
PAYMENT CURRENCY
If a Specified Currency is not available for the payment of principal of and
premium and interest, if any, with respect to a Foreign Currency Note due to the
imposition of exchange controls or other circumstances beyond the control of the
Company, or is no longer used by the government of the country issuing such
currency or for the settlement of transactions by public authorities of or
within the international banking community, the Company will be entitled to
satisfy its obligations to holders of Foreign Currency Notes by
S-15
<PAGE>
making such payment in U.S. dollars on the basis of the noon buying rate in The
City of New York for cable transfers of the Specified Currency as certified for
customs purposes by the Federal Reserve Bank of New York (the "Market Exchange
Rate") on the second day prior to such payment, or if such Market Exchange Rate
is not then available, on the basis of the most recently available Market
Exchange Rate or as otherwise specified in an applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, any payment
made under such circumstances in U.S. dollars where required payment is in a
Specified Currency will not constitute a default under the Mortgage or the
Indenture, as the case may be.
If payment on a Foreign Currency Note is required to be made in European
Currency Units ("ECU") and ECU are unavailable due to the imposition of exchange
controls or other circumstances beyond the Company's control, or are no longer
used in the European Monetary System, all payments due on that date with respect
to such Foreign Currency Note shall be made in U.S. dollars. The amount so
payable on any date in ECU shall be converted into U.S. dollars, at a rate
determined by the Exchange Rate Agent as of the second Business Day prior to the
date on which such payment is due on the following basis. The component
currencies of the ECU for this purpose (the "Components") shall be the currency
amounts that were components of the ECU as of the last date on which ECU were
used in the European Monetary System. The equivalent of ECU in U.S. dollars
shall be calculated by aggregating the U.S. dollar equivalents of the
Components. The U.S. dollar equivalent of each of the Components shall be
determined by the Paying Agent on the basis of the most recently available
Market Exchange Rate, or as otherwise specified in the applicable Pricing
Supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be multiplied or divided in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into two
or more currencies, the amount of that currency as a Component shall be replaced
by amounts of such two or more currencies, each of which shall have a value on
the date of division equal to the amount of the former component currency
divided by the number of currencies into which that currency was divided.
All determinations referred to above by the Exchange Rate Agent or the
applicable Paying Agent shall be at its sole discretion (except to the extent
expressly provided herein that any determination is subject to approval by the
Company) and, in the absence of manifest error, shall be conclusive for all
purposes and binding on holders of the Notes and the Exchange Rate Agent or
Paying Agent, as the case may be, shall have no liability therefor. Unless
otherwise specified in the applicable Pricing Supplement, any payment made in
U.S. dollars under the aforementioned circumstances where required payment is in
a Specified Currency will not constitute a default under the Mortgage or the
Indenture, as the case may be.
CURRENCY RISKS
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND PRICING
SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED
IN A CURRENCY (INCLUDING ANY COMPOSITE CURRENCY) OR NOTES DENOMINATED IN OTHER
THAN U.S. DOLLARS AND THE COMPANY DISCLAIMS ANY RESPONSIBILITY TO ADVISE
PROSPECTIVE INVESTORS OF SUCH RISKS AS THEY EXIST AT THE DATES THEREOF OR AS
SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE INVESTORS SHOULD CONSULT
THEIR OWN FINANCIAL, TAX AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN
INVESTMENT IN SUCH NOTES. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR
INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in the Foreign Currency Notes entails significant risks that
are not associated with a similar investment in a security denominated in U.S.
dollars. Such risks include, without limitation, the
S-16
<PAGE>
possibility of significant changes in rates of exchange between the U.S. dollar
and the Specified Currency and the possibility of the imposition or modification
of foreign exchange controls by either the U.S. or foreign governments. Such
risks generally depend on economic and political events over which the Company
has no control. In recent years, rates of exchange between the U.S. dollar and
certain foreign currencies have been highly volatile and such volatility may be
expected in the future. The exchange rate between the U.S. dollar and a foreign
currency or currency unit is in most cases established principally by the supply
of and demand for such currencies, and changes in the rate result over time from
the interaction of many factors, among which are rates of inflation, interest
rate levels, balances of payments, and the extent of governmental surpluses or
deficits in the countries of such currencies. These factors are in turn
sensitive to, among other things, the monetary, fiscal, and trade policies
pursued by such governments and those of other countries important to
international trade and finance. Fluctuations in any particular exchange rate
that have occurred in the past are not necessarily indicative, however, of
fluctuations in the rate that may occur during the term of any Note.
Depreciation of the Specified Currency in a Foreign Currency Note against the
U.S. dollar would result in a decrease in the U.S. dollar-equivalent yield of
such Note below its coupon rate, and in certain circumstances could result in a
loss to the investor on a U.S. dollar basis.
Foreign exchange rates can either be fixed by sovereign governments or
float. Exchange rates of most economically developed nations are permitted to
fluctuate in value relative to the U.S. dollar. National governments, however,
rarely voluntarily allow their currencies to float freely in response to
economic forces. Sovereign governments in fact use a variety of techniques, such
as intervention by a country's central bank or imposition of regulatory controls
or taxes, to affect the exchange rate of their currencies. Governments may also
issue a new currency to replace an existing currency or alter the exchange rate
or relative exchange characteristics by devaluation or revaluation of a
currency. Thus, a special risk in purchasing Foreign Currency Notes is that
their U.S. dollar-equivalent yields could be affected by governmental actions,
which could change or interfere with theretofore freely determined currency
valuation, fluctuations in response to other market forces, and the movement of
currencies across borders. There will be no adjustment or change in the terms of
such Notes in the event that exchange rates should become fixed, or in the event
of any devaluation or revaluation or imposition of exchange or other regulatory
controls or taxes, or in the event of other developments, affecting the U.S.
dollar or any applicable currency or currency unit.
Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at a Note's maturity or when payment of interest
thereon is due. There can be no assurance that exchange controls will not
restrict or prohibit payments in any currency or currency unit. Even if there
are no actual exchange controls, it is possible that the Specified Currency for
any particular Note that would otherwise be payable in such Specified Currency
would not be available at such Note's maturity. In that event, the Company will
make required payments in U.S. dollars on the basis of the Market Exchange Rate
on the second day prior to such payment, or if such Market Exchange Rate is not
then available, on the basis of the most recently available Market Exchange
Rate. See "Foreign Currency Notes--Payment Currency."
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in foreign currencies will not be sold in, or to residents of, the
country of the Specified Currency in which particular Notes are denominated.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Company
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding, or receipt of payments of principal of, and
premium and interest, if any, on the Notes. Such persons should consult their
own counsel with regard to such matters.
JUDGMENTS
Courts in the United States generally grant or enforce a judgment relating
to an action based on the Foreign Currency Notes only in U.S. dollars, and the
date used to determine the rate of conversion of foreign currencies into U.S.
dollars will depend on various factors, including which court renders the
judgment.
S-17
<PAGE>
Section 27 of the Judiciary Law of the State of New York provides that a New
York State court would be required to enter a judgment in the Specified Currency
of the underlying obligation; such judgment would then be converted into U.S.
dollars at the rate of exchange prevailing on the date of entry of the judgment.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary, which was prepared by Stoel Rives LLP, counsel to the
Company, describes certain United States federal income tax consequences of the
ownership of Notes as of the date hereof. Except where noted, it deals only with
Notes held by initial purchasers as capital assets within the meaning of Section
1221 of the Internal Revenue Code of 1986, as amended (the "Code"). The
following summary does not deal with special situations, such as those of
dealers in securities, financial institutions, life insurance companies, United
States Holders (as defined below) whose "functional currency" is not the U.S.
dollar, tax exempt organizations, persons holding Notes as a hedge against
currency risks or as a position in a "straddle," or persons owning (actually or
constructively) ten percent or more of the combined voting power of all classes
of voting stock of the Company. In addition, the discussion below must be read
in conjunction with the discussion of certain federal income tax consequences
which may appear in the applicable Pricing Supplement for such Notes. The
discussion below is based upon the provisions of the Code and Treasury
Regulations (including proposed Treasury Regulations), rulings, and judicial
decisions thereunder as of the date hereof. Such authorities may be amended,
repealed, revoked, modified or, in the case of proposed Treasury Regulations,
withdrawn or finalized in a form different from such proposed Treasury
Regulations, so as to result in federal income tax consequences different from
those discussed below. THIS SUMMARY DOES NOT PURPORT TO COVER ALL THE POSSIBLE
TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES, AND IT IS
NOT INTENDED AS TAX ADVICE. THIS SUMMARY DOES NOT DISCUSS AT ALL THE TAX
CONSEQUENCES UNDER STATE, LOCAL, OR FOREIGN TAX LAWS. PERSONS CONSIDERING THE
PURCHASE, OWNERSHIP, OR DISPOSITION OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR
PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY
OTHER TAXING JURISDICTION.
This summary is based on the assumption that the Notes are issued in
"registered" form for United States federal income tax purposes and are not
convertible into non-registered form. If any Notes are issued in, or are
convertible into, non-registered or bearer form, the applicable Pricing
Supplement will discuss the special tax considerations that may apply.
UNITED STATES HOLDERS
As used herein, a "United States Holder" of a Note means a holder that is
(a) a citizen or resident of the United States, (b) a corporation or partnership
created or organized in or under the laws of the United States or any state
within the United States, or (c) an estate or trust that is otherwise subject to
United States federal income taxation on a net income basis in respect of a
Note. A "Non-United States Holder" is a holder that is not a United States
Holder.
PAYMENTS OF INTEREST. Except as set forth below, interest on a Note will
generally be taxable to a United States Holder as ordinary income from domestic
sources at the time it is received or accrued in accordance with the United
States Holder's method of accounting for tax purposes.
ORIGINAL ISSUE DISCOUNT. The following is a summary of the principal United
States federal income tax consequences of the ownership of Original Issue
Discount Notes (as defined below) by United States Holders. Additional rules
applicable to Original Issue Discount Notes which are denominated in or
determined by reference to a Specified Currency are described under "Foreign
Currency Notes" below.
A Note may be issued for an amount that is less than its stated redemption
price at maturity (the sum of all payments to be made on the Note other than
"qualified stated interest" payments). The excess of the stated redemption price
at maturity of the Note over its "issue price," if such excess is at least 0.25
percent of the stated redemption price at maturity multiplied by the number of
complete years to maturity, will be "original issue discount" ("OID"). The
"issue price" of each Note will be the initial offering price to the public at
which a substantial amount of the particular offering is sold (not including
sales to bond houses, brokers, or similar persons or organizations acting as
underwriters).
