<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-00191
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 25, 1996)
U.S. $200,000,000
[PTI LOGO]
MEDIUM-TERM NOTES, SERIES C
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
Pacific Telecom, Inc. (the "Company") may from time to time offer its
Medium-Term Notes, Series C (the "Notes"), in an aggregate principal amount of
up to U.S. $200,000,000 or the equivalent thereof in other currencies or
composite currencies (each, a "Specified Currency"). 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 repayment or repurchase
at the option of the holder thereof prior to maturity. Each Note will bear
interest at a fixed rate (a "Fixed Rate Note") or 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 CMT Rate or other Base Rate set
forth in a pricing supplement (each, a "Pricing Supplement") to this Prospectus
Supplement, as adjusted by the Spread or Spread Multiplier, if any, applicable
to such Note. Notes may also be issued with provisions for the extension
("Extendible Notes"), at the Company's option, of their maturities or for
payments of principal and interest to be made in installments over their life
("Amortizing Notes"). 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.
Unless otherwise indicated in the applicable Pricing Supplement, the authorized
denominations of U.S. dollar Notes will be U.S. $1,000 and integral multiples of
U.S. $1,000 in excess thereof. Authorized denominations of Notes issued in a
Specified Currency will be set forth 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, or 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."
Unless otherwise indicated, interest on each Fixed Rate Note will accrue from
its date of issue and will be payable semi-annually on each March 1 and
September 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 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' PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) COMPANY (2)(3)
<S> <C> <C> <C>
Per Note.............................................................. 100.000% .125%-.875% 99.875%-99.125%
Total (4)............................................................. U.S. $200,000,000 U.S. $250,000 U.S. $199,750,000
U.S. $1,750,000 U.S. $198,250,000
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Unless otherwise indicated in the applicable Pricing Supplement, Notes will
be issued at 100% of their principal amount.
(2) For Notes with maturities not greater than 40 years from their dates of
issue, the Company will pay Salomon Brothers Inc, Goldman, Sachs & Co. and
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Agents"), as agents, a commission ranging from .125% to .875% of the
principal amount of any Note, depending on its maturity, sold through any
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. The Company also may sell Notes to any
Agent or to others, as principal, at a discount for resale to one or more
investors or other purchasers at a fixed public offering price or at varying
prices related to prevailing market prices at the time of resale, as
determined by such Agent or such other persons. 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 and such Note may be resold by
such Agent. The Company may also sell Notes directly to investors on its own
behalf, in which case no commission will be payable.
(3) Before deducting other expenses payable by the Company estimated to be U.S.
$265,000, 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 which has agreed to use its reasonable best efforts to solicit
purchases of the Notes. The Company also may sell Notes to any Agent acting as
principal for resale to one or more investors or other purchasers. The Company
may sell Notes directly on its own behalf or to other dealers for resale to
investors. 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 the Notes. The Company
reserves the right to withdraw, cancel or modify the offer made hereby without
notice. The Company or any Agent may reject any offer to purchase Notes, in
whole or in part. See "Plan of Distribution of Notes."
SALOMON BROTHERS INC
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
The date of this Prospectus Supplement is January 26, 1996.
<PAGE>
DESCRIPTION OF NOTES
The terms and conditions set forth herein concerning the Notes, and in the
accompanying Prospectus, will apply to each Note unless otherwise specified in
the applicable Pricing Supplement and such Note.
GENERAL
The Notes are part of a separate series of Debt Securities of the Company
issued pursuant to an Indenture, dated as of September 20, 1991, as amended and
supplemented (the "Indenture"), between the Company and The First National Bank
of Chicago, as trustee (the "Trustee"), which is more fully described in the
accompanying Prospectus. The following summaries of certain parts of the
Indenture do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all provisions of the Indenture, including the
definitions therein of certain terms.
The Notes offered by this Prospectus Supplement are limited to an aggregate
principal amount of U.S. $200,000,000 (or the equivalent thereof in other
currencies or composite currencies).
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 their dates
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 repayment 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, which may be
adjusted by a Spread or Spread Multiplier (each as defined below). Interest
rates offered by the Company with respect to the Notes may differ depending
upon, among other things, the aggregate principal amount of the Notes purchased
in any single transaction.
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."
Unless otherwise indicated in the applicable Pricing Supplement, the
authorized denominations of U.S. dollar Notes will be U.S. $1,000 and integral
multiples of U.S. $1,000 in excess thereof. Authorized denominations of Notes
issued 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 (i) with
respect to all Notes, in The City of New York, and (ii) with respect to Foreign
Currency Notes (as herein defined), in the principal financial center of the
country of the Specified Currency (or, in the case of Foreign Currency Notes
denominated in European Currency Units, in Brussels, Belgium) and (b) with
respect to LIBOR Notes (as defined below), is 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) 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 denominations, currency risks and applicable U.S. tax
consequences to purchasers; (2) whether such Note is a Fixed Rate Note or a
Floating Rate Note; (3) the price (expressed as a percentage of the aggregate
principal amount thereof) at which such Note will be issued (the "Issue Price"),
unless such Note is issued at 100% of its principal amount; (4) the date on
which such Note will be issued (the "Original Issue Date") and, unless interest
on such Note will accrue from its date of issue, the date from which interest on
such Note will accrue; (5) the date on which such
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Note will mature (the "Maturity Date"); (6) if such Note is a Fixed Rate Note,
the rate per annum at which such Note will bear interest; (7) if such Note is a
Floating Rate Note, the Base Rate, the Initial Interest Rate, the Interest Reset
Period, the Interest Reset Dates, the Interest Payment Period, the Interest
Payment Dates, the Index Maturity, the Maximum Interest Rate and the Minimum
Interest Rate, if any, and the Spread or Spread Multiplier, if any (all as
defined below), and any other terms relating to the particular method of
calculating the interest rate for such Note; (8) whether such Note may be
redeemed or is subject to repayment or repurchase prior to the Maturity Date
and, if so, the provisions relating to such redemption, repayment or repurchase;
(9) whether such Note will be issued as a Book-Entry Note or Certificated Note;
and (10) any other terms of such Note not inconsistent with the provisions of
the Indenture.
Investors should consult their own tax advisors in determining the federal,
state, local and any other tax consequences to them of the purchase, ownership
and disposition of Notes.
The Notes are referred to in the accompanying Prospectus as the "Offered
Securities." For a description of the rights attaching to different series of
Debt Securities under the Indenture, see "Description of Debt Securities" in the
accompanying Prospectus.
PAYMENT OF PRINCIPAL AND INTEREST
Unless otherwise indicated in the applicable Pricing Supplement, payments of
principal (and premium, if any) and interest will be made at the Corporate Trust
Office of the Trustee in Chicago or at the Trustee's office in The City of New
York designated for such purpose; PROVIDED that interest (other than interest
payable at maturity) may, at the Company's option, be paid (i) by check mailed
to the address of the person entitled thereto as it appears in the Security
Register as of the Record Date (as defined below) or (ii) by wire transfer to an
account maintained by such person with a bank located in the United States (so
long as proper wire transfer instructions have been received by the Trustee by
the Record Date). Payments of principal (and premium, if any) and interest with
respect to Book-Entry Notes will be made in the manner described under
"Book-Entry Notes" herein and under "Description of Debt Securities -- Global
Securities" in the accompanying Prospectus. See also "Description of Debt
Securities -- Payment and Paying Agents" in the accompanying Prospectus.
Except as set forth below, interest will be payable on each Interest Payment
Date (as defined below) and at maturity. 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 early redemption or repayment 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 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). 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.
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.
