Filed Pursuant to Rule 424(b)(2)
Registration No. 333-59704
PROSPECTUS SUPPLEMENT
(To Prospectus dated May 4, 2001)
17,647,059 SHARES
[EL PASO LOGO]
COMMON STOCK
We are selling 17,647,059 shares of our common stock. Our common stock is listed
on the New York Stock Exchange and the Pacific Stock Exchange under the symbol
"EPG". On December 20, 2001, the last reported sale price on the NYSE was $45.00
per share.
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PER SHARE TOTAL
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Public offering price $43.35 $765,000,007.65
Underwriting discounts $ 0.85 $ 15,000,000.15
Proceeds to El Paso, before expenses $42.50 $750,000,007.50
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The underwriter has an option to purchase a maximum of 2,647,059 additional
shares of common stock from us to cover over-allotment of shares.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. PLEASE READ "RISK FACTORS" ON PAGE
S-3.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
JPMORGAN
December 20, 2001
TABLE OF CONTENTS
PAGE
PROSPECTUS SUPPLEMENT
About this prospectus supplement.......... S-i
Prospectus supplement summary............. S-1
Risk factors.............................. S-3
Selected combined financial data.......... S-4
Capitalization............................ S-5
Use of proceeds........................... S-6
Price range of common stock and
dividends............................... S-6
Underwriting.............................. S-6
Legal matters............................. S-8
PAGE
PROSPECTUS
About this prospectus..................... i
Cautionary statement regarding forward-
looking statements...................... 1
Where you can find more information....... 2
El Paso Corporation....................... 4
The trusts................................ 6
Use of proceeds........................... 7
Ratio of earnings to fixed charges and
ratio of earnings to combined fixed
charges and preferred and preference
stock dividend requirements............. 7
Description of the debt securities........ 8
Description of capital stock.............. 18
Description of the trust preferred
securities.............................. 22
Description of the trust preferred
securities guarantees................... 23
Relationship among the trust preferred
securities, the subordinated debt
securities and the guarantees........... 27
Plan of distribution...................... 29
Legal matters............................. 30
Experts................................... 30
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement is part of a registration statement that we have
filed with the Securities and Exchange Commission (SEC) utilizing a "shelf"
registration process. Under this shelf process, we are offering to sell our
common stock using this prospectus supplement and the accompanying prospectus.
The prospectus supplement describes our business and the specific terms of the
common stock offering. The accompanying base prospectus gives more general
information, some of which may not apply to this offering. Generally, when we
refer only to the "prospectus," we are referring to both parts combined. You
should read both this prospectus supplement together with the accompanying
prospectus before making a decision to invest in our common stock. If the
description of the offering varies between the prospectus supplement and the
accompanying prospectus, you should rely on the information in the prospectus
supplement.
In this prospectus supplement, unless the context indicates otherwise, when we
refer to "El Paso," "we," "us," "our" and "ours," we are describing El Paso
Corporation and its subsidiaries. Unless indicated otherwise, all share
information in this prospectus supplement assumes no exercise of the
underwriter's over-allotment option.
S-i
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights information appearing in other sections of this
prospectus supplement or the accompanying prospectus. It may not contain all of
the information that you should consider before investing in our common stock.
You should read the entire prospectus supplement, the accompanying prospectus
and the documents incorporated by reference carefully, including the "Risk
Factors" section and the financial statements and the footnotes to those
statements contained therein.
OUR BUSINESS
We are a global energy company with operations that span the wholesale energy
value chain, from energy production and extraction to power generation.
Our principal operations include:
- transportation, gathering, processing, and storage of natural gas;
- marketing of energy and energy-related commodities and products;
- generation of power;
- refining of petroleum;
- production of chemicals;
- development and operation of energy infrastructure facilities;
- exploration and production of natural gas and oil; and
- mining of coal.
Our Pipelines segment owns or has interests in approximately 60,000 miles of
interstate natural gas pipelines in the U.S. and internationally. In the U.S.,
our systems connect the nation's principal natural gas supply regions to the
five largest consuming regions in the United States: the Gulf Coast, California,
the Northeast, the Midwest, and the Southeast. These operations represent one of
the largest, and only, integrated coast-to-coast mainline natural gas
transmission system in the U.S. Our U.S. pipeline systems also own or have
interests in over 425 billion cubic feet of storage capacity used to provide a
variety of services to our customers. Our international pipeline operations
include access from our U.S. based systems into Canada and Mexico as well as
interests in three major operating natural gas transmission systems in
Australia.
Our Merchant Energy segment is involved in a broad range of activities in the
energy marketplace including asset ownership, trading and risk management and
financial services. We are one of North America's largest wholesale energy
commodity marketers and traders, and buy, sell, and trade natural gas, power,
crude oil, refined products, coal, and other energy commodities in the U.S. and
internationally. We are also a significant non-utility owner of electric
generating capacity. Our refineries have the capacity to process 450,000 barrels
of crude oil per day and produce a variety of gasolines and other products. We
also produce agricultural and industrial chemicals and petrochemicals at seven
facilities in the U.S. and Canada. Our coal operations produce high-quality,
bituminous coal with reserves in Kentucky, Virginia, and West Virginia. Most
recently, we have announced our expansion into the liquefied natural gas
business, capitalizing upon the U.S. and worldwide demand for natural gas. The
financial services businesses of Merchant Energy invest in emerging businesses
to facilitate growth in the U.S. and Canadian energy markets. As a global energy
merchant, we evaluate and measure risks inherent in the markets we serve, and
use sophisticated systems and integrated risk management techniques to manage
those risks.
Our Field Services segment provides natural gas gathering, products extraction,
fractionation, dehydration, purification, compression and intrastate
transmission services. These services include gathering of natural gas from more
than 15,000 natural gas wells with approximately 24,000 miles of natural gas
gathering and natural gas liquids pipelines, and 35 natural gas processing,
treating, and fractionation facilities located in some of the most prolific and
active
S-1
production areas in the U.S., including the San Juan Basin, east and south
Texas, Louisiana, the Gulf of Mexico, and the Rocky Mountains. We conduct our
intrastate transmission operations through interests in six intrastate systems,
which serve a majority of the metropolitan areas and industrial load centers in
Texas as well as markets in Louisiana. Our primary vehicle for growth and
development of midstream energy assets is El Paso Energy Partners, L.P., a
publicly traded master limited partnership of which our subsidiary is the
general partner. Through Energy Partners, we provide natural gas and oil
gathering and transportation, storage, and other related services, principally
in the Gulf of Mexico.
Our Production segment leases approximately 5 million net acres in 16 states,
including Colorado, Kansas, Louisiana, New Mexico, Texas, Oklahoma, Utah,
Wyoming, and Arkansas, as well as the Gulf of Mexico. We also have exploration
and production rights in Australia, Brazil, Canada, Hungary, Indonesia, and
Turkey. During 2000, daily equivalent natural gas production exceeded 1.6
billion cubic feet per day, and our reserves at December 31, 2000 were
approximately 6.4 trillion cubic feet of natural gas equivalents.
Our principal executive offices are located in the El Paso Building, located at
1001 Louisiana Street, Houston, Texas 77002, and our telephone number at that
address is (713) 420-2600.
RECENT DEVELOPMENTS
We recently announced that we intend to pursue a plan to strengthen our capital
structure and enhance our liquidity in response to current changes in market
conditions precipitated by the bankruptcy of Enron Corp. The key elements of
this plan are to:
- generate approximately $2.25 billion in cash from asset sales;
- reduce capital spending to approximately $3.1 billion and generate free cash
flow in excess of $1.5 billion in 2002;
- increase common equity by at least $1.3 billion through a combination of
retained earnings and equity financings; and
- eliminate or renegotiate the rating triggers in certain of our financings.
We expect this plan to reduce our debt to total capital ratio from 56% to
approximately 50% by the end of 2002 and to simplify our financial structure.
The rate reduction ratio includes approximately $2 billion of off-balance sheet
long-term debt associated with the Electron and Gemstone financings coming onto
our balance sheet.
We also announced that we anticipate our 2001 earnings per share to be $3.30 and
our 2002 earnings per share to be between $3.40 and $3.55.
THE OFFERING
Common stock offered by El Paso: 17,647,059 shares(1)
Common stock to be outstanding after this offering: 528,001,480 shares(1)
USE OF PROCEEDS
We plan to use the net proceeds from this offering to reduce short-term
borrowings and for general corporate purposes. We may invest any funds we do not
require immediately in short-term, investment grade, interest-bearing
securities.
NYSE and PCX symbol: EPG
---------------
(1) Assumes no exercise of the underwriter's over-allotment option. The number
of shares of our common stock outstanding after this offering is based on
the number of shares outstanding as of November 30, 2001 and excludes shares
subject to issuance under options to purchase 44,497,370 shares of our
common stock held by our employees, executive officers and directors and
shares subject to issuance under outstanding convertible securities.
S-2
RISK FACTORS
Before you invest in our common stock, you should read the risks, uncertainties
and factors that may adversely affect us that are discussed under the caption
"Risk Factors and Cautionary Statement For Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of 1995" in our
Current Report on Form 8-K/A filed May 17, 2001, which are incorporated by
reference in this prospectus supplement, as well as the following additional
risk factors.
WE MAY HAVE DIFFICULTY ACCESSING CAPITAL ON ATTRACTIVE TERMS OR AT ALL.
In response to the occurrence of several recent events, including the September
11, 2001 terrorist attack on the United States, the ongoing war against
terrorism by the United States, and the bankruptcy of Enron Corp., one of our
major competitors, the financial markets have been disrupted in general, and the
availability and cost of capital for our business and that of our competitors
has been adversely affected. In addition, the bankruptcy of Enron has caused the
credit ratings agencies to review the capital structure and earnings power of
energy companies, including us. These reviews have constrained the capital
available to our industry and could adversely affect our access to funding for
our operations. Our business is capital intensive, and achievement of our growth
targets is dependent, at least in part, upon our ability to access capital at
rates and on terms we determine to be attractive. If our ability to access
capital becomes significantly constrained, our financial condition and future
results of operations could be significantly adversely affected.
WE COULD BE REQUIRED TO PAY SIGNIFICANT MONETARY DAMAGES AND BE SUBJECT TO
SANCTIONS OR BUSINESS RESTRICTIONS IN CONNECTION WITH THE ENERGY CRISIS IN
CALIFORNIA.
As a result of the high prices of wholesale electricity and natural gas in
California during part of 2000 and 2001, several state regulatory agencies have
initiated investigations or proceedings to determine the causes of the high
prices and potentially to recommend remedial action. In a recent proceeding
before the Federal Energy Regulatory Commission (FERC) that was initiated by
California parties to determine whether certain of our subsidiaries violated any
laws or regulations related to the price of natural gas in the California
marketplace, an administrative law judge determined that our subsidiaries had
not abused their alleged market power in the California marketplace, although
they had violated certain FERC rules on transactions with affiliates. We and the
other parties to that proceeding are currently appealing the conclusions of the
administrative law judge. In addition, on December 19, 2001, the FERC issued an
order remanding the proceeding to the administrative law judge for the limited
purpose of determining whether, during the period from November 2000 through
March 31, 2001, our subsidiary, El Paso Natural Gas Company, made all of its
capacity available at our California delivery points as required by FERC
regulations. Further, we have been named as defendants in a number of civil
lawsuits claiming that certain of our subsidiaries' actions wrongfully created
artificially high prices for natural gas in California and seeking monetary
damages and equitable relief against us. Several state agencies in California,
including the California Public Utilities Commission, the California Office of
the Attorney General and the California Senate, have separate ongoing
investigations into the high prices and their causes, any of which could involve
us or our subsidiaries. There is also a possibility that federal agencies or
legislative committees could initiate similar investigations.
None of these investigations or proceedings has been concluded and no final
decisions have been made in connection with any of them. We believe any
allegation of wrongdoing directed at any El Paso entity to be meritless and will
defend all such allegations vigorously; however, we cannot assure you of the
outcome of any present or future proceeding. The final result of one or more of
these proceedings or investigations could be imposition of monetary damages,
sanctions, or business restrictions that would have a material adverse effect on
our consolidated results of operations, cash flows or financial position.
S-3
SELECTED COMBINED FINANCIAL DATA
On January 29, 2001, we completed our merger with The Coastal Corporation. The
information below presents the operating results data from our audited combined
financial statements for the three years ended December 31, 2000, and our
operating results data and financial position data from our unaudited combined
financial statements for the nine months ended September 30, 2000 and 2001. Our
merger was accounted for as a pooling of interests. We filed on May 17, 2001 a
Current Report on Form 8-K/A reflecting combined financial data which includes
The Coastal Corporation operations for all periods presented. You should read
the following information together with our historical combined financial
statements and related notes contained in our Current Report on Form 8-K/A and
our consolidated financial data and related notes included in our Quarterly
Report on Form 10-Q for the quarter ended September 30, 2001.
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- ---------------------------
(IN MILLIONS, EXCEPT PER SHARE DATA) 2001 2000 2000 1999 1998
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(UNAUDITED)
Operating Results Data:(1)
Operating revenues(2)(3)............................... $45,324 $32,580 $49,268 $27,332 $23,773
Merger-related costs and asset impairment(3)........... 1,794 56 125 557 15
Ceiling test charges(4)................................ 135 -- -- 352 1,035
Income (loss) from continuing operations............... (308) 882 1,236 257 176
Income (loss) from continuing operations available to
common stockholders.................................. (308) 882 1,236 257 170
Basic earnings (loss) per common share from continuing
operations........................................... (0.61) 1.79 2.50 0.52 0.35
Diluted earnings (loss) per common share from
continuing operations................................ (0.61) 1.74 2.43 0.52 0.34
Cash dividends declared per common share(5)............ 0.64 0.62 0.82 0.80 0.76
Basic average common shares outstanding................ 504 493 494 490 487
Diluted average common shares outstanding.............. 504 511 513 497 495
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SEPTEMBER 30, DECEMBER 31,
(IN MILLIONS) (UNAUDITED) 2001 2000
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Financial Position Data:(1)
Total assets(3)........................................... $ 47,118 $ 46,314
Long-term debt, less current maturities................... 12,371 10,903
Non-current notes payable to unconsolidated affiliates.... 370 343
Company-obligated preferred securities of consolidated
trusts.................................................. 925 925
Minority interests........................................ 2,782 2,782
Stockholders' equity...................................... 8,324 8,119
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(1) Our operating results and financial position reflect the acquisitions in
August 1998 of DeepTech International, and in December 2000 of PG&E's Texas
Midstream operations. These acquisitions were accounted for as purchases and
therefore operating results are included in our results prospectively from
the purchase date.
(2) We restated historical operating revenues due to the implementation in 2000
of Emerging Issues Task Force Issue No. 99-19, Reporting Revenue Gross as a
Principal versus Net as an Agent, which provides guidance on the gross
versus net presentation of revenues and expenses and to adjust Coastal's
presentation of its petroleum trading activities to our manner of
presentation. These reclassifications impacted operating revenues and
expenses, but had no impact on net income or earnings per share.
(3) Reflects the consolidation of the U.S. operations of Coastal Merchant Energy
in September 2000 as well as the significant growth in our Merchant Energy
operations in 2000.
(4) Ceiling test charges are reductions in earnings that result when capitalized
costs of natural gas and oil properties exceed the upper limit, or ceiling,
on the value of these properties.
(5) We have assumed that cash dividends declared per share of common stock are
the same as the historical dividends declared by El Paso during the periods
presented.
S-4
CAPITALIZATION
The following table sets forth our unaudited consolidated capitalization as of
September 30, 2001:
- on an actual basis; and
- on an as adjusted basis to give effect to (1) the sale by us of 17,647,059
shares of common stock, after deducting underwriting discounts and estimated
offering expenses, and (2) the use of approximately $749,750,000 of the
estimated net proceeds to reduce short term borrowings.
You should read this table in conjunction with our consolidated financial
statements and related notes contained in our Current Report on Form 8-K/A dated
May 17, 2001 and our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2001, each of which is incorporated herein by reference.
--------------------------------------------------------------------------------
SEPTEMBER 30, 2001 AS
(IN MILLIONS, EXCEPT SHARE DATA) (UNAUDITED) ACTUAL ADJUSTED
--------------------------------------------------------------------------------
Short-term debt:
Short-term debt........................................... $ 1,662 $ 912
Current maturities of long-term debt...................... 1,111 1,111
------------------
Total short-term debt................................... 2,773 2,023
------------------
Long-term debt, less current maturities..................... 12,371 12,371
------------------
Notes payable to unconsolidated affiliates.................. 370 370
------------------
Company-obligated preferred securities of consolidated
trusts.................................................... 925 925
------------------
Minority interests.......................................... 2,782 2,782
------------------
Stockholders' equity:
Common stock, par value $3.00 per share; 750,000,000
shares authorized; 517,895,002 shares issued as of
September 30, 2001, actual; and 535,542,061 shares
issued as of September 30, 2001, as adjusted............ 1,554 1,607
Additional paid-in capital................................ 2,256 2,953
Retained earnings......................................... 4,634 4,634
Other..................................................... (120) (120)
------------------
Total stockholders' equity.............................. 8,324 9,074
------------------
Total capitalization.................................... $27,545 $ 27,545
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S-5
USE OF PROCEEDS
We will use the net proceeds we receive from the sale of the common stock,
approximately $749,750,000, or approximately $862,250,000 if the underwriter
exercises its overallotment option in full, to reduce short term borrowings and
for general corporate purposes. We may invest any funds we do not require
immediately for general corporate purposes in marketable securities and
short-term investments.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
As of November 30, 2001, there were 510,354,421 shares of common stock
outstanding held by approximately 57,054 registered holders. Our common stock is
traded on the New York Stock Exchange and the Pacific Stock Exchange under the
symbol "EPG". The following table sets forth the high and low sales price per
share of the common stock as reported on the NYSE and our dividends declared for
the periods shown:
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HIGH LOW DIVIDENDS
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2001
Fourth Quarter (through December 20, 2001)................ $54.0500 $36.0000 $ 0.2125
Third Quarter............................................. 54.4800 38.0000 0.2125
Second Quarter............................................ 71.1000 49.9000 0.2125
First Quarter............................................. 75.3000 57.2500 0.2125
2000
Fourth Quarter............................................ $74.2500 $57.1300 $ 0.2060
Third Quarter............................................. 67.5000 46.2500 0.2060
Second Quarter............................................ 52.5000 39.3750 0.2060
First Quarter............................................. 42.3125 30.3125 0.2060
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On December 20, 2001, the last reported sale price of our common stock on the
NYSE was $45.00 per share.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement dated December
20, 2001, we have agreed to sell to J.P. Morgan Securities Inc., as underwriter,
and J.P. Morgan Securities Inc. has agreed to purchase, 17,647,059 shares of our
common stock. The underwriting agreement provides that if the underwriter takes
any of these shares, then it must take all of these shares.
The underwriter is offering the shares of common stock, subject to the prior
sale of shares, and when, as and if such shares are delivered to and accepted by
it. The underwriter will offer to sell the shares to the public at the offering
price shown on the cover page of this prospectus supplement. The underwriter may
sell shares to securities dealers at a discount of up to $0.51 per share from
the public offering price. Any such securities dealers may resell shares to
certain other brokers or dealers at a discount of up to $0.10 per share from the
public offering price. After the offering, the underwriter may vary the public
offering price and other selling terms.
If the underwriter sells more shares than the total number shown on the table
above, the underwriter has the option to buy up to an additional 2,647,059
shares of common stock from us to cover such sales. It may exercise this option
during the 30-day period from the date of this prospectus supplement.
S-6
The following table shows the per share and total underwriting discounts that we
will pay to the underwriter. These amounts are shown assuming both no exercise
and full exercise of the underwriter's option to purchase additional shares.
UNDERWRITING DISCOUNTS
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WITHOUT OVER- WITH OVER-
ALLOTMENT EXERCISE ALLOTMENT EXERCISE
-------------------------------------------------------------------------------------------------------
Per share................................................... $ 0.85 $ 0.85
Total....................................................... $ 15,000,000.15 $ 17,250,000.30
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The underwriter has advised us that it may make short sales of our common stock
in connection with this offering, resulting in the sale by the underwriter of a
greater number of shares than it is required to purchase pursuant to the
underwriting agreement. The short position resulting from those short sales will
be deemed a "covered" short position to the extent that it does not exceed the
2,647,059 shares subject to the underwriter's over-allotment option and will be
deemed a "naked" short position to the extent that it exceeds that number. A
naked short position is more likely to be created if the underwriter is
concerned that there may be downward pressure on the trading price of the common
stock in the open market that could adversely affect investors who purchase
shares in this offering. The underwriter may reduce or close out its covered
short position either by exercising the over-allotment option or by purchasing
shares in the open market. In determining which of these alternatives to pursue,
the underwriter will consider the price at which shares are available for
purchase in the open market as compared to the price at which they may purchase
shares through the over-allotment option. Any naked short position will be
closed out by purchasing shares in the open market. Similar to the other
stabilizing transactions described below, open market purchases made by the
underwriter to cover all or a portion of its short position may have the effect
of preventing or retarding a decline in the market price of our common stock
following this offering. As a result, our common stock may trade at a price that
is higher than the price that otherwise might prevail in the open market.
The underwriter has advised us that, pursuant to Regulation M under the
Securities Exchange Act of 1934, it may engage in transactions, including
stabilizing bids, that may have the effect of stabilizing or maintaining the
market price of the shares of common stock at a level above that which might
otherwise prevail in the open market. A "stabilizing bid" is a bid for the
purchase of shares of common stock on behalf of the underwriter for the purpose
of fixing or maintaining the price of the common stock. The underwriter has
advised us that stabilizing bids and open market purchases may be effected on
the New York Stock Exchange, the Pacific Stock Exchange, in the over-the-counter
market or otherwise and, if commenced, may be discontinued at any time.
We estimate that the total expenses of this offering, excluding underwriting
discounts, will be approximately $250,000.
We have agreed to indemnify the underwriter against certain liabilities,
including liabilities under the Securities Act of 1933.
We have agreed with the underwriter that, subject to limited exceptions, for a
period of 90 days following the date of this prospectus supplement, without the
prior written consent of the underwriter, we will not dispose of any shares of
common stock or any securities convertible into or exchangeable for common
stock. Certain of our directors and executive officers will agree with the
underwriter that, subject to limited exceptions, they will not dispose of any
shares of common stock or any securities convertible into or exchangeable for
common stock, for a period of 45 days following the date of this prospectus
supplement,
S-7
without the prior written consent of the underwriter. The underwriter may, at
any time without prior notice, release all or any portion of the shares from
these restrictions.