S-18
<PAGE>
Generally, a "qualified stated interest" payment is stated interest that is
unconditionally payable at least annually at a single fixed rate, or, at a rate
(a "Variable Rate") which (a) varies among payment periods if such rate can
reasonably be expected to measure contemporaneous variations in the cost of
newly borrowed funds or (b) is based upon the changes in the yield or price of
certain actively traded personal property, or a combination thereof. A rate that
reflects a fixed rate minus a Variable Rate described in clause (a) of the
preceding sentence also constitutes a Variable Rate. Interest is payable at a
single fixed rate only if the rate appropriately takes into account the length
of the interval between payments. Notes that may be redeemed prior to their
maturity date at the option of the issuer shall be treated from the time of
issuance as having a maturity date for federal income tax purposes on such
redemption date if such redemption would result in a lower yield to maturity.
Notice will be given in the applicable Pricing Supplement when the Company
issues Notes that are redeemable prior to maturity and determines that such
Notes will be deemed to have a maturity date for federal income tax purposes
prior to their maturity.
In certain cases (E.G., where interest payments are deemed not to be
qualified stated interest payments), Notes that bear interest from a non-tax
standpoint may be deemed instead to be Original Issue Discount Notes for federal
income tax purposes, with the result that the inclusion of interest in income
for federal income tax purposes may vary from the actual payments of interest
made on such Notes, generally accelerating income for cash method taxpayers. For
those purposes, the Treasury Regulations provide rules for determining whether
payments on a Note with a Variable Rate will be treated as payments of qualified
stated interest. The Pricing Supplement for any series of Notes will specify
whether they are Original Issue Discount Notes.
United States Holders of Original Issue Discount Notes with a maturity upon
issuance of more than one year must, in general, include OID in income in
advance of the receipt of some or all of the related cash payments. The amount
of OID includible in income with respect to the Note is the sum of the "daily
portions" of OID with respect to the Note for each day during the taxable year
or portion of the taxable year in which such United States Holder held such Note
("accrued OID"). The daily portion is determined by allocating to each day in
any "accrual period" a pro rata portion of the OID allocable to that accrual
period. Accrual periods may be of any length and may vary in length over the
term of the Note provided that each accrual period is no longer than one year
and each scheduled payment of principal or interest occurs at the beginning or
the end of an accrual period. The amount of OID allocable to any accrual period
is an amount equal to the excess (if any) of (a) the product of the Note's
"adjusted issue price" at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each accrual
period and properly adjusted for the length of the accrual period) over (b) the
sum of any qualified stated interest allocable to the accrual period. In
determining OID allocable to an accrual period, if an interval between payments
of qualified stated interest contains more than one accrual period the amount of
qualified stated interest payable at the end of the interval is allocated on a
pro rata basis to each accrual period in the interval and the adjusted issue
price at the beginning of each accrual period in the interval must be increased
by the amount of any qualified stated interest that has accrued prior to the
beginning of the first day of the accrual period but is not payable until the
end of the interval. If all accrual periods are of equal length, except for an
initial short accrual period, the amount of OID allocable to the initial short
accrual period may be computed under any reasonable method. The adjusted issue
price of the Note at the start of any accrual period is equal to its issue price
increased by the accrued OID for each prior accrual period and reduced by any
prior payments on such Note that did not constitute qualified stated interest
payments. Under these rules, a United States Holder generally will have to
include in income increasingly greater amounts of OID in successive accrual
periods. The Company is required to report the amount of OID accrued on Notes
held of record by persons other than corporations and other exempt holders.
In the case of Original Issue Discount Notes having a term of one year or
less ("Short-Term Original Issue Discount Notes"), OID is included in income
currently either on a straight-line basis or, if the United States Holder so
elects, under the constant yield method used generally for OID as described
above. However, certain categories of United States Holders (such as individual
cash method taxpayers) are not required to include accrued OID on Notes of this
type in their income currently unless they elect to do so. If such a United
States Holder that does not elect to currently include the OID in income
subsequently
S-19
<PAGE>
recognizes a gain upon the disposition of the Note, such gain will be treated as
ordinary interest income to the extent of the accrued OID to the date of
disposition. Furthermore, such United States Holder may be required to defer
deductions for a portion of such United States Holder's interest expense with
respect to any indebtedness incurred or maintained to purchase or carry such
Note.
AMORTIZATION OF PREMIUM. A Note may be considered to have been issued at a
"premium" to the extent that the United States Holder's tax basis in the Note
immediately after purchase exceeds the amount payable at maturity. A United
States Holder generally may elect to amortize the premium over the remaining
term of the Note on a constant yield method. Any such election shall apply to
all debt securities (other than debt securities the interest on which is
excludible from gross income) held by the United States Holder at the beginning
of the first taxable year to which the election applies (or thereafter acquired
by the United States Holder) and is irrevocable without the consent of the
Internal Revenue Service ("IRS"). Pursuant to regulations proposed by the IRS on
June 27, 1996, if a United States Holder makes such an election and holds a debt
security acquired before the taxable year for which such election is made, the
United States Holder may not amortize amounts that would have been amortized in
prior taxable years had an election been in effect for those prior taxable
years. The amount amortized in any year will be treated as a reduction of the
United States Holder's interest income from the Note. Bond premium on a Note
held by a United States Holder that does not make such an election will decrease
the gain or increase the loss otherwise recognized on disposition of the Note.
ACQUISITION PREMIUM. If a United States Holder purchases an Original Issue
Discount Note at a premium (I.E., an amount in excess of the amount payable at
maturity), it does not include any OID in gross income. An Original Issue
Discount Note purchased in the initial offering for more than the issue price
but less than the stated redemption price at maturity possesses acquisition
premium. The daily portion of accrued OID on such a Note is reduced by the
product of the daily portion of OID (determined without regard to this
adjustment) and a fraction the numerator of which is the excess of purchase
price over issue price and the denominator of which is the excess of all
payments to be made on the Note other than qualified stated interest over the
Note's issue price.
ELECTION TO TREAT ALL INTEREST AS OID. A cash or accrual basis United
States Holder may elect to treat all interest on any Note as OID and calculate
the amount includible in gross income under the constant yield method described
above. For the purposes of this election, interest includes stated interest,
acquisition discount, OID, de minimis OID, market discount, de minimis market
discount and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium. If a United States Holder makes this election for a Note
with amortizable bond premium, the election is treated as an election under the
amortizable bond premium provisions described above and the electing United
States Holder will be required to amortize bond premium for all of the holder's
other debt instruments with amortizable bond premium. The election must be made
for the taxable year in which the United States Holder acquires the Note, and
may not be revoked without the consent of the IRS. United States Holders should
consult with their own tax advisors about this election.
SALE, EXCHANGE, AND RETIREMENT OF NOTES. A United States Holder's tax basis
in a Note will, in general, be the United States Holder's cost therefor,
increased by all accrued OID and reduced by any amortized premium and any cash
payments on the Note other than qualified stated interest payments. Upon the
sale, exchange, or retirement of a Note, a United States Holder will recognize
gain or loss equal to the difference between the amount realized upon the sale,
exchange, or retirement and the adjusted tax basis of the Note. Except as
described above with respect to certain Short-Term Original Issue Discount
Notes, and except with respect to gain or loss attributable to changes in
exchange rates as described below with respect to certain Foreign Currency
Notes, such gain or loss will be capital gain or loss and will be long-term
capital gain or loss if at the time of sale, exchange, or retirement the Note
has been held for more than one year. Under current law, net capital gains are,
under certain circumstances, taxed at lower rates than ordinary income. The
deductibility of capital losses is subject to limitations.
EXTENDIBLE NOTES. A Note may provide that the Company has the option to
reset the interest rate, in the case of a Fixed Rate Note, or the Spread or
Spread Multiplier, in the case of a Floating Rate Note, on an
S-20
<PAGE>
Interest Reset Date or to extend the maturity of a Note at maturity. The
treatment of a United States Holder of Notes with respect to which such an
option has been exercised who does not elect to have the Company repay such
Notes on the applicable Optional Reset Date or Original Stated Maturity (or has
no right to so elect) will depend upon the original terms of such Notes and such
option as well as the terms established for such Notes by the Company pursuant
to the exercise of such option (the "Revised Terms"). Such holder may be treated
for federal income tax purposes as having exchanged such Notes (the "Old Notes")
for new Notes with Revised Terms (the "New Notes"). If the holder is treated as
having exchanged Old Notes for New Notes, such exchange may be treated as either
a taxable exchange or a tax-free recapitalization.
If the exercise of the option by the Company is not treated as an exchange
of Old Notes for New Notes, no gain or loss will be recognized by a United
States Holder as a result thereof. If the exercise of the option is treated as a
taxable exchange of Old Notes for New Notes, a United States Holder would
recognize gain or loss equal to the difference between the issue price of the
New Notes and the holder's adjusted tax basis in the Old Notes. If the exercise
of the option is treated as a tax-free recapitalization, no loss would be
recognized by a United States Holder as a result thereof and gain, if any, would
be recognized to the extent of the fair market value of the excess, if any, of
the principal amount of securities received over the principal amount of
securities surrendered. Although, in this regard, the meaning of the term
"principal amount" is not clear, such term could be interpreted to mean "issue
price" with respect to securities that are received and "adjusted issue price"
with respect to securities that are surrendered.
FOREIGN CURRENCY NOTES. The following is a summary of the principal United
States federal income tax consequences to a United States Holder of the
ownership of a Note denominated in a Specified Currency other than the U.S.
dollar ("Foreign Currency Notes") and deals only with Foreign Currency Notes
that are not treated, for federal income tax purposes, as an integrated economic
transaction in conjunction with one or more spot contracts, futures contracts or
similar financial instruments. Persons considering the purchase of Foreign
Currency Notes should consult their own tax advisors with regard to the
application of the United States federal income tax laws to their particular
situations, as well as any consequences arising under the laws of any other
taxing jurisdiction.
If interest payments are made in a Specified Currency to a United States
Holder who is not required to accrue such interest prior to its receipt, such
holder will be required to include in income the U.S. dollar value of the amount
received (determined by translating the Specified Currency received at the "spot
rate" for such Specified Currency on the date such payment is received),
regardless of whether the payment is in fact converted into U.S. dollars. No
exchange gain or loss is recognized with respect to the receipt of such payment.