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 annual rate
stated on the face thereof until the principal amount thereof is paid or made
available for payment. Unless otherwise indicated in the applicable Pricing
Supplement, the Interest Payment Dates for the Fixed Rate Notes will be March 1
and September 1 of
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each year. Interest payments on Fixed Rate Notes will include interest accrued
to, but excluding, the Interest Payment Date. Interest on Fixed Rate Notes will
be computed and paid 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: (i)
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 (ii) 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: (a) the
Commercial Paper Rate (a "Commercial Paper Rate Note"), (b) LIBOR (a "LIBOR
Note"), (c) the Treasury Rate (a "Treasury Rate Note"), (d) the CD Rate (a "CD
Rate Note"), (e) the Prime Rate (a "Prime Rate Note"), (f) the CMT Rate (a "CMT
Rate Note") or (g) 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 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, on 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 or repayment) 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, and no additional interest
shall accrue as a result of such delayed payment, 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 or repayment of a Floating Rate Note falls
on a day that is not a Business Day, the
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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
(except in the case of Floating Rate Notes that reset daily or weekly) will
include accrued interest from and including the Original Issue Date or from and
including the last date in respect of which interest has been paid, as the case
may be, to, but excluding, such Interest Payment Date. In the case of Floating
Rate Notes that reset daily or weekly, interest payments will include accrued
interest from and including the Original Issue Date or from but excluding the
last date in respect of which interest has been paid, as the case may be, to,
and including, the Record Date immediately preceding the applicable Interest
Payment Date. At maturity the interest payable will include interest accrued
from and including the Original Issue Date or from and including the last date
in respect of which interest has been paid (except in the case of Floating Rate
Notes that reset daily or weekly for which such last date is excluded), as the
case may be, to, but excluding, the Maturity Date. Accrued interest will be
calculated by multiplying the principal amount of a Floating Rate Note by an
accrued interest factor. This accrued interest factor will be computed by adding
the interest factors calculated for each day in the period for which accrued
interest is being calculated. The interest factor (expressed as a decimal) for
each such day will be computed by dividing the interest rate applicable to such
day by 360, in the case of Commercial Paper Rate Notes, LIBOR Notes, CD Rate
Notes and Prime 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.
The Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note, a CD Rate Note, a Prime Rate Note and a CMT Rate
Note will be the second Business Day next preceding such Interest Reset Date.
The Interest Determination Date pertaining to an Interest Reset Date for a LIBOR
Note will be the second London Banking Day next preceding such Interest Reset
Date. The Interest Determination Date pertaining to an Interest Reset Date for a
Treasury Rate Note will be the day of the week in which such Interest Reset Date
falls on which Treasury bills of the Index Maturity specified on the face of the
Treasury Rate Notes are auctioned. Treasury bills are normally sold at auction
on Monday of each week, unless that day is a legal holiday, in which case the
auction is normally held on the following Tuesday, except that such auction may
be held on the preceding Friday. If, as the result of a legal holiday, an
auction is so held on the preceding Friday, such Friday will be the Interest
Determination Date pertaining to the Interest Reset Date occurring in the next
succeeding week.
Unless otherwise indicated in the applicable Pricing Supplement, the
"Calculation Date," where applicable, pertaining to an Interest Determination
Date is the earlier of (i) the tenth calendar day after such Interest
Determination Date or, if any such day is not a Business Day, the next
succeeding Business Day and (ii) the Business Day preceding the applicable
Interest Payment Date or date of maturity, as the case may be.
Unless otherwise indicated in the applicable Pricing Supplement, the Trustee
will be the calculation agent (the "Calculation Agent") with respect to the
Floating Rate Notes. All determinations of interest rates by the Calculation
Agent shall, in the absence of manifest error, be conclusive for all purposes
and
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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 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 so 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.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
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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.
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
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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 for the purpose of displaying London interbank
offered rates of major banks) and "Telerate Page 3750" means the display
designated as page "3750" on the Telerate Service (or such other page as may
replace the 3750 page on that service or such other service or services as
may be nominated by the British Bankers' Association for the purpose of
displaying London interbank offered rates for U.S. dollar deposits). If
neither LIBOR Reuters nor LIBOR Telerate is specified in the applicable
Pricing Supplement, LIBOR will be determined as if LIBOR Telerate had been
specified. In the case where (a) above applies, if fewer than two offered
rates appear on the Reuters Screen LIBO Page, or, in the case where (b)
above applies, if no rate appears on the Telerate Page 3750, as applicable,
LIBOR in respect of that Interest Determination Date will be determined as
if the parties had specified the rate described in (ii) below.
(ii) With respect to an Interest Determination Date on which this
provision applies, LIBOR will be determined on the basis of the rates at
which deposits in U.S. dollars having the Index Maturity designated in the
applicable Pricing Supplement 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 equal 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.
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.
"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,
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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.
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.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread or Spread Multiplier, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
"Prime Rate" means, 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
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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.
"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).
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 designated 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 (i) if the Designated CMT Telerate page is
7055, the rate for the applicable Interest Determination Date and (ii) if the
Designated CMT Telerate page is 7052, the week or the month, as 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
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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. If two
Treasury Notes with an original maturity as described in the second preceding
sentence have remaining terms to maturity equally close to the Index Maturity
designated in the applicable Pricing Supplement, the quotes for the Treasury
Note with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). 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.
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 Notes will be
represented by one or more permanent global securities (each a "Global
Security"). Each Global Security will be deposited with, or on behalf of, The
Depository Trust Company, New York, New York ("DTC") and registered in the name
of a nominee of DTC or such other depositary as is specified in the Pricing
Supplement (the "Depositary"). Except under the limited circumstances described
below, Global Securities will not be exchangeable for definitive Certificated
Notes.
Ownership of beneficial interests in a Global Security will be limited to
institutions that have accounts with the Depositary or its nominee
("participants") or persons that may hold interests through participants. In
addition, ownership of beneficial interests by participants in such Global
Security will be evidenced only by, and the transfer of that ownership interest
will be effected only through, records maintained by the Depositary or its
nominee for such Global Security. Ownership of beneficial interests in such
Global Security by persons that hold through participants will be evidenced only
by, and the transfer of that ownership interest within such participant will be
effected only through, records maintained by such participant. The Depositary
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.
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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 Trustee or any other agent of the Company or the
Trustee will have any responsibility or liability for any aspect of the records
of the Depositary, any nominee or any participant relating to or payments made
on account of beneficial interests in a Global Security or for maintaining,
supervising or reviewing any of the records of the Depositary, any nominee or
any participant relating to such beneficial interests.
A Global Security is exchangeable for definitive Notes registered in the
name of, and a transfer of a Global Security may be registered to, any person
other than the Depositary or its nominee, only if:
(a) the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for such Global Security or if at any time the
Depositary ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act");
(b) the Company in its sole discretion determines that such Global
Security shall be exchangeable for definitive Notes in registered form;
(c) there shall have occurred and be continuing an event of default
under the Indenture, as described in the accompanying Prospectus, and the
Depositary is notified by the Company, the applicable Trustee, or the
applicable Registrar and Paying Agent that such Global Security shall be
exchangeable for definitive Notes in registered form; 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, on terms acceptable to the Company and the Depositary for
such Global Security, receive Notes in definitive form.
Any Global Security that is exchangeable pursuant to the preceding sentence
will be exchangeable in whole for definitive Notes in registered form, of like
tenor and of an equal aggregate principal amount as the Global Security, in
denominations of $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 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 Indenture, 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 Indenture.
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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 Indenture, 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.