It is expected that delivery of the shares will be made to investors on or about
December 27, 2001.
From time to time in the ordinary course of their respective businesses, the
underwriter and its affiliates have engaged in and may in the future engage in
commercial banking and/or investment banking transactions with us and our
affiliates.
Affiliates of the underwriter are lenders under our revolving and other credit
facilities, a portion of which we intend to repay with the proceeds of this
offering. In the event more than 10% of the net proceeds of this offering are
paid to affiliates of the underwriter, this offering will be conducted in
accordance with Rule 2710(c)(8) of the Conduct Rules of the National Association
of Securities Dealers, Inc.
LEGAL MATTERS
The validity of our common stock offered in this prospectus will be passed upon
for us by Andrews & Kurth Mayor, Day, Caldwell & Keeton L.L.P., Houston, Texas.
Some legal matters in connection with the sale of our common stock offered in
this prospectus will be passed upon for the underwriter by Cahill Gordon &
Reindel, New York, New York.
S-8
PROSPECTUS
$3,000,000,000
EL PASO CORPORATION
SENIOR DEBT SECURITIES
SUBORDINATED DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
---------------------
EL PASO CAPITAL TRUST II
EL PASO CAPITAL TRUST III
TRUST PREFERRED SECURITIES
(GUARANTEED BY EL PASO CORPORATION)
El Paso Corporation may offer and sell in one or more offerings:
- unsecured debt securities consisting of senior notes and debentures and
subordinated notes and debentures and/or other unsecured evidences of
indebtedness in one or more series;
- shares of preferred stock, in one or more series, which may be
convertible or exchangeable for common stock or debt securities; and
- shares of common stock.
El Paso Capital Trust II and El Paso Capital Trust III, each a wholly owned
subsidiary of El Paso Corporation, may offer and sell in one or more offerings:
- trust preferred securities representing undivided beneficial interests in
the assets of each trust. As described in this document, we will provide
a limited guarantee of the payment by each trust of distributions on the
trust preferred securities and the payment upon liquidation and
redemption.
The aggregate initial offering price of the securities that we offer by
this prospectus will not exceed $3,000,000,000. We will offer the securities in
amounts, at prices and on terms to be determined by market conditions at the
time of our offerings.
We will provide the specific terms of the securities in supplements to this
prospectus. You should read this prospectus and the prospectus supplements
carefully before you invest in any of our securities. This prospectus may not be
used to consummate sales of our securities unless it is accompanied by a
prospectus supplement.
Our common stock is listed for trading on the New York Stock Exchange and
the Pacific Exchange under the symbol "EPG."
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is May 4, 2001
TABLE OF CONTENTS
PAGE
----
About this Prospectus....................................... i
Cautionary Statement Regarding Forward-Looking Statements... 1
Where You Can Find More Information......................... 2
El Paso Corporation......................................... 4
The Trusts.................................................. 6
Use of Proceeds............................................. 7
Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred and Preference Stock
Dividend Requirements..................................... 7
Description of the Debt Securities.......................... 8
Description of Capital Stock................................ 18
Description of the Trust Preferred Securities............... 22
Description of the Trust Preferred Securities Guarantees.... 23
Relationship among the Trust Preferred Securities, the
Subordinated Debt Securities and the Guarantees........... 27
Plan of Distribution........................................ 29
Legal Matters............................................... 30
Experts..................................................... 30
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with
the Securities and Exchange Commission (SEC) utilizing a "shelf" registration
process. Under this shelf process, we may, over the next two years, sell
different types of securities described in this prospectus in one or more
offerings up to a total offering amount of $3,000,000,000. This prospectus
provides you with a general description of the securities we may offer. Each
time we sell securities, we will provide a prospectus supplement that will
contain specific information about the terms of that offering and the securities
offered by us in that offering. The prospectus supplement may also add, update
or change information in this prospectus. You should read both this prospectus
and any prospectus supplement together with additional information described
under the heading "Where You Can Find More Information."
In this prospectus, references to "El Paso," "we," "us" and "our" mean El
Paso Corporation, and references to an "El Paso Trust" or a "trust" mean El Paso
Capital Trust II and El Paso Capital Trust III.
i
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
We have made statements in this document and in documents that we have
incorporated by reference into this document that constitute forward-looking
statements, as that term is defined in the Private Securities Litigation Reform
Act of 1995. These statements are subject to risks and uncertainties.
Forward-looking statements include information concerning possible or assumed
future results of operations of El Paso. These statements may relate to, but are
not limited to, information or assumptions about earnings per share, capital and
other expenditures, dividends, financing plans, capital structure, cash flow,
pending legal proceedings and claims, including environmental matters, future
economic performance, operating income, cost savings, management's plans, goals
and objectives for future operations and growth and markets for the stock of El
Paso. These forward-looking statements generally are accompanied by words such
as "intend," "anticipate," "believe," "estimate," "expect," "should" or similar
expressions. You should understand that these forward-looking statements are
estimates reflecting the best judgment of senior management of El Paso, not
guarantees of future performance. They are subject to a number of assumptions,
risks and uncertainties that could cause actual results to differ materially
from those expressed or implied in the forward-looking statements. Important
factors that could cause actual results to differ materially from estimates or
projections contained in forward-looking statements include, among others, the
following:
- the risk that earnings may be adversely affected by fluctuating energy
prices;
- the risk that rates charged to customers may be reduced by governmental
authorities;
- the highly competitive nature of the natural gas transportation,
gathering, processing and storage businesses, the oil and gas exploration
and production business, the energy marketing and power generation
industries, the crude oil refining and chemical production businesses and
the coal mining business;
- the risk of favorable customer contracts expiring or being renewed on
less attractive terms;
- the timing and success of our exploration and development drilling
programs, which would affect production levels and reserves;
- changes to our estimates of oil, gas and coal reserves;
- the risk of financial losses arising out of derivative transactions;
- risks incident to the drilling and operation of oil and gas wells;
- risks incident to operating crude oil refineries, chemical plants and
coal mines;
- future drilling, production and development costs, including drilling rig
rates;
- the costs of environmental liabilities, regulations and litigation;
- the impact of operational hazards;
- the risk that required regulatory approvals for proposed pipeline,
storage and power generation projects may be delayed or may only be
granted on terms that are unacceptable or significantly less favorable
than anticipated;
- the risks associated with future weather conditions;
- the risk that our telecommunications strategy may not be successful;
- the risk that the former businesses of The Coastal Corporation may not be
successfully integrated with our businesses;
1
- the risk that we may not fully realize the benefits expected to result
from our merger with The Coastal Corporation;
- the impact of the loss of key employees; and
- the risk that other firms will further expand into markets in which we
operate.
These factors are more fully described in our Current Report on Form 8-K
filed March 23, 2001 and our 2000 Annual Report on Form 10-K under the heading
"Risk Factors and Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of 1995" and are
incorporated herein by reference. Other factors that could cause actual results
to differ materially from estimates and projections contained in forward-looking
statements are described in the other documents that we incorporated by
reference into this document. In addition, we can give you no assurance that:
- we have correctly identified and assessed all of the factors affecting
our businesses;
- the publicly available and other information with respect to these
factors on which we have based our analysis is complete or correct;
- our analysis is correct; or
- our strategies, which are based in part on this analysis, will be
successful.
Accordingly, you should not place undue reliance on forward-looking
statements, which speak only as of the date of this prospectus, or, in the case
of documents incorporated by reference, the date of those documents.
All subsequent written and oral forward-looking statements attributable to
us or any person acting on our behalf are expressly qualified in their entirety
by the cautionary statements contained or referred to in this section. We do not
undertake any obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date of
this prospectus or to reflect the occurrence of unanticipated events.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement with the SEC under the Securities
Act of 1933 that registers the securities offered by this prospectus. The
registration statement, including the attached exhibits, contains additional
relevant information about us. The rules and regulations of the SEC allows us to
omit some information included in the registration statement from this
prospectus.
In addition, we file reports, proxy statements and other information with
the SEC under the Securities Exchange Act of 1934. You may read and copy this
information at the following locations of the SEC:
Public Reference Room New York Regional Office Chicago Regional Office
Room 1024 Suite 100 Citicorp Center
Judiciary Plaza 7 World Trade Center Suite 1400
450 Fifth Street, N.W. New York, New York 10048 500 West Madison Street
Washington, D.C. 20549 Chicago, Illinois
60661-2511
You may also obtain copies of this information by mail from the public
reference section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. The SEC also maintains an
Internet world wide website that contains reports, proxy statements and other
information about issuers, including El Paso, who file electronically with the
SEC. The address of that site is http://www.sec.gov. You can also inspect
reports, proxy statements and other information about us at the offices of The
New York Stock Exchange, Inc., located at 20 Broad Street, New York, New York
10005 and at the offices of the Pacific Exchange at 301 Pine Street, San
Francisco, California 94104.
2
The SEC allows us to "incorporate by reference" information into this
document. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this document, except for
any information that is superseded by information that is included directly in
this document.
We incorporate by reference the documents listed below that we have
previously filed with the SEC. They contain important information about us and
our financial condition. Some of these filings have been amended by later
filings, which are also listed.
- Annual Report on Form 10-K, for the year ended December 31, 2000;
- Current Reports on Form 8-K filed January 3, 2001, January 29, 2001,
February 2, 2001, February 5, 2001, February 6, 2001, February 15, 2001,
February 21, 2001, February 23, 2001, March 2, 2001, March 23, 2001,
March 26, 2001, and March 29, 2001;
- Proxy Statement for the Annual Meeting of Shareholders to be held on May
21, 2001, filed March 27, 2001; and
- The description of our common stock contained in our registration
statement on Form 8-A, dated April 5, 2001; and the description of our
preferred stock purchase rights contained in our registration statement
on Form 8-A/A, dated January 29, 1999.
We also incorporate by reference additional documents that we may file with
the SEC until all of the securities offered by this prospectus have been sold.
These documents include periodic reports, including Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy
statements.
You can obtain any of the documents incorporated by reference in this
document through us or from the SEC through the SEC's website at the address
provided above. Documents incorporated by reference are available from us
without charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this document. You can
obtain documents incorporated by reference in this document by requesting them
in writing or by telephone from us at the following address:
El Paso Corporation
Office of Investor Relations
El Paso Building
1001 Louisiana Street
Houston, Texas 77002
Telephone No.: (713) 420-2600
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION THAT DIFFERS FROM, OR ADDS TO, THE INFORMATION IN THIS DOCUMENT
OR IN OUR DOCUMENTS THAT ARE PUBLICLY FILED WITH THE SEC. THEREFORE, IF ANYONE
DOES GIVE YOU DIFFERENT OR ADDITIONAL INFORMATION, YOU SHOULD NOT RELY ON IT.
IF YOU ARE IN A JURISDICTION WHERE IT IS UNLAWFUL TO OFFER TO EXCHANGE OR
SELL, OR TO ASK FOR OFFERS TO EXCHANGE OR BUY, THE SECURITIES OFFERED BY THIS
DOCUMENT, OR IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO DIRECT THESE
ACTIVITIES, THEN THE OFFER PRESENTED BY THIS DOCUMENT DOES NOT EXTEND TO YOU.