A United States Holder who is required to accrue interest on a Foreign
Currency Note prior to receipt of such interest (an "Accrual Holder") will be
required to include in income for each taxable year the U.S. dollar value of the
interest that has accrued during such year, determined by translating such
interest at the average rate of exchange for the period or periods during which
such interest accrued. The average rate of exchange for an interest accrual
period is the simple average of the exchange rates for each business day of such
period (or such other average that is reasonably derived and consistently
applied by the holder). An
Accrual Holder may elect to translate interest income at the spot rate on the
last day of the accrual period (or last day of the taxable year in the case of
an accrual period that straddles the holder's taxable year) or on the date the
interest payment is received if such date is within five days of the end of the
accrual period. Any such election shall apply to all debt securities held by the
United States Holder at the beginning of the first taxable year to which the
election applies (or thereafter acquired by the United States Holder) and is
irrevocable without the consent of the IRS. Upon receipt of an interest payment
on such Note or on disposition of the Note, such holder will recognize ordinary
income or loss in an amount equal to the difference between the U.S. dollar
value of such payment (determined by translating any Specified Currency received
at the spot rate for such Specified Currency on the date received or on the date
of disposition) and the U.S. dollar value of the interest income that such
holder has previously included in income with respect to such payment. Any such
gain or loss generally will not be treated as interest income or expense, except
to the extent provided in Treasury Regulations or administrative pronouncements
of the IRS.
S-21
<PAGE>
OID on a Note that is also a Foreign Currency Note will be determined for
any accrual period in the applicable Specified Currency and then translated into
U.S. dollars in the same manner as interest income accrued by a holder on the
accrual basis, as described above. Likewise, a United States Holder will
recognize exchange gain or loss when the OID is paid to the extent of the
difference between the U.S. dollar value of the accrued OID (determined in the
same manner as for accrued interest) and the U.S. dollar value of such payment
(determined by translating any Specified Currency received at the spot rate for
such Specified Currency on the date of payment). For this purpose, all receipts
on a Note will be viewed first as the receipt of any periodic interest payments
called for under the terms of the Note, second as receipts of previously accrued
OID (to the extent thereof), with payments considered made for the earliest
accrual periods first, and thereafter as the receipt of principal.
A United States Holder's tax basis in a Foreign Currency Note will be the
U.S. dollar value of the Specified Currency amount paid for such Foreign
Currency Note determined at the spot rate at the time of such purchase. In the
case of a Note which is denominated in a foreign currency and is traded on an
established securities market, a cash basis taxpayer (or, if it elects, an
accrual basis taxpayer) will determine the U.S. dollar value of the cost of such
Note by translating the amount paid at the spot rate of exchange on the
settlement date of the purchase. A United States Holder who purchases a Note
with any previously owned Specified Currency will recognize exchange gain or
loss at the time of purchase attributable to the difference at the time of
purchase, if any, between his tax basis in such Specified Currency and the fair
market value of the Note in U.S. dollars on the date of purchase. Such gain or
loss will be ordinary income or loss.
For purposes of determining the amount of any gain or loss recognized by a
United States Holder on the sale, exchange, or retirement of a Foreign Currency
Note, the amount realized upon such sale, exchange, or retirement will be the
U.S. dollar value of the amount realized in Specified Currency (other than
amounts attributable to accrued but unpaid interest not previously included in
the holder's income), determined at the time of the sale, exchange, or
retirement and in accordance with the holder's method of accounting. In the case
of a Note which is denominated in a foreign currency and is traded on an
established securities market, a cash basis taxpayer (or, if it elects, an
accrual basis taxpayer) will determine the U.S. dollar value of the amount
realized by translating such amount at the spot rate of exchange on the
settlement date of the sale.
A United States Holder will recognize exchange gain or loss attributable to
the movement in exchange rates between the time of purchase and the time of
disposition (including the sale, exchange or retirement) of a Foreign Currency
Note. Such gain or loss will be treated as ordinary income or loss. Such gain or
loss may be required to be netted against any non-exchange gain or loss in
calculating overall gain or loss on a Note. Under proposed Treasury Regulations
issued on March 17, 1992, which could differ materially from the final Treasury
Regulations, if a Foreign Currency Note is denominated in one of certain
hyperinflationary currencies, generally (a) exchange gain or loss would be
realized with respect to movements in the exchange rate between the beginning
and end of each taxable year (or such shorter period) that such Note was held
and (b) any such exchange loss would be treated as an offset to the accrued
interest income on (and an adjustment to the holder's tax basis in) the Foreign
Currency Note. To the extent such loss exceeds the interest income or there is
exchange gain, it will generally be treated as ordinary loss or gain,
respectively.
A United States Holder's tax basis in any Specified Currency received as
interest on (or OID with respect to), or received on the sale or retirement of,
a Foreign Currency Note will be the U.S. dollar value thereof at the spot rate
at the time the holder received such Specified Currency. Generally, any gain or
loss recognized by a United States Holder on a sale, exchange, or other
disposition of Specified Currency will be ordinary income or loss and will not
be treated as interest income or expense, except to the extent provided in
Treasury Regulations or administrative pronouncements of the IRS.
NON-UNITED STATES HOLDERS
Non-United States Holders generally will not be subject to United States
federal withholding tax on the interest income (including any OID and income
with respect to Foreign Currency Notes) on any Note, provided that (a) the
Non-United States Holder does not actually or constructively own 10% or more of
the
S-22
<PAGE>
voting stock of the Company, (b) the Non-United States Holder is not a
controlled foreign corporation related to the Company through stock ownership,
and the Non-United States Holder provides the correct certification of
non-United States Holder status (c) (which may generally be satisfied by
providing an IRS Form W-8 certifying that the beneficial owner is not a United
States Holder and providing the name and address of the beneficial owner).
A Non-United States Holder generally will not be subject to United States
federal income tax on gain realized from the sale or exchange of a Note. Under
certain conditions, a non-United States Holder may be subject to United States
federal income taxes on gain and interest received with respect to a Note (even
if no withholding of taxes is required). Such income taxation may occur, for
example, if the non-United States Holder (a) is engaged in a trade or business
in the United States and gain and interest on a Note are effectively connected
with the conduct of that trade or business or (b) is an individual present in
the United States for 183 days or more during the taxable year. Such taxation is
beyond the scope of this summary and should be discussed with a tax advisor. If
interest is effectively connected with the conduct of a trade or business in the
United States by a non-United States Holder, withholding of United States
federal income tax may be required unless the non-United States Holder files
with the Company or its Paying Agent an Internal Revenue Service form to the
effect that the interest is so effectively connected.
A Note held by an individual who is not a citizen or resident of the United
States at the time of such holder's death will not be subject to United States
federal estate tax, provided that any interest received on the Note, if received
by the holder at the time of the holder's death, would not be effectively
connected with the conduct of a trade or business in the United States and the
individual does not own, actually or constructively, at the date of death, 10%
or more of the voting stock of the Company.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, if a United States Holder fails to furnish a correct taxpayer
identification number, fails to report dividend and interest income in full, or
fails to certify that such holder has provided a correct taxpayer identification
number and that the holder is not subject to withholding, the Company may
withhold a 31 percent federal backup withholding tax on amounts paid to the
holder. An individual's taxpayer identification number is such person's social
security number.
Payments in respect of a Note made within the United States by the Company
or any of its paying agents are generally subject to backup withholding at a
rate of 31 percent. Information reporting and backup withholding do not apply to
payments made on a Note if the certification described in clause (c) under "Non-
United States Holders" above is received, provided the payor does not have
actual knowledge that the holder is a United States person. Special rules may
apply with respect to the payment of the proceeds from the sale of a Note to or
through foreign offices of certain brokers.
The backup withholding tax is not an additional tax and may be credited
against a holder's regular federal income tax liability or refunded by the IRS
where applicable.
PLAN OF DISTRIBUTION OF NOTES
The Notes are being offered on a continuous basis by the Company through
Goldman, Sachs & Co., Lehman Brothers, Lehman Brothers Inc., Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated, Salomon Brothers Inc and Smith Barney Inc. (the "Agents"), each of
whom has agreed to use its reasonable best efforts to solicit purchases of the
Notes. For Notes with maturities not greater than 40 years from their dates of
issue, the Company will pay each Agent a maximum commission of .125% to .875% of
the principal amount of each Note, depending on its maturity, sold through such
Agent on an agency basis. Commissions on Notes with maturities greater than 40
years will be negotiated at the time of sale and indicated in the applicable
Pricing Supplement. The Company may also sell Notes to an Agent, acting as
principal, for resale to investors and other purchasers. Unless otherwise
indicated in the applicable Pricing Supplement, any Note sold to an Agent as
principal will be purchased by such Agent at a price equal to 100% of the
principal amount thereof less a percentage equal to the commission applicable to
an agency sale of a Note of identical maturity. Any such Note may be resold by
S-23
<PAGE>
such Agent to one or more investors or other purchasers, including other
dealers, from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices related to
prevailing market prices at the time of resale. Unless otherwise indicated in
the applicable Pricing Supplement, if any Note is resold by an Agent to any
dealer at a discount, such discount will not be in excess of the discount
received by such Agent from the Company. After the initial public offering of
any Notes to be resold by an Agent to investors and other purchasers at a fixed
public offering price, the public offering price and discounts may be changed.
The Company has agreed to reimburse the Agents for certain expenses in
connection with the offering of the Notes.
The Notes may also be sold by the Company directly to investors or other
purchasers on its own behalf or to or through such other agents as the Company
shall designate from time to time, provided that such Notes are sold on terms,
including without limitation any commissions payable with respect thereto, in
substance identical to those contained in the Selling Agency Agreement, dated
September 4, 1996, by and between the Company and the Agents. No commission will
be payable on Notes sold directly to investors by the Company.
The Company will have the sole right to accept offers to purchase Notes and
may reject any proposal to purchase Notes in whole or in part. Each Agent will
have the right, in its discretion reasonably exercised, to reject any offer to
purchase Notes received by it in whole or in part.
In addition to offering Notes through the Agents as described herein, the
Company may concurrently offer Euro Secured Medium-Term Notes, Series H, and
Euro Unsecured Medium-Term Notes, Series U-1, described in a separate Prospectus
Supplement that may have terms identical or similar to the terms of the Notes
offered hereby and which will be issued in bearer or registered form. The Euro
Medium-Term Notes may be offered on a continuous basis outside the United States
and, in the case of Euro Medium-Term Notes in bearer form, during a 40-day
restricted period, only to persons who are not United States Persons other than
foreign branches of U.S. financial institutions that agree in writing to comply
with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal
Revenue Code of 1986, as amended, and the regulations thereunder or purchase
during the restricted period only for resale to non-United States Persons
outside the United States pursuant to a selling agency agreement with Goldman
Sachs International Limited, Lehman Brothers International Limited, Merrill
Lynch International, Morgan Stanley International Limited, Salomon Brothers
International Limited and Smith Barney Inc., acting as Agents. Pursuant to such
selling agency agreement, Goldman Sachs International Limited, Lehman Brothers
International Limited, Merrill Lynch International, Morgan Stanley International
Limited, Salomon Brothers International Limited and Smith Barney Inc., may not,
during the restricted period, offer or sell any such Euro Medium-Term Notes in
bearer form in the United States or to United States Persons (other than
financial institutions described above) nor deliver such Euro Medium-Term Notes
in bearer form within the United States; however they may purchase such Euro
Medium-Term Notes as principals for their own accounts for resale (but not for
resale directly or indirectly to a United States Person or to a person within
the United States), and the Company may sell such Notes directly to investors on
its behalf or to other dealers for resale to investors subject to the same
restrictions on offers, sales and deliveries in the United States or to United
States Persons. For this purpose, the term "United States" means the United
States of America (including the States and the District of Columbia), its
territories, its possessions (including the Commonwealth of Puerto Rico) and
other areas subject to its jurisdiction and the term "United States Person"
means any person who is a citizen or resident of the United States, or any
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, or any estate
or trust which is subject to United States federal income tax regardless of the
source of its income. Any Euro Medium-Term Notes so offered and sold will reduce
correspondingly the maximum aggregate principal amount of Notes that may be
offered by this Prospectus Supplement.
The Notes will not have an established trading market when issued. The Notes
will not be listed on any securities exchange. Each Agent may make a market in
the Notes, but such Agent is not obligated to do so and may discontinue any
market-making at any time without notice. There can be no assurance of a
secondary market for any Notes, or that the Notes will be sold.
S-24
<PAGE>
The Agents and certain affiliates thereof engage in transactions with and
perform services for the Company and its affiliates in the ordinary course of
business.
The Company has agreed to indemnify each Agent against certain liabilities,
including certain liabilities under the Securities Act of 1933, as amended (the
"Securities Act"), or to contribute to payments such Agent may be required to
make in respect thereof. Each Agent (and each other dealer, if any, who
purchases Notes for resale to the public) may be deemed to be an "underwriter"
within the meaning of the Securities Act with respect to Notes sold through it.
S-25
<PAGE>
$1,000,000,000
[LOGO]
COMMON STOCK
NO PAR SERIAL PREFERRED STOCK
FIRST MORTGAGE BONDS
UNSECURED DEBT SECURITIES
PacifiCorp, an Oregon corporation (the "Company"), may from time to time
offer (i) shares of its Common Stock ("Additional Common Stock"), (ii) shares of
its No Par Serial Preferred Stock ("Additional Preferred Stock"), (iii) First
Mortgage Bonds ("Additional Bonds") and (iv) other debt securities, including
unsecured debt securities that are subordinated to other debt of the Company
("Unsecured Debt Securities"), all at prices and on terms to be determined at
the time of sale. Additional Common Stock, Additional Preferred Stock,
Additional Bonds and Unsecured Debt Securities (collectively, the "Securities")
may be issued in one or more issuances or series and the aggregate initial
offering price thereof will not exceed $1,000,000,000, of which no more than an
aggregate of $853,491,250 may consist of Additional Preferred Stock and
Unsecured Debt Securities.
This Prospectus will be supplemented by a prospectus supplement or
supplements (each, a "Prospectus Supplement" that will set forth: (i) in the
case of any Additional Common Stock, the number of shares of such Common Stock,
their purchase price, the initial public offering price or prices and other
specific terms of such Common Stock in respect of which this Prospectus is being
delivered; (ii) in the case of any Additional Preferred Stock, the number of
shares of such Preferred Stock, their purchase price, the initial public
offering price or prices, dividend rights and restrictions, voting rights and
redemption or conversion provisions, if any, and other specific terms of such
Preferred Stock in respect of which this Prospectus is being delivered; (iii) in
the case of any Additional Bonds, the form in which such Bonds are to be issued,
their aggregate principal amount, rate or rates and times of payment of
interest, maturity or maturities, the initial public offering price or prices,
redemption or repurchase provisions, if any, and other specific terms of such
Bonds in respect of which this Prospectus is being delivered; and (iv) in the
case of any Unsecured Debt Securities, their aggregate principal amount, rate of
interest, maturity, the initial public offering price or prices, redemption
provisions, if any, and other specific terms of such Unsecured Debt Securities
in respect of which this Prospectus is being delivered. See "Description of
Capital Stock," "Description of Additional Bonds" and "Description of Unsecured
Debt Securities" herein.
The Common Stock of the Company is listed on the New York Stock Exchange
(the "NYSE") and the Pacific Stock Exchange (the "PSE") (Symbol: PPW). The
Additional Common Stock will be listed, subject to notice of issuance, on those
exchanges. The $1.98 No Par Serial Preferred Stock, Series 1992 (the "Series
1992 Preferred Stock") of the Company is listed on the NYSE (Symbol: PPW E). No
other class or series of Preferred Stock of the Company is listed on any
exchange, although the Preferred Securities, Series A of PacifiCorp Capital I, a
Delaware business trust, all of the common securities of which are owned by the
Company, are listed on the NYSE (Symbol: PPW PrA). The Junior Subordinated
Deferrable Interest Debentures, Series A and Series B of the Company (the
"Series A Debentures" and the "Series B Debentures," respectively) are also
listed on the NYSE (Symbols: PCQ and PCX, respectively).
The Securities may be sold directly by the Company, through agents
designated from time to time or through underwriters or dealers. See "Plan of
Distribution." If any agents of the Company or underwriters are involved in the
sale of any Securities in respect of which this Prospectus is being delivered,
the names of such agents or underwriters and any applicable commissions or
discounts will be set forth in a Prospectus Supplement. The net proceeds to the
Company from such sale also will be set forth in a Prospectus Supplement.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement relating to the Securities offered.
THE DATE OF THIS PROSPECTUS IS AUGUST 9, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CLASSES OR
SERIES OF SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE APPLICABLE
EXCHANGES, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (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 the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 10549, 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,
Citicorp Center, 500 West Madison Street, Suite 1400, 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, at prescribed
rates. The Commission maintains a Website that contains reports, proxy and
information statements and other information regarding reporting companies under
the Exchange Act, including the Company at http://www.sec.gov. The Common Stock
of the Company is listed on the NYSE and the PSE. The Series 1992 Preferred
Stock, the Series A Debentures and the Series B Debentures are also listed on
the NYSE. 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-3
(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.
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:
(i) The Company's Annual Report on Form 10-K for the year ended December
31, 1995, as amended by Form 10-K/A dated June 24, 1996;
(ii) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996; and
(iii) The Company's Current Reports on Form 8-K dated January 16, 1996,
February 12, 1996 and August 5, 1996.
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
termination of this offering shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing of such
documents (such documents, and the documents enumerated above, being hereinafter
referred to as "Incorporated Documents"; PROVIDED, HOWEVER, that all documents
subsequently filed by the Company pursuant to Section 13 or 14 of the Exchange
Act in each year during which the offering made by this
2
<PAGE>
Prospectus is in effect prior to the filing with the Commission of the Company's
Annual Report on Form 10-K covering such year shall not be Incorporated
Documents or be incorporated by reference in this Prospectus or be a part hereof
from and after such filing of such Annual Report on Form 10-K).
Any statement contained in an Incorporated Document shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed Incorporated
Document modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS IS DELIVERED,
ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE
INCORPORATED DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE THEREIN. REQUESTS SHOULD BE
DIRECTED TO PACIFICORP, 700 NE MULTNOMAH, SUITE 1600, PORTLAND, OREGON 97232,
ATTENTION: RICHARD T. O'BRIEN, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER, TELEPHONE NUMBER (503) 731-2000. THE INFORMATION RELATING TO THE
COMPANY CONTAINED IN THIS PROSPECTUS DOES NOT PURPORT TO BE COMPREHENSIVE AND
SHOULD BE READ TOGETHER WITH THE INFORMATION CONTAINED IN THE INCORPORATED
DOCUMENTS.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR IN ANY PROSPECTUS SUPPLEMENT,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT DO
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY OR THEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT NOR
ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR ITS
SUBSIDIARIES SINCE THE DATE OF THIS PROSPECTUS OR THE DATE OF THE LATEST
PROSPECTUS SUPPLEMENT, AS THE CASE MAY BE.
3
<PAGE>
THE COMPANY
The Company is an electric utility headquartered in Portland, Oregon 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 100% of each of Powercor Australia Limited ("Powercor"), an Australian
electric distribution company, and Pacific Telecom, Inc. ("Pacific Telecom"), a
leading provider of local telephone exchange service to rural and suburban
markets.
The Company furnishes electric service to approximately 1,300,000 customers
in portions of seven western states: California, Idaho, Montana, Oregon, Utah,
Washington and Wyoming. Powercor serves approximately 540,000 customers in
suburban Melbourne and the western and central regions of the State of Victoria
in southeast Australia. 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 in six states and is engaged in sales of capacity in and
operation of a submarine fiber optic cable between the United States and Japan.
PacifiCorp Holdings, Inc. also has interests in the independent power and
cogeneration business through its wholly-owned subsidiary, Pacific Generation
Company, and continues to liquidate portions of the loan, leasing and real
estate investment portfolio of its wholly-owned subsidiary, PacifiCorp Financial
Services, Inc. ("PFS"). PFS expects to retain only its tax advantaged
investments in leveraged lease assets (primarily aircraft) and affordable
housing, and is limiting its pursuit of tax-advantaged investment opportunities
to affordable housing.
The principal executive offices of the Company are located at 700 NE
Multnomah, Suite 1600, Portland, Oregon 97232; the telephone number is (503)
731-2000.
USE OF PROCEEDS
Unless otherwise indicated in a Prospectus Supplement, the net proceeds to
be received by the Company from the issuance and sale of the Securities will
initially become part of the general funds of the Company and will be used to
repay all or a portion of the Company's short-term borrowings outstanding at the
time of issuance of the Securities or may be applied to utility asset purchases,
new construction or other corporate purposes, including the refunding of
long-term debt. Reference is made to the Incorporated Documents with respect to
the Company's capital requirements and its general financing plans.
DESCRIPTION OF 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") and 16,000,000 shares of No Par Serial Preferred Stock ("No Par Serial
Preferred Stock"); and 750,000,000 shares of Common Stock ("Common Stock").
Following is a brief summary of the relative rights and preferences of the
various classes of the Company's capital stock, which does not purport to be
complete. For a complete description of the relative rights and preferences of
the various classes of the Company's capital stock, reference is made to Article
III of the Company's Second Restated Articles of Incorporation, as amended (the
"Articles"), a copy of which is an exhibit to the Registration Statement.
GENERAL. The Company's Articles provide that Serial Preferred Stock and 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 (i) the dividend rate or rates,
which may be subject to adjustment, (ii) the date or dates from which dividends
shall be cumulative, (iii) the dividend payment dates, (iv) the amount to be
paid upon redemption, if redeemable, or in the event of voluntary liquidation,
dissolution or winding up of the Company, (v) the rights of conversion, if any,
into
4
<PAGE>
shares of Common Stock and the terms and conditions of any such conversion, (vi)
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
(vii) with respect to the No Par Serial Preferred Stock, voting rights.
The specific terms of the series of Additional Preferred Stock to which this
Prospectus relates, including the dividend rate (or, if the rate is not fixed,
the method of determining the dividend rate) and restrictions, the liquidation
preference per share, the voting rights for shares of such series, redemption or
conversion provisions, if any, and other specific terms of such series, will be
set forth in a Prospectus Supplement.
DIVIDENDS. Each class of Preferred Stock is entitled, pari passu with each
other class and in preference to the Common Stock, to accumulate dividends at
the rate or rates, which may be subject to adjustment, determined in accordance
with the Articles at the time of creation of each series. Subject to the prior
rights of each class of Preferred Stock (and to the rights of any other classes
of preferred stock hereafter authorized), the Common Stock alone is entitled to
all dividends other than those payable in respect of each class of Preferred
Stock.
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 and to
"Description of Additional Bonds -- Dividend Restrictions" herein.
LIQUIDATION RIGHTS. Upon involuntary liquidation of the Company, each class
of Preferred Stock is entitled, pari passu with each other class and in
preference to the Common Stock, to the stated value thereof or, in the case of
the No Par Serial Preferred Stock, the amount fixed as the consideration
therefor in the resolution creating the series of No Par Serial Preferred Stock,
in each case plus accrued dividends to the date of distribution.
Upon voluntary liquidation of the Company, each outstanding series of No Par
Serial Preferred Stock (other than the $7.70 Series and the $7.48 Series, which
are entitled to $100 per share, and the 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 class and in
preference to the Common Stock.
Subject to the rights of each class of Preferred Stock (and to the rights of
any other class of preferred 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 each class of Preferred Stock.
VOTING RIGHTS. The holders of the 5% Preferred Stock, Serial Preferred
Stock and Common Stock are entitled to one vote for each share held on matters
presented to shareholders generally. The holders of the No Par Serial Preferred
Stock are entitled to such voting rights as are set forth in the Articles upon
creation of each series. Certain series of No Par Serial Preferred Stock may not
be entitled to vote on matters presented to shareholders generally, including
the election of directors. During any periods when dividends on any class of
Preferred Stock are in default in an amount equal to four full quarterly
payments or more per share, the holders of all classes of 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 Preferred Stock.
5
<PAGE>
None of the Company's outstanding shares of capital stock has 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.
None of the Company's outstanding shares of capital stock has any 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 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:
(i) The Related Person has no direct or indirect interest in the
proposed transaction except as a shareholder;
(ii) 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 any Voting Stock acquired by it;
(iii) At least two-thirds of the Continuing Directors expressly approved
in advance the acquisition of the Voting Stock that caused such Related
Person to become a Related Person; or
(iv) The transaction is approved by at least two-thirds of the
Continuing Directors.
This provision of the Articles may be amended or replaced only upon the
approval of the holders of at least 80% of the Voting Stock.
CLASSIFICATION OF BOARD; REMOVAL. The Board of Directors of the Company is
divided into three classes, designated Class I, Class II and Class III, each
class as nearly equal in number as possible. The directors in each class serve
staggered three-year terms such that one-third (or as close thereto as possible)
of the Board of Directors is elected each year. A vote of at least 80% of the
votes entitled to be cast at an election of directors is required to remove a
director without cause, and at least two-thirds of the votes entitled to be cast
at an election of directors are required to remove a director for cause. Any
amendment or revision of this provision requires the approval of at least 80% of
the votes entitled to be cast at an election of directors.
DESCRIPTION OF ADDITIONAL BONDS
GENERAL. Additional Bonds may be issued from time to time under the
Company's Mortgage and Deed of Trust, dated as of January 9, 1989, as amended
and supplemented (the "Mortgage"), with The Chase Manhattan Bank (formerly known
as Chemical Bank), as successor trustee (the "Mortgage Trustee"). The following
summary is subject to the provisions of and is qualified by reference to the
Mortgage, a copy of which is an exhibit to the Registration Statement. Whenever
particular provisions or defined terms in the Mortgage 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 Mortgage
unless otherwise noted.
The Company assumed the Mortgages and Deeds of Trust, as supplemented, of
Pacific Power & Light Company (the "Pacific Mortgage") and Utah Power & Light
Company (the "Utah Mortgage") (each, a "Class "A" Mortgage") as the surviving
corporation in its 1989 merger with PacifiCorp, a Maine corporation, and Utah
Power & Light Company, a Utah corporation. The first mortgage bonds issued under
these
6
<PAGE>
Class "A" Mortgages were secured by a first mortgage lien on certain properties
owned by the particular company prior to the merger and on improvements,
extensions and additions to, and renewals and replacements of, such properties.
The Mortgage was a second mortgage lien on these properties. The Company is
currently in the process of discharging the Pacific and Utah Mortgages, which
discharge will be completed prior to the issuance of any Additional Bonds.
The Mortgage provides that in the event of the merger or consolidation of
another electric utility company with or into the Company or the conveyance or
transfer to the Company by another such company of all or substantially all of
such company's property that is of the same character as Property Additions
under the Mortgage, an existing mortgage constituting a first lien on operating
properties of such other company may be designated by the Company as an
additional Class "A" Mortgage. (Section 11.06) Bonds thereafter issued pursuant
to such additional mortgage would be Class "A" Bonds and could provide the basis
for the issuance of Bonds under the Mortgage.
The Company expects to issue Additional Bonds in the form of fully
registered bonds and, except as may be set forth in any Prospectus Supplement
relating to such Additional Bonds, in denominations of $1,000 and any multiple
thereof. They may be transferred without charge, other than for applicable taxes
or other governmental charges, at the offices of the Mortgage Trustee, New York,
New York. Any Additional Bonds issued will be equally and ratably secured with
all other bonds issued under the Mortgage.
MATURITY AND INTEREST PAYMENTS. Reference is made to the Prospectus
Supplement relating to any Additional Bonds for the date or dates on which such
Bonds will mature; the rate or rates per annum at which such Bonds will bear
interest; and the times at which such interest will be payable. These terms and
conditions, as well as the terms and conditions relating to redemption and
purchase referred to under "Redemption or Purchase of Additional Bonds" below,
will be as established in or pursuant to resolutions of the Board of Directors
of the Company at the time of issuance of the Additional Bonds.
REDEMPTION OR PURCHASE OF ADDITIONAL BONDS. The Additional Bonds may be
redeemable, in whole or in part, on not less than 30 days' notice either at the
option of the Company or as required by the Mortgage. The Additional Bonds may
be subject to repurchase at the option of the holder.
Reference is made to the Prospectus Supplement relating to any Additional
Bonds for the redemption or repurchase terms and other specific terms of such
Bonds.
If, at the time notice of redemption is given, the redemption moneys are not
held by the Mortgage Trustee, the redemption may be made subject to their
receipt on or before the date fixed for redemption and such notice shall be of
no effect unless such moneys are so received.
While the Mortgage, as described below, contains provisions for the
maintenance of the Mortgaged and Pledged Property, the Mortgage does not permit
redemption of Bonds pursuant to these provisions. There is no sinking or
analogous fund in the Mortgage.
Cash deposited under any provisions of the Mortgage may be applied (with
certain exceptions) to the redemption or repurchase of Bonds of any series.
(Articles XII and XIII)
SECURITY AND PRIORITY. The Bonds issued under the Mortgage will be secured
by a first mortgage lien on certain utility property owned from time to time by
the Company and/or Class "A" Bonds held by the Mortgage Trustee. The Lien of the
Mortgage is subject to Excepted Encumbrances, including tax and construction
liens, purchase money liens and certain other exceptions.
There are excepted from the Lien of the Mortgage all cash and securities
(except those specifically deposited); equipment, materials or supplies held for
sale or other disposition; any fuel and similar consumable materials and
supplies; automobiles, other vehicles, aircraft and vessels; timber, minerals,
mineral rights and royalties; receivables, contracts, leases and operating
agreements; electric energy, gas, water, steam, ice and other products for sale,
distribution or other use; natural gas wells; gas transportation lines or other
property used in the sale of natural gas to customers or to a natural gas
distribution or pipeline company, up to the point of connection with any
distribution system; the Company's interest in the Wyodak Facility; and all
properties that have been released from the Pacific Mortgage or the Utah
Mortgage and that PacifiCorp,
7
<PAGE>
a Maine corporation, or Utah Power & Light Company, a Utah corporation,
contracted to dispose of, but title to which had not passed at the date of the
Mortgage. The Company has reserved the right, without any consent or other
action by holders of Bonds of the Eighth Series or any subsequently created
series of Bonds (including the Additional Bonds), to amend the Mortgage in order
to except from the Lien of the Mortgage allowances allocated to steam-electric
generating plants owned by the Company, or in which the Company has interests,
pursuant to Title IV of the Clean Air Act Amendments of 1990, as now in effect
or as hereafter supplemented or amended.