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") and does not
deal with special situations, such as those of dealers in securities, financial
institutions, life insurance companies, United States Holders (as defined below)
whose "functional currency" is not the U.S. dollar, tax-exempt organizations,
persons holding Notes as a hedge against currency risks or as a position in a
"straddle," or persons owning (actually or constructively) 10% 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 United States federal income tax consequences that may appear in a
Pricing Supplement. 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 United States federal income tax
consequences different from those discussed below. THIS SUMMARY DOES NOT PURPORT
TO COVER ALL THE POSSIBLE TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF NOTES, AND IT IS NOT INTENDED AS TAX ADVICE. THIS SUMMARY DOES
NOT DISCUSS THE TAX CONSEQUENCES UNDER STATE, LOCAL OR FOREIGN TAX LAWS. PERSONS
CONSIDERING PURCHASE, OWNERSHIP OR DISPOSITION OF NOTES SHOULD CONSULT THEIR OWN
TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IN
LIGHT OF THEIR PARTICULAR SITUATIONS, AS WELL AS ANY CONSEQUENCES ARISING UNDER
THE LAWS OF ANY OTHER TAXING JURISDICTION.
This summary is based on the assumption that the Notes are issued in
"registered" form for United States federal income tax purposes and are not
convertible into non-registered form. If any Notes are issued in, or are
convertible into, non-registered or bearer form, the applicable Pricing
Supplement will discuss the special tax considerations that may apply.
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UNITED STATES HOLDERS
As used herein, a "United States Holder" of a Note means a holder that is
(i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the law of the
United States or of any state or (iii) an estate or trust that is otherwise
subject to United States federal income taxation on a net income basis in
respect of a Note. A "Non-United States Holder" is a holder that is not a United
States Holder.
PAYMENTS OF INTEREST. Except as set forth below, interest on a Note will
generally be taxable to a United States Holder as ordinary income from domestic
sources at the time it is received or accrued in accordance with the United
States Holder's method of accounting for tax purposes.
ORIGINAL ISSUE DISCOUNT. The following is a summary of the principal United
States federal income tax consequences of the ownership of Notes with original
issue discount ("OID") by United States Holders.
A Note may be issued for an amount that is less than its stated redemption
price at maturity (the sum of all payments provided by the Note other than
"qualified stated interest" payments). Generally, the excess of the stated
redemption price at maturity of the Note over its "issue price" will be OID. If
such excess is less than 0.25 percent of the stated redemption price at maturity
multiplied by the number of complete years to maturity ("de minimis OID"), OID
will be treated as zero, and all stated interest (including stated interest that
would otherwise be characterized as de minimis OID) will be treated as
"qualified stated interest." A United States Holder of a Note bearing de minimis
OID must include the de minimis OID (other than de minimis OID treated as
"qualified stated interest") in income as stated principal payments are made,
and the amount of de minimis OID includible in income as principal payments are
made will be treated as gain recognized on retirement of the debt instrument.
Any gain attributable to de minimis OID recognized on the sale or exchange of a
Note will be capital gain if the Note is a capital asset in the hands of the
United States Holder. The de minimis amount is calculated differently for Notes
that provide for the payment of any amount other than "qualified stated
interest" before maturity. The method of calculating de minimis OID for
Amortizing Notes will be set forth in the applicable Pricing Supplement.
The "issue price" of each Note will be the initial offering price to the
public at which a substantial amount of the particular offering is sold.
Generally, a "qualified stated interest" payment is stated interest that is
unconditionally payable or will be constructively received at least annually at
a single fixed rate, or at a rate ("variable rate") that varies among payment
periods, if such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds, or that is based upon the
changes in the yield or price of certain actively traded property, or a
combination thereof. A rate that reflects a fixed rate minus such variable rate
ordinarily 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. 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.
Notes that may be redeemed before maturity at the option of the issuer shall
be treated from the time of issuance as having a maturity date, for purposes of
determining the amount of qualified stated interest, on the optional redemption
date if a redemption on that date 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 United States federal income
tax purposes prior to their maturity date.
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 bear OID for United States federal income
tax purposes ("Original Issue Discount Notes"), with the result that the
inclusion of interest in income for United States federal income tax purposes
may vary from the actual
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cash payments of interest made on such Notes, generally accelerating income for
cash method taxpayers. 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
generally 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
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 or an initial and a final short accrual period, the amount
of OID allocable to the initial short accrual period may be computed under any
reasonable method. The OID allocable to the final accrual period is equal to the
excess of the amount payable at maturity (other than a payment of qualified
stated interest) over the adjusted issue price at the beginning of the final
accrual period. 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 other than
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.
SHORT-TERM NOTES. In the case of Notes having a term of one year or less
("Short-Term Notes"), no payments of interest are treated as qualified stated
interest payments; thus, a Short-Term Note that provides for interest ordinarily
will have a stated redemption price at maturity that exceeds its issue price
and, therefore, ordinarily will have OID.
CERTAIN UNITED STATES HOLDERS REQUIRED TO INCLUDE OID ON SHORT-TERM
NOTES IN INCOME CURRENTLY. Generally, United States Holders are required to
include OID on Short-Term Notes in income currently 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.
CERTAIN UNITED STATES HOLDERS NOT REQUIRED TO INCLUDE OID ON SHORT-TERM
NOTES IN INCOME CURRENTLY. Certain categories of United States Holders
(such as individual cash method taxpayers) are not required to include
accrued OID on Short-Term Notes in their income currently unless they elect
to do so. An election to include accrued OID on a Short-Term Note in income
currently must be made for the taxable year in which the holder acquires the
Note and is irrevocable without the consent of the Internal Revenue Service
("IRS"). If such a United States Holder that does not elect currently to
include the OID in income subsequently recognizes a gain upon the
disposition of a Short-Term Note, such gain will be treated as ordinary
interest income to the extent of the ratable portion of OID to the date of
disposition. Alternatively, such a United States Holder can irrevocably
elect to accrue OID using a constant yield method for purposes of
calculating the amount of OID to include in income as ordinary interest
income arising as a result of the disposition of a Short-Term
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Note. A United States Holder not currently including accrued OID in income
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 a Short-Term 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 sum of all payments payable on the Note
after the purchase date other than qualified stated interest. If a United States
Holder purchases an Original Issue Discount Note at a premium (i.e., an amount
in excess of the stated redemption price at maturity), it does not include any
OID in gross income. A 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 IRS. The amount amortized in any year will be treated as a
reduction of the United States Holder's interest income from the Note, and the
United States Holder is required to make corresponding reductions in its
adjusted basis in the Note. 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. A Note purchased in the initial offering for more than
the issue price but less than the stated redemption price at maturity possesses
acquisition premium. The daily portion of accrued OID on such a Note is reduced
by the product of the daily portion of OID (determined without regard to this
adjustment) and a fraction the numerator of which is the excess of the adjusted
basis of the Note immediately after acquisition over the adjusted issue price of
the Note and the denominator of which is the excess of the sum of all amounts
payable on the debt instrument after the purchase date, other than payments of
qualified stated interest, over the Note's adjusted issue price. The adjusted
issue price of a Note at the beginning of the first accrual period is the issue
price; thereafter, the adjusted issue price generally is the issue price
increased by the amount of OID previously includible in the gross income of any
holder (without regard to the reduction described in the previous sentence), and
decreased by the amount of any payment previously made on the Note other than a
payment of qualified stated interest.
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 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 premium or
acquisition premium. If a United States Holder makes this election for a Note
with amortizable premium, the election is treated as an election under the
amortizable premium provisions described above and the electing United States
Holder will be required to amortize premium for all of the holder's other debt
instruments with amortizable premium. The election is to be made for the taxable
year in which the United States Holder acquires the Note, and may not be revoked
without the consent of the IRS. United States Holders should consult with their
own tax advisors about this election.