THE INFORMATION CONTAINED IN THIS DOCUMENT SPEAKS ONLY AS OF ITS DATE
UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES.
3
EL PASO CORPORATION
BUSINESS
We are a global energy company with operations that span the wholesale
energy value chain, from energy production and extraction to power generation.
Our principal operations include:
- transportation, gathering, processing, and storage of natural gas;
- marketing of energy and energy-related commodities and products;
- generation of power;
- refining of petroleum;
- production of chemicals;
- development and operation of energy infrastructure facilities;
- exploration and production of natural gas and oil; and
- mining of coal.
Our Pipelines segment owns or has interests in approximately 60,000 miles
of interstate natural gas pipelines in the U.S. and internationally. In the
U.S., our systems connect the nation's principal natural gas supply regions to
the five largest consuming regions in the United States: the Gulf Coast,
California, the Northeast, the Midwest, and the Southeast. These operations
represent one of the largest, and only, integrated coast-to-coast mainline
natural gas transmission system in the U.S. Our U.S. pipeline systems also own
or have interests in over 425 billion cubic feet of storage capacity used to
provide a variety of services to our customers. Our international pipeline
operations include access from our U.S. based systems into Canada and Mexico as
well as interests in three major operating natural gas transmission systems in
Australia.
Our Merchant Energy segment is involved in a broad range of activities in
the energy marketplace including asset ownership, trading and risk management
and financial services. We are one of North America's largest wholesale energy
commodity marketers and traders, and buy, sell, and trade natural gas, power,
crude oil, refined products, coal, and other energy commodities in the U.S. and
internationally. We are also a significant non-utility owner of electric
generating capacity with 84 facilities in 20 countries. Our four refineries have
the capacity to process 538,000 barrels of crude oil per day and produce a
variety of gasolines and other products. We also produce agricultural and
industrial chemicals and petrochemicals at seven facilities in the U.S. and
Canada. Our coal operations produce high-quality, bituminous coal with reserves
in Kentucky, Virginia, and West Virginia. Most recently, we have announced our
expansion into the liquefied natural gas business, capitalizing upon the U.S.
and worldwide demand for natural gas. The financial services businesses of
Merchant Energy invest in emerging businesses to facilitate growth in the U.S.
and Canadian energy markets. As a global energy merchant, we evaluate and
measure risks inherent in the markets we serve, and use sophisticated systems
and integrated risk management techniques to manage those risks.
Our Field Services segment provides natural gas gathering, products
extraction, fractionation, dehydration, purification, compression and intrastate
transmission services. These services include gathering of natural gas from more
than 15,000 natural gas wells with approximately 24,000 miles of natural gas
gathering and natural gas liquids pipelines, and 35 natural gas processing,
treating, and fractionation facilities located in some of the most prolific and
active production areas in the U.S., including the San Juan Basin, east and
south Texas, Louisiana, the Gulf of Mexico, and the Rocky Mountains. We conduct
our intrastate transmission operations through interests in six intrastate
systems, which serve a majority of the metropolitan areas and industrial load
centers in Texas as well as markets in Louisiana. Our primary vehicle for growth
and development of midstream energy assets is El Paso Energy
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Partners, L.P., a publicly traded master limited partnership of which our
subsidiary is the general partner. Through Energy Partners, we provide natural
gas and oil gathering and transportation, storage, and other related services,
principally in the Gulf of Mexico.
Our Production segment leases approximately 5 million net acres in 16
states, including Colorado, Kansas, Louisiana, New Mexico, Texas, Oklahoma,
Utah, Wyoming, and Arkansas, as well as the Gulf of Mexico. We also have
exploration and production rights in Australia, Brazil, Canada, Hungary,
Indonesia, and Turkey. During 2000, daily equivalent natural gas production
exceeded 1.6 billion cubic feet per day, and our reserves at December 31, 2000,
were approximately 6.4 trillion cubic feet of natural gas equivalents.
In addition to our energy activities, we have announced a
telecommunications strategy that will leverage our knowledge of the commodity
and capital markets into the emerging telecommunications market. Our strategy
involves:
- accessing fiber deep within metropolitan markets to aggregate supply in
major U.S. cities;
- utilizing fiber rings and key points of interconnection of major carriers
and service providers to allow for liquidity to develop in major markets;
and
- assembling a high capacity thin fiber national long-haul backbone.
We will overlay against this asset base a merchant-based operating support
system and valuation models that will allow us to apply the merchant skills
developed in our core commodity business to the rapidly changing
telecommunications markets.
Our principal executive offices are located in the El Paso Building at 1001
Louisiana Street, Houston, Texas 77002, and our telephone number at that address
is (713) 420-2600.
5
THE TRUSTS
Each of El Paso Capital Trust II and El Paso Capital Trust III is a
statutory business trust created under Delaware law through the filing of a
certificate of trust with the Delaware Secretary of State. Each trust's business
is defined in a declaration of trust which we have executed, as sponsor for each
of the trusts. Officers of El Paso will be the administrative trustees, as
defined below, for each of the trusts. Each declaration will be amended and
restated before any trust preferred securities are sold by that trust. Each
declaration will also be qualified as an indenture under the Trust Indenture Act
of 1939, as amended. Each trust exists for the exclusive purposes of:
- issuing and selling the trust preferred securities and the trust common
securities;
- investing the gross proceeds from the sale of the trust preferred
securities in subordinated debt securities issued by us; and
- engaging in only those other activities necessary or incidental to these
purposes.
We will, directly or indirectly, in connection with an offering of trust
preferred securities by an El Paso Trust purchase trust common securities in an
aggregate liquidation amount equal to 3% of the total capital of the trust.
Each trust's business and affairs will be conducted by its trustees. A
majority of the trustees of each trust will be administrative trustees and will
be persons who are employees or officers of or affiliated with us. One trustee
of each trust will be a financial institution that will be unaffiliated with us
and that will act as property trustee and as indenture trustee for purposes of
the Trust Indenture Act, as described in the applicable prospectus supplement.
In addition, unless the property trustees maintain a principal place of business
in the State of Delaware, and otherwise meet the requirements of applicable law,
one trustee of each trust, the Delaware trustee, will have its principal place
of business or reside in the State of Delaware. The administrative trustees and
the property trustees, together with the Delaware trustee, are referred to in
this document as the "trustees." Each trust's business and affairs will be
conducted by the administrative trustees appointed by us, as the direct or
indirect holder of all the trust common securities. Except in limited
circumstances, we, as the holder of the trust common securities, will be
entitled to appoint, remove or replace any of, or increase or reduce the number
of, the trustees of a trust. The declaration of each trust will govern the
duties and obligations of the trustees. We will pay and guarantee all fees and
expenses related to the trusts and the offering of trust securities.
The office of the Delaware Trustee for each El Paso Trust in the State of
Delaware is 1201 Market Street, Wilmington, Delaware 19801. The principal place
of business of each El Paso Trust will be c/o El Paso Corporation, El Paso
Building, 1001 Louisiana Street, Houston, Texas 77002, and its telephone number
is (713) 420-2600.
6
USE OF PROCEEDS
We will use the net proceeds we receive from the sale of the securities
offered by this prospectus for general corporate purposes unless we specify
otherwise in an applicable prospectus supplement. We may invest any funds we do
not require immediately for general corporate purposes in marketable securities
and short-term investments. The trusts will use all proceeds received from the
sale of the trust preferred securities to purchase subordinated debt securities
from us.
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED AND PREFERENCE STOCK DIVIDENDS
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1997 1998 1999 2000
----- ----- ---- ---- -----
Ratio of Earnings to Fixed Charges and Ratio of
Earnings to Combined Fixed Charges and Preferred and
Preference Stock Dividend Requirements(1)........... 2.62x 2.53x --(2) --(2) 2.04x
---------------
(1) The ratio of earnings to combined fixed charges and preferred and preference
stock dividend requirements for each of the periods presented is the same as
the ratio of earnings to fixed charges since we have no outstanding
preferred stock or preference stock and, therefore, no dividend
requirements.
(2) Earnings were inadequate to cover fixed charges by $549 million in 1998 and
$407 million in 1999.
For purposes of computing these ratios, earnings means income (loss) from
continuing operations before:
- income taxes;
- minority interest in majority-owned subsidiaries;
- interest expense, not including interest on rate refunds;
- amortization of debt costs;
- that portion of rental expense that we believe to represent an interest
factor; and
- adjustment to equity earnings to reflect actual distributions from equity
investments.
Fixed charges means the sum of the following:
- interest cost, not including interest on rate refunds;
- amortization of debt costs;
- that portion of rental expense that we believe to represent an interest
factor;
- the pre-tax preferred stock dividend requirements of majority-owned
subsidiaries; and
- minority interest in majority-owned subsidiaries.
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DESCRIPTION OF THE DEBT SECURITIES
Any debt securities we offer will be our direct, unsecured general
obligations. The debt securities will be either senior debt securities or
subordinated debt securities and will be issued under one or more separate
indentures between us and The Chase Manhattan Bank, as indenture trustee. Senior
debt securities will be issued under a "senior indenture" and subordinated debt
securities will be issued under a "subordinated indenture." Together the senior
indenture and the subordinated indenture are called "indentures."
We have summarized selected provisions of the indentures below. The
following description is a summary of the material provisions of the indentures.
It does not restate those agreements in their entirety. We urge you to read each
of the indentures because each one, and not this description, defines your
rights as holders of the debt securities. A senior indenture and a subordinated
indenture between us and The Chase Manhattan Bank, as trustee, have been filed
as exhibits to the registration statement.
GENERAL
The debt securities will be our direct, unsecured obligations. The senior
debt securities will rank equally with all of our other senior and
unsubordinated debt. The subordinated debt securities will have a junior
position to all of our senior debt securities.
If El Paso Capital Trust II or El Paso Capital Trust III issues trust
preferred securities, we will also issue subordinated debt securities to the
trust or a trustee of either trust. If the trusts are subsequently dissolved
upon the occurrence of the events described in the prospectus supplement
relating to the trust preferred securities, the trusts or trustees may
distribute these subordinated debt securities ratably to the holders of trust
preferred securities.
A prospectus supplement and a supplemental indenture relating to any series
of debt securities being offered will include specific terms relating to the
offered debt securities. These terms will include some or all of the following:
- the title and type of the debt securities;
- the total principal amount of the debt securities and the currency, if
other than U.S. dollars, in which such notes are denominated;
- the percentage of the principal amount at which the debt securities will
be issued and any payments due if the maturity of the debt securities is
accelerated;
- the dates on which the principal of the debt securities will be payable
and the terms on which any such maturity date may be extended;
- the interest rate which the debt securities will bear and the interest
payment dates for the debt securities;
- the form of the subordinated debt securities we will issue to the trusts
or a trustee if the trusts issue trust preferred securities;
- in the case of subordinated debt securities issued to the trusts or
trustees, the right to extend payment periods and the duration of that
extension;
- any optional redemption periods;
- any sinking fund or other provisions that would obligate us to repurchase
or otherwise redeem some or all of the debt securities;
- any changes to or additional events of defaults or covenants;
- any special tax implications of the debt securities, including provisions
for original issue discount securities, if offered;
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- restrictions on the declaration of dividends or requiring the maintenance
of any asset ratio or the creation or maintenance of reserves; and
- any other terms of the debt securities.