The Mortgage contains provisions subjecting after-acquired property to the
Lien thereof. These provisions may be limited, at the option of the Company, in
the case of consolidation or merger (whether or not the Company is the surviving
corporation), conveyance or transfer of all or substantially all of the utility
property of another electric utility company to the Company or sale of
substantially all of the Company's assets. In addition, after-acquired property
may be subject to a Class "A" Mortgage, purchase money mortgages and other liens
or defects in title. (Section 18.03)
The Mortgage provides that the Mortgage Trustee shall have a lien upon the
mortgaged property, prior to the holders of Bonds, for the payment of its
reasonable compensation and expenses and for indemnity against certain
liabilities. (Section 19.09)
ISSUANCE OF ADDITIONAL BONDS. The maximum principal amount of Bonds which
may be issued under the Mortgage is not limited. Bonds of any series may be
issued from time to time on the basis of: (i) Class "A" Bonds (which need not
bear interest) delivered to the Mortgage Trustee; (ii) 70% of qualified Property
Additions after adjustments to offset retirements; (iii) retirement of Bonds or
certain prior lien bonds; and/ or (iv) deposits of cash. With certain exceptions
in the case of (i) and (iii) above, the issuance of Bonds is subject to Adjusted
Net Earnings of the Company for 12 consecutive months out of the preceding 15
months, before income taxes, being at least twice the Annual Interest
Requirements on all Bonds at the time outstanding, including the issue of
Additional Bonds, all outstanding Class "A" Bonds held other than by the
Mortgage Trustee or by the Company, and all other indebtedness secured by a lien
prior to the Lien of the Mortgage. In general, interest on variable interest
bonds, if any, is calculated using the rate then in effect. (Articles IV through
VII)
Property Additions generally include electric, gas, steam and/or hot water
utility property but not fuel, securities, automobiles, other vehicles or
aircraft, or property used principally for the production or gathering of
natural gas. (Section 1.04)
The issuance of Bonds on the basis of Property Additions subject to prior
liens is restricted. Bonds may, however, be issued against the deposit of Class
"A" Bonds. (Sections 1.04 to 1.07 and 4.01 to 7.01)
RELEASE AND SUBSTITUTION OF PROPERTY. Property subject to the Lien of the
Mortgage may be released upon the basis of: (i) the release of such property
from the Lien of a Class "A" Mortgage; (ii) the deposit of cash or, to a limited
extent, purchase money mortgages; (iii) Property Additions, after making
adjustments for certain prior lien bonds outstanding against Property Additions;
and/or (iv) waiver of the right to issue Bonds. Cash may be withdrawn upon the
bases stated in (i), (iii) and (iv) above. Property that does not constitute
Funded Property may be released without funding other property. Similar
provisions are in effect as to cash proceeds of such property. The Mortgage
contains special provisions with respect to certain prior lien bonds deposited
and disposition of moneys received on deposited prior lien bonds. (Sections
1.05, 7.02, 7.03, 9.05, 10.01 to 10.04 and 13.03 to 13.09)
CERTAIN COVENANTS. The Mortgage contains a number of covenants by the
Company for the benefit of bondholders, including provisions requiring the
Company to maintain the Mortgaged and Pledged Property as an operating system or
systems capable of engaging in all or any of the generating, transmission,
distribution or other utility businesses described in the Mortgage. (Article IX;
Section 9.06)
DIVIDEND RESTRICTIONS. The Mortgage provides that the Company may not
declare or pay dividends (other than dividends payable solely in shares of
Common Stock) on any shares of Common Stock if, after giving effect to such
declaration or payment, the Company would not be able to pay its debts as they
become
8
<PAGE>
due in the usual course of business. (Section 9.07) 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 for information
relating to other restrictions.
FOREIGN CURRENCY DENOMINATED BONDS. The Mortgage authorizes the issuance of
Bonds denominated in foreign currencies, PROVIDED that the Company deposits with
the Mortgage Trustee a currency exchange agreement with an entity having, at the
time of such deposit, a financial rating at least as high as that of the Company
that, in the opinion of an independent expert, gives the Company at least as
much protection against currency exchange fluctuation as is usually obtained by
similarly situated borrowers. The Company believes that such a currency exchange
agreement will provide effective protection against currency exchange
fluctuations. However, if the other party to the exchange agreement defaults and
the foreign currency is valued higher at the date of maturity than at the date
of issuance of the relevant Bonds, holders of such Bonds would have a claim on
the assets of the Company which is greater than that to which holders of
dollar-denominated Bonds issued at the same time would be entitled.
THE MORTGAGE TRUSTEE. The Chase Manhattan Bank acts as lender and agent
under loan agreements with the Company and affiliates of the Company, and serves
as trustee under indentures and other agreements involving the Company and its
affiliates.
MODIFICATION. The rights of bondholders may be modified with the consent of
holders of 60% of the Bonds, or, if less than all series of Bonds are adversely
affected, the consent of the holders of 60% of the series of Bonds adversely
affected. In general, no modification of the terms of payment of principal,
premium, if any, or interest and no modification affecting the Lien or reducing
the percentage required for modification is effective against any bondholder
without the consent of such holder. (Article XXI)
Unless there is a Default under the Mortgage, the Mortgage Trustee generally
is required to vote Class "A" Bonds held by it with respect to any amendment of
the applicable Class "A" Mortgage proportionately with the vote of the holders
of all Class "A" Bonds then actually voting. (Section 11.03)
DEFAULTS AND NOTICE THEREOF. Defaults are defined in the Mortgage as:
default in payment of principal; default for 60 days in payment of interest or
an installment of any fund required to be applied to the purchase or redemption
of any Bonds; default in payment of principal or interest with respect to
certain prior lien bonds; certain events in bankruptcy, insolvency or
reorganization; default in other covenants for 90 days after notice; and the
existence of any default under a Class "A" Mortgage which permits the
declaration of the principal of all of the bonds secured by such Class "A"
Mortgage and the interest accrued thereupon due and payable. (Section 15.01) An
effective default under any Class "A" Mortgage or under the Mortgage will result
in an effective default under all such mortgages. The Mortgage Trustee may
withhold notice of default (except in payment of principal, interest or funds
for retirement of Bonds) if it determines that it is not detrimental to the
interests of the bondholders. (Section 15.02)
The Mortgage Trustee or the holders of 25% of the Bonds may declare the
principal and interest due and payable on Default, but a majority may annul such
declaration if such Default has been cured. (Section 15.03) No holder of Bonds
may enforce the Lien of the Mortgage without giving the Mortgage Trustee written
notice of a Default and unless the holders of 25% of the Bonds have requested
the Mortgage Trustee to act and offered it reasonable opportunity to act and
indemnity satisfactory to it against the costs, expenses and liabilities to be
incurred thereby and the Mortgage Trustee shall have failed to act. (Section
15.16) The holders of a majority of the Bonds may direct the time, method and
place of conducting any proceedings for any remedy available to the Mortgage
Trustee or exercising any trust or power conferred on the Mortgage Trustee.
(Section 15.07) The Mortgage Trustee is not required to risk its funds or incur
personal liability if there is reasonable ground for believing that repayment is
not reasonably assured. (Section 19.08)
9
<PAGE>
DESCRIPTION OF UNSECURED DEBT SECURITIES
GENERAL
The Unsecured Debt Securities may be issued from time to time in one or more
series under an indenture or indentures (each, an "Indenture"), between the
Company and the trustees named below, or other bank or trust company to be named
as trustee (each, an "Indenture Trustee"). The Unsecured Debt Securities will be
unsecured obligations of the Company. If so provided in the Prospectus
Supplement, the Unsecured Debt Securities will be subordinated obligations of
the Company ("Subordinated Debt Securities"). Except as may otherwise be
described in the Prospectus Supplement, Subordinated Debt Securities will be
issued under the Indenture, dated as of May 1, 1995, as supplemented (the
"Subordinated Indenture"), between the Company and The Bank of New York, as
trustee. Except as may otherwise be described in the Prospectus Supplement,
Unsecured Debt Securities other than Subordinated Debt Securities will be issued
under an Indenture, dated as of September 1, 1996 (the "Unsecured Indenture"),
between the Company and The Chase Manhattan Bank, as Trustee. Except as
otherwise specified herein, the term "Indenture" includes the Subordinated
Indenture and the Unsecured 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 or incorporated by
reference in 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 Indenture provides that Unsecured Debt Securities 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. (Section 2.01)
The Indenture does not limit the aggregate principal amount of Unsecured Debt
Securities which may be issued thereunder. The Company's 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, 1996,
approximately $1 billion of unsecured debt was outstanding and approximately
$1.2 billion of additional unsecured debt could have been issued under this
provision. The Indenture does not contain any provisions that would limit the
ability of the Company to incur indebtedness or that would afford holders of
Unsecured Debt Securities protection in the event of a highly leveraged or
similar transaction involving the Company or in the event of a change of
control.
Reference is made to the Prospectus Supplement which will accompany this
Prospectus for the following terms of the series of Unsecured Debt Securities
being offered thereby: (i) the specific title of such Unsecured Debt Securities;
(ii) any limit on the aggregate principal amount of such Unsecured Debt
Securities; (iii) the date or dates on which the principal of such Unsecured
Debt Securities is payable; (iv) the rate or rates at which such Unsecured Debt
Securities will bear interest or the manner of calculation of such rate or
rates; (v) the date or dates from which such interest shall accrue, the interest
payment dates on which such interest will be payable or the manner of
determination of such interest payment dates and the record dates for the
determination of holders to whom interest is payable on any such interest
payment dates; (vi) the period or periods within which, the price or prices at
which and the terms and conditions upon which such Unsecured Debt Securities may
be redeemed, in whole or in part, at the option of the Company; (vii) the
obligation, if any, of the Company to redeem or purchase such Unsecured Debt
Securities pursuant to any sinking fund or analogous provisions or at the option
of the holder thereof and the period or periods, the price or prices at which
and the terms and conditions upon which such Unsecured Debt Securities shall be
redeemed or purchased, in whole or part, pursuant to such obligation; (viii) the
form of such Unsecured Debt Securities; (ix) if other than denominations of
$1,000 (except with respect to Subordinated Debt Securities issued pursuant to
the Subordinated Indenture, in which case other than denominations of $25) or,
in either case, any integral multiple thereof, the denominations in which such
Unsecured Debt Securities shall be issuable; (x) whether such Unsecured Debt
Securities are issuable as a global security, and in such case, the identity of
the depository; and (xi) any and all other terms with respect to such series.
(Section 2.01) For Subordinated Debt Securities issued pursuant to the
Subordinated Indenture, the applicable Prospectus
10
<PAGE>
Supplement will also describe (a) the right, if any, to extend the interest
payment periods and the duration of such extension and (b) the subordination
terms of the Subordinated Debt Securities to the extent such subordination terms
vary from those described under "-- Subordination" below.
SUBORDINATION
The Subordinated Indenture provides that Subordinated Debt Securities are
subordinate and junior in right of payment to the prior payment in full of all
Senior Indebtedness (as defined below) of the Company as provided in the
Subordinated Indenture. No payment of principal of (including redemption and
sinking fund payments), or premium, if any, or interest on, the Subordinated
Debt Securities 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 Subordinated Debt Securities are entitled to receive or retain any
payment. The rights of the holders of the Subordinated Debt Securities 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 Subordinated Debt Securities (including the Subordinated Debt
Securities to be offered hereby) are paid in full. (Sections 14.01 to 14.04 of
the Subordinated Indenture)
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 Subordinated Indenture or
thereafter incurred, created or assumed:
(i) all indebtedness of the Company evidenced by notes (including
indebtedness owed to banks), debentures, bonds or other securities sold by
the Company for money;
(ii) all indebtedness of others of the kinds described in the preceding
clause (i) 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
(iii) all renewals, extensions or refundings of indebtedness of the
kinds described in either of the preceding clauses (i) and (ii);
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 Subordinated Debt Securities. Such Senior Indebtedness shall
continue to be Senior Indebtedness and entitled to the benefits of the
subordination provisions contained in the Subordinated Indenture
irrespective of any amendment, modification or waiver of any term of such
Senior Indebtedness. (Section 1.01 of the Subordinated Indenture)
The Subordinated Indenture does not limit the aggregate amount of Senior
Indebtedness which may be issued. As of June 30, 1996, Senior Indebtedness of
the Company aggregated approximately $3.6 billion.
As the Subordinated Debt Securities will be issued by the Company, the
Subordinated Debt Securities effectively will be subordinate to all obligations
of the Company's subsidiaries, and the rights of the Company's creditors,
including holders of Bonds issued under the Mortgage, Subordinated Debt
Securities and any other Unsecured Debt Securities issued by the Company, to
participate in the 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.
11
<PAGE>
CERTAIN COVENANTS OF THE COMPANY
If, with respect to Subordinated Debt Securities issued pursuant to the
Subordinated Indenture, 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 described in
clause (i) in the last sentence under "-- General" above, the Company will not,
until all defaulted interest on the Subordinated Debt Securities and all
interest accrued on the Subordinated Debt Securities during any such extended
interest payment period and all principal and premium, if any, then due and
payable on the Subordinated Debt Securities 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 Common Stock, 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 that are
subject to mandatory redemption or sinking fund requirements, PROVIDED that the
aggregate stated value of all such series of Preferred Stock outstanding at the
time of any such payment does not exceed five percent of the aggregate of (a)
the total principal amount of all bonds or other securities representing secured
indebtedness issued or assumed by the Company and then outstanding and (b) 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 of the Subordinated
Indenture) As of June 30, 1996, the aggregate stated value of such series of
Preferred Stock outstanding was approximately $219 million, which represented
approximately three percent of the aggregate of clauses (a) and (b) above at
such date.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Each series of Unsecured Debt Securities will be issued in registered form
and in certificated form or will be represented by one or more global
securities. If not represented by one or more global securities, Unsecured Debt
Securities may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed) or exchange, at the office of the
Registrar or at the office of any transfer agent designated by the Company for
such purpose with respect to any series of Unsecured Debt Securities and
referred to in an applicable Prospectus Supplement, without service charge and
upon payment of any taxes and other governmental charges as described in the
Indenture. Such transfer or exchange will be effected upon the registrar or such
transfer agent, as the case may be, being satisfied with the documents of title
and identity of the person making the request. (Section 2.05) If a Prospectus
Supplement refers to any transfer agent (in addition to the registrar) initially
designated by the Company with respect to any series of Unsecured Debt
Securities, the Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts, except that the Company will be required to maintain a
transfer agent in each place of payment for such series. (Section 4.02) The
Company may at any time designate additional transfer agents with respect to any
series of Unsecured Debt Securities. The Unsecured Debt Securities may be
transferred or exchanged without service charge, other than any tax or
governmental charge imposed in connection therewith. (Section 2.05)
In the event of any redemption in part, the Company shall not be required to
(i) issue, register the transfer of or exchange any Unsecured Debt Security
during a period beginning at the opening of business 15 days before any
selection for redemption of Unsecured Debt Securities of like tenor and of the
series of which such Unsecured Debt Security is a part, and ending at the close
of business on the earliest date in which the relevant notice of redemption is
deemed to have been given to all holders of Unsecured Debt Securities of like
tenor and of such series to be redeemed and (ii) register the transfer of or
exchange any Unsecured Debt Securities so selected for redemption, in whole or
in part, except the unredeemed portion of any Unsecured Debt Security being
redeemed in part. (Section 2.05)
12
<PAGE>
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the Prospectus Supplement, payment of
principal of and premium (if any) on any Unsecured Debt Security will be made
only against surrender to the Paying Agent of such Unsecured Debt Security.
Unless otherwise indicated in the Prospectus Supplement, principal of and any
premium and interest, if any, on Unsecured Debt Securities will be payable,
subject to any applicable laws and regulations, at the office of such Paying
Agent or Paying Agents as the Company may designate from time to time, except
that at the option of the Company payments on the Unsecured Debt Securities may
be made (i) by checks mailed by the Indenture Trustee to the holders entitled
thereto at their registered addresses as specified in the Register for such
Unsecured Debt Securities or (ii) to a holder of $1,000,000 or more in aggregate
principal amount of such Unsecured Debt Securities who has delivered a written
request to the Indenture Trustee at least 14 days prior to the relevant 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 Unsecured Debt Security will be made only upon surrender of such
Unsecured Debt Security to the Indenture Trustee. Unless otherwise indicated in
the Prospectus Supplement, payment of interest on an Unsecured Debt Security on
any Interest Payment Date will be made to the person in whose name such
Unsecured Debt Security (or Predecessor Security) is registered at the close of
business on the Regular Record Date for such interest payment. (Sections 2.03
and 4.03)
The Company will act as Paying Agent with respect to the Unsecured Debt
Securities. 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 Unsecured Debt Securities. (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 Unsecured Debt Security 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 Unsecured Debt Security will thereafter look
only to the Company for payment thereof. (Section 11.06)
GLOBAL DEBENTURES
If any Unsecured Debt Securities of a series are represented by one or more
global securities, the Prospectus Supplement will describe the circumstances, if
any, under which beneficial owners of interests in any such global Unsecured
Debt Security may exchange such interests for Unsecured Debt Securities of such
series and of like tenor and principal amount in any authorized form and
denomination. Principal of and premium, if any, and interest on a global
Unsecured Debt Security will be payable in the manner described in the
Prospectus Supplement. (Section 2.11)
The specific terms of the depository arrangement with respect to any portion
of a series of Unsecured Debt Securities to be represented by a global Unsecured
Debt Security will be described in the Prospectus Supplement.
AGREED TAX TREATMENT
The Subordinated Indenture provides that each holder of a Subordinated Debt
Security, each person that acquires a beneficial ownership interest in a
Subordinated Debt Security and the Company agree that for United States federal,
state and local tax purposes it is intended that such Subordinated Debt Security
constitutes indebtedness. (Section 13.12 of the Subordinated Indenture)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Indenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of the Unsecured Debt Securities 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
Unsecured Debt Securities; PROVIDED that no such modification may, without the
consent of the holder of each outstanding Unsecured Debt Security affected
13
<PAGE>
thereby, (i) extend the fixed maturity of any Unsecured Debt Securities 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, (ii) reduce the percentage of Unsecured Debt Securities, the
holders of which are required to consent to any such supplemental indenture or,
in the case of the Unsecured Indenture, (iii) reduce the percentage of Unsecured
Debt Securities, the holders of which are required to waive any default and its
consequences or modify any provision of the Indenture relating to the percentage
of Unsecured Debt Securities (except to increase such percentage) required to
rescind and annul any declaration of principal due and payable upon an Event of
Default. (Section 9.02)
In addition, the Company and the Indenture Trustee may execute, without the
consent of any holder of Unsecured Debt Securities (including the Unsecured Debt
Securities being offered hereby), any supplemental indenture for certain other
usual purposes, including the creation of any new series of Unsecured Debt
Securities. (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 Unsecured Debt Securities:
(i) failure for 30 days (except with respect to Subordinated Debt
Securities issued under the Subordinated Indenture, in which case failure
for 10 days) to pay interest on the Unsecured Debt Securities of that series
when due; or
(ii) failure to pay principal of or premium, if any, on the Unsecured
Debt Securities 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
(iii) failure to observe or perform any other covenant (other than those
specifically relating to one or more other series) contained in the
Indenture under which Unsecured Debt Securities of that series were issued
for 90 days after notice; or
(iv) 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 and, in the case of the Unsecured Indenture,
such order shall have continued unvacated and unstayed for a period of 90
days; 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
(v) 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)
The holders of a majority in aggregate outstanding principal amount of any
series of the Unsecured Debt Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Indenture Trustee for that series. (Section 6.06) The applicable Indenture
Trustee or the holders of not less than 25% in aggregate outstanding principal
amount of any particular series of the Unsecured Debt Securities may declare the
principal due and payable immediately upon an Event of
14
<PAGE>
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 such Indenture Trustee. (Sections 6.01 and 6.06)
The holders of a majority in aggregate outstanding principal amount of all
series of the Unsecured Debt Securities issued under the Indenture and affected
thereby may, on behalf of the holders of all the Unsecured Debt Securities 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 applicable Indenture 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 Unsecured Debt
Securities of any series (except in each case for certain obligations to
register the transfer or exchange of Unsecured Debt Securities, replace stolen,
lost or mutilated Unsecured Debt Securities, maintain paying agencies and hold
moneys for payment in trust) if the Company deposits with the Indenture Trustee,
in trust, moneys or Government Obligations, in an amount sufficient to pay all
the principal of, and interest on, the Unsecured Debt Securities of such series
on the dates such payments are due in accordance with the terms of such
Unsecured Debt Securities and, if, among other things, such Unsecured Debt
Securities are not due and payable, or are not to be called for redemption,
within one year, the Company delivers to the Indenture Trustee an Opinion of
Counsel to the effect that the holders of Unsecured Debt Securities 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 (i)
the Company delivers to the Indenture 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 Subordinated
Debt Securities 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) such deposit shall
not result in the Company, the Indenture Trustee or the trust resulting from the
defeasance being deemed an investment company under the Investment Company Act
of 1940, as amended and (ii), in the case of the Unsecured Indenture, no event
or condition shall exist that would prevent the Company from making payments of
the principal of (and premium, if any) or interest on the Securities on the date
of such deposit or at any time during the period ending on the ninety-first day
after the date of such deposit (it being understood that this condition shall
not be deemed satisfied until the expiration of such period), then, in such
event, the Company will be deemed to have paid and discharged the entire
indebtedness on the Unsecured Debt Securities of such series. In the event of
any such defeasance and discharge of Unsecured Debt Securities of such series,
holders of Unsecured Debt Securities 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 Unsecured Debt Securities of such series. (Sections
11.01, 11.02 and 11.03 of the Indenture)
GOVERNING LAW
The Indenture and the Unsecured Debt Securities will be governed by, and
construed in accordance with, the laws of the State of New York. (Section 13.04)
15
<PAGE>
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture 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 person would exercise in the
conduct of his or her own affairs. (Section 7.01) Subject to such provision, the
Indenture Trustee is under no obligation to exercise any of the powers vested in
it by the Indenture at the request of any holder of Unsecured Debt Securities,
unless offered reasonable indemnity by such holder against the costs, expenses
and liabilities which might be incurred thereby. (Section 7.02) The Indenture
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 Indenture
Trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it. (Section 7.01)
The Bank of New York and The Chase Manhattan Bank serve as trustees and
agents 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 of the
Subordinated Indenture and Section 13.10 of the Unsecured Indenture)
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges of the Company for the years ended
December 31, 1991 through 1995 and for the six months ended June 30, 1996,
calculated as required by the Commission, are 2.4x, 1.6x, 2.5x, 3.0x, 2.9x and
2.5x, respectively. Excluding the effect of special charges, the ratio was 1.9x
for the year 1992. For the purpose of computing such ratios, "earnings"
represents the aggregate of (i) income from continuing operations, (ii) taxes
based on income from continuing operations, (iii) minority interest in the
income of majority-owned subsidiaries that have fixed charges, (iv) fixed
charges and (v) undistributed losses (income) of less than 50% owned affiliates
without loan guarantees. "Fixed charges" represents consolidated interest
charges, an estimated amount representing the interest factor in rents and
preferred stock dividend requirements of majority-owned subsidiaries, and
excludes discontinued operations.
CONSOLIDATED RATIOS OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
The ratios of earnings to combined fixed charges and preferred stock
dividends of the Company for the years ended December 31, 1991 through 1995 and
for the six months ended June 30, 1996, calculated as required by the
Commission, are 2.2x, 1.4x, 2.2x, 2.6x, 2.5x and 2.2x, respectively. Excluding
the effect of special charges, the ratio was 1.8x for the year 1992. For the
purpose of computing such ratios, "earnings" represents the aggregate of (i)
income from continuing operations, (ii) taxes based on income from continuing
operations, (iii) minority interest in the income of majority-owned subsidiaries
that have fixed charges, (iv) fixed charges and (v) undistributed losses
(income) of less than 50% owned affiliates without loan guarantees. "Fixed
charges" represents consolidated interest charges, an estimated amount
representing the interest factor in rents and preferred stock dividend
requirements of majority-owned subsidiaries, and excludes discontinued
operations. "Preferred stock dividends" represents preferred dividend
requirements multiplied by the ratio which pre-tax income from continuing
operations bears to income from continuing operations.
PLAN OF DISTRIBUTION
The Company may sell the Securities through underwriters, dealers or agents,
or directly to one or more purchasers. The Prospectus Supplement with respect to
the Securities offered thereby will set forth the terms of the offering of such
Securities, including the name or names of any underwriters, dealers or agents,
the
16
<PAGE>
purchase price of such Securities and the proceeds to the Company from such
sale, any underwriting discounts and other items constituting underwriters' or
agents' compensation, any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers.
If underwriters are involved in the sale of any Securities, such Securities
will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The underwriter or underwriters with respect to a
particular underwritten offering of Securities will be named in the Prospectus
Supplement relating to such offering and, if an underwriting syndicate is used,
the managing underwriter or underwriters will be set forth on the cover page of
such Prospectus Supplement. Unless otherwise set forth in such Prospectus
Supplement, the obligations of the underwriters to purchase the Securities will
be subject to certain conditions precedent, and the underwriters will be
obligated to purchase all such Securities if any are purchased.
If a dealer is used in the sale of any Securities, the Company will sell
such Securities to the dealer, as principal. The dealer may then resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale. The name of any dealer involved in a particular offering of
Securities and any discounts or concessions allowed or reallowed or paid to the
dealer will be set forth in the Prospectus Supplement relating to such offering.
The Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any such agent, who may be deemed
to be an underwriter as that term is defined in the Securities Act, involved in
the offer or sale of any of the Securities will be named, and any commissions
payable by the Company to such agent will be set forth, in the Prospectus
Supplement relating to such offer or sale. Unless otherwise indicated in such
Prospectus Supplement, any such agent will be acting on a reasonable best
efforts basis for the period of its appointment.
If sold through agents, the Additional Common Stock may be sold from time to
time through such agents, by means of (i) ordinary brokers' transactions, (ii)
block transactions (which may involve crosses) in accordance with the rules of
the NYSE, the PSE or other stock exchanges on which the Common Stock is admitted
to trading privileges (the "Exchanges"), in which such agent may attempt to sell
the Additional Common Stock as agent but may position and resell all or a
portion of the blocks as principal, (iii) "fixed price offerings" off the floor
of the Exchanges or "exchange distributions" and "special offerings" in
accordance with the rules of the Exchanges or (iv) a combination of any such
methods of sale, in each case at market prices prevailing at the time of sale in
the case of transactions on the Exchanges and at negotiated prices related to
prevailing market prices in the case of transactions off the floor of the
Exchanges. In connection therewith, distributors' or sellers' commissions may be
paid or allowed that will not exceed those customary in the types of
transactions involved. If an agent purchases Additional Common Stock as
principal, such stock may be resold by any of the methods of sale described
above.
From time to time an agent may conduct a "fixed price offering" of
Additional Common Stock covered by this Prospectus off the floor of the
Exchanges. In such case, such agent would purchase a block of shares from the
Company and would form a group of selected dealers to participate in the resale
of the shares. Any such offering would be described in the Prospectus Supplement
setting forth the terms of the offering and the number of shares being offered.
It is also possible that an agent may conduct from time to time "special
offerings" or "exchange distributions" in accordance with the rules of the
Exchanges. Any such offering or distribution would be described in the
Prospectus Supplement at the time thereof.
If so indicated in an applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Securities from the Company at the public offering
price set forth in such Prospectus Supplement pursuant to delayed delivery
contracts ("Contracts") providing for payment and delivery on the date or dates
stated in such Prospectus Supplement. Each Contract will be for an amount not
less than, and the aggregate principal amount of Securities sold pursuant to
Contracts shall be not less nor more than, the respective amounts stated in such
Prospectus Supplement. Institutions with whom Contracts, when authorized, may be
made include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable
17
<PAGE>
institutions and other institutions, but will in all cases be subject to the
approval of the Company. Contracts will not be subject to any conditions except
(i) the purchase by an institution of the Securities covered by its Contracts
shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject, and (ii)
if the Securities are being sold to underwriters, the Company shall have sold to
such underwriters the total principal amount of the Securities less the
principal amount thereof covered by Contracts. Agents and underwriters will have
no responsibility in respect of the delivery or performance of Contracts.
Certain of the underwriters, dealers or agents and their associates may be
customers of, engage in the transactions with or perform services for the
Company and its affiliates in the ordinary course of business.
The Company will indicate in a Prospectus Supplement the extent to which it
anticipates that a secondary market for the Securities will be available.
Underwriters, dealers and agents participating in the distribution of the
Securities may be deemed to be "underwriters" within the meaning of, and any
discounts and commissions received by them and any profit realized by them on
resale of such Securities may be deemed to be underwriting discounts and
commissions under, the Securities Act. Subject to certain conditions, the
Company may agree to indemnify the several underwriters, dealers or agents and
their controlling persons against certain civil liabilities, including certain
liabilities under the Securities Act, or to contribute to payments any such
person may be required to make in respect thereof.
LEGAL OPINIONS
The validity of the Securities will be passed upon for the Company by Stoel
Rives LLP, counsel to the Company, 700 NE Multnomah, Suite 950, Portland, Oregon
97232, and for any underwriters, dealers or agents by Winthrop, Stimson, Putnam
& Roberts, One Battery Park Plaza, New York, New York 10004. John M. Schweitzer
and John Detjens III, who are assistant secretaries of the Company, are partners
in the firm of Stoel Rives LLP.
EXPERTS
The financial statements incorporated in this Prospectus by reference from
the Company's Annual Report on Form 10-K have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports incorporated by reference
herein (which report with respect to the Form 10-K for the year ended December
31, 1995 expresses an unqualified opinion and includes an explanatory paragraph
relating to changes adopted in accounting for income taxes and other
postretirement benefits), and have been so incorporated in reliance upon the
report of such firm given upon its authority as experts in accounting and
auditing.
With respect to any unaudited interim financial information which 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 the Company's
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 of which this Prospectus is a part prepared or certified
by an accountant within the meaning of Sections 7 and 11 of the Securities Act.
18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION SET FORTH HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT
<S> <C>
PAGE
----
Description of Notes...................................................... S-2
Foreign Currency Notes.................................................... S-13
Currency Risks............................................................ S-16
Certain United States Federal Income Tax Consequences..................... S-18
Plan of Distribution of Notes............................................. S-23
<CAPTION>
PROSPECTUS
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Company............................................................... 4
Use of Proceeds........................................................... 4
Description of Capital Stock.............................................. 4
Description of Additional Bonds........................................... 6
Description of Unsecured Debt Securities.................................. 10
Consolidated Ratios of Earnings to Fixed Charges.......................... 16
Consolidated Ratios of Earnings to Combined Fixed Charges and Preferred
Stock Dividends.......................................................... 16
Plan of Distribution...................................................... 16
Legal Opinions............................................................ 18
Experts................................................................... 18
</TABLE>
U.S. $750,000,000
[LOGO]
U.S. $500,000,000 SECURED
MEDIUM-TERM NOTES, SERIES H
(A SERIES OF FIRST MORTGAGE BONDS)
AND
U.S. $250,000,000 UNSECURED
MEDIUM-TERM NOTES, SERIES U-1
EACH DUE NINE MONTHS
OR MORE
FROM DATE OF ISSUE
-----------------
PROSPECTUS SUPPLEMENT
-----------------
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
SALOMON BROTHERS INC
SMITH BARNEY INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