SALE, EXCHANGE AND RETIREMENT OF NOTES. A United States Holder's tax basis
in a Note will, in general, be the United States Holder's cost therefor,
increased by all accrued OID and reduced by any amortized premium and any
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 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, in certain circumstances, taxed
at lower rates than ordinary income. The deductibility of capital losses is
subject to limitations.
S-15
<PAGE>
EXTENDIBLE NOTES. A Note may provide that the Company has the option to
reset the interest rate, in the case of a Fixed Rate Note, or the Spread or
Spread Multiplier, in the case of a Floating Rate Note, on an Interest Reset
Date or to extend the maturity of a Note at maturity. Pursuant to proposed
Treasury Regulations issued on December 2, 1992, which could differ materially
from the final Treasury Regulations, the treatment of a United States Holder of
Notes with respect to which such an option has been exercised who does not elect
to have the Company repay such Notes on the applicable optional reset date or at
maturity (or has no right to so elect) will depend on the terms established for
such Notes by the Company pursuant to the exercise of such option (the "Revised
Terms"). Such holder may be treated for United States 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 direct result thereof. If the exercise of the option is
treated as a taxable exchange of Old Notes for New Notes, a United States Holder
will 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 will
be recognized by a United States Holder as a result thereof and gain, if any,
will be recognized to the extent of the fair market value of the excess, if any,
of the principal amount of New Notes over the principal amount of Old Notes.
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 New
Notes and "adjusted issue price" with respect to Old Notes.
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) on any Note,
provided that (i) the Non-United States Holder does not actually or
constructively own 10% or more of the voting stock of the Company, (ii) the
Non-United States Holder is not a controlled foreign corporation related to the
Company through stock ownership and (iii) the Non-United States Holder provides
the correct certification of Non-United States Holder status (which may
generally be satisfied by providing an IRS Form W-8 certifying that the
beneficial owner is not a United States Holder and providing the name and
address of the beneficial owner).
A Non-United States Holder generally will not be subject to United States
federal income tax on gain realized from the sale or exchange of a Note. Under
certain conditions, a Non-United States Holder may be subject to United States
federal income tax on gain or interest received with respect to a Note (even if
no withholding of taxes is required). Such income taxation may occur, for
example, if the Non-United States Holder (i) is engaged in a trade or business
in the United States and gain or interest on a Note is effectively connected
with conduct of that trade or business, or (ii) is an individual present in the
United States for 183 days or more during the taxable year. Such taxation is
beyond the scope of this summary and should be discussed with a tax advisor. If
interest is effectively connected with the conduct of a trade or business in the
United States by a Non-United States Holder, withholding of United States
federal income tax may be required unless the Non-United States Holder files
with the Company or its Paying Agent an IRS 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, if any interest received on the Note, if received by the
holder at the time of the holder's death, would not have been effectively
connected with the conduct of a trade or business in the United States and the
individual did 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 must
withhold a 31% federal backup withholding tax on certain amounts paid to the
holder. An individual's taxpayer identification number is such person's social
security number.
S-16
<PAGE>
Payments in respect of a Note made within the United States by the Company
or any of its paying agents are generally subject to potential backup
withholding at a rate of 31%. Information reporting and backup withholding do
not apply to payments made on a Note if the certification described in clause
(iii) under "Non-United States Holders" above is received, provided the payor
does not have actual knowledge that the holder is a United States person.
Special rules may apply with respect to the payment of the proceeds from the
sale of a Note to or through foreign offices of certain brokers.
The backup withholding tax is not an additional tax and may be credited
against a holder's regular federal income tax liability or refunded by the IRS
where applicable.
PLAN OF DISTRIBUTION OF NOTES
Pursuant to the terms of a Selling Agency Agreement dated January 26, 1996
(the "Selling Agency Agreement"), the Notes are being offered on a continuous
basis by the Company through Salomon Brothers Inc, Goldman, Sachs & Co. and
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Agents"), each of which 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 commission of
from .125% to .875% of the principal amount of each Note, depending on its
maturity, sold through such Agent on an agency basis. 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. The
Company also may sell Notes to an Agent, acting as principal, for resale to
investors and other purchasers. Unless otherwise indicated in the applicable
Pricing Supplement, any Note sold to an Agent as principal will be purchased by
such Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to an agency sale of a Note of
identical maturity. Any such Note may be resold by such Agent to one or more
investors or other purchasers, including other dealers, from time to time in one
or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices related to prevailing market prices at the
time of resale. Unless otherwise indicated in the applicable Pricing Supplement,
if any Note is resold by an Agent to any dealer at a discount, such discount
will not be in excess of the discount received by such Agent from the Company.
After the initial public offering of any Notes to be resold by an Agent to
investors and other purchasers the public offering price (in the case of Notes
to be resold at a fixed public offering price) and discounts may be changed. The
Company has agreed to reimburse the Agents for certain expenses in connection
with the offering of the Notes.
The Notes may also be sold by the Company directly to investors or to or
through such other agents as the Company shall designate from time to time,
provided that such Notes are sold on terms, including, without limitation, any
commissions payable with respect thereto, in substance identical to those
contained in the Selling Agency Agreement. 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.
The Notes will not have an established trading market when issued. The Notes
will not be listed on any securities exchange. Each Agent may make a market in
the Notes, but such Agent is not obligated to do so and may discontinue any
market-making at any time without notice. There can be no assurance of a
secondary market for any Notes or that the Notes will be sold.
The Agents and certain affiliates thereof engage in transactions with and
perform services for the Company and its affiliates in the ordinary course of
business.
The Company has agreed to indemnify each Agent against certain liabilities,
including certain liabilities under the Securities Act of 1933, as amended (the
"Securities Act"), or to contribute to payments such Agent may be required to
make in respect thereof. Each Agent (and each other dealer, if any, who
purchases Notes for resale to the public) may be deemed to be an "underwriter"
within the meaning of the Securities Act with respect to Notes sold through it.
S-17
<PAGE>
PROSPECTUS
[PTI LOGO]
DEBT SECURITIES
Pacific Telecom, Inc. (the "Company") may from time to time offer its
unsecured debt securities consisting of notes, debentures or other evidences of
indebtedness (the "Debt Securities") in an aggregate principal amount of up to
U.S. $200,000,000 (or the equivalent thereof in other currencies or composite
currencies) of its unsecured debt securities consisting of notes, debentures or
other evidences of indebtedness (the "Debt Securities"). The Debt Securities may
be offered as separate series in amounts, at prices and on terms to be
determined in light of market conditions at the time of sale and set forth in a
Prospectus Supplement or Prospectus Supplements.
The terms of each series of Debt Securities, including, where applicable,
the specific designation, aggregate principal amount, authorized denominations
and currencies, maturity or maturities, rate or rates and time or times of
payment of any interest, any terms for optional or mandatory redemption or
payment of additional amounts or any sinking fund provisions, any initial public
offering price, the proceeds to the Company and any other specific terms in
connection with the offering and sale of such series (the "Offered Securities")
will be set forth in a Prospectus Supplement or Prospectus Supplements.
The Debt Securities may be sold directly by the Company, through agents
designated from time to time or to or through underwriters or dealers. See "Plan
of Distribution." If any agents of the Company or any underwriters are involved
in the sale of any Debt 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 or Prospectus Supplements.
The Debt Securities may be issued only in registered form, which may, if so
designated in the applicable Prospectus Supplement or Prospectus Supplements, be
in the form of a registered global security to facilitate the use of a
"book-entry" registration and transfer system. See "Description of Debt
Securities -- Global Securities."
------------------------
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 Debt Securities
unless accompanied by a Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS JANUARY 25, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SECURITIES
OFFERED HEREBY OR ANY OTHER DEBT SECURITIES OF THE COMPANY AT LEVELS ABOVE THOSE
THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. 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 public reference facilities maintained by the Commission at 450 Fifth
Street, NW, Washington, D.C. 20549, and at the following Regional Offices of the
Commission: New York Regional Office, 7 World Trade Center, 13th Floor, New
York, New York 10048, and Chicago Regional Office, 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, NW, Washington, D.C. 20549, upon payment of the prescribed rates.
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 previously filed by the Company with the Commission
pursuant to the Exchange Act are incorporated in this Prospectus by reference:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1994 (as amended by Form 10-K/A dated June 30, 1995);
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 1995; and
(c) The Company's Current Reports on Form 8-K dated February 6, February
15, March 9, March 31, July 14, September 27, 1995 and September 30, 1995.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
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 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
2
<PAGE>
subsequently filed Incorporated Document or in any accompanying Prospectus
Supplement 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 HAS BEEN
DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR
ALL OF THE INCORPORATED DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE THEREIN. REQUESTS
SHOULD BE DIRECTED TO PACIFIC TELECOM, INC., 805 BROADWAY, P.O. BOX 9901,
VANCOUVER, WASHINGTON 98668-8701, ATTENTION: BRIAN M. WIRKKALA, VICE PRESIDENT
AND TREASURER, TELEPHONE NUMBER (360) 696-6918. THE INFORMATION RELATING TO THE
COMPANY CONTAINED IN THIS PROSPECTUS DOES NOT PURPORT TO BE COMPREHENSIVE AND
SHOULD BE READ TOGETHER WITH THE INFORMATION CONTAINED IN THE INCORPORATED
DOCUMENTS.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR IN ANY PROSPECTUS SUPPLEMENT
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. 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
GENERAL
The Company was organized in 1955 to provide telephone service to suburban
and rural communities principally in the Pacific Northwest. Since that time, the
Company has grown significantly through acquisitions and expanded its service
offerings in several areas within the telecommunications industry. The Company
is a holding company, and its assets are predominantly the common stock of its
majority or wholly-owned subsidiaries. The Company currently operates one of the
major non-Bell telephone companies in the United States. Through its
subsidiaries, the Company 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 nine states and is
engaged in sales of capacity in and operation of a submarine fiber optic cable
between the United States and Japan. See "Available Information" and
"Incorporation of Certain Documents by Reference" for additional information
concerning the Company's operations.
The Company is a Washington corporation. Its principal executive offices are
located at 805 Broadway, Vancouver, Washington 98668-8701, and its telephone
number is (360) 905-5800.
RELATIONSHIP WITH PACIFICORP AND HOLDINGS
All of the common stock of the Company is owned by PacifiCorp Holdings, Inc.
("Holdings"), a wholly-owned subsidiary of PacifiCorp. PacifiCorp is an electric
utility headquartered in Portland, Oregon that conducts its 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. PacifiCorp is the indirect owner through Holdings, of 100% of each
of Powercor Australia Limited ("Powercor"), the Company, Pacific Generation
Company ("PGC") and PacifiCorp Financial Services, Inc. ("PFS"). Powercor is an
electric distribution company serving 570,000 customers in suburban Melbourne
and the western and central regions of the State of Victoria in southeast
Australia. PGC is engaged in the independent power production and cogeneration
business. PFS plans to continue to liquidate portions of its lease, leasing and
real estate investments.
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 Debt Securities
will be used for general corporate purposes, including repayment of short-term
indebtedness that may be incurred from time to time, future acquisitions and
further investments in subsidiaries.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued pursuant to an Indenture, dated as of
September 20, 1991, as amended and supplemented (the "Indenture"), between the
Company and The First National Bank of Chicago, as Trustee (the "Trustee"), a
copy of which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The statements under this caption are brief summaries of
certain provisions of the Indenture, do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all of the
provisions of the Indenture, including the definitions therein of certain terms.
Section references and defined terms used herein or in a Prospectus Supplement
are references to provisions of and defined terms in the Indenture, unless
otherwise noted.
The Debt Securities may be issued from time to time in one or more series.
The particular terms of each series of Debt Securities offered by any Prospectus
Supplement or Prospectus Supplements will be described in such Prospectus
Supplement or Prospectus Supplements relating to such series.
GENERAL
The Debt Securities offered hereby (the "Offered Securities") will be
limited to an aggregate principal amount of U.S. $200,000,000 (or the equivalent
thereof in other currencies or composite
4
<PAGE>
currencies). The Indenture does not limit the aggregate amount of Debt
Securities that may be issued thereunder, and Debt Securities may be issued
thereunder from time to time in separate series up to the aggregate amount from
time to time authorized by the Company for each series. The Debt Securities will
be unsecured obligations of the Company and will rank pari passu with all other
unsecured and unsubordinated indebtedness of the Company.
The applicable Prospectus Supplement or Prospectus Supplements will describe
the following terms of the Offered Securities: (1) the title of the Offered
Securities; (2) any limit upon the aggregate principal amount of the Offered
Securities; (3) the date or dates on which the principal of the Offered
Securities is payable; (4) the rate or rates (or, if subject to adjustment, the
manner for determining such rates) at which the Offered Securities shall bear
interest, if any, the date or dates from which any such interest shall accrue,
the Interest Payment Dates on which any such interest shall be payable, the
Regular Record Dates for any interest payable on the Interest Payment Dates and
the basis upon which interest shall be calculated if other than a year of twelve
30-day months; (5) the place or places where, subject to the terms of the
Indenture as described below under "Payment and Paying Agents," the principal of
and premium, if any, and interest on the Offered Securities will be payable and
where, subject to the terms of the Indenture as described below under
"Denominations, Registration and Transfer," the Offered Securities may be
presented for registration of transfer or exchange and the place or places where
notices and demands to or upon the Company in respect of the Offered Securities
and the Indenture may be made; (6) the period or periods within which, the price
or prices at which and the terms and conditions upon which Offered Securities
may be redeemed, in whole or in part, at the option of the Company; (7) the
obligation, if any, of the Company to redeem, repurchase or repay the Offered
Securities pursuant to any sinking fund or analogous provisions or at the option
of a holder thereof and the period or periods within which, the price or prices
at which and the terms and conditions upon which the Offered Securities shall be
redeemed, repurchased or repaid, in whole or in part, pursuant to such
obligation; (8) the denominations in which any Offered Securities shall be
issuable if other than denominations of $1,000 and any integral multiple thereof
and the currency or composite currency in which the Offered Securities will be
denominated if other than U.S. dollars; (9) any addition to, or modification or
deletion of, any Event of Default or any covenant of the Company specified in
the Indenture with respect to the Offered Securities; (10) any index used to
determine the amount of payments of principal of and premium, if any, on the
Offered Securities and the manner in which such amounts will be determined; (11)
if other than the principal amount thereof, the portion of the principal amount
of the Offered Securities which shall be payable upon declaration of
acceleration of the Maturity thereof pursuant to the Indenture; (12) the dates
within 15 days of which lists of Holders of Original Issue Discount Securities
are to be furnished to the Trustee pursuant to the Indenture; (13) whether such
Offered Securities may be issued in whole or in part in the form of one or more
Global Securities and, if so, the identity of the Depositary for such Global
Security or Securities; and (14) any other terms of the Offered Securities not
inconsistent with the provisions of the Indenture.
The Debt Securities will be unsecured, general obligations of the Company.
The Debt Securities will rank equally with the Company's other unsecured and
unsubordinated indebtedness and will not, by their terms, be subordinate in
right of payment to any other indebtedness of the Company. As the Debt
Securities will be issued at the holding company level, the 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
the Debt Securities, 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 agreements, bonds, capital leases, notes and other
obligations. With respect to any such subsidiaries that are not wholly-owned by
the Company, the rights of the Company's creditors, including holders of the
Debt Securities, will also be limited to the Company's ownership interest in
such subsidiaries. See "The Company -- General."
5
<PAGE>
Other than the restriction on the Company's ability to incur secured
indebtedness for borrowed money described below under "Limitation on Liens,"
there are no provisions in the Indenture that afford holders of the Debt
Securities protection in the event of a highly leveraged transaction involving
the Company. The restriction on the Company's ability to incur secured
indebtedness for borrowed money contained in the Indenture may be waived or
modified only with the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Debt Securities of each series
affected by the waiver or modification. See "Modification and Waiver."
Debt Securities may be issued as Original Issue Discount Securities to be
sold at a discount below their principal amount. Special United States federal
income tax considerations applicable to any Debt Securities issued at an
original issue discount, including Original Issue Discount Securities, will be
described in the applicable Prospectus Supplement or Prospectus Supplements.
DENOMINATIONS, REGISTRATION AND TRANSFER
The Debt Securities will be issuable only in registered form without
coupons. Debt Securities of a series may be issuable in whole or in part in the
form of one or more Global Securities, as described below under "Global
Securities." One or more Global Securities will be issued in a denomination or
aggregate denominations equal to the aggregate principal amount of Outstanding
Debt Securities of the series to be represented by such Global Security or
Securities.
Debt Securities (other than Global Securities) may be presented for exchange
as provided above, and may be presented for registration of transfer (with the
form of transfer endorsed thereon duly executed) at the office of the Security
Registrar or at the office of any transfer agent designated by the Company for
such purpose with respect to any series of Debt Securities and referred to in an
applicable Prospectus Supplement, without service charge and upon payment of any
taxes and other governmental charges as described in the Indenture. Such
transfer or exchange will be effected upon the Security Registrar or such
transfer agent, as the case may be, being satisfied with the documents of title
and identity of the person making the request. Unless otherwise indicated in a
Prospectus Supplement or changed by written notice to the Holders of any series
of Debt Securities affected thereby, the Trustee will be designated as the sole
Security Registrar with respect to the Offered Securities. (Section 305) If a
Prospectus Supplement refers to any transfer agents (in addition to the Security
Registrar) initially designated by the Company with respect to any series of
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, provided that the Company maintains a transfer agent in
each Place of Payment for such series. The Company may at any time designate
additional transfer agents with respect to any series of Debt Securities.
(Section 1002)
In the event of any redemption, the Company shall not be required to (i)
issue, register the transfer of or exchange Debt Securities of any series during
a period beginning at the opening of business 15 days before any selection of
Debt Securities of that series to be redeemed and ending at the close of
business on the day of mailing of the relevant notice of redemption or (ii)
register the transfer of or exchange any Debt Security, or portion thereof,
called for redemption, except the unredeemed portion of any Debt Security being
redeemed in part. (Section 305)
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary (the "Depositary") identified in the Prospectus Supplement
relating to such series. Unless and until it is exchanged in whole or in part
for Debt Securities in definitive form, a Global Security may not be transferred
except as a whole by the Depositary for such Global Security to a nominee of
such Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor. (Sections 303 and
305)
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<PAGE>
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series will be described in the Prospectus Supplement or
Prospectus Supplements relating to such series. The Company anticipates that the
following provisions will apply to all depositary arrangements.
So long as the Depositary for a Global Security, or its nominee, is the
owner of such Global Security, such Depositary or nominee, as the case may be,
will be considered the sole owner or holder of the Debt Securities represented
by such Global Security for all purposes under the Indenture governing such Debt
Securities; provided that with respect to a consent or vote of a Holder, Global
Securities will be voted in accordance with the instructions of the owners of
beneficial interests therein. Except as set forth below, owners of beneficial
interests in a Global Security will not be entitled to have Debt Securities of
the series represented by such Global Security registered in their names, will
not receive or be entitled to receive physical delivery of Debt Securities of
such series in definitive form and will not be considered the owners or holders
thereof under the Indenture.
Principal, premium, if any, and interest payments on Debt Securities
registered in the name of or held by a Depositary or its nominee will be made to
the Depositary or its nominee, as the case may be, as the registered owner or
the holder of the Global Security representing such Debt Securities. None of the
Company, the Trustee for such Debt Securities, any Paying Agent or the Security
Registrar for such Debt Securities will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in a Global Security for such Debt Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests. (Section 308)
If a Depositary for Debt Securities of a series is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days, the Company will issue Debt Securities of such
series in definitive form in exchange for the Global Security or Securities
representing the Debt Securities of such series. In addition, the Company may at
any time and in its sole discretion determine not to have any Debt Securities of
a series represented by one or more Global Securities and, in such event, will
issue Debt Securities of such series in definitive form in exchange for the
Global Security or Securities representing such Debt Securities. If there shall
have occurred and be continuing an event of default under the Indenture, as
described under "Events of Default," and the Depositary is notified by the
Company, the Trustee or the Registrar and Paying Agent that such Global Security
shall be exchangeable for definitive Notes in registered form, the Company will
issue Debt Securities of such series in definitive form in exchange for the
Global Security representing the Debt Securities of such series. Further, if the
Company so specifies with respect to the Debt Securities of a series, an owner
of a beneficial interest in a Global Security representing Debt Securities of
such series may, on terms acceptable to the Company and the Depositary for such
Global Security, receive Debt Securities of such series in definitive form. In
any such instance, an owner of a beneficial interest in a Global Security will
be entitled to physical delivery in definitive form of Debt Securities of the
series represented by such Global Security equal in principal amount to such
beneficial interest and to have such Debt Securities registered in its name.
Debt Securities of such series so issued in definitive form will be issued as
registered securities in denominations, unless otherwise specified by the
Company, of $1,000 and integral multiples thereof.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Debt Securities will
be made at the office or offices of such Paying Agent or Paying Agents as the
Company may designate from time to time, except that, at the option of the
Company, payment of any interest may be made (i) by check mailed to the address
of the Person entitled thereto as such address shall appear in the Security
Register or (ii) by wire transfer to an account maintained by the Person
entitled thereto as specified in the Security Register, provided that proper
wire transfer instructions have been received by the Regular Record Date.
(Sections 305, 307 and 1002) Unless otherwise indicated in an applicable
Prospectus Supplement, payment of any installment of interest on Debt Securities
(other than Defaulted Interest) will be made to the Person
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<PAGE>
in whose name such Debt Security (or Predecessor Security) is registered at the
close of business on the Regular Record Date for such interest, except that
interest payable at Maturity will be payable to the Person entitled to the
principal payment. (Section 307)
Unless otherwise indicated in an applicable Prospectus Supplement or changed
by written notice to the Holders of any series of Debt Securities affected
thereby, the Trustee, at its Corporate Trust Office in Chicago and its office in
The City of New York, will be designated as the Company's sole Paying Agent for
payments with respect to Offered Securities. The Company may at any time
designate additional Paying Agents, rescind the designation of any Paying Agent
or approve a change in the office or offices 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 Debt Securities. (Section 1002)
All monies paid by the Company to a Paying Agent for the payment of
principal of (and premium, if any) or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest
shall have become due and payable will be repaid to the Company, and the Holder
of such Debt Security will thereafter look only to the Company for payment
thereof as a general unsecured creditor. (Section 1003)
LIMITATION ON LIENS
The Indenture provides that the Company may not at any time incur secured
indebtedness for borrowed money in excess of 10% of Consolidated Net Worth (as
defined below) of the Company without expressly securing payment of the
principal of and premium, if any, and interest on the Debt Securities equally
and ratably with such secured indebtedness; PROVIDED, HOWEVER, that this
restriction will not apply to (1) liens on any property or assets securing
indebtedness of the Company incurred or assumed for the purpose of financing all
or any part of the cost of acquiring such property or asset; PROVIDED, HOWEVER,
that such lien attaches to such property or assets concurrently with or within
90 days after the acquisition thereof and no such lien shall extend to or cover
any other property or assets of the Company; (2) any liens securing indebtedness
upon the property or assets of a corporation which are in existence prior to the
time such corporation is merged into or consolidated with the Company or which
are in existence on properties or assets acquired by the Company and which are
not created in contemplation of any such event, PROVIDED, HOWEVER, that no such
lien shall extend to or cover any other property or assets of the Company; (3)
liens on property or related receivables, or both, to secure nonrecourse
obligations in connection with the Company's engaging in any leveraged or
single-investor or other lease, project financing or similar transaction entered
into by the Company in the ordinary course of its business; (4) any extension,
renewal or replacement (or successive extensions, renewals or replacements, in
any case, without increase in principal amount of the indebtedness secured
thereby), in whole or in part, of any of the foregoing; PROVIDED, HOWEVER, that
any such extension, renewal or replacement shall be limited to all or part of
the property or assets which secured the lien so extended, renewed or replaced
(plus improvements) and the principal amount secured thereby shall not be
increased as a result thereof. (Section 1005)
The term "Consolidated Net Worth" means, at any date, the shareholders'
equity of the Company and its consolidated subsidiaries, determined on a
consolidated basis in accordance with generally accepted accounting principles
then in effect.
DIVIDEND COVENANT
The Indenture provides that the Company may not declare or pay dividends
(other than dividends payable solely in the Company's common stock) on, directly
or indirectly purchase or otherwise acquire (except solely by exchange of
additional shares of common stock), or make any other distributions of cash or
property with respect to, any class of its common stock or, in the case of any
such purchase or acquisition, any options or warrants to acquire its common
stock ("Restricted Payments") if the aggregate of all Restricted Payments made
after August 31, 1989 would exceed the sum of (i) $150,000,000 plus (ii) 80% of
the cumulative consolidated net income of the Company after January 1, 1989
(minus 100% of the cumulative consolidated net losses during such period) plus
8
<PAGE>
(iii) the amount of any net proceeds to the Company from the sale of its common
and preferred stock, equity contributions to its capital and other contributions
to its capital from the conversion or exercise of securities to or for its
equity securities, in each case subsequent to January 1, 1989. (Section 1006)
DEFEASANCE
The Company may discharge its indebtedness and its obligations or certain of
its obligations under the Indenture with respect to any series of Debt
Securities by depositing funds or U.S. Government Obligations with the Trustee.
DEFEASANCE AND DISCHARGE. The Indenture provides that the Company will be
discharged from certain obligations in respect of the Debt Securities of any
series (not including obligations relating to payment thereof in accordance with
their terms, exchange of Debt Securities, registration of the transfer of or
exchange of Debt Securities of such series, replacement of stolen, lost or
mutilated Debt Securities of such series and maintenance of paying agencies)
upon the deposit with the Trustee, in trust, of money and/or U.S. Government
Obligations which, through the payment of interest and principal in respect
thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of (and premium, if any), each installment of
interest on and any sinking fund payments on the Debt Securities of such series
on the Stated Maturity of such payments in accordance with the terms of the
Indenture and the Debt Securities of such series. Such a trust may only be
established if, among other things, (a) the Company has paid or caused to be
paid all other sums payable with respect to the Debt Securities of such series;
(b) such deposit will not result in a breach or violation of, or constitute a
default under, the Indenture or any other agreement or instrument to which the
Company is a party or by which it is bound; (c) no Event of Default or event
which, with the giving of notice or lapse of time, or both, would become an
Event of Default with respect to the Debt Securities of such series shall have
occurred and be continuing on the date of such deposit; (d) the Debt Securities
of such series, if then listed on any national securities exchange, will not be
delisted as a result of such deposit, defeasance and discharge; and (e) the
Company has delivered to the Trustee an Officer's Certificate and an Opinion of
Counsel as to certain matters. In addition to discharging certain obligations
under the Indenture as stated above, if the Company delivers to the Trustee an
Opinion of Counsel 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 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,
then, in such event, the obligation of the Company to duly and punctually pay or
cause to be paid the principal of (and premium, if any) and interest on the Debt
Securities of such series shall cease, terminate and be completely discharged.
In the event of any such defeasance and discharge of Debt Securities of such
series, Holders of 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 their Debt Securities. (Section 403)
EVENTS OF DEFAULT
Any of the following events will constitute an Event of Default under the
Indenture with respect to Debt Securities of any series: (a) failure to pay any
interest on any Debt Security of that series when due, and such failure shall
continue for 30 days; (b) failure to pay principal of or any premium on any Debt
Security of that series when due; (c) failure to deposit any sinking fund
payment, when due, in respect of any Debt Security of that series; (d) failure
to perform any other covenant of the Company in the Indenture (other than a
covenant included in the Indenture solely for the benefit of series of Debt
Securities other than that series), continued for 30 days after written notice
as provided in the Indenture; (e) default resulting in the acceleration of the
maturity of, or default in the payment of, any other indebtedness of the Company
in an aggregate amount in excess of $5,000,000 and the failure by the Company to
obtain rescission or annulment of all such accelerations or to discharge all
such
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<PAGE>
defaulted indebtedness within 10 days after notice thereof to the Company by the
Trustee or the Holders of at least 25% in principal amount of the Debt
Securities; (f) certain events in bankruptcy, insolvency or reorganization
involving the Company; and (g) any other Event of Default provided with respect
to Debt Securities of that series. (Section 501)
If an Event of Default with respect to Debt Securities of any series at the
time Outstanding occurs and is continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Outstanding Debt Securities of
that series, by notice as provided in the Indenture, may declare the principal
amount (or, if the Debt Securities of that series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of that series) of all the Debt Securities of that series and the accrued
interest thereon, if any, to be due and payable immediately. At any time after a
declaration of acceleration with respect to Debt Securities of any series has
been made, but before a judgment or decree for payment of money has been
obtained by the Trustee, the Holders of a majority in aggregate principal amount
of the Outstanding Debt Securities of that series may, under certain
circumstances, including the Company's payment or deposit with the Trustee of
all overdue amounts (other than amounts due solely as a result of such
acceleration), rescind and annul such acceleration. (Section 502)
The Indenture provides that the Trustee shall transmit notice, as provided
in the Indenture, of any default with respect to the Debt Securities of any
series unless (a) such default has been cured or waived or (b) such default does
not constitute a payment default with respect to such series and the board of
directors, the executive committee or a trust committee of directors of the
Trustee and/or Responsible Officers in good faith determine that the withholding
of such notice is in the interest of the Holders of Securities of such series.
(Section 602)
The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable security or indemnity. (Sections 601 and 603)
Subject to such provisions for the indemnification of the Trustee, the Holders
of a majority in aggregate principal amount of the Outstanding Debt Securities
of any series will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Debt Securities
of that series, unless the Trustee shall determine that the action specified
would be in conflict with any rule of law or the Indenture, involve the Trustee
in personal liability which has not been indemnified or be unduly prejudicial to
the interests of the Holders of the Debt Securities not joining in such
direction. (Section 512)
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (Section 704)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Debt Securities of each series
affected by such modification or amendment; PROVIDED, HOWEVER, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security affected thereby, (a) change the Stated Maturity of
the principal of, or any installment of principal of or interest on, any Debt
Security; (b) reduce the principal amount of, or premium or interest, if any,
on, any Debt Security; (c) reduce the amount of principal of an Original Issue
Discount Security payable upon acceleration of the maturity thereof; (d) reduce
any premium payable upon redemption; (e) waive any default in the payment of the
principal of or interest on any Debt Security; (f) change the coin or currency
in which any Debt Security or any premium or interest thereon is payable; (g)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Debt Security; (h) reduce the percentage in principal amount of
Outstanding Debt
10
<PAGE>
Securities of any series, the consent of whose Holders is required for
modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults; (i)
change any obligation of the Company to maintain an office or agency in the
places and for the purposes required by the Indenture; or (j) modify any of the
above provisions or the provisions set forth in the paragraph below, except to
increase the foregoing percentage. (Sections 508 and 902)
The Holders of not less than a majority in aggregate principal amount of the
Outstanding Debt Securities of each series may, on behalf of the Holders of all
the Debt Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the Indenture.
(Section 1008) The Holders of not less than a majority in aggregate principal
amount of the Outstanding Debt Securities of each series may, on behalf of all
Holders of Debt Securities of that series, waive any past default under the
Indenture with respect to Debt Securities of that series, except a default (a)
in the payment of principal of (or premium, if any) or interest on any security
of such series or (b) in respect of a covenant or provision of the Indenture
which cannot be modified or amended without the consent of the Holder of each
Outstanding Debt Security of such series affected. (Section 513)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of the Holders of any of the Outstanding
Debt Securities under the Indenture, may consolidate or merge with or into, or
convey, transfer or lease all or substantially all of its property or assets to,
any entity organized under the laws of any domestic jurisdiction, or may permit
any Person to consolidate with or merge into the Company or convey, transfer or
lease all or substantially all of its properties and assets to the Company;
provided that, in the case of a consolidation or a merger of the Company into
any other Person or the conveyance, transfer or lease of all or substantially
all of the property and assets of the Company to any other Person, any
successor, transferee or lessee expressly assumes the Company's obligations on
the Debt Securities and under the Indenture, after giving effect to the
transaction no Event of Default shall have occurred and be continuing and the
Company delivers to the Trustee an Officer's Certificate and an Opinion of
Counsel to the effect that such consolidation, merger, conveyance, transfer or
lease complies with the provisions of the Indenture and certain other conditions
are met. (Section 801)
NOTICES
Except as otherwise provided in the Indenture, notices to Holders of Debt
Securities will be given by mail to the addresses of such Holders as they appear
in the Security Register. (Sections 101 and 106)
REPLACEMENT OF DEBT SECURITIES
Any mutilated Debt Security may be replaced by the Company at its discretion
at the expense of the Holder upon surrender of such Debt Security to the
Trustee. Debt Securities that become destroyed, stolen or lost may be replaced
by the Company at the expense of the Holder upon delivery to the Trustee of the
Debt Security or evidence of the destruction, loss or theft thereof satisfactory
to the Company and the Trustee. In the case of a destroyed, lost or stolen Debt
Security, an indemnity satisfactory to the Trustee and the Company may be
required at the expense of the Holder of such Debt Security before a replacement
Debt Security will be issued. (Section 306)
REGARDING THE TRUSTEE
The Company and affiliates of the Company maintain banking relationships in
the ordinary course of business with the Trustee.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities in any of the following ways: (i)
through underwriters or dealers; (ii) directly to a limited number of purchasers
or to a single purchaser; or (iii) through agents. The Prospectus Supplement
with respect to any Offered Securities will set forth the terms of the
11
<PAGE>
offering of such Offered Securities, including the name or names of any
underwriters, dealers or agents, the purchase price of such Offered Securities
and the proceeds to the Company from such sale, any underwriting discounts and
other items constituting underwriters' compensation, any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers.
Any initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If underwriters are involved in the sale of any Offered Securities, such
Offered 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 Offered 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
Offered Securities will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all such Offered Securities if any
are purchased.
If a dealer is used in the sale of any Offered Securities, the Company will
sell such Offered Securities to the dealer, as principal. The dealer may then
resell such Offered 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 Offered 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.
Offered 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 Offered 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 Offered Securities. 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.
Underwriters, dealers and agents participating in the distribution of the
Offered 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 Offered Securities may be deemed to be underwriting discounts
and commissions under, the Securities Act. Underwriters, dealers and agents may
be entitled, under agreements with the Company, to indemnification against or
contribution toward certain civil liabilities, including certain liabilities
under the Securities Act, and to reimbursement by the Company for certain
expenses.
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 Offered 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 Offered 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
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 Offered 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 Offered Securities are being sold to underwriters, the
12
<PAGE>
Company shall have sold to such underwriters the total principal amount of the
Offered 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 or agents and their associates may be customers
of, engage in transactions with and 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 Offered Securities will be
available.
Subject to certain conditions, the Company may agree to indemnify the
several underwriters, agents or dealers and their controlling persons against
certain civil liabilities, including certain liabilities under the Securities
Act, or to contribute to payments any such person may be required to make in
respect thereof. Agents, underwriters and dealers may engage in transactions
with or perform services for the Company and its subsidiaries in the ordinary
course of business.
RATIOS OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for the years ended December 31,
1990 through 1994 and for the nine months ended September 30, 1995, calculated
as required by the Commission, are 3.9x, 2.8x, 2.6x, 2.4x, 3.5x and 4.9x,
respectively. For the purpose of computing such ratios, "earnings" represents
the aggregate of (a) income from continuing operations before income taxes, (b)
fixed charges, (c) equity losses of less than 50 percent owned subsidiaries, and
(d) minority interest. "Fixed charges" consist of interest charges and an
estimated amount representing the interest portion of rental expense.
LEGAL MATTERS
The validity of the Offered 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.
Winthrop, Stimson, Putnam & Roberts may rely on the opinion of Stoel Rives LLP
as to matters of Washington law. John M. Schweitzer and John Detjens III, who
are assistant secretaries of PacifiCorp, are partners in the firm of Stoel Rives
LLP.
EXPERTS
The consolidated financial statements of the Company and subsidiaries and
supplemental schedules incorporated by reference in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports included in or incorporated by reference in the Company's Annual Report
on Form 10-K incorporated by reference herein, and have been so incorporated
herein in reliance upon such reports given upon the authority of that firm as
experts in accounting and auditing.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
PROSPECTUS SUPPLEMENT
<S> <C>
Description of Notes................. S-2
Certain United States Federal Income
Tax Consequences.................... S-12
Plan of Distribution of Notes........ S-17
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents by
Reference........................... 2
The Company.......................... 4
Use of Proceeds...................... 4
Description of Debt Securities....... 4
Plan of Distribution................. 11
Ratios of Earnings to Fixed
Charges............................. 13
Legal Matters........................ 13
Experts.............................. 13
</TABLE>
U.S. $200,000,000
[PTI LOGO]
MEDIUM-TERM NOTES,
SERIES C
DUE NINE MONTHS
OR MORE FROM DATE OF ISSUE
SALOMON BROTHERS INC
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
PROSPECTUS SUPPLEMENT
DATED JANUARY 26, 1996