None of the indentures limits the amount of debt securities that may be
issued. Each indenture allows debt securities to be issued up to the principal
amount that we may authorize and may be in any currency or currency unit we
designate.
Debt securities of a series may be issued in registered, bearer, coupon or
global form.
DENOMINATIONS
The prospectus supplement for each issuance of debt securities will state
whether the securities will be issued in registered form of $1,000 each or
multiples of $1,000 or bearer form of $5,000 each.
SUBORDINATION
Under the subordinated indenture, payment of the principal, interest and
any premium on the subordinated debt securities will generally be subordinated
and junior in right of payment to the prior payment in full of all senior debt
securities. The subordinated indenture states that no payment of principal,
interest and any premium on the subordinated debt securities may be made in the
event:
- of any insolvency, bankruptcy or similar proceeding involving us or our
property, or
- we fail to pay the principal, interest, any premium or any other amounts
on any senior debt when due.
The subordinated indenture will not limit the amount of senior debt that we
may incur.
Senior debt includes all notes or other unsecured evidences of
indebtedness, including guarantees given by us, for money borrowed by us, not
expressly subordinate or junior in right of payment to any of our other
indebtedness.
CONSOLIDATION, MERGER OR SALE
Each indenture generally permits a consolidation or merger between us and
another corporation. They also permit us to sell all or substantially all of our
property and assets. If this occurs, the remaining or acquiring corporation will
assume all of our responsibilities and liabilities under the indentures,
including the payment of all amounts due on the debt securities and performance
of the covenants in the indentures. However, we will consolidate or merge with
or into any other corporation or sell all or substantially all of our assets
only according to the terms and conditions of the indentures. The remaining or
acquiring corporation will be substituted for us in the indentures with the same
effect as if it had been an original party to the indentures. After that the
successor corporation may exercise our rights and powers under any indenture, in
our name or in its own name. Any act or proceeding required or permitted to be
done by our board or any of our officers may be done by the board or officers of
the successor corporation. If we sell all or substantially all of our assets, we
will be released from all our liabilities and obligations under any indenture
and under the debt securities.
MODIFICATION OF INDENTURES
Under each indenture our rights and obligations and the rights of the
holders may be modified with the consent of the holders of a majority in
aggregate principal amount of the outstanding debt securities of each series
affected by the modification. No modification of the principal or interest
payment terms, and no modification reducing the percentage required for
modifications, is effective against any holder without its consent.
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EVENTS OF DEFAULT
"Event of default" when used in an indenture, will mean any of the
following:
- failure to pay the principal of or any premium on any debt security when
due;
- failure to pay interest on any debt security for 30 days;
- failure to perform any other covenant in the indenture that continues for
60 days after being given written notice;
- certain events in our bankruptcy, insolvency or reorganization; or
- any other event of default included in any indenture or supplemental
indenture.
An event of default for a particular series of debt securities does not
necessarily constitute an event of default for any other series of debt
securities issued under an indenture. The trustee may withhold notice to the
holders of debt securities of any default, except in the payment of principal or
interest, if it considers such withholding of notice to be in the best interests
of the holders.
If an event of default for any series of debt securities occurs and
continues, the trustee or the holders of at least 25% in aggregate principal
amount of the debt securities of the series may declare the entire principal of
all the debt securities of that series to be due and payable immediately. If
this happens, subject to certain conditions, the holders of a majority of the
aggregate principal amount of the debt securities of that series can void the
declaration.
Other than its duties in case of a default, a trustee is not obligated to
exercise any of its rights or powers under any indenture at the request, order
or direction of any holders, unless the holders offer the trustee reasonable
indemnity. If they provide this reasonable indemnification, the holders of a
majority in principal amount of any series of debt securities may direct the
time, method and place of conducting any proceeding or any remedy available to
the trustee, or exercising any power conferred upon the trustee, for any series
of debt securities.
COVENANTS
General
Under the indentures, we will:
- pay the principal of, and interest and any premium on, the debt
securities when due;
- maintain a place of payment;
- deliver a report to the trustee at the end of each fiscal year reviewing
our obligations under the indentures; and
- deposit sufficient funds with any paying agent on or before the due date
for any principal, interest or premium.
The senior indenture provides that we will not, nor will we permit any
restricted subsidiary to, create, assume, incur or suffer to exist any lien upon
any principal property, whether owned or leased on the date of the senior
indenture or thereafter acquired, to secure any of our debt or any other person
(other than the senior debt securities issued under the senior indenture),
without causing all of the senior debt securities outstanding under the senior
indenture to be secured equally and ratably with, or prior to, the new debt so
long the new debt is so secured. This restriction does not prohibit us from
creating the following:
(i) any lien upon any of our property or assets or any restricted
subsidiary in existence on the date of the senior indenture or created
pursuant to an "after-acquired property" clause or similar term
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in existence on the date of the senior indenture or any mortgage, pledge
agreement, security agreement or other similar instrument in existence on
the date of the senior indenture;
(ii) any lien upon any property or assets created at the time of
acquisition of such property or assets by or any of our restricted
subsidiaries or within one year after such time to secure all or a portion
of the purchase price for such property or assets or debt incurred to
finance such purchase price, whether such debt was incurred prior to, at
the time of or within one year of such acquisition;
(iii) any lien upon any property or assets existing on the property at
the time of the acquisition of the property by us or any of our restricted
subsidiaries (whether or not the obligations secured are assumed by us or
any of our restricted subsidiaries);
(iv) any lien upon any property or assets of a person existing on the
property at the time that person becomes a restricted subsidiary by
acquisition, merger or otherwise;
(v) the assumption by us or any of our restricted subsidiaries of
obligations secured by any lien existing at the time of the acquisition by
us or any of our restricted subsidiaries of the property or assets subject
to such lien or at the time of the acquisition of the person which owns
that property or assets;
(vi) any lien on property to secure all or part of the cost of
construction or improvements on the property or to secure debt incurred
prior to, at the time of, or within one year after completion of such
construction or making of such improvements, to provide funds for any such
purpose;
(vii) any lien on any oil, gas, mineral and processing and other plant
properties to secure the payment of costs, expenses or liabilities incurred
under any lease or grant or operating or other similar agreement in
connection with or incident to the exploration, development, maintenance or
operation of such properties;
(viii) any lien arising from or in connection with a conveyance by us
or any of our restricted subsidiaries of any production payment with
respect to oil, gas, natural gas, carbon dioxide, sulphur, helium, coal,
metals, minerals, steam, timber or other natural resources;
(ix) any lien in favor of us or any of our restricted subsidiaries;
(x) any lien created or assumed by us or any of our restricted
subsidiaries in connection with the issuance of debt the interest on which
is excludable from gross income of the holder of such debt pursuant to the
Internal Revenue Code of 1986, as amended, or any successor statute, for
the purpose of financing, in whole or in part, the acquisition or
construction of property or assets to be used by us or any of our
subsidiaries;
(xi) any lien upon property or assets of any foreign restricted
subsidiary to secure debt of that foreign restricted subsidiary;
(xii) permitted liens (as defined below);
(xiii) any lien upon any additions, improvements, replacements,
repairs, fixtures, appurtenances or component parts thereof attaching to or
required to be attached to property or assets pursuant to the terms of any
mortgage, pledge agreement, security agreement or other similar instrument,
creating a lien upon such property or assets permitted by clauses (i)
through (xii), inclusive, above; or
(xiv) any extension, renewal, refinancing, refunding or replacement
(or successive extensions, renewals, refinancing, refundings or
replacements) of any lien, in whole or in part, that is referred to in
clauses (i) through (xiii), inclusive, above, or of any debt secured
thereby; provided, however, that the principal amount of debt secured shall
not exceed the greater of the principal amount of debt so secured at the
time of such extension, renewal, refinancing, refunding or replacement and
the original principal amount of debt so secured (plus in each case the
aggregate amount of premiums, other payments, costs and expenses required
to be paid or incurred in connection with such extension, renewal,
refinancing, refunding or replacement); provided further, however, that
such extension,
11
renewal, refinancing, refunding or replacement shall be limited to all or a
part of the property (including improvements, alterations and repairs on
such property) subject to the encumbrance so extended, renewed, refinanced,
refunded or replaced (plus improvements, alterations and repairs on such
property).
Notwithstanding the foregoing, under the senior indenture, we may, and may
permit any restricted subsidiary to, create, assume, incur, or suffer to exist
any lien upon any principal property to secure our debt or any person (other
than the senior debt securities) that is not excepted by clauses (i) through
(xiv), inclusive, above without securing the senior debt securities issued under
the senior indenture, provided that the aggregate principal amount of all debt
then outstanding secured by such lien and all similar liens, together with all
net sale proceeds from sale-leaseback transactions (excluding sale-leaseback
transactions permitted by clauses (i) through (iv), inclusive, of the first
paragraph of the restriction on sale-leasebacks covenant described below) does
not exceed 15% of consolidated net tangible assets.
The senior indenture also provides that we will not, nor will we permit any
restricted subsidiary to, engage in a sale-leaseback transaction, unless: (i)
such sale-leaseback transaction occurs within one year from the date of
acquisition of the principal property subject thereto or the date of the
completion of construction or commencement of full operations on such principal
property, whichever is later; (ii) the sale-leaseback transaction involves a
lease for a period, including renewals, of not more than three years; (iii) we
or any of our restricted subsidiaries would be entitled to incur debt secured by
a lien on the principal property subject thereto in a principal amount equal to
or exceeding the net sale proceeds from such sale-leaseback transaction without
securing the senior debt securities; or (iv) we or any of our restricted
subsidiaries, within a one-year period after such sale-leaseback transaction,
applies or causes to be applied an amount not less than the net sale proceeds
from such sale-leaseback transaction to (A) the repayment, redemption or
retirement of funded debt of us or any such restricted subsidiary, or (B)
investment in another principal property.
Notwithstanding the foregoing, under the senior indenture we may, and may
permit any restricted subsidiary to, effect any sale-leaseback transaction that
is not excepted by clauses (i) through (iv), inclusive, of the above paragraph,
provided that the net sale proceeds from such sale-leaseback transaction,
together with the aggregate principal amount of outstanding debt (other than the
senior debt securities) secured by liens upon principal properties not excepted
by clauses (i) through (xiv), inclusive, of the first paragraph of the
limitation on liens covenant described above, do not exceed 15% of the
consolidated net tangible assets.
Subordinated Indenture Covenants
If we issue subordinated debt securities to an El Paso Trust in connection
with the issuance of trust securities by the El Paso Trust and
- an event of default under the subordinated indenture has occurred,
- we are in default of our payment obligations under the related trust
guarantee or the guarantee of the trust common securities, or
- we have elected to defer payments of interest on the subordinated debt
securities by extending the interest payment period as provided in the
subordinated indenture, and the interest payment period, or any extension
of it, is continuing, then
we will be subject to restrictions regarding the declaration or payment of
dividends on, and the making of guarantee payments with respect to, any of our
capital stock, and the making of any payment of interest, principal or premium,
if any, on, or the repayment, repurchase or redemption of, any debt securities
(including guarantees) issued by us which rank the same as or junior to the
subordinated debt securities. These restrictions will be more fully described in
the prospectus supplement applicable to the particular series of subordinated
debt securities issued to a trust.
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In the event we issue subordinated debt securities to an El Paso Trust in
connection with the El Paso Trust's issuance of trust securities, for so long as
such trust securities remain outstanding, we will covenant in the declaration,
the guarantees or the supplemental indenture to the subordinated indenture with
respect to such El Paso Trust:
- to directly or indirectly maintain 100% ownership of the common
securities of the El Paso Trust; however, any permitted successor to us
under the subordinated indenture may succeed to our ownership of the
trust common securities and
- not to voluntarily terminate, wind-up or liquidate the El Paso Trust,
except in connection with
(i) the distribution of subordinated debt securities to the holders of
trust securities in liquidation of the trust,
(ii) the redemption of all of the trust securities of the trust, or
(iii) certain mergers, consolidations or amalgamations, each as
permitted by the declaration of the trust.
We will also covenant to use our commercially reasonable efforts, consistent
with the terms and provisions of the declaration of the El Paso Trust, to cause
the trust to remain classified as a grantor trust and not taxable as a
corporation for United States federal income tax purposes.
Definitions
The following are definitions of some terms used in the above covenant
descriptions:
"Consolidated net tangible assets" means, at any date of
determination, the total amount of assets after deducting (i) all current
liabilities (excluding (A) any current liabilities that by their terms are
extendable or renewable at the option of the obligor thereon to a time more
than 12 months after the time as of which the amount thereof is being
computed, and (B) current maturities of long-term debt), and (ii) the value
(net of any applicable reserves) of all goodwill, trade names, trademarks,
patents and other like intangible assets, all as set forth on our
consolidated balance sheet and our consolidated subsidiaries for our most
recently completed fiscal quarter, prepared in accordance with generally
accepted accounting principles.
"Debt" means any obligation created or assumed by any person to repay
money borrowed and any purchase money obligation created or assumed by such
person.
"Funded debt" means all debt maturing one year or more from the date
of the creation thereof, all debt directly or indirectly renewable or
extendible, at the option of the debtor, by its terms or by the terms of
any instrument or agreement relating thereto, to a date one year or more
from the date of the creation thereof, and all debt under a revolving
credit or similar agreement obligating the lender or lenders to extend
credit over a period of one year or more.
"Lien" means any mortgage, pledge, security interest, charge, lien or
other encumbrance of any kind, whether or not filed, recorded or perfected
under applicable law.
"Permitted liens" means (i) liens upon rights-of-way for pipeline
purposes; (ii) any governmental lien, mechanics', materialmen's, carriers'
or similar lien incurred in the ordinary course of business which is not
yet due or which is being contested in good faith by appropriate
proceedings and any undetermined lien which is incidental to construction;
(iii) the right reserved to, or vested in, any municipality or public
authority by the terms of any right, power, franchise, grant, license,
permit or by any provision of law, to purchase or recapture or to designate
a purchaser of, any property; (iv) liens of taxes and assessments which are
(a) for the then current year, (b) not at the time delinquent, or (c)
delinquent but the validity of which is being contested at the time by us
or any subsidiary in good faith; (v) liens of, or to secure performance of,
leases; (vi) any lien upon, or deposits of, any assets in favor of any
surety company or clerk of court for the purpose of obtaining
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indemnity or stay of judicial proceedings; (vii) any lien upon property or
assets acquired or sold by us or any restricted subsidiary resulting from
the exercise of any rights arising out of defaults on receivables; (viii)
any lien incurred in the ordinary course of business in connection with
workmen's compensation, unemployment insurance, temporary disability,
social security, retiree health or similar laws or regulations or to secure
obligations imposed by statute or governmental regulations; (ix) any lien
upon any property or assets in accordance with customary banking practice
to secure any debt incurred by us or any restricted subsidiary in
connection with the exporting of goods to, or between, or the marketing of
goods in, or the importing of goods from, foreign countries; or (x) any
lien in favor of the U.S. or any state thereof, or any other country, or
any political subdivision of any of the foregoing, to secure partial,
progress, advance, or other payments pursuant to any contract or statute,
or any lien securing industrial development, pollution control, or similar
revenue bonds.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, other entity, unincorporated organization, or government or any
agency or political subdivision thereof.
"Principal property" means (a) any pipeline assets owned by us or by
any of our subsidiaries, including any related facilities employed in the
transportation, distribution or marketing of natural gas, that are located
in the U.S. or Canada, and (b) any processing or manufacturing plant owned
or leased by us or any of our subsidiaries that is located within the U.S.
or Canada, except, in the case of either clause (a) or (b), any such assets
or plant which, in the opinion our board of directors, is not material in
relation to our activities and our subsidiaries as a whole.
"Restricted subsidiary" means any of our subsidiaries owning or
leasing any principal property.
"Sale-leaseback transaction" means the sale or transfer by us or any
of our restricted subsidiaries of any principal property to a person (other
than us or a subsidiary) and the taking back by us or any of our restricted
subsidiaries, as the case may be, of a lease of such principal property.
If the El Paso Trusts issue trust preferred securities and we issue
subordinated debt securities to the trust or a trustee in connection with the
issuance of the trust preferred securities and (1) an event of default as
defined in this document has occurred, (2) we are in default with respect to our
payment of any obligations under the related trust guarantee or the guarantee of
the trust common securities or (3) we have given notice of our election to defer
payments of interest on these subordinated debt securities by extending the
interest payment period as provided in the indenture governing these
subordinated debt securities, and this interest payment period, or any extension
of this interest payment period, is continuing, we will be subject to
restrictions regarding
- the declaration of payment of dividends on, and the making of guarantee
payments with respect to, any of our capital stock; and
- the making of any payment of interest, principal or premium, if any, on
or the repayment, repurchase or redemption of debt securities including
guarantees issued by us which rank equally with or junior to these
subordinated debt securities.
These restrictions will be described in more detail in the prospectus
supplement relating to these subordinated debt securities.
If the El Paso Trusts issue trust preferred securities and we issue
subordinated debt securities to the trust or a trustee in connection with the
issuance of the trust preferred securities, for so long as the trust preferred
securities remain outstanding, we will covenant in the declaration of the
trusts, the related guarantees or the indenture governing these subordinated
debt securities:
- To directly or indirectly maintain 100% ownership of the common
securities of each trust; provided, however, that any permitted successor
under the indenture governing the subordinated debt securities may
succeed to our ownership of the trust common securities; and
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- Not to voluntarily terminate, wind-up or liquidate either El Paso
Capital Trust II or El Paso Capital Trust III, as the case may be,
except in connection with
- the distribution of subordinated debt securities to the holders of
trust preferred securities in liquidation of either trust;
- the redemption of all trust preferred securities of either trust;
or
- mergers, consolidations or amalgamations permitted by the
declaration of either trust.
We will also covenant to use our commercially reasonable efforts,
consistent with the terms and provisions of the declaration of either trust, to
cause each trust to remain classified as a grantor trust and not taxable as a
corporation for U.S. federal income tax purposes.
PAYMENT AND TRANSFER
Unless we specify otherwise in a prospectus supplement, we will pay
principal, interest and any premium on the debt securities, and they may be
surrendered for payment or transferred, at the offices of the trustee. We will
make payment on registered securities by check mailed to the persons in whose
names the debt securities are registered or by transfer to an account maintained
by the registered holder on days specified in the indentures or any prospectus
supplement. If we make debt securities payments in other forms, we will specify
the form and place in a prospectus supplement.
We will maintain a corporate trust office of the trustee or another office
or agency for the purpose of transferring or exchanging fully registered
securities, without the payment of any service charge except for any tax or
governmental charge.
GLOBAL SECURITIES
We may issue one or more series of the debt securities as permanent global
debt securities deposited with a depositary. Unless otherwise indicated in the
prospectus supplement, the following is a summary of the depository arrangements
applicable to debt securities issued in permanent global form and for which The
Depositary Trust Company (DTC) acts as depositary.
Each global debt security will be deposited with, or on behalf of, DTC, as
depositary, or its nominee and registered in the name of a nominee of DTC.
Except under the limited circumstances described below, global debt securities
are not exchangeable for definitive certificated debt securities.
Ownership of beneficial interests in a global debt security is limited to
participants that have accounts with DTC or its nominee, or persons that may
hold interests through those participants. In addition, ownership of beneficial
interests by participants in a global debt security will be evidenced only by,
and the transfer of that ownership interest will be effected only through,
records maintained by DTC or its nominee for a global debt security. Ownership
of beneficial interests in a global debt security by persons that hold through
participants will be evidenced only by, and the transfer of that ownership
interest within that participant will be effected only through, records
maintained by that participant. DTC has no knowledge of the actual beneficial
owners of the debt securities. 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 participants through which the
beneficial owners entered the transaction. The laws of some jurisdictions
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such laws may impair the ability to transfer
beneficial interests in a global debt security.
We will make payment of principal of, and interest on, debt securities
represented by a global debt security registered in the name of or held by DTC
or its nominee will be made to DTC or its nominee, as the case may be, as the
registered owner and holder of the global debt security representing those debt
securities. DTC has advised us that upon receipt of any payment of principal of,
or interest on, a global debt security, DTC will immediately credit accounts of
participants on its book-entry registration and
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transfer system with payments in amounts proportionate to their respective
beneficial interests in the principal amount of that global debt security as
shown in the records of DTC. Payments by participants to owners of beneficial
interests in a global debt security held through those participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name," and will be the sole responsibility of those participants,
subject to any statutory or regulatory requirements that may be in effect from
time to time.
Neither we, any trustee nor any of our respective agents, will be
responsible for any aspect of the records of DTC, any nominee or any participant
relating to, or payments made on account of, beneficial interests in a permanent
global debt security or for maintaining, supervising or reviewing any of the
records of DTC, any nominee or any participant relating to such beneficial
interests.
A global debt security is exchangeable for definitive debt securities
registered in the name of, and a transfer of a global debt security may be
registered to, any person other than DTC or its nominee, only if:
- DTC notifies us that it is unwilling or unable to continue as depositary
for that global debt security or at any time DTC ceases to be registered
under the Exchange Act;
- we determine in our discretion that the global debt security shall be
exchangeable for definitive debt securities in registered form; or
- there shall have occurred and be continuing an event of default or an
event which, with notice or the lapse of time or both, would constitute
an event of default under the debt securities.
Any global debt security that is exchangeable pursuant to the preceding
sentence will be exchangeable in whole for definitive debt securities in
registered form, of like tenor and of an equal aggregate principal amount as the
global debt security, in denominations specified in the applicable prospectus
supplement, if other than $1,000 and integral multiples of $1,000. The
definitive debt securities will be registered by the registrar in the name or
names instructed by DTC. We expect that these instructions may be based upon
directions received by DTC from its participants with respect to ownership of
beneficial interests in the global debt security.
Except as provided above, owners of the beneficial interests in a global
debt security will not be entitled to receive physical delivery of debt
securities in definitive form and will not be considered the holders of debt
securities for any purpose under the indentures. No global debt security shall
be exchangeable except for another global debt security of like denomination and
tenor to be registered in the name of DTC or its nominee. Accordingly, each
person owning a beneficial interest in a global debt security must rely on the
procedures of DTC and, if that person is not a participant, on the procedures of
the participant through which that person owns its interest, to exercise any
rights of a holder under the global debt security or the indentures.
We understand that, under existing industry practices, in the event that we
request any action of holders, or an owner of a beneficial interest in a global
debt security desires to give or take any action that a holder is entitled to
give or take under the debt securities or the indentures, DTC would authorize
the participants holding the relevant beneficial interests to give or take that
action, and those participants would authorize beneficial owners owning through
those participants to give or take that action or would otherwise act upon the
instructions of beneficial owners owning through them.
DTC has advised us that DTC is a limited purpose trust company organized
under the laws of the State of New York, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered under the Exchange Act. DTC was created
to hold securities of its participants and to facilitate the clearance and
settlement of securities transactions among its participants in those securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. DTC is owned by a number
of its participants and by the New York Stock
16
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to DTC's book-entry system is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant, either directly
or indirectly. The rules applicable to DTC and its participants are on file with
the SEC.
DEFEASANCE
We will be discharged from our obligations on the debt securities of any
series at any time if we deposit with the trustee sufficient cash or government
securities to pay the principal, interest, any premium and any other sums due to
the stated maturity date or a redemption date of the debt securities of the
series. If this happens, the holders of the debt securities of the series will
not be entitled to the benefits of the indenture except for registration of
transfer and exchange of debt securities and replacement of lost, stolen or
mutilated debt securities.
Under U.S. federal income tax laws as of the date of this prospectus, a
discharge may be treated as an exchange of the related debt securities. Each
holder might be required to recognize gain or loss equal to the difference
between the holder's cost or other tax basis for the debt securities and the
value of the holder's interest in the trust. Holders might be required to
include as income a different amount than would be includable without the
discharge. Prospective investors should seek tax advice to determine their
particular consequences of a discharge, including the applicability and effect
of tax laws other than the U.S. federal income tax laws.
GOVERNING LAW
Each indenture and the debt securities will be governed by and construed in
accordance with the laws of the State of New York.
NOTICES
Notices to holders of debt securities will be given by mail to the
addresses of such holders as they appear in the security register.
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DESCRIPTION OF CAPITAL STOCK
The statements under this caption are brief summaries and are subject to,
and are qualified in their entirety by reference to, the more complete
descriptions contained in (1) our Restated Certificate of Incorporation, as
amended (the "charter"), and the Amended and Restated Shareholder Rights
Agreement, dated as of January 20, 1999, between us and Fleet National Bank c/o
EquiServe, as rights agent (the "shareholder rights agreement"), copies of which
are available upon request to El Paso, and (2) the certificate of designation
relating to each series of preferred stock, which will be filed with the SEC at,
or prior to, the time of the offering of such series of preferred stock.
GENERAL
We are currently authorized by our charter to issue up to 750,000,000
shares of common stock and up to 50,000,000 shares of preferred stock. As of
March 16, 2001, there were 508,892,767 shares of common stock and 200,000 shares
of Series B Mandatorily Convertible Single Reset Preferred Stock issued and
outstanding.
COMMON STOCK
We are currently authorized by our charter to issue up to 750,000,000
shares of common stock. The holders of common stock are entitled to one vote for
each share held of record on all matters submitted to a vote of stockholders.
Subject to preferences that may be applicable to any outstanding preferred
stock, holders of common stock are entitled to receive ratably dividends which
are declared by our board of directors out of funds legally available for such a
purpose. In the event of our liquidation, dissolution, or winding up, holders of
common stock are entitled to share ratably in all assets remaining after payment
of liabilities and liquidation preference of any outstanding preferred stock.
Holders of common stock have no preemptive rights and have no rights to convert
their common stock into any other securities. The common stock is not
redeemable. All of the outstanding shares of common stock are, and the common
stock offered by this offering circular will be, fully paid and nonassessable
upon issuance against full payment of the purchase price.
Fleet National Bank c/o EquiServe is the transfer agent and registrar for
our common stock.
PREFERRED STOCK
Our board of directors, without any further action by our stockholders, is
authorized to issue up to 50,000,000 shares of preferred stock and to divide the
preferred stock into one or more series. The Board may fix by resolution or
resolutions any of the designations, powers, preferences and rights, and the
qualifications, limitations, or restrictions of the shares of each such series,
including, but not limited to, dividend rates, conversion rights, voting rights,
terms of redemption and liquidation preferences, and the number of shares
constituting each such series. The issuance of preferred stock may have the
effect of delaying, deterring or preventing a change in control of El Paso.
Preferred stock, upon issuance against full payment of the purchase price
therefor, will be fully paid and nonassessable. The specific terms of a
particular series of preferred stock will be described in the certificate of
designation relating to that series. The description of preferred stock set
forth below does not purport to be complete and is qualified in its entirety by
reference to the certificate of designation relating to the particular series of
preferred stock.
The designations, powers, preferences and rights, and the qualifications,
limitations, or restrictions of the preferred stock of each series will be fixed
by the certificate of designation relating to such series. The certificate of
designation relating to each series will specify the terms of the preferred
stock as follows:
- The maximum number of shares to constitute each series and the
distinctive designation of the shares;
- The annual dividend rate, if any, on shares of each series, whether such
rate is fixed or variable or both, the date or dates from which dividends
will begin to accrue or accumulate and whether dividends will be
cumulative;
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- The purchase price and terms of conditions of the shares of each series,
including the time during which shares of each series may be redeemed and
any accumulated dividends that the holders of shares of each series shall
be entitled to receive upon the redemption of the shares;
- The liquidation preference, if any, and any accumulated dividends
thereon, that the holders of shares of each series shall be entitled to
receive upon the liquidation, dissolution or winding up of the affairs of
El Paso;
- Whether or not the shares of each series will be subject to operation of
a retirement or sinking fund, and, if so, the extent and manner in which
any such fund shall be applied to the purchase or redemption of the
shares of such series for retirement or for other corporate purposes and
the terms and provisions relating to the operation of such fund;
- The terms and conditions, if any, on which the shares of each series
shall be convertible into, or exchangeable for, debt securities, shares
of any other class or classes of our capital stock, or any series of any
other class or classes, or of any other series of the same class,
including the price or prices or the rate or rates of conversion or
exchange and the method, if any, of adjusting the same;
- The voting rights, if any, on the shares of each series; and
- Any or all other preferences and relative, participating, operational, or
other special rights, qualifications, limitations, or restrictions on
each series.
As of the date of this offering circular, 200,000 shares of Series B
Mandatorily Convertible Single Reset Preferred Stock are outstanding. Pursuant
to the shareholder rights agreement, our board of directors has designated
7,500,000 shares of Series A preferred stock. A summary description of each of
the shareholder rights agreement, the Series A preferred stock and the Series B
Mandatorily Convertible Single Reset Preferred Stock is set forth below. You
should refer to the full text of the shareholder rights agreement and the
certificate of designation for each series of preferred stock for more complete
descriptions.
SHAREHOLDER RIGHTS AGREEMENT
In July 1992, the board of directors of El Paso Natural Gas Company, our
predecessor ("EPG"), declared a dividend distribution of one preferred stock
purchase right (an "EPG right") for each share of EPG's common stock par value
$3.00 per share, then outstanding. In July 1997, EPG's board amended EPG's
shareholder rights agreement pursuant to which the EPG rights were issued. All
shares of EPG common stock issued subsequent to July 1992 also included these
EPG rights. In connection with the holding company reorganization effected as of
August 1, 1998, each one-half EPG right then associated with each outstanding
share of EPG common stock was converted into one preferred stock purchase right
(a "right") associated with each share of our common stock. All shares of our
common stock issued after August 1, 1998 will also include a right. Under
conditions specified in the shareholder rights agreement, each right may be
exercised to purchase from us one two-hundredths of a share of a series of our
preferred stock, designated as Series A junior participating preferred stock,
par value $.01 per share (the "Series A preferred stock"), at a price of $75 per
one two-hundredths of a share, subject to adjustment. In January 1999, the
shareholder rights agreement was amended and restated.
Our charter provides that the holders of a whole share of Series A
preferred stock are entitled to 200 votes per share on all matters submitted to
a vote of our stockholders subject to adjustment. In addition, during any period
that dividends on the Series A preferred stock are in arrears in an amount equal
to six quarterly dividend payments, the holders of Series A preferred stock will
have the right to vote together as a class to elect two of our directors.
The rights will separate from the common stock and will become exercisable
on the earlier of (1) the first date of the public announcement that a person or
group has acquired or obtained the right to acquire beneficial ownership of 15%
or more of the voting power of all of our outstanding voting securities and (2)
10 business days (or such later date as the board may determine) after the
commencement of, or
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announcement of an intention to commence, a tender or exchange offer, that would
result in a person or group beneficially owning 15% or more of our voting
securities. If, after the rights become exercisable, we are involved in a merger
or other business combination transaction in which our common stock is exchanged
or changed, or it sells 50% or more of its assets or earning power, each holder
of a right will have the right to purchase at the right's then-current exercise
price, common stock of the acquiring company which at the time of such
transaction will have a market value of two times the exercise price of the
right. If a person becomes the beneficial owner of securities having 15% or more
of the voting power of all of our then-outstanding voting securities (except
pursuant to a "permitted offer"), or if, during any period of such ownership,
there shall be any reclassification of securities or recapitalization of us, or
any merger or consolidation of us with any of our subsidiaries or any other
transaction or series of transactions which has the effect, directly or
indirectly, of increasing by more than 1% the proportionate share of the
outstanding shares of any class of our equity securities or any of our
subsidiaries which is directly or indirectly owned by such person, then for the
next 60 days each right not owned by such person will entitle the holder of the
right to purchase, at the right's then-current exercise price, shares of common
stock or, in the discretion of the board, the number of one two-hundredths of a
shares of series A preferred stock (or in circumstances specified in the
shareholder rights agreement, other of our equity securities with at least the
same economic value as the common stock) having a market value of twice the
right's then-current exercise price. The rights, which have no voting rights,
expire no later than 5:00 p.m., New York time on July 7, 2002. A "permitted
offer" is a tender or exchange offer for all outstanding shares of common stock
which is at a price and on terms determined, prior to the purchase of shares in
such offer, by a majority of the disinterested directors to be adequate and
otherwise in the best interests of us and our stockholders (other than the
person and its affiliates making the offer), taking into account all factors
that such disinterested directors deem relevant. "Disinterested directors" are
directors who are neither our officers nor the officers an acquiring company or
affiliate, associate or representative of such a company, or a person directly
or indirectly proposed or nominated as director by a transaction person (as
defined in the shareholder rights agreement). We may redeem the rights under
circumstances specified in the shareholder rights agreement, prior to their
expiration date at a purchase price of $.01 per right. It is possible that the
existence of the rights may have the effect of delaying, deterring or preventing
our takeover.
Each share of our common stock issued upon conversion of the debentures
will include a right issued under the shareholder rights agreement.
EL PASO SERIES B MANDATORILY CONVERTIBLE SINGLE RESET PREFERRED STOCK
In March 2000, we issued 200,000 shares of El Paso Series B Mandatorily
Convertible Single Reset Preferred Stock having an initial aggregate liquidation
preference of $1,000,000,000 in connection with the issuance by Limestone
Electron Trust and Limestone Electron, Inc. of $1,000,000,000 aggregate
principal amount of notes (the "Limestone Notes"). The shares of the El Paso
Series B Mandatorily Convertible Single Reset Preferred Stock were deposited
under a share trust agreement into a trust established for the benefit of the
holders of the Limestone Notes. We are the beneficial owner of the trust. The
preferred shares are to be sold by the trust only if:
- the Limestone Notes are accelerated as a result of an event of default,
including, in addition to various defaults under the documentation
relating to the transactions pursuant to which the Limestone Notes were
issued, payment defaults by El Paso under debt obligations specified in
the documentation relating to the transactions;
- the funds necessary to pay the Limestone Notes upon maturity are not
timely deposited; or
- our credit ratings fall below investment grade and our common stock price
for ten consecutive trading days falls below $27.07, subject to certain
adjustments.
The date that the preferred shares are sold by the trust, or under certain
circumstances the date of a failed remarketing of the preferred shares, is the
"Rate Reset Date," and the market price of El Paso common stock on the day such
sale is priced or the date of such failed remarketing is the "Reset Price,"
20
which price is subject to certain antidilution adjustments. If the Limestone
Notes, which mature on March 15, 2003, are timely repaid in full, we expect the
El Paso Series B Mandatorily Convertible Single Reset Preferred Stock will be
retired and canceled.
No dividends are payable on the El Paso Series B Mandatorily Convertible
Single Reset Preferred Stock prior to the Rate Reset Date. After the Rate Reset
Date, dividends are payable at a rate equal to 7% per annum plus an amount which
is intended to approximate the dividend yield on the El Paso common stock as of
the Rate Reset Date. Such dividends are payable quarterly in arrears and are
cumulative. The amount payable on shares of El Paso Series B Mandatorily
Convertible Single Reset Preferred Stock in the event of a liquidation,
dissolution or winding up of the affairs of El Paso is $5,000 per share,
together with accrued dividends to the date of payment. These dividend and
liquidation rights are senior to the dividend and liquidation rights of the El
Paso common stock and the El Paso Series A Participating Junior Preferred Stock.
The El Paso Series B Mandatorily Convertible Single Reset Preferred Stock is not
redeemable after the Rate Reset Date.
After the Rate Reset Date and prior to the date on which the El Paso Series
B Mandatorily Convertible Single Reset preferred Stock automatically convert
into shares of El Paso common stock, the holders of the El Paso Series B
Mandatorily Convertible Single Reset Preferred Stock will be entitled to convert
the preferred shares into El Paso common stock based on a conversion price of
110% of the Reset Price. The El Paso Series B Mandatorily Convertible Single
Reset Preferred Stock will be converted automatically into El Paso common stock
on the later to occur of the third anniversary of the Rate Reset Date and March
15, 2006, and holders will also be entitled to receive cash equal to all accrued
dividends. The number of shares of El Paso common stock issuable per share of El
Paso Series B Mandatorily Convertible Single Reset Preferred Stock upon
automatic conversion will equal the quotient of $5,000 divided by a conversion
price which will be between 100% to 110% of the Reset Price, depending on the
market price of El Paso common stock at the time of automatic conversion.
The holders of El Paso Series B Mandatorily Convertible Single Reset
Preferred Stock generally have no voting rights except as may be required by
statute, but are entitled to certain class voting rights, including the
requirement for approval by the holders of at least a majority thereof to
effect:
- an amendment to El Paso's certificate of incorporation that would
adversely affect the powers, rights or preferences of the holders of the
El Paso Series B Mandatorily Convertible Single Reset Preferred Stock;
- the authorization or issuance of capital stock ranking senior to the El
Paso Series B Mandatorily Convertible Single Reset Preferred Stock; or
- the merger or consolidation of El Paso in which holders of the El Paso
Series B Mandatorily Convertible Single Reset Preferred Stock do not
receive or continue to hold a similar interest in the surviving entity,
subject to certain exceptions.
If full cumulative dividends on the El Paso Series B Mandatorily
Convertible Single Reset Preferred Stock are not paid for six consecutive
quarters, the holders of the El Paso Series B Mandatorily Convertible Single
Reset Preferred Stock (together with the holders of any other series of capital
stock, including the Series A preferred stock, that are entitled to elect
directors as a result of dividend arrearages) will have the right to elect two
directors to El Paso's Board of Directors until all dividend arrearages have
been paid. If we fail to pay dividends when due on El Paso Series B Mandatorily
Convertible Single Reset Preferred Stock, we are prohibited from paying
dividends on prior stock, including El Paso common stock and Series A preferred
stock, and we and our subsidiaries are prohibited from redeeming or acquiring
junior stock, including El Paso common stock and Series A preferred stock.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
We are a Delaware corporation subject to Section 203 of the Delaware
General Corporation Law. Generally, Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business
21
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless (1) prior to such date, either the business combination or
such transaction which resulted in the stockholder becoming an interested
stockholder is approved by the board of directors of the corporation, (2) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owns at least 85% of the
outstanding voting stock, or (3) on or after such date, the business combination
is approved by the board of directors of the corporation and by the affirmative
vote at least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder. A "business combination" includes merger, asset sales
and other transactions resulting in a financial benefit to the interested
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns, or, within three years, did own, 15% or more of
the corporation's outstanding voting stock.
EL PASO'S RESTATED CERTIFICATE OF INCORPORATION
Our charter contains provisions applicable to a merger, consolidation,
asset sale, liquidation, recapitalization, or other business transactions,
including the issuance of our stock ("business combinations"). Our charter
requires the affirmative vote of 51% or more of our voting stock, excluding any
voting stock held by an interested stockholder (defined in our charter as any
person who owns 10% or more of the voting stock and specifically defined
affiliates), with respect to all business combinations involving the interested
stockholder, unless directors who served as such prior to the time the
interested stockholder became an interested stockholder determine by a
two-thirds vote that (1) the proposed consideration meets specified minimum
price criteria, or (2)(A) the interested stockholder holds 80% or more of the
voting stock and (B) the interested stockholder has not received (other than
proportionately as a stockholder) the benefit of any financial assistance from
us, whether in anticipation of or in connection with such business combination.
To meet the minimum price criteria, all stockholders must receive consideration
or retain value per share after the transaction which is not less than the price
per share paid by the interested stockholder. Our charter also requires the
dissemination to stockholders of a proxy or information statement describing the
business combination.
Our charter also prohibits the taking of any action by written stockholder
consent in lieu of a meeting and the subsequent amendment of our charter to
repeal or alter the above provisions without the affirmative vote of 51% of our
voting stock, excluding voting stock held by any interested stockholder.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
Each trust may issue in one or more offerings only one series of trust
preferred securities having terms described in the applicable prospectus
supplement. The declaration of each trust authorizes the administrative trustees
to issue on behalf of that trust one series of trust preferred securities. The
declaration of each trust, as amended in connection with the trust's sale of
trust preferred securities, will be qualified as an indenture under the Trust
Indenture Act.
The trust preferred securities will have such terms, including
distributions, redemption, voting, conversion, exchange, liquidation rights and
such other preferred, deferred or other special rights or such restrictions as
are set forth in the declaration, as amended in connection with the trust's sale
of trust preferred securities or made part of the declaration by the Trust
Indenture Act. You should refer to the prospectus supplement relating to the
trust preferred securities of the trust for specific terms, including:
- the distinctive designation of the trust preferred securities;
- the number of trust preferred securities issued by each trust;
- the annual distribution rate (or method of determining such rate) for
trust preferred securities issued by the trust and the date or dates upon
which the distributions are payable;
- the date or dates or method of determining the date or dates from which
distributions on trust preferred securities will be cumulative;
22
- the amount or amounts that will be paid out of the assets of the trust to
the holders of trust preferred securities upon voluntary or involuntary
dissolution, winding-up or termination of the trust;
- the obligation, if any, of the trust to purchase or redeem the trust
preferred securities and the price or prices at which, the period or
periods within which, and the terms and conditions upon which, trust
preferred securities will be purchased or redeemed, in whole or in part,
pursuant to that obligation;
- the voting rights, if any, of trust preferred securities in addition to
those required by law, including the number of votes per trust preferred
security and any requirement for the approval by the holders of trust
preferred securities, as a condition to specified action or amendments to
the declaration of the trust;
- the terms and conditions, if any, upon which the assets of the trust may
be distributed to holders of trust preferred securities;
- provisions regarding convertibility or exchangeability of the trust
preferred securities for our capital stock or debt securities;
- if applicable, any securities exchange upon which the trust preferred
securities will be listed; and
- any other relevant rights, preferences, privileges, limitations or
restrictions of trust preferred securities not inconsistent with the
declaration of the trust or with applicable law.
We will guarantee all trust preferred securities offered to the limited
extent set forth below under "Description of the Trust Preferred Securities
Guarantees."
Any U.S. federal income tax considerations applicable to any offering of
trust preferred securities will be described in the applicable prospectus
supplement.
In connection with the issuance of trust preferred securities, each trust
will issue one series of trust common securities. The declaration of each trust
authorizes the administrative trustees of the trust to issue on behalf of the
trust one series of trust common securities. The amended and restated
declaration of the trust will set forth the terms of the trust common
securities, including terms regarding distributions, redemption, voting,
liquidation rights and any restrictions. The terms of the trust common
securities issued by each trust will be substantially identical to the terms of
the trust preferred securities issued by the trust. The trust common securities
will rank equally, and payments will be made on the trust common securities pro
rata, with the trust preferred securities. However, upon an event of default
under the declaration, the rights of the holders of the trust common securities
to payment in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the trust
preferred securities. Except in the limited circumstances to be described in the
amended and restated declaration, the trust common securities will also carry
the right to vote to appoint, remove or replace any of the trustees of a trust.
All of the trust common securities of each trust will be directly or indirectly
owned by us.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES GUARANTEES
A summary of information concerning the trust guarantees which we will
execute and deliver from time to time for the benefit of the holders of the
trust preferred securities is set forth below. Each trust guarantee will be
qualified as an indenture under the Trust Indenture Act. The Chase Manhattan
Bank will act as the trust guarantee trustee, or indenture trustee, under each
trust guarantee. The terms of each trust guarantee will be those set forth in
that trust guarantee and those made part of that trust guarantee by the Trust
Indenture Act. The following is a summary of the material terms and provisions
of the trust preferred securities guarantees. You should refer to the provisions
of the form of trust guarantee and the Trust Indenture Act for a more complete
discussion. We have filed the form of trust guarantee as an exhibit to the
registration statement of which this prospectus is a part. Each trust guarantee
will be held
23
by the trust guarantee trustee for the benefit of the holders of the trust
preferred securities of the applicable trust.
GENERAL
Under each trust guarantee, we will irrevocably and unconditionally agree,
to the extent set forth in each applicable trust guarantee, to pay the trust
guarantee payments described below in full to the holders of the trust preferred
securities issued by a trust, in the event they are not paid by or on behalf of
the applicable trust when due, regardless of any defense, right of set-off or
counterclaim which the trust may have or assert.
The following payments (the trust guarantee payments) with respect to trust
preferred securities of any trust not paid by the trust when due, will be
subject to the related trust guarantee:
- any accrued and unpaid distributions required to be paid on the trust
preferred securities, to the extent that trust will have funds legally
and immediately available for payment;
- the redemption price of any trust preferred securities called for
redemption by that trust, including all accrued and unpaid distributions
to the date of redemption, to the extent that trust has funds available
for payment; and
- upon dissolution, winding-up or termination of that trust (other than in
connection with the distribