FILED PURSUANT TO RULE 424(b)(3)
COMMISSION FILE NO. 333-60766
PROSPECTUS
$250,000,000
QUESTAR PIPELINE COMPANY
(AN INDIRECT SUBSIDIARY OF QUESTAR CORPORATION)
MEDIUM-TERM NOTES, SERIES B
DUE FROM 9 MONTHS TO 30 YEARS FROM DATE OF ISSUE
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THE COMPANY: Questar Pipeline Company, our executive offices are located at 180
East 100 South Street, P.O. Box 45360, Salt Lake City, Utah 84145-0360, and our
telephone number is (801) 324-5555.
TERMS: We may offer from time to time up to $250,000,000 of medium-term notes.
The following terms may apply to the notes. We will provide the final terms for
each note in a pricing supplement.
- - The notes will be senior unsecured debt securities of Questar Pipeline.
- - The notes will mature in 9 months to 30 years from the date they are
originally issued.
- - The notes may be subject to redemption or repayment at our option or the
option of the holder.
- - We will pay amounts due on the notes in U.S. dollars.
- - The notes will bear interest at either a fixed or floating rate. The floating
interest rate formula may be based on:
- Commercial Paper Rate;
- Federal Funds Rate;
- LIBOR;
- Prime Rate;
- Treasury Rate; or
- A basis, index or formula specified in the applicable pricing supplement.
- - The notes will be in certificated or book-entry form.
- - Interest will be paid on fixed rate notes on June 1 and December 1 of each
year.
- - Interest will be paid on floating rate notes as described in the applicable
pricing supplement.
- - The notes will have minimum denominations of $1,000 increased in multiples of
$1,000.
- - We will specify the final terms of each note, which may be different from the
terms described in this prospectus, in the applicable pricing supplement.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 2.
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PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC (1) AND COMMISSIONS (2)(3) COMPANY (2)(4)
Per Note............... 100% .125%-.750% 99.875%-99.250%
Total.................. $250,000,000 $312,500-$1,875,000 $249,687,500-$248,125,000
(1) Unless otherwise specified in the applicable pricing supplement, notes will
be issued at 100% of their principal amount.
(2) We will pay a commission to the agents in the form of a discount, ranging
from .125% to .750% of the principal amount of any note, depending upon its
stated maturity, sold through such agent, and may sell notes to any agent,
as principal, at a discount for resale to investors or other purchasers at
varying prices related to prevailing market prices at the time of resale to
be determined by such agent. No commission will be payable on any sales made
directly by us.
(3) We have agreed to indemnify the agents against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Plan of Distribution."
(4) Before deducting expenses payable by us estimated at $476,000.
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We may sell the notes to the agents as principal for resale at varying or
fixed offering prices or through the agents as agents using their reasonable
best efforts on our behalf. We will sell the notes to the public at 100% of the
principal amount unless otherwise specified in the applicable pricing
supplement. We may also sell the notes without the assistance of the agents.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus, any prospectus supplement or any pricing supplement, is truthful or
complete. Any representation to the contrary is a criminal offense.
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MERRILL LYNCH & CO.
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
U.S. BANCORP PIPER JAFFRAY
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The date of this prospectus is May 22, 2001.
TABLE OF CONTENTS
PAGE
----
Risk Factors................................................ 2
The Company................................................. 5
Use of Proceeds............................................. 9
Capitalization.............................................. 9
Ratio of Earnings to Fixed Charges.......................... 9
Description of the Medium-Term Notes........................ 10
Plan of Distribution........................................ 29
Legal Matters............................................... 30
Experts..................................................... 30
Where You Can Find Additional Information................... 30
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You should rely only on the information contained or incorporated by
reference in this prospectus. We have not, and the agents have not, authorized
any other person to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on it. We
are not, and the agents are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date.
References in this prospectus to "the Company," "we," "us," or "our" are to
Questar Pipeline Company.
1
RISK FACTORS
Investment in the notes involves certain risks. In consultation with
financial and legal advisers, you should carefully consider, among other
matters, the following discussion of risks before deciding whether an investment
in the notes is suitable. The notes are not an appropriate investment for
unsophisticated investors.
INVESTING IN INDEXED NOTES INVOLVES ADDITIONAL RISK
If your notes are indexed notes, they entail significant risks that are not
associated with an investment in a conventional fixed-rate or floating rate debt
security. Indexation of the interest rate of a note may result in an interest
rate that is less than the rate payable on a conventional fixed-rate debt
security issued at the same time, including the possibility that no interest
will be paid. Indexation of the principal of and/or premium on a note may result
in an amount of principal and/or premium payable that is less than the original
purchase price of the note, including the possibility that no principal will be
paid.
The value of an index can depend on a number of factors over which we have
no control, including economic, financial and political events. These factors
are important in determining the existence, magnitude and longevity of the risks
and their results. If the formula used to determine the amount of principal,
premium and/or interest payable with respect to indexed notes contains a
multiplier or leverage factor, the effect of any change in the index will be
magnified. In recent years, values of indices and formulas have been volatile
and you should be aware that volatility may occur in the future. Nonetheless,
the historical experience of an index should not be taken as an indication of
its future performance. In addition, special tax rules may apply to indexed
notes, which rules will be discussed in the applicable pricing supplement. You
should consult your own financial, tax and legal advisors as to the risks
entailed by an investment in indexed notes and the suitability of the notes in
light of your particular circumstances.
OUR ABILITY TO REDEEM THE NOTES MAY ADVERSELY AFFECT YOUR RETURN ON THE NOTES
If your notes are redeemable at our option or subject to mandatory
redemption, we may, in the case of optional redemption, or must, in the case of
mandatory redemption, choose to redeem the notes at times when prevailing
interest rates may be relatively low. Accordingly, you will not be able to
reinvest the redemption proceeds in a comparable security at an interest rate as
high as that of the notes.
WE CANNOT ASSURE YOU THAT A MARKET WILL DEVELOP FOR YOUR NOTES OR WHAT THE
MARKET PRICE WILL BE
We cannot assure that a trading market for your notes will develop or be
maintained. In addition to our creditworthiness, many other factors may affect
the trading market for or value of the notes. These factors include:
- complexity and volatility of the index or formula applicable to the notes,
- method of calculating the principal, premium and interest in respect of
the notes,
- time remaining to the maturity of the notes,
- outstanding amount of the notes,
- redemption features of the notes,
- amount of other debt securities linked to the index or formula applicable
to the notes, and
- level, direction and volatility of market interest rates generally.
2
In addition, because some notes may be designed for specific investment
objectives or strategies, these notes will have a more limited trading market
and experience more price volatility. There may be a limited number of buyers
when you decide to sell the notes. This limited market may affect the price you
receive for the notes or your ability to sell the notes. You should not purchase
the notes unless you understand, and know you can bear, all of the investment
risks involving the notes.
OUR CREDIT RATINGS MAY NOT REFLECT ALL THE RISKS OF AN INVESTMENT IN THE NOTES
Our credit ratings are an independent assessment of ability to pay our
obligations. Consequently, real or anticipated changes in our credit ratings
will generally affect the market value of your notes. Our credit ratings,
however, may not reflect the potential impact of risks related to structural,
market or other factors discussed in this prospectus on the value of your notes.
AS OUR PARENT COMPANY DIVERSIFIES INTO MORE UNREGULATED BUSINESS ACTIVITIES, OUR
CREDIT RATINGS MAY BE AFFECTED
Our credit ratings depend in part on our relationship with our parent
company and our affiliates, some of which are businesses involved in open market
competition for sales. Our parent company has announced an intention to target
as much as 70% of capital expenditures towards non-regulated activities related
to oil and gas exploration and production and other activities over the next
several years. In as much as rating agencies tend to view those ventures as
holding more business risk than investment in rate regulated utility properties,
our parent company may see pressure on its credit ratings. This pressure could
negatively impact the ratings on the notes.
ENVIRONMENTAL REGULATION SIGNIFICANTLY AFFECTS OUR BUSINESS
Our business operations are subject to federal, state and local laws and
regulations relating to environmental protection. If an accidental leak or spill
of hazardous materials occurs from our pipelines, storage, or other facilities,
we may have to pay a significant amount to clean up the leak or spill. The
resulting costs and liabilities could negatively affect our level of cash flow.
In addition, emission controls required under the Federal Clean Air Act and
other similar federal and state laws could require unexpected capital
expenditures at our facilities. Although we cannot predict the impact of
Environmental Protection Agency standards or future environmental measures or
other state and local regulations, our costs could increase if environmental
laws and regulations become stricter. Since the costs of environmental
regulation are already significant, additional regulation could negatively
affect our business.
COMPETITION COULD LEAD TO LOWER LEVELS OF PROFITS AND LOWER OUR CASH FLOW OVER
TIME
Our natural gas pipelines and storage facilities compete against other
existing natural gas pipelines originating from the same sources or serving the
same markets as our facilities. In addition, we also may face competition from
natural gas pipelines and storage projects that may be built in the future. Our
ability to compete also depends upon general market conditions, which may
change. We conduct our operations without the benefit of exclusive franchises
from government entities. We provide open access transportation and storage
services at filed tariffs. Demand for storage service and transportation on our
pipelines is primarily a function of customer usage rates, economic conditions,
competing transportation and storage sources and price for service.
3
WE ARE PARTIES TO A COMPLEX LAWSUIT INVOLVING OUR OWNERSHIP IN THE TRANSCOLORADO
GAS TRANSMISSION COMPANY, WHICH COULD EXPOSE US TO MATERIAL LOSSES
KN TransColorado, Inc. ("KNTC"), a subsidiary of Kinder Morgan, Inc., is
challenging the validity of our contractual right to put our 50% interest in the
project to it. KNTC alleges we have breached our fiduciary duty to it and to the
partnership and is seeking damages in excess of $150 million plus punitive
damages, and a ruling that our put option is void and unenforceable. We have
filed a counterclaim seeking affirmation of our contractual right to exercise
the put and damages of at least $185 million. A trial is scheduled for
April 2002. In the meantime, we are incurring significant legal expenses to
defend ourselves and to protect our rights.
4
THE COMPANY
OVERVIEW
We are a subsidiary of Questar Corporation ("Questar"), and are in the
business of transporting and storing natural gas in the Rocky Mountain States of
Utah, Wyoming and Colorado. We and our affiliate Questar Gas Company ("Questar
Gas", formerly Mountain Fuel Supply Company) are directly owned by Questar
Regulated Services Company which is a sub-holding company of Questar.
As an open-access pipeline, we transport gas for affiliated and unaffiliated
customers. We own and operate the Clay Basin storage facility, a large
underground storage project in northeastern Utah, and own other underground
storage operations in Utah and Wyoming. Through a subsidiary, we own and operate
a gas processing plant. We are also involved in two partnerships, Overthrust
Pipeline Company ("Overthrust"), and TransColorado Gas Transmission Company
("TransColorado").
We have extended our presence in other parts of the western United States by
participating in the TransColorado pipeline project and purchasing the Southern
Trails line. There are market risks associated with these projects, as evidenced
by our decision to write down our investment in TransColorado in 1999. See
"Partnership Interests." Our efforts to complete the western section of Southern
Trails are affected by our ability to obtain firm shipper contracts.
Competition for transportation and storage services has intensified in
recent years. Changes in regulation have significantly increased customer
choices. We actively compete with other interstate pipelines for transportation
volumes throughout the Rocky Mountain region.
We have two key assets that contribute to our continued success. We have a
strategically located and integrated, low-cost transmission system with
interconnections to major pipeline systems and with access to major producing
areas and markets. We also have the Clay Basin storage facility, a storage
reservoir that has been successfully operated since 1977. Clay Basin has been
expanded in response to interest from customers and is fully subscribed by
firm-service customers under contracts that are generally long-term in nature.
We intend to take advantage of these assets by increasing our ability to quickly
and reliably move gas volumes between receipt and delivery points and by
continuing to review opportunities to increase our storage capacity and
services.
REGULATION
As a natural gas company under the Natural Gas Act, we are subject to the
jurisdiction of the Federal Energy Regulatory Commission (the "FERC"), which
administers the Natural Gas Act of 1938 and other federal laws as to rates and
charges for storage and transportation of gas in interstate commerce,
construction of new storage and transmission facilities, extensions or
abandonments of service and facilities, accounts and records, and depreciation
and amortization policies. We hold certificates of public convenience and
necessity granted by the FERC for the transportation and underground storage of
natural gas in interstate commerce and for the facilities required to perform
such operations.
We plan to maintain our current rate structure and do not currently plan to
file an application with the FERC for an increase in rates in 2001. We, however,
will continue to review our revenues and costs as we add new facilities and make
expenditures to comply with regulatory mandates.
AFFILIATE RELATIONSHIPS
We have significant business relationships with affiliates, particularly
Questar Gas. Depending on the season, Questar Gas has reserved 66% to 69% of the
total reserved firm transportation capacity on our transmission system to serve
the needs of its approximately 706,000 customers in Utah, southwestern Wyoming,
and southeastern Idaho. Questar Gas has also contracted for 26% of the firm
5
storage capacity available at Clay Basin and has storage contracts for 100% of
the capacity of three smaller storage reservoirs. Through a subsidiary, we have
a processing plant that extracts carbon dioxide from a portion of the gas
volumes delivered to Questar Gas. We transport natural gas owned by Questar Gas
and produced from properties operated by Wexpro Company ("Wexpro"), another
affiliate, as well as natural gas volumes purchased directly by Questar Gas from
field producers and other suppliers. We also transport volumes that are marketed
by Questar Energy Trading Company ("Questar Energy Trading"), another affiliate.
TRANSMISSION SYSTEM
Our core transmission system is strategically located in the Rocky Mountains
near large reserves of natural gas. We describe it as a "hub and spoke" system,
rather than a "long-line" pipeline, because of its physical configuration,
multiple interconnections to other interstate pipeline systems, and access to
major producing areas. Our transmission system has connections with the pipeline
systems of Colorado Interstate Gas Company ("CIG"); the middle segment of the
Trailblazer Pipeline System ("Trailblazer") owned by Wyoming Interstate
Company, Ltd. ("WIC"); The Williams Companies Inc. ("Williams"), including Kern
River Gas Transmission Company ("Kern River"); TransColorado; and Overthrust.
These connections have opened markets in the western and mid-western United
States outside Questar Gas' traditional service area and allow us to transport
gas for others.
Our transmission system includes 1,734 miles of transmission lines that link
various producers of natural gas with Questar Gas' distribution facilities in
Utah and Wyoming and interconnect with other pipelines. This total transmission
mileage includes pipelines associated with our storage fields and tap lines. It
does not include the systems in which we have a partnership interest or Southern
Trails line. The system includes two major segments, often referred to as the
northern and southern systems, which are linked together. The northern segment
extends from northwestern Colorado through southwestern Wyoming into northern
Utah; the southern segment of the transmission system extends from western
Colorado to Payson, in central Utah. The link between the two systems is
provided by our transmission line that runs from the Kanda/Coleman compressor
station on the northern segment to our Clay Basin storage reservoir and then on
to our Fidlar compressor station on the southern system.
Our largest single transportation customer is our affiliate, Questar Gas.
During 2000, we transported 108.2 million decatherms ("MMDth") (or 39% of our
total transportation) for Questar Gas, compared to 105.5 MMDth in 1999 (A
decatherm ("Dth") is the amount of heat energy equal to 10 therms or one million
British thermal units ("Btu")). These transportation volumes include Questar
Gas' cost-of-service gas produced by Wexpro and volumes purchased by Questar Gas
directly from field producers and other suppliers.
Our transportation agreement with Questar Gas was extended in 1999 for three
years and expires June 30, 2002. Questar Gas paid an annual reservation charge
of approximately $54.3 million in 2000, which includes reservation charges
attributable to firm and "no-notice" transportation. Questar Gas only needs its
total reserved capacity during peak-demand situations. When it is not fully
utilizing its capacity, Questar Gas releases the capacity to others, primarily
industrial transportation customers and marketing entities.
We collect approximately 95% of our transmission revenues through
reservation charges from firm transportation customers. In other words, these
customers pay primarily for access to transportation capacity. Consequently, our
throughput volumes do not have a significant effect on our short-term operating
results. Transportation revenues are not significantly affected by fluctuating
demand based on the vagaries of weather or gas prices. Revenues may, however, be
affected if the FERC changes its basic regulatory scheme of "straight
fixed-variable" rates described above.
Total system throughput increased from 253.5 MMDth in 1999 to 275.2 MMDth in
2000. We increased volumes transported for nonaffiliated customers from 135.9
MMDth in 1999 to 158.6 MMDth
6
in 2000. About 77% of our transmission system capacity is subscribed for under
firm transportation contracts.
We also own and operate a major compressor complex near Rock Springs,
Wyoming. The Kanda/ Coleman station compresses volumes of gas from our
transmission system for delivery to the WIC segment of the Trailblazer system
and to CIG. The complex has become a major delivery point on our system. Five of
our major natural gas lines are connected to the system at the complex. In
addition, both of CIG's Wyoming pipelines and the WIC segment are connected to
the complex.
Our pipelines, compressor stations, regulator stations, and other
transmission-related facilities are constructed on properties held under
long-term easements, rights of way, or fee interests sufficient for the conduct
of our business activities.
PARTNERSHIP INTERESTS
In addition to the transmission system described above, we own a 72%
interest in and are the operating partner of Overthrust, a general partnership
that was organized in 1979 to construct, own, and operate the Overthrust segment
of Trailblazer. Trailblazer is a major 800-mile pipeline system that transports
gas from producing areas in the Rocky Mountains to the Midwest. The 88-mile
Overthrust segment is the western-most segment in Trailblazer's system. Although
the Overthrust segment is currently underutilized because it was designed to
flow gas eastward, we and our partners are reviewing opportunities, including
reversing its flow ("backhauling"), to increase its value in meeting western gas
demand. The Overthrust partnership agreement requires unanimous consent of all
partners on major operating and financial issues.
Questar TransColorado, Inc., which is our subsidiary, and KN
TransColorado, Inc., a subsidiary of Kinder Morgan, Inc. (formerly KN Energy)
each have a 50% interest in the TransColorado pipeline project. Our ownership
interest in the project is subject to a lawsuit described in Item 3 of our 2000
Annual Report on Form 10-K and updated in our Quarterly Report on Form 10-Q. The
pipeline, which was completed in March 1999, was built to transport gas from the
Rocky Mountain area that was traditionally priced lower than other gas supplies
to California and Midwestern markets through interconnections with major
pipeline systems. The pipeline originates at a point on our system 25 miles east
of Rangely in northwestern Colorado and extends 292 miles to the Blanco hub in
northwestern New Mexico.
In its first two full years of operation, TransColorado incurred significant
losses because basis differentials, which reflect gas prices in different
producing basins, were not sufficient to encourage producers and market
aggregators to transport volumes on the line. We wrote down our investment in
TransColorado at year-end 1999 (which write-down included our anticipated
contributions of operating funds to April 1, 2001), pending the outcome of the
litigation and our ability to put our interest to our partner. The Company has
been, and may continue to be, required to contribute operating funds to
TransColorado in the amount of approximately $2 million per quarter.
STORAGE FACILITIES
Our Clay Basin storage facility in northeastern Utah is the largest
underground storage reservoir in the Rocky Mountains. The facility has a total
capacity of 117.5 billion cubic feet ("Bcf") and a working capacity of 51.3 Bcf.
Clay Basin has been operational since 1977 and has been successfully expanded
several times. Clay Basin's firm storage capacity is fully subscribed by
customers under long-term agreements. Questar Gas currently has 13.3 MMDth of
working gas capacity at Clay Basin. Other large customers include Williams;
Puget Sound Energy Company, a distribution utility in the state of Washington;
and Duke Energy Trading and Marketing L.L.C. Storage service is important to
distribution companies that need to match annual gas purchases with fluctuating
customer demand, improve service reliability, and avoid imbalance penalties. We
offer interruptible storage service at Clay
7
Basin and also allow firm storage service customers the right to release their
injection and withdrawal rights to other parties. Our storage facilities are
certificated by the FERC, and rates for storage service (based on operating
costs and investment in plant plus an allowed rate of return) are subject to
approval by the FERC.
NEW PROJECTS
The Mainline 104 project is expected to commence construction during 2001 in
order to have the project in service before the winter heating season of
2001-2002. This line, which is 75.6 miles long and 24 inches in diameter,
extends from Price, Utah, near the Ferron area of coalbed methane gas, to
Questar Gas' system at Payson, Utah, and the Kern River line near Elberta, Utah.
The project is estimated to cost $80 million and will provide approximately
272,000 Dth per day of additional firm transportation capacity. CIG has a 31.3%
interest in the line and has subscribed to 94,000 Dth of capacity. Questar Gas
has contracted for 50,000 Dth of capacity all year long and 50,000 Dth of
additional capacity during the heating-season months of December, January and
February. This additional capacity will allow Questar Gas to have additional
firm capacity to meet its long-term needs. The Bureau of Land Management has
established a schedule of town meetings to consider public response to the new
line. We do not yet have the final environmental approvals to construct, but the
timetable established by the federal agencies involved with the environmental
review, if met, would allow us to meet our schedule.
The Southern Trails Pipeline project involves converting a 700-mile oil
pipeline and installing compression facilities to transport natural gas volumes.
The line extends from the Four Corners area where the states of Utah, Colorado,
New Mexico and Arizona meet to Long Beach, California. Through a subsidiary, we
are continuing to negotiate necessary rights of way for the project. Current
operating plans divide this line into two segments. The eastern segment, with a
daily capacity of 80,000 Dth, extends from the San Juan Basin to the California
state line and is expected to be in service in mid-2002. The western segment,
which has a daily capacity of 120,000 Dth and extends from the California state
line to Long Beach, needs firm shipper contracts and action by the California
Public Utilities Commission that would modify its residual load service tariff
penalty to allow completion of this segment. We have received regulatory
approval for the project from the FERC and formal certification from the
California State Lands Commission. On April 9, 2001, we announced we had secured
a long-term gas-transportation contract for the entire initial capacity on the
eastern segment of the line.
On May 2, 2001, we announced our intention to construct a high
deliverability salt cavern gas storage facility near the city of Evanston,
Wyoming. The facility will consist of four salt cavern domes that will each hold
up to 3.5 Bcf of gas which could be injected and withdrawn up to twelve times
each year. We believe the facility will be useful for those electric power
companies which require immediate delivery of gas supplies. Depending on our
ability to sign contracts with customers, the facility is expected to be in
operation by 2004.
EMPLOYEES
As of December 31, 2000, we and a wholly-owned subsidiary had an aggregated
108 employees, compared to 129 employees as of year-end 1999. Questar Regulated
Services, our parent, had 358 employees (compared to 431 at year-end 1999) who
perform specified services for us, and other members of the group. The reduction
in employees reflects an early retirement program offered to employees of the
Questar Regulated Services group effective October 31, 2000.
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HEADQUARTERS
Our headquarters are located at 180 East 100 South Street, P.O. Box 45360,
Salt Lake City, Utah 84145-0360 and our telephone number is (801) 324-5555.
USE OF PROCEEDS
The net proceeds from the sale of the notes will be used to redeem our
$85 million 9 3/8% Debentures due 2021, to finance a portion of capital
expenditures and partnership investments, estimated at $180.3 million in 2001.
During 2001, capital expenditures for Main Line 104 are estimated at
$77.5 million, while capital expenditures for the Southern Trails Pipeline are
estimated to be $38.0 million in 2001. At March 31, 2001, short-term debt
totaled $800,000 and had an interest rate of 5.47% per annum. Short-term debt
was incurred for general corporate purposes.
CAPITALIZATION
The following table shows the capitalization of the Company as of March 31,
2001.
MARCH 31, 2001
-----------------------
AMOUNT PERCENTAGE
--------- -----------
(DOLLARS IN THOUSANDS)
Short-term debt, owed to Questar............................ $ 800
========
Long-term debt (1).......................................... $215,025 47.5%
Common shareholder's equity................................. 237,668 52.5%
-------- ------
Total capitalization........................................ $452,693 100.0%
======== ======
- ------------------------
(1) This amount reflects a discount of $375,000.
RATIO OF EARNINGS TO FIXED CHARGES
YEARS ENDED DECEMBER 31, TWELVE MONTHS
-------------------------------------------------------- ENDED
1996 1997 1998 1999 2000 MARCH 31, 2001
---- -------- -------- -------- -------- ---------------
Ratio of earnings to fixed charges (1)....... 3.58 4.02 3.78 .33 3.05 3.12
- ------------------------
(1) For purposes of this presentation, earnings represent income from continuing
operations before income taxes and fixed charges. Fixed charges consist of
total interest charges, amortization of debt issuance costs and debt
discounts, and the interest portion of rental costs.
9
DESCRIPTION OF THE MEDIUM-TERM NOTES
We will issue the notes as a new series of debt securities under an
indenture, dated as of August 17, 1998, as amended and modified from time to
time, between us and Wells Fargo Bank Northwest, National Association (f/k/a
First Security Bank, N.A.), as trustee. The following description is only a
summary of the material provisions of the notes and of the indenture and is not
complete and is qualified in its entirety by reference to the indenture, a copy
of which has been filed as an exhibit to the registration statement of which
this prospectus is a part. We urge you to read the indenture because it, and not
this description, defines your rights as holders of the notes. A copy of the
indenture is available upon request made to us or to the agents. When we refer
to securities, we refer to all debt securities that we have issued or may issue
in the future under the indenture and include the notes. The terms and
conditions described below apply to each note unless otherwise indicated in an
applicable pricing supplement.
GENERAL
In addition to the notes we are offering in this prospectus, the indenture
provides for the issuance of additional securities, in one or more series
(including both interest bearing and original issue discount securities),
without limitation as to aggregate principal amount. The notes will be our
unsecured obligations and will rank equally with all our other unsecured and
unsubordinated indebtedness. Other than a limitation on liens covenant, the
indenture does not contain restrictive covenants which would require us to
maintain certain financial ratios or restrict our ability to incur additional
indebtedness. In addition, the indenture permits the issuance of notes which do
not pay interest for stated periods of time and which are issued with original
issue discount.
The notes being offered hereby constitute a separate series of securities
under the indenture and are currently limited to $250,000,000 aggregate initial
offering amount. Such series may be reopened and the aggregate initial offering
amount of the notes may be increased from time to time. The notes will be
offered on a continuing basis, and each note will mature on a Business Day (as
defined below), not less than 9 months nor more than 30 years from its date of
issue, as selected by the initial purchaser and agreed to by us. The notes will
be denominated and be payable in United States dollars.
The pricing supplement relating to any note will set forth the principal
amount, interest rate, issue price and agent's commission, original issue and
Maturity dates, redemption and repayment provisions, if any, and other material
terms of such note.
Unless otherwise specified in the applicable pricing supplement, each note
will be issued in registered book-entry form or in registered certificated form,
in denominations of $1,000 and integral multiples of $1,000. Book-entry notes
may be transferred or exchanged only through a participating member of The
Depository Trust Company (or such other depositary as is identified in an
applicable pricing supplement). See "Book Entry notes; Global Securities" below.
Registration of transfer or exchange of certificated notes will be made at the
corporate trust office of the trustee. No service charge will be made for the
registration of transfer or exchange of notes, but we may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith (other than exchanges pursuant to Sections 304, 906 or 1107
of the indenture, not involving any transfer).
"Business Day" means any day that is not a Saturday or Sunday, and that in
The City of New York is not a day on which banking institutions are generally
authorized or obligated by law or executive order to close, and, with respect to
any LIBOR Note, is a London Business Day. Unless otherwise specified in the
applicable pricing supplement, "London Business Day" means any day on which
dealings in deposits in United States dollars are transacted in the London
interbank market.
10
"Maturity," when used with respect to any note, means the date on which the
principal of such note or an installment of principal becomes due and payable as
provided in the note or the indenture, whether at the Stated Maturity or by
declaration of acceleration, call for redemption, repayment at the option of the
holder or otherwise.
"Stated Maturity," when used with respect to any note or any installment of
principal thereof or interest thereon, means the date specified in such note as
the fixed date on which the principal of such note or such installment of
principal or interest is due and payable.
Under the indenture, notes may be issued at a discount from their principal
amount payable at stated maturity, or with such terms (such as contingent
interest, interest holidays, irregular accrual periods, interest payable in
additional notes, stepped rates, rates based on multiple or non-conventional
interest indices or notes on which payments are tied to the value of a single
stock, a basket of stocks, a commodity or a stock or commodities index) so as to
cause the notes to be subject to the original issue discount rules of federal,
state, local or foreign tax laws. In the event notes are issued at such a
discount or with such terms so as to cause original issue discount rules to
apply, the terms of such notes and additional disclosure regarding the federal
income tax treatment of such notes as well as certain other considerations will
be provided in the applicable pricing supplement relating to such notes.
Unless otherwise indicated in a pricing supplement, the covenants contained
in the indenture and the notes would not necessarily afford holders of the notes
protection in the event of a highly leveraged or other transaction involving us
that may adversely affect holders.
Interest rates offered by us with respect to the notes may differ depending
upon, among other things, the aggregate principal amount of notes purchased in
any single transaction. Notes with similar variable terms other than interest
rates, as well as notes with different other variable terms, may be offered
concurrently to different investors. Interest rates or formulas and other terms
of notes are subject to change by us from time to time, but no such change will
affect any note previously issued or as to which an offer to purchase has been
accepted by us.
PAYMENTS
For certificated notes, payments of principal, premium, if any, and interest
payable at Maturity will be made in immediately available funds at the corporate
trust office of the trustee in Salt Lake City, Utah or at such other place as we
may designate, provided that the certificated note is presented to the trustee
in time for the trustee to make such payments in such funds in accordance with
its normal procedures. Interest (other than interest payable at Maturity) will
be paid by check mailed to the address of the holder as it appears in the
security register as of the regular record dates or, at our option, by wire
transfer to an account maintained by such holder with a bank located in the
United States. Notwithstanding the foregoing, a holder of $10,000,000 or more in
aggregate principal amount of certificated notes having the same Interest
Payment Dates (as defined below) shall be entitled, upon written request
received by the trustee prior to the regular record date in respect of an
interest payment, or the date which is fifteen days before the Stated Maturity
or date of redemption or repayment of the principal of the notes, as the case
may be, to receive payments of principal, premium, if any, and interest by wire
transfer to an account maintained by such holder with a bank located in the
United States; provided, however, that no payment of principal and premium, if
any, will be made without prior notice of presentment and surrender of the
notes. If any Stated Maturity or date of redemption or repayment would otherwise
be a day that is not a Business Day, payments due on any such day need not be
made on such day, but may be made on the next succeeding Business Day (or, in
the case of a LIBOR Note, if such day falls in the next succeeding calendar
month, the immediately preceding Business Day), with the same force and effect
as if made on the due date, and no interest shall accrue for the period from
such due date to such succeeding Business Day.
11
The total amount of any principal, premium, if any, or interest due on any
global security (as defined below) representing one or more book-entry notes on
any interest payment date or at Maturity will be made available to the trustee
on such date. As soon as practicable thereafter, the trustee will make such
payments to the depositary in accordance with existing arrangements between the
trustee and the depositary. The depositary will allocate such payments to each
book-entry note represented by such global security and make payments to the
registered owners or holders thereof in accordance with its existing operating
procedures. Neither we nor the trustee shall have any responsibility or
liability for such payments by the depositary. So long as the depositary or its
nominee is the registered owner of any global security, the depositary or its
nominee, as the case may be, will be considered the sole owner or holder of the
book-entry note or book-entry notes represented by such global security for all
purposes under the indenture.
REDEMPTION AT THE OPTION OF THE COMPANY; NO SINKING FUND
Unless otherwise specified in an applicable pricing supplement, the notes
will not be subject to any optional or mandatory sinking fund. If provided in an
applicable pricing supplement, the notes may be subject to redemption, in whole
or in part, prior to their Stated Maturity at our option or through operation of
a mandatory or optional sinking fund or analogous provisions at a price or
prices (including premiums, if any) determined as set forth in a pricing
supplement, together with interest thereon payable to the date of redemption, on
notice given no more than 60 nor less than 30 days prior to the date of
redemption. If the notes are to be redeemable, the notes will be subject to
redemption by us on and after the redemption date, if any, fixed at the time of
sale and set forth in the applicable pricing supplement. If no redemption date
is indicated in the applicable pricing supplement with respect to a note, such
note will not be redeemable prior to Stated Maturity.
REPAYMENT AT THE OPTION OF THE HOLDER
If provided in an applicable pricing supplement, the notes will be subject
to repayment at the option of the holder of the notes in accordance with the
terms of such notes on their respective optional repayment dates, if any, as
agreed upon by us and the purchasers of such notes at the time of sale (each, an
"Optional Repayment Date"). If no Optional Repayment Date is indicated with
respect to a note, such note will not be repayable at the option of the holder
of such note prior to its Stated Maturity.
We may at any time purchase notes at any price or prices in the open market
or otherwise. Notes so purchased by us may, at our discretion, be held, resold
or surrendered to the trustee for cancellation.
INTEREST AND INTEREST RATES
GENERAL
Unless otherwise specified in an applicable pricing supplement, each note
will bear interest from the date of original issue at the rate per annum or, in
the case of a Floating Rate Note, pursuant to the interest rate formula, stated
therein and in the applicable pricing supplement until the principal thereof is
paid or made available for payment. Interest will be payable in arrears on each
date specified in the applicable pricing supplement and in a note on which an
installment of interest is due and payable (an "Interest Payment Date") and at
Maturity. Interest will be payable generally to the person in whose name a note
(or any predecessor security) is registered at the close of business on the
regular record date next preceding the related Interest Payment Date; provided,
however, that interest payable at Maturity will be payable to the person to whom
principal shall be payable. Each interest payment shall be the amount of
interest accrued from and including the later of the date of original issue or
the most recent Interest Payment Date (in respect of which interest has been
paid or duly provided for
12
with respect to such note) to but excluding the next succeeding Interest Payment
Date (an "Interest Accrual Period"). Unless otherwise specified in the
applicable pricing supplement, the first payment of interest on any note
originally issued between a regular record date and the related Interest Payment
Date will be made on the Interest Payment Date immediately following the next
succeeding regular record date to the holder on such next succeeding regular
record date. Interest rates, interest rate formulas and other terms of the notes
are subject to change by us from time to time but no such change will affect any
notes already issued or as to which offers to purchase have been accepted by us.
FIXED RATE NOTES
Unless otherwise specified in an applicable pricing supplement, we will pay
interest on Fixed Rate Notes semiannually on June 1 and December 1 of each year,
and the regular record dates in respect of such Interest Payment Dates will be
the immediately preceding May 15 and November 15 (whether or not a Business
Day), respectively. If any Interest Payment Date or Maturity of a Fixed Rate
Note falls on a day that is not a Business Day with respect to such Fixed Rate
Note, the payment due on such Interest Payment Date or at Maturity will be made
on the following day that is a Business Day with respect to such Fixed Rate Note
as if it were made on the date such payment was due and no interest shall accrue
on the amount so payable for the period from and after such Interest Payment
Date or Maturity, as the case may be. Unless otherwise specified in the
applicable pricing supplement, interest on each Fixed Rate Note will be computed
on the basis of a 360-day year of twelve 30-day months.
FLOATING RATE NOTES
Unless otherwise specified in an applicable pricing supplement, Floating
Rate Notes will be issued as described below. Interest on Floating Rate Notes
will be determined by reference to a "Base Rate," which may be one or more of:
- the Commercial Paper Rate, in which case such note will be a "Commercial
Paper Rate Note";
- the Federal Funds Rate, in which case such note will be a "Federal Funds
Rate Note";
- LIBOR, in which case such note will be a "LIBOR Note";
- the Prime Rate, in which case such note will be a "Prime Rate Note";
- the Treasury Rate, in which case such note will be a "Treasury Rate Note";
or
- such other interest rate formula as may be set forth in the applicable
pricing supplement and Floating Rate Note.
In addition, a Floating Rate Note may bear interest at the lowest of two or more
Base Rates determined in the same manner as the Base Rates are determined for
the types of Floating Rate Notes described above (except the interest rate for
such Floating Rate Notes will not be determined with reference to the Treasury
Rate). Each Floating Rate Note will specify the Base Rate or Rates applicable
thereto.
The interest rate on each Floating Rate Note will be calculated by reference
to the specified Base Rate or the lowest of two or more specified Base Rates, in
either case plus or minus the applicable Spread, if any, and/or multiplied by
the applicable Spread Multiplier, if any. The "Spread" is the number of basis
points to be added to or subtracted from the related Base Rate or Rates
applicable to such Floating Rate Note. The "Spread Multiplier" is the percentage
of the related Base Rate or Rates applicable to such Floating Rate Note by which
said Base Rate or Rates are to be multiplied to determine the applicable
interest rate on such Floating Rate Note. The "Index Maturity" is the period to
Maturity of the instrument or obligation with respect to which the related Base
Rate or Rates are calculated. Each Floating Rate Note will specify the Index
Maturity and the Spread, if any, and/or Spread Multiplier, if any, applicable
thereto.
13
Each Floating Rate Note and the applicable pricing supplement will specify
whether the rate of interest on such Floating Rate Note will be reset daily,
weekly, monthly, quarterly, semiannually, annually or otherwise (each, an
"Interest Reset Period") and the date on which such interest rate will be reset
(each, an "Interest Reset Date"). Unless otherwise specified in a Floating Rate
Note and the applicable pricing supplement, the Interest Reset Date will be, in
the case of a Floating Rate Note which resets:
- daily, each Business Day;
- weekly, on Wednesday of each week (with the exception of weekly reset
Floating Rate Notes as to which the Treasury Rate is an applicable Base
Rate, which will reset Tuesday of each week, except as described below);
- monthly, the third Wednesday of each month;
- quarterly, the third Wednesday of each March, June, September and December
of each year;
- semiannually, the third Wednesday of each of the two months specified in
such pricing Supplement; and
- annually, the third Wednesday of the month specified in such pricing
supplement.
If any Interest Reset Date for any Floating Rate Note would otherwise be a
day that is not a Business Day, such Interest Reset Date will be postponed to
the next succeeding day that is a Business Day, except that in the case of a
LIBOR Note (or a Floating Rate Note for which LIBOR is an applicable Base Rate),
if such Business Day is in the next succeeding calendar month, such Interest
Reset Date shall be the last Business Day in the preceding month.
The interest rate applicable to each Interest Reset Period commencing on the
Interest Reset Date or Dates with respect to such Interest Reset Period will be
the rate determined with respect to the applicable "Interest Determination
Date." Unless otherwise specified in an applicable pricing supplement, the
Interest Determination Date with respect to the Commercial Paper Rate, the
Federal Funds Rate and the Prime Rate will be the second Business Day preceding
each Interest Reset Date for the related note. Unless otherwise specified in an
applicable pricing supplement, the Interest Determination Date with respect to
LIBOR will be the second London Business Day preceding each Interest Reset Date.
With respect to the Treasury Rate, unless otherwise specified in an applicable
pricing supplement, the Interest Determination Date will be the day in the week
in which the Interest Reset Date falls on which day Treasury Bills are normally
auctioned (Treasury Bills are normally sold at auction on Monday of each week,
unless that day is a legal holiday, in which case the auction is normally held
on the following Tuesday, except that such auction may be held on the preceding
Friday); provided, however, that if, as a result of a legal holiday, an auction
is held on the Friday of the week preceding the Interest Reset Date, the related
Interest Determination Date shall be such preceding Friday; and provided,
further, that if an auction shall fall on any Interest Reset Date, then the
related Interest Reset Date shall instead be the first Business Day immediately
following such auction. Unless otherwise specified in the applicable pricing
supplement, the Interest Determination Date pertaining to a Floating Rate Note
the interest rate of which is determined with reference to two or more Base
Rates will be the first Business Day which is at least two Business Days prior
to such Interest Reset Date for such a Floating Rate Note on which each Base
Rate shall be determinable. Each Base Rate shall be determined and compared on
such date, and the applicable interest rate shall take effect on the related
Interest Reset Date.
Any Floating Rate Note may also specify either or both a maximum limit and a
minimum limit on the rate at which interest may accrue during any Interest
Accrual Period. In addition to any maximum interest rate that may be applicable
to any Floating Rate Note pursuant to the preceding sentence, the
14
interest rate on Floating Rate Notes will in no event be higher than the maximum
rate permitted by New York law, as the same may be modified by United States law
of general application.
Except as provided below or in the applicable pricing supplement, interest
will be payable, in the case of a Floating Rate Note which resets:
- daily, each Business Day;
- weekly, on Wednesday of each week (with the exception of weekly reset
Floating Rate Notes as to which the Treasury Rate is an applicable Base
Rate, which will reset on Tuesday of each week, except as described
below);
- monthly, on the third Wednesday of each month;
- quarterly, on the third Wednesday of March, June, September and December
of each year;
- semiannually, on the third Wednesday of the two months of each year
specified in the applicable pricing supplement; and
- annually, on the third Wednesday of the month specified in the applicable
pricing supplement (each, an "Interest Payment Date");
and, in each case, at Maturity. If any Interest Payment Date for a Floating Rate
Note falls on a day that is not a Business Day with respect to such Floating
Rate Note, such Interest Payment Date will be the following day that is a
Business Day with respect to such Floating Rate Note, except that, in the case
of a LIBOR Note (or a Floating Rate Note for which LIBOR is an applicable Base
Rate), if such Business Day is in the next succeeding calendar month, such
Interest Payment Date shall be the immediately preceding day that is a Business
Day with respect to such Floating Rate Note. If the Maturity of a Floating Rate
Note falls on a day that is not a Business Day with respect to such Floating
Rate Note, the payment of principal, premium, if any, and interest will be made
on the next succeeding Business Day with respect to such Floating Rate Note, and
no interest on such payment shall accrue for the period from and after Maturity.
Unless otherwise specified in a Floating Rate Note and the applicable pricing
supplement, the regular record date or Dates for interest payable on such
Floating Rate Note will be the fifteenth day (whether or not a Business Day)
immediately preceding the related Interest Payment Date or Dates.
The interest rate in effect with respect to a Floating Rate Note on each day
that is not an Interest Reset Date will be the interest rate determined as of
the Interest Determination Date pertaining to the immediately preceding Interest
Reset Date and the interest rate in effect on any day that is an Interest Reset
Date will be the interest rate determined as of the Interest Determination Date
pertaining to such Interest Reset Date, subject in either case to applicable
provisions of law and any maximum or minimum interest rate limitation referred
to in such Floating Rate Note; provided, however, that the interest rate in
effect with respect to a Floating Rate Note for the period from the date of
original issue to the first Interest Reset Date will be the rate specified as
such in the applicable pricing supplement and the related Floating Rate Note
(the "Initial Interest Rate") and unless otherwise specified in the applicable
pricing supplement the interest rate in effect for the ten calendar days
immediately prior to a Maturity will be the interest rate in effect on the tenth
calendar day preceding such Maturity.
Unless otherwise specified in the applicable pricing supplement, with
respect to each Floating Rate Note, accrued interest is calculated by
multiplying its face amount by an accrued interest factor. Such accrued interest
factor is computed by adding the interest factor calculated for each day from
the later of the date of issue, or from the last date to which interest has been
paid or duly provided for, to the date for which accrued interest is being
calculated. Unless otherwise specified in the applicable pricing supplement, the
interest factor for each such day is computed by dividing the interest rate
applicable to such day by 360, in the case of Commercial Paper Rate Notes,
Federal Funds Rate Notes, LIBOR
15
Notes, or Prime Rate Notes or by the actual number of days in the year, in the
case of Treasury Rate Notes. Unless otherwise specified in an applicable pricing
supplement, the interest factor for notes for which the interest rate is
calculated with reference to two or more Base Rates will be calculated in each
period in the same manner as if only the lowest of the applicable Base Rates
applied.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) will be rounded upward to 9.87655% (or 0987655)), and
all dollar amounts used in or resulting from such calculation on Floating Rate
Notes will be rounded to the nearest cent (with one-half cent being rounded
upward).
Unless otherwise specified in an applicable pricing supplement, the trustee
will be the calculation agent. Upon the request of the holder of any Floating
Rate Note, the calculation agent will provide the interest rate then in effect
and, if determined, the interest rate that will become effective as a result of
a determination made for the next succeeding Interest Reset Date with respect to
such Floating Rate Note. Unless otherwise specified in an applicable pricing
supplement, the calculation date, if applicable, pertaining to any Interest
Determination Date will be the earlier of:
- the tenth calendar day after the applicable Interest Determination Date
or, if the tenth calendar day is not a Business Day, the next succeeding
Business Day; or
- the Business Day immediately preceding the applicable Interest Payment
Date or Maturity, as the case may be.
The interest rate in effect with respect to a Floating Rate Note from the
date of original issue to the first Interest Reset Date will be the Initial
Interest Rate. The interest rate for each subsequent Interest Reset Date will be
determined by the calculation agent as follows:
COMMERCIAL PAPER RATE. Commercial Paper Rate Notes will bear interest at
the interest rates (calculated with reference to the Commercial Paper Rate and
the Spread and/or Spread Multiplier, if any) specified in such Commercial Paper
Rate Notes and in an applicable pricing supplement.
Unless otherwise specified in an applicable pricing supplement, "Commercial
Paper Rate" means, with respect to any Interest Determination Date relating to a
Commercial Paper Rate Note or any Interest Determination Date for a note for
which the Commercial Paper Rate is one of the Base Rates (a "Commercial Paper
Rate Interest Determination Date"), the Money Market Yield (as defined below) on
such date of the rate for commercial paper having the Index Maturity specified
in the applicable pricing supplement as published by the Board of Governors of
the Federal Reserve System in "Statistical release H.15(519), Selected Interest
Rates" or any successor publication ("H.15(519)") under the heading "Commercial
Paper--Nonfinancial" or, if unavailable, under such other heading representing
commercial paper issued by non-financial entities whose bond rating is "AA," or
the equivalent, from a nationally recognized statistical rating organization. In
the event that such rate is not published by 3:00 P.M., New York City time, on
the Calculation Date pertaining to such Commercial Paper Rate Interest
Determination Date, then the Commercial Paper Rate will be the Money Market
Yield on such Commercial Paper Rate Interest Determination Date of the rate for
commercial paper having the Index Maturity specified in the applicable pricing
supplement as published by the Federal Reserve Bank of New York in its daily
statistical release "Composite 3:30 P.M. Quotations for U.S. Governmental
Securities" or any successor publication ("Composite Quotations") under the
heading "Commercial Paper" (with an Index Maturity of one month or three months
being deemed to be equivalent to an Index Maturity of thirty days or ninety
days, respectively). If such rate is not published in either H.15(519) or
Composite Quotations by 3:00 P.M., New York City time, on such Calculation Date,
then the Commercial Paper Rate will be calculated by the calculation agent and
will be the Money Market Yield of the arithmetic mean of the offered rates, as
of approximately 11:00 A.M., New York City time, on such Commercial Paper Rate
Interest Determination Date, of three leading dealers
16
of commercial paper in The City of New York (which may include one or more of
the agents or their affiliates) selected by the calculation agent (after
consultation with us) for commercial paper having the specified Index Maturity
placed for a nonfinancial issuer whose bond rating is "AA," or the equivalent,
from a nationally recognized statistical rating organization; provided, however,
that if the dealers selected as aforesaid by the calculation agent are not
quoting as mentioned in this sentence, the Commercial Paper Rate determined as
of such Commercial Paper Interest Determination Date will be the Commercial
Paper Rate in effect on such Commercial Paper Rate Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
D X 360
MONEY MARKET YIELD = -------------- X 100
[ 360 - (D X M) ]
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
FEDERAL FUNDS RATE. Federal Funds Rate Notes will bear interest at the
interest rates (calculated with reference to the Federal Funds Rate and the
Spread and/or Spread Multiplier, if any) specified in such Federal Funds Rate
Notes and in an applicable pricing supplement.
Unless otherwise specified in an applicable pricing supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to a
Federal Funds Rate Note or a Floating Rate Note for which the interest rate is
determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for United States dollar
federal funds as published in H.15(519) under the heading "Federal Funds
(Effective)" or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, the rate on such Federal Funds Rate Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/ Effective Rate." If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the
related Calculation Date, then the Federal Funds Rate on such Federal Funds Rate
Interest Determination Date will be calculated by the calculation agent and will
be the arithmetic mean of the rates for the last transaction in overnight United
States dollar federal funds arranged by three leading brokers of federal funds
transactions in The City of New York (which may include the agents or their
affiliates) selected by the calculation agent prior to 9:00 A.M., New York City
time, on such Federal Funds Rate Interest Determination Date; provided, however,
that if the brokers so selected by the calculation agent are not quoting as
mentioned in this sentence, the Federal Funds Rate determined as of such Federal
Funds Rate Interests Determination Date will be the Federal Funds Rate in effect
on such Federal Funds Rate Interest Determination Date.
LIBOR. LIBOR Notes will bear interest at the interest rates (calculated
with reference to LIBOR and the Spread and/or Spread Multiplier, if any)
specified in such LIBOR Notes and in an applicable pricing supplement.
Unless otherwise specified in an applicable pricing supplement, "LIBOR"
means the rate determined by the calculation agent in accordance with the
following provisions:
- With respect to an Interest Determination Date relating to a LIBOR Note or
any Floating Rate Note for which LIBOR is an applicable Base Rate (a
"LIBOR Interest Determination Date"), either, as specified in the
applicable pricing supplement: (a) the arithmetic mean of the offered
rates for deposits in U.S. dollars for the period of the Index Maturity
specified in the applicable pricing supplement, commencing on the second
London Business Day immediately following such LIBOR Interest
Determination Date, which appear on the Reuters Screen LIBOR Page as of
11:00 A.M., London time, on the LIBOR Interest Determination Date, if at
least two such
17
offered rates appear on the Reuters Screen LIBOR Page ("LIBOR Reuters"),
or (b) the rate for deposits in U.S. dollars having the Index Maturity
designated in the applicable pricing supplement, commencing on the second
London Business Day immediately following that LIBOR Interest
Determination Date, that appears on the Telerate Page 3750 as of
11:00 A.M., London time, on that LIBOR Interest Determination Date ("LIBOR
Telerate"). Unless otherwise indicated in the applicable pricing
supplement, "Reuters Screen LIBOR Page" means the display designated as
Page "LIBOR" on the Reuters Monitor Money Rate Service (or such other page
as may replace the LIBOR page on that service for the purpose of
displaying London interbank offered rates of major banks). "Telerate Page
3750" means the display designated as page "3750" on the Telerate Service
(or such other page as may replace the 3750 page on that service or such
other service or services as may be nominated by the British Bankers'
Association for the purpose of displaying London interbank offered rates
for U.S. dollar deposits). If neither LIBOR Reuters nor LIBOR Telerate is
specified in the applicable pricing supplement, LIBOR will be determined
as if LIBOR Telerate had been specified. If fewer than two offered rates
appear on the Reuters Screen LIBOR Page, or if no rate appears on the
Telerate Page 3750, as applicable, LIBOR in respect of that LIBOR Interest
Determination Date will be determined as if the parties had specified the
rate described in the immediately following clause.
- With respect to a LIBOR Interest Determination Date on which fewer than
two offered rates appear on the Reuters Screen LIBOR Page, as described in
clause (a) immediately above, or on which no rate appears on the Telerate
Page 3750, as specified in clause (b) immediately above, as applicable,
LIBOR will be determined on the basis of the rates at which deposits in
U.S. dollars having the index Maturity designated in the applicable
pricing supplement are offered at approximately 11:00 A.M., London time,
on such LIBOR Interest Determination Date by four major banks ("Reference
Banks") in the London interbank market selected by the calculation agent
(after consultation with us) to prime banks in the London interbank market
commencing on the second London Business Day immediately following such
LIBOR Interest Determination Date and in a principal amount of not less
than U.S. $1,000,000 that is representative for a single transaction in
such market at such time. The calculation agent will request the principal
London office of each of the Reference Banks to provide a quotation of its
rate. If at least two such quotations are provided, LIBOR for such LIBOR
Interest Determination Date will be the arithmetic mean of such
quotations. If fewer than two quotations are provided, LIBOR for such
LIBOR Interest Determination Date will be the arithmetic mean of the rates
quoted at approximately 11:00 AM., New York City time, on such LIBOR
Interest Determination Date by three major banks (which may include the
agents or their affiliates) in The City of New York selected by the
calculation agent (after consultation with us) for loans in U.S. dollars
to leading European banks having the specified Index Maturity designated
in the applicable pricing supplement commencing on the second London
Business Day immediately following such LIBOR Interest Determination Date
and in a principal amount equal to an amount of not less than U.S.
$1,000,000 that is representative for a single transaction in such market
at such time; provided, however, that if the banks selected as aforesaid
by the calculation agent are not quoting as mentioned in this sentence,
LIBOR determined as of such LIBOR Interest Determination Date will be
LIBOR then in effect on such LIBOR Interest Determination Date.
PRIME RATE. Prime Rate Notes will bear interest at the interest rates
(calculated with reference to the Prime Rate and the Spread and/or Spread
Multiplier, if any) specified in such Prime Rate Notes and in an applicable
pricing supplement.
Unless otherwise specified in an applicable pricing supplement, "Prime Rate"
means:
- with respect to any Interest Determination Date relating to a Prime Rate
Note or a Floating Rate Note for which the interest rate is determined
with reference to the Prime Rate (a "Prime Rate Interest Determination
Date"), the rate on such date as such rate is published in
H.15(519) under the heading "Bank Prime Loan"; or
18
- if the rate referred to in the first clause is not published prior to
3:00 P.M., New York City time, on the related Calculation Date, then the
arithmetic mean of the rates of interest publicly announced by each bank
that appears on the Reuters Screen USPRIME1 Page (as hereinafter defined)
as such bank's prime rate or base lending rate as in effect for such Prime
Rate Interest Determination Date; or
- if fewer than four such rates described in the second clause appear on the
Reuters Screen USPRIME1 Page for such Prime Rate Interest Determination
Date, then the arithmetic mean of the prime rates or base lending rates
quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date by four major money center banks (which may include
affiliates of the agents) in The City of New York selected by the
calculation agent;
- if fewer than four such quotations described in the third clause are so
provided, then the arithmetic mean of four prime rates quoted on the basis
of the actual number of days in the year divided by a 360-day year as of
the close of business on such Prime Rate Interest Determination Date as
furnished in The City of New York by the major money center banks, if any,
that have provided such quotations and by a reasonable number of
substitute banks or trust companies (which may include affiliates of the
agents) to obtain four such prime rate quotations, provided such
substitute banks or trust companies are organized and doing business under
the laws of the United States, or any State thereof, each having total
equity capital of at least $500 million and being subject to supervision
or examination by Federal or State authority.
"Reuters Screen USPRIME1 Page" means the display on the Reuter Monitor Money
Rates Service (or any successor service) on the "USPRIME1" page (or such other
page as may replace the USPRIME1 page on such service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
TREASURY RATE. Treasury Rate Notes will bear interest at the interest rates
(calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any) specified in such Treasury Rate Notes and in an applicable
pricing supplement.
Unless otherwise specified in an applicable pricing supplement, "Treasury
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Rate Note or any Floating Rate Note for which the interest rate is
determined by reference to the Treasury Rate (a "Treasury Rate Interest
Determination Date"), the rate applicable to the most recent auction of direct
obligations of the United States ("Treasury Bills") having the Index Maturity
specified in the applicable pricing supplement, as such rate is published in
H.15(519) under the heading "Treasury Bills--auction average (investment)" or,
if not published by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Treasury Rate Interest Determination Date, the auction
average rate (expressed as a bond equivalent on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) as otherwise announced by
the United States Department of the Treasury.
In the event that the results of the auction of Treasury Bills having the
specified Index Maturity are not reported as provided by 3:00 P.M., New York
City time, on such Calculation Date, or if no such auction is held in a
particular week, then the Treasury Rate shall be calculated by the calculation
agent and shall be a yield to Maturity (expressed as a bond equivalent on the
basis of a year of 365 days or 366 days, as applicable, and applied on a daily
basis) of the arithmetic mean of the secondary market bid rates, as of
approximately 3:30 P.M., New York City time on such Treasury Rate Interest
Determination Date, of three leading primary United States government securities
dealers (which may include one or more of the agents or their affiliates)
selected by the calculation agent (after consultation with us), for the issue of
Treasury Bills with a remaining Maturity closest to the specified index
Maturity; provided, however, that if the dealers selected as aforesaid by the
calculation agent are not quoting as mentioned in this sentence, the Treasury
Rate determined as of such Treasury Rate
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Interest Determination Date will be the Treasury Rate in effect on such Treasury
Rate Interest Determination Date.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the determination of a Base Rate, the
specification of a Base Rate, calculation of the interest rate applicable to a
Floating Rate Note, its Interest Payment Dates or any other matter relating
thereto may be modified by the terms as specified under "Other Provisions" on
the face of the applicable notes or in an Addendum relating to the applicable
notes, if so specified on the face of the applicable notes and described in the
applicable pricing supplement.
DISCOUNT NOTES
We may offer notes ("Discount Notes") from time to time that have an issue
price (as specified in the applicable pricing supplement) that is less than 100%
of the principal amount of the applicable notes by more than a percentage equal
to the product of 0.25% and the number of full years to the Stated Maturity.
Discount Notes may not bear any interest currently or may bear interest at a
rate that is below market rates at the time of issuance. The difference between
the issue price of a Discount Note and 100% of the principal amount is referred
to as the "discount." In the event of redemption, repayment or acceleration of
Maturity of a Discount Note, the amount payable to the holder of such Discount
Note will be equal to the sum of (i) the issue price (increased by any accruals
of discount) and, in the event of any redemption of such Discount Note (if
applicable), multiplied by the redemption percentage (as adjusted by the annual
redemption percentage reduction, if applicable) and (ii) any unpaid interest
accrued thereon to the date of such redemption, repayment or acceleration of
Maturity, as the case may be.
Unless otherwise specified in the applicable pricing supplement, for
purposes of determining the amount of discount that has accrued as of any date
on which a redemption, repayment or acceleration of Maturity occurs for a
Discount Note, such discount will be accrued using a constant yield method. The
constant yield will be calculated using a 30-day month, 360-day year convention,
a compounding period that, except for the Initial Period (as defined below),
corresponds to the shortest period between Interest Payment Dates for the
applicable Discount Note (with ratable accruals within a compounding period), a
coupon rate equal to the initial coupon rate applicable to such Discount Note
and an assumption that the Maturity of such Discount Note will not be
accelerated. If the period from the date of issue to the initial Interest
Payment Date for a Discount Note (the "Initial Period") is shorter than the
compounding period for such Discount Note, a proportionate amount of the yield
for an entire compounding period will be accrued. If the Initial Period is
longer than the compounding periods, then such period will be divided into a
regular compounding period and a short period with the short period being
treated as provided in the preceding sentence. The accrual of the applicable
discount may differ from the accrual of original issue discount for purposes of
the Internal Revenue Code of 1986, as amended (the "Code"), certain Discount
Notes may not be treated as having original issue discount within the meaning of
the Code, and notes other than Discount Notes may be treated as issued with
original issue discount for federal income tax purposes. In the event notes are
issued at such a discount or with such terms so as to cause original issue
discount rules under federal tax laws to apply, the terms of such notes and
additional disclosure regarding the federal income tax treatment of such notes
as well as certain other considerations will be provided in the applicable
pricing supplement relating to such notes.
BOOK-ENTRY NOTES; GLOBAL SECURITIES
Upon issuance, all book-entry notes having the same original issue date,
Stated Maturity and otherwise having identical terms and provisions will be
represented by a single global security. Each global security representing
book-entry notes will be deposited with, or on behalf of, the depositary.
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Except as set forth below, a global security may not be transferred except as a
whole by the depositary to a nominee of the depositary or by a nominee of the
depositary to the depositary or another nominee of the depositary or by the
depositary or any nominee to a successor of the depositary or a nominee of such
successor.
Upon our issuance of book-entry notes represented by a global security, the
depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of the book-entry notes represented by such global
security to the accounts of participants. The accounts to be credited shall be
designated by the applicable agent or the underwriter of such book-entry notes,
as the case may be. Ownership of beneficial interests in a global security will
be limited to participants or persons that hold interests through participants.
Ownership of beneficial interests in book-entry notes represented by a global
security will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the depositary (with respect to interest of
participants in the depositary), or by participants in the depositary or persons
that may hold interests through such participants (with respect to persons other
than participants in the depositary). The laws of some states may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interest in a global security.
So long as the depositary for a global security, or its nominee, is the
registered owner of the global security, the depositary or its nominee, as the
case may be, will be considered the sole owner or holder of the book-entry notes
represented by such global security for all purposes under the indenture. Except
as provided below, owners of beneficial interests in book-entry notes
represented by a global security will not be entitled to have book-entry notes
represented by such global security registered in their names, will not receive
or be entitled to receive or be entitled to receive physical delivery of
book-entry notes in definitive form, known as certificated notes and will not be
considered the owners or holders of such book-entry notes under the indenture.
The Depository Trust Company, or DTC, will be the initial depositary with
respect to the book-entry notes. The book-entry notes will be issued as fully
registered securities registered in the name of Cede & Co., DTC's partnership
nominee. One fully registered global security will be issued for each issue of
book-entry notes having the same terms and provisions, each in the aggregate
principal amount of such issue, and will be deposited with DTC. If, however, the
aggregate principal amount of any issue exceeds $200,000,000, one global
security will be issued with respect to each $200,000,000 of principal amount
and an additional global security will be issued with respect to any remaining
principal amount of such issue.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants deposit with DTC. DTC also facilitates
the clearance and settlement among participants of securities transactions, such
as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in participants' accounts, thereby eliminating
the need of physical movement of securities certificates. Direct participants of
DTC include securities brokers and dealers (including the agents), banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its direct participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., and the National Association
of Securities Dealers, Inc. Access to DTC's system is also available to others,
known as indirect participants, such as securities brokers and dealers, banks
and trust companies that clear through or maintain a custodial relationship with
a direct participant, either directly or indirectly. The rules applicable to DTC
and its participants are on file with the Securities and Exchange Commission.
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Purchases of book-entry notes under DTC's system must be made by or through
direct participants, which will receive a credit for such book-entry notes on
DTC's records. The ownership interest of each actual purchaser, or beneficial
owner, of each book-entry note represented by a global security is in turn to be
recorded on the records of direct participants and indirect participants.
Beneficial owners will not receive written confirmation from DTC of their
purchase, but beneficial owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the direct participants or indirect participants through which
such beneficial owner entered into the transaction. Transfer of ownership
interests in a global security representing book-entry notes are to be
accomplished by entries made on the books of participants acting on behalf of
beneficial owners. Beneficial owners of a global security representing
book-entry notes will not receive certificated notes representing their
ownership interests in such global security, except in the limited circumstances
described above.
To facilitate subsequent transfers, all global securities representing
book-entry notes which are deposited with, or on behalf of, DTC are registered
in the name of DTC's nominee, Cede & Co. The deposit of global securities with,
or on behalf of, DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual beneficial
owners of the global securities representing the book-entry notes; DTC's records
reflect only the identity of the direct participants to whose accounts such
book-entry notes are credited, which may or may not be the beneficial owners.
The participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the global
securities representing the book-entry notes. Under its usual procedures, DTC
mails an omnibus proxy to us as soon as possible after the applicable record
date. The omnibus proxy assigns Cede & Co.'s consenting or voting rights to
those direct participants to whose account the book-entry notes are credited on
the applicable record date (identified in a listing attached to the omnibus
proxy).
Principal, premium, if any, and/or interest, if any, payments on the global
securities representing the book-entry notes will be made by us through the
trustee in immediately available funds to DTC or its nominee, as the case may
be, as the registered owner of such global securities. DTC's practice is to
credit direct participants' accounts on the applicable payment date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on such date. Payments by
participants to beneficial owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such participant and not of DTC, the trustee or ours, subject
to any statutory or regulatory requirements as may be in effect from time to
time. Payment of principal, premium, if any, and/or interest, if any, to DTC is
the responsibility of ours and the trustee, disbursement of such payments to
direct participants shall be the responsibility of DTC, and disbursement of such
payments to the beneficial owners shall be the responsibility of direct
participants and indirect participants. None of us, the trustee, the Paying
Agent or the Security Registrar will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests of a global security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the book-entry notes are being redeemed, DTC's practice is to determine
by lot the amount of the interest of each direct participant in such issue to be
redeemed.
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Unless otherwise specified in the applicable pricing supplement, book-entry
notes represented by a global security will be exchanged for certificated notes
of like tenor and terms and of differing authorized denominations in a like
aggregate principal amount, only if:
- the depositary notifies us that it is unwilling or unable to continue as
depositary for the global securities or we become aware that the
depositary has ceased to be a clearing agency registered under the
Exchange Act and, in any such case, we shall not have appointed a
successor to the depositary within 90 days after we receive such notice or
become aware of such ineligibility, or
- we, in our sole discretion, determine that the global securities shall be
exchanged for certificated notes.
Under such circumstances, certificated notes will be printed and delivered. Upon
any such exchange, the certificated notes shall be registered in the names of
the beneficial owners of the global security or securities representing
book-entry notes, which names shall be provided by the depositary's relevant
participants (as identified by the depositary) to the trustee.
LIMITATIONS ON LIENS
Subject to certain exceptions, we will not, and will not permit any
Subsidiary to, create, assume or suffer to exist, otherwise than in favor of us
or a Subsidiary, any mortgage, pledge, lien, encumbrance, or security interest
(collectively, "Liens") upon any of our properties or assets or upon any income
or profits therefrom unless the notes shall be equally and ratably secured. This
prohibition will not apply to:
- Liens existing as of the date of the indenture;
- any purchase money mortgage or Lien created to secure all or part of the
purchase price of any property (or to secure a loan made to us or any
Subsidiary to enable it to acquire such property), provided that such Lien
shall extend only to the property so acquired, improvements thereon,
replacements thereof and the income or profits therefrom;
- Liens on any property at the time of the acquisition thereof, whether or
not assumed by us or a Subsidiary; provided that such Lien shall extend
only to the property so acquired, improvements thereon, replacements
thereof and income or profits therefrom;
- Liens on property or any contract for the sale of any product or service
or any rights thereunder or any proceeds therefrom, acquired or
constructed by us or a Subsidiary and created within one year after the
later of (1) the completion of such acquisition or construction or
(2) the commencement of operation of the project, provided that such Lien
shall extend only to the property so acquired or constructed, improvements
thereon, replacements thereof and income or profits therefrom;
- Liens of Subsidiaries outstanding at the time they become Subsidiaries;
- Liens created or assumed by us or a Subsidiary on coal, geothermal, oil,
natural gas, inert gas, other hydrocarbon or mineral properties owned or
leased by us or a Subsidiary to secure loans to us or a Subsidiary, for
the purpose of developing such properties;
- Liens on any investment (as defined in the indenture) of ours or a
Subsidiary in any Person other than a Subsidiary or on any security
representing any investment of ours or a Subsidiary;
- any Lien not otherwise permitted by the indenture, provided that after
giving effect to such Liens the sum of (1) all indebtedness of ours and
our Subsidiaries secured by Liens not otherwise permitted by the indenture
and (2) all Attributable Debt of ours and our Subsidiaries (to the extent
not included in (1) above) does not exceed 10% of Consolidated
Capitalization;
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- any refunding or extension of Maturity, in whole or in part, of any
obligation or indebtedness secured by certain permitted Liens, provided
that the principal amount of the obligation or indebtedness secured by
such refunding or extension shall not exceed the principal amount of the
obligation or indebtedness then outstanding and shall be limited in lien
to the same or substituted property and after-acquired property that
secured the refunded or extended obligation or indebtedness;
- Liens upon any office equipment, data processing equipment or any motor
vehicles, tractors or trailers;
- Liens of or upon or in current assets of ours or a Subsidiary created or
assumed to secure indebtedness incurred in the ordinary course of
business;
- any Lien which is payable, both with respect to principal and interest,
solely out of the proceeds of natural gas, oil, coal, geothermal
resources, inert gas, hydrocarbons or minerals to be produced from the
property subject thereto and to be sold or delivered by us or a
Subsidiary;
- Liens to secure indebtedness incurred to finance advances made by us or
any Subsidiary to any third party for the purpose of financing oil,
natural gas, hydrocarbon, inert gas or other mineral exploration or
development, provided that such Liens shall extend only to the receivables
of ours or such Subsidiary in respect of such advances; and
- any rights reserved in others to take or reserve any part of the natural
gas, oil, coal, geothermal resources, inert gas, hydrocarbons or minerals
produced at any time on any property of ours or a Subsidiary.
Also excepted from the general prohibition are various other liens
including, but not limited to: mechanics' or materialmen's liens, certain
governmental liens, certain leases, certain judgment liens, and certain liens
arising in connection with leases, easements and rights-of-way for pipeline or
distribution plant purposes.
CERTAIN DEFINITIONS
Certain terms used in the indenture are defined and are used in this
prospectus as follows:
"Attributable Debt" means, as of the date of determination, the present
value of net rent for the remaining term of a capital lease, determined in
accordance with accounting principles generally accepted in the United States
("GAAP"), which is part of a Sale and Leaseback Transaction (as defined),
including any periods for which the lessee has the right to renew or extend the
lease. For purposes of the foregoing, "net rent" means the sum of capitalized
rental payments required to be paid by the lessee, other than amounts required
to be paid by the lessee for maintenance, repairs, insurance, taxes,
assessments, energy, fuel, utilities and similar charges. In the case of a
capital lease which is terminable by the lessee upon the payment of a penalty,
such net amount shall also include the amount of such penalty, but no rent shall
be considered to be required to be paid under such lease subsequent to the first
date upon which it may be so terminated.
"Consolidated Capitalization" means, without duplication, the sum of
- the principal amount of Consolidated Funded Debt of ours and our
Subsidiaries at the time outstanding,
- the total capital represented by the capital stock of ours and our
Subsidiaries at the time outstanding based, in the case of stock having
par value, upon its par value, and in the case of stock having no par
value, upon the value stated on our books,
- the total amount of (or less the amount of any deficit in) retained
earnings and paid-in capital of ours and our Subsidiaries,
24
- reserves for deferred federal and state income taxes arising from timing
differences, and
- Attributable Debt, all as shown on a consolidated balance sheet of ours
and our Subsidiaries prepared in accordance with GAAP;
provided that in determining the consolidated retained earnings and paid-in
capital of ours and our Subsidiaries no effect shall be given to any unrealized
write-up or write-down in the value of assets or any amortization thereof,
except for accumulated provisions for depreciation, depletion, amortization and
property retirement which shall have been created by charges made by us or any
of our Subsidiaries on our books.
"Consolidated Funded Debt" means the Funded Debt of ours and our
Subsidiaries, consolidated in accordance with GAAP.
"Funded Debt" means all Indebtedness that will mature, pursuant to a
mandatory sinking fund or prepayment provision or otherwise, and all
installments of Indebtedness that will fall due, more than one year from the
date of determination. In calculating the Maturity of any Indebtedness, there
shall be included the term of any unexercised right of the debtor to renew or
extend such Indebtedness existing at the time of determination.
"Indebtedness" means all items of indebtedness for borrowed money (other
than unamortized debt discount and premium) which would be included in
determining total liabilities as shown on the liability side of a balance sheet
prepared in accordance with GAAP as of the date as of which Indebtedness is to
be determined, and shall include Indebtedness for borrowed money (other than
unamortized debt discount and premium) with respect to which we or any
Subsidiary customarily pays interest secured by any mortgage, pledge or other
lien or encumbrance of or upon, or any security interest in, any properties or
assets owned by us or any Subsidiary, whether or not the Indebtedness secured
thereby shall have been assumed, and shall also include guarantees of
Indebtedness of others; provided that in determining Indebtedness of ours or any
Subsidiary there shall be included the aggregate liquidation preference of all
outstanding securities of any Subsidiary senior to its Common Stock that are not
owned by us or a Subsidiary; and provided, further, that Indebtedness of any
Person shall not include the following:
- any indebtedness evidence of which is held in treasury (but the subsequent
resale of such indebtedness shall be deemed to constitute the creation
thereof); or
- any particular indebtedness if, upon or prior to the Maturity thereof,
there shall have been deposited with a depository (or set aside and
segregated, if permitted by the instrument creating such indebtedness), in
trust, money (or evidence of such indebtedness as permitted by the
instrument creating such indebtedness) in the necessary amount to pay,
redeem or satisfy such indebtedness; or
- any indebtedness incurred to finance oil, natural gas, hydrocarbon, inert
gas or other mineral exploration or development to the extent that the
issuer thereof has outstanding advances to finance oil, natural gas,
hydrocarbon, inert gas or other mineral exploration or development, but
only to the extent such advances are not in default; or
- any indebtedness incurred without recourse to us or any Subsidiary; or
- any indebtedness incurred to finance advance payments for gas (pursuant to
take-or-pay provisions or otherwise), but only to the extent that such
advance payments are pursuant to gas purchase contracts entered into in
the normal course of business; or
- any amount (whether or not included in determining total liabilities as
shown on the liability side of a balance sheet prepared in accordance with
GAAP) representing capitalized rent under any lease; or
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- any indirect guarantees or other contingent obligations in respect of
indebtedness of other Persons, including agreements, contingent or
otherwise, with such other Persons or with third parties with respect to,
or to permit or assure the payment of, obligations of such other Persons,
including, without limitation, agreements to purchase or repurchase
obligations of such other Persons, to advance or supply funds to, or to
invest in, such other Persons, or to pay for property, products or
services of such other Persons (whether or not conveyed, delivered or
rendered); demand charge contracts, through-put, take-or-pay, keep-well,
make-whole or maintenance of working capital or similar agreements; or
guarantees with respect to rental or similar periodic payments to be made
by such other Persons.
"Sale and Leaseback Transaction" means an arrangement in which we or a
Subsidiary sells any of our or its property which was placed into service more
than 120 days prior to such sale to a Person and leases it back from that Person
within 180 days of the sale.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Nothing contained in the indenture or in any of the notes shall prevent any
consolidation or merger of us with or into any other Person (whether or not
affiliated with us), or successive consolidations or mergers in which we or our
successor shall be a party, or shall prevent any conveyance, transfer or lease
of our property as an entirety or substantially as an entirety, to any other
Person (whether or not affiliated with us); provided, however, that:
- in case of such a transaction, the entity formed by such consolidation or
into which we are merged or the Person which acquires or leases our
properties and assets substantially as an entirety shall be a corporation
organized under the laws of the United States of America, any state
thereof or the District of Columbia and shall expressly assume the due and
punctual payment of the principal of, premium, if any, and interest on and
any Additional Amounts (as defined in the indenture) with respect to all
the notes and the performance of every other covenant of the indenture;
- immediately after giving effect to such transaction, no event which, after
notice or lapse of time, would become an Event of Default, shall have
occurred and be continuing; and
- each of us and the successor Person shall have delivered to the trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
transaction complies with the above paragraphs (a) and (b) and that all
conditions precedent relating to such transaction have been complied with.
EVENTS OF DEFAULT
The following are Events of Defaults under the indenture with respect to any
notes:
- failure to pay the principal of (or premium, if any, on) any note when
due;
- failure to make any mandatory sinking fund payment on any note when due or
failure to pay any interest installment on or any Additional Amounts with
respect to any note when due, in each case, continued for 30 days;
- failure to perform any of our other covenants, continued for 90 days after
written notice as provided in the indenture;
- the occurrence of an event of default in other indebtedness of ours
(including Securities other than the notes) resulting in indebtedness in
excess of $10,000,000 principal amount being due and payable prior to
Maturity and such acceleration shall not have been rescinded or annulled
or such indebtedness shall not have been discharged after written notice
as provided in the indenture; and
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- certain events of bankruptcy, insolvency or reorganization.
If an Event of Default with respect to notes at the time outstanding shall
occur and be continuing, then and in every such case (unless the principal of
all the notes shall have already become due and payable) the trustee or the
holders of at least 33 1/3% in principal amount of the outstanding notes may
declare to be due and payable immediately, by a notice in writing to us (and to
the trustee if given by holders), the entire principal amount of all the
outstanding notes. At any time after such declaration of acceleration has been
made, but before a judgment or decree for payment of the money due has been
obtained by the trustee, the holders of a majority in principal amount of the
outstanding notes, by written notice to us and the trustee, may, in certain
circumstances, rescind and annul such declaration,
No holder of any notes shall have any right to institute any proceeding with
respect to the indenture or for any remedy thereunder, unless such holder
previously shall have given to the trustee written notice of a default and
unless also the holders of at least 25% of the principal amount of outstanding
notes shall have made written request upon the trustee, and have offered
reasonable indemnity, to institute such proceeding as the trustee may request,
and the trustee shall not have received direction inconsistent with such request
in writing by the holders of a majority in principal amount of outstanding notes
and shall have neglected or refused to institute such proceeding within
60 days. However, the rights of any holder of any notes to enforce the payment
of principal, premium, if any, and interest due on and any Additional Amount
with respect to such notes on or after the dates expressed in such notes may not
be impaired or affected.
WAIVER, MODIFICATION AND AMENDMENT
The holders of a majority in principal amount of the outstanding notes may
waive certain past defaults, except a default in the payment of the principal of
(or premium, if any) or interest on any note or in respect of any covenant or
provision in the indenture which under the terms of the indenture cannot be
modified without the consent of all holders of outstanding notes. The holders of
a majority in aggregate principal amount of outstanding notes may waive our
compliance with certain restrictive provisions.
We and the trustee may modify and amend the indenture with the consent of
the holders of majority in aggregate principal amount of the outstanding notes,
provided that no such modification or amendment may, without the consent of the
holder of each note affected thereby:
- change the Stated Maturity of the principal of, or any installment of
principal of, or interest on or any Additional Amount with respect to, any
note;
- reduce the principal amount of, or the rate of interest, if any, on, any
Additional Amounts with respect to, or any premium payable upon the
redemption of any note;
- change the Place of Payment or change the currency of payment of
principal, premium, if any, interest on, or any Additional Amounts with
respect to any note;
- impair the right to institute suit for the enforcement of any payment on
or with respect to any note;
- reduce the percentages of holders of outstanding notes specified in this
or the preceding paragraph; or
- effect certain other modifications or amendments described in the
indenture.
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DEFEASANCE AND COVENANT DEFEASANCE
The indenture provides that we may elect either:
- to defease and be discharged from any and all obligations with respect to
the notes ("defeasance"), or
- to be released from our obligations with respect to such notes described
above under "Limitations on Liens" and "Consolidation, Merger and Sale of
Assets" ("covenant defeasance"), upon the irrevocable deposit with the
trustee, in trust for such purpose, of money, and/or U.S. Government
Obligations (as defined in the indenture) which through the payment of
principal and interest in accordance with their terms will provide money,
in an amount sufficient to pay the principal of, and premium, if any, and
interest on and any Additional Amounts with respect to such notes, and any
mandatory sinking fund or analogous payments thereon, on the scheduled due
date therefor.
Unless otherwise specified in the applicable pricing supplement, defeasance and
covenant defeasance are each conditioned upon our delivery to the trustee of an
Opinion of Counsel to the effect that the holders of the notes will have no
federal income tax consequences as a result of such deposit. The applicable
pricing supplement may further describe the provisions, if any, permitting such
defeasance or covenant defeasance with respect to the related notes (including
any modifications to the provisions described above) and the effect of such
defeasance or covenant defeasance under federal tax law.
CONCERNING THE TRUSTEE
Wells Fargo Bank Northwest, National Association (f/k/a First Security Bank,
N.A.) is the trustee under the indenture. The indenture contains certain
limitations on the rights of the trustee, should it become our creditor, to
obtain payment of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. The trustee will
be permitted to engage in other transactions with us; however, if it acquires a
conflicting interest it must eliminate such conflict or resign or otherwise
comply with the Trust Indenture Act of 1939, as amended. The indenture also
provides that we will indemnify the trustee against loss, liability or expense
incurred without negligence or bad faith on the part of the trustee arising out
of or in connection with the trust under the indenture.
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PLAN OF DISTRIBUTION
The notes are being offered on a continuing basis for sale by us through the
agents, who have agreed to use their reasonable efforts to solicit offers to
purchase the notes, and we may also sell the notes to an agent, as principal,
for resale to investors and other purchasers at varying prices related to
prevailing market prices at the time of resale to be determined by such agent.
We also reserve the right to sell notes directly on our own behalf or through
additional agents, acting either as agent or principal, on substantially
identical terms as those applicable to the agents. We reserve the right to
withdraw, cancel or modify the offer made hereby without notice and may reject
orders, in whole or in part, whether placed directly with us or through one of
the agents. The agents will have the right, in their discretion reasonably
exercised, to reject in whole or in part any offer to purchase notes received by
them. We will pay the agents, in the form of a discount or otherwise, a
commission which, depending on the Stated Maturity of the note, will range from
.125% to .750% of the principal amount of any note sold through the agents.
In addition, the agents may offer the notes they have purchased as principal
to other dealers. The agents may sell notes to any dealer at a discount and,
unless otherwise specified in the applicable pricing supplement, such discount
allowed to any dealer will not be in excess of the discount to be received by
such agent from us. Unless otherwise indicated in the applicable pricing
supplement, any note sold to an agent as principal will be purchased by such
agent at a price equal to 100% of the principal amount thereof less a percentage
equal to the commission applicable to any agency sale of a note of identical
Maturity, and may be resold by the agent to investors and other purchasers from
time to time in one or more transactions, including negotiated transactions, at
varying prices determined at the time of sale or, if so agreed, at a fixed
public offering price. After the initial public offering of notes to be resold
to investors and other purchasers, the public offering price (if resold on a
fixed public offering price basis), concession and discount may be changed.
Unless otherwise specified in the applicable pricing supplement, payment of
the purchase price of the notes will be required to be made in immediately
available funds in New York City on the date of settlement.
In connection with the offering of the notes purchased by one or more agents
as principal on a fixed price basis, the agents are permitted to engage in
certain transactions that stabilize the price of the notes. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the notes. If the agents create a short position in the notes in
connection with the offering, i.e., if they sell notes in an aggregate principal
amount exceeding that set forth in the applicable pricing supplement, the agents
may reduce that short position by purchasing notes in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither we nor any of the agents makes any representation or prediction as
to the direction or magnitude of any effect that the transactions described
above may have on the price of the notes. In addition, neither we nor any of the
agents makes any representation that the agents will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
The notes are a new issue of securities with no established trading market.
Unless otherwise specified in the applicable pricing supplement, the notes will
not be listed on any securities exchange. Each of the agents may from time to
time purchase and sell notes in the secondary market, but no agent is obligated
to do so, and there can be no assurance that there will be a secondary market
for the notes or liquidity in the secondary market if one develops. From time to
time, each of the agents may make a market in the notes.
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Each agent may be deemed to be an "underwriter" within the meaning of the
Securities Act. We have agreed to indemnify each of the agents against, or to
make contributions relating to, certain civil liabilities, including civil
liabilities under the Securities Act. We have agreed to reimburse each of the
agents for certain expenses.
Certain of the agents have provided and will provide from time to time
certain financial advisory services to us and Questar and certain of our
affiliates. Merrill Lynch has acted as agent for the sale of our medium-term
notes and those of Questar Gas and is a commercial paper issue agent for
Questar. Merrill Lynch, Banc of America Securities, and Banc One Capital Markets
were underwriters for the sale of the notes by another affiliate, Questar Market
Resources, in 2001. Affiliates of Banc One Capital Markets, Banc of America
Securities and U.S. Bancorp Piper Jaffray are lenders to our affiliates. The
trustee, Wells Fargo Bank Northwest, National Association, is also a lender to
our affiliates.
LEGAL MATTERS
Certain legal matters will be passed upon for us by Connie C. Holbrook,
Senior Vice President, General Counsel and Corporate Secretary of Questar, 180
East 100 South Street, Salt Lake City, Utah 84111, and by Skadden, Arps, Slate,
Meagher & Flom LLP, Four Times Square, New York, New York 10036. Sidley Austin
Brown & Wood LLP, 555 California Street, San Francisco, California 94104, will
act as counsel for the agents. In rendering their opinion, Sidley Austin
Brown & Wood LLP may rely upon the opinion of Ms. Holbrook as to all matters
governed by Utah law. As of March 31, 2001, Ms. Holbrook beneficially owned
226,285 shares of common stock of Questar (including currently exercisable
options to purchase 119,551 shares of common stock of Questar).
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our annual report on Form 10-K for the year
ended December 31, 2000, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
consolidated financial statements are incorporated by reference in reliance on
Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and special reports and other information with the
Securities and Exchange Commission. You may read and copy any document we file
at the public reference facilities of the SEC located at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may also obtain information on the operation of the
SEC's public reference facilities by calling the SEC at 1-800-SEC-0330. You can
also obtain copies of this material from commercial retrieval services and
electronically at the SEC's Internet web site at http://www.sec.gov.
We have filed with the SEC a registration statement on Form S-3
(Registration No. 333-60766). This prospectus, which constitutes part of the
registration statement, does not contain all of the information set forth in the
registration statement. Certain parts of the registration statement are omitted
from the prospectus in accordance with the rules and regulations of the SEC.
The SEC permits us to "incorporate by reference" information we file with
them into this document, which means that we can disclose important information
to you by referring you to those documents filed with the SEC. The information
incorporated by reference is considered to be part of this prospectus, and
information that we file (or that is deemed to have been filed) with the SEC
after the date of this prospectus will automatically update and supersede this
information. This prospectus
30
incorporates by reference the documents set forth below that we previously filed
with the SEC. These documents contain important information about our
operations.
FILING PERIOD
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Annual Report on Form 10-K Year ended December 31, 2000
Quarterly Report on Form 10-Q Quarter ended March 31, 2001
We also incorporate by reference any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, until we sell all of the notes being registered or until this offering
is otherwise terminated.
If you request a copy of any or all of the documents incorporated by
reference, then we will send to you the copies you requested at no charge.
However, we will not send exhibits to the documents unless exhibits are
specifically incorporated by reference in those documents. You should direct
requests for copies to: Corporate Secretary, Questar Pipeline Company, 180 East
100 South Street, Salt Lake City, Utah 84111; telephone number (801) 324-5202.
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No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this prospectus or any prospectus supplement
(including the applicable pricing supplement) in connection with the offer made
by this prospectus and such prospectus supplement and, if given or made, such
information or representations must not be relied upon as having been authorized
by us or any agent. Neither the delivery of this prospectus or any prospectus
supplement (including the applicable pricing supplement) nor any sale made
hereunder shall under any circumstance create an implication that there has been
no change in our affairs since the date hereof or thereof. This prospectus or
any prospectus supplement (including the applicable pricing supplement) shall
not constitute an offer or solicitation by anyone in any state in which such
offer or solicitation is not authorized or in which the person making such offer
or solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation.
$250,000,000
QUESTAR PIPELINE COMPANY
(AN INDIRECT SUBSIDIARY OF QUESTAR CORPORATION)
[LOGO]
MEDIUM-TERM NOTES, SERIES B
DUE FROM 9 MONTHS TO 30 YEARS FROM DATE OF ISSUE
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PROSPECTUS
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MERRILL LYNCH & CO.
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
U.S. BANCORP PIPER JAFFRAY
MAY 22, 2001
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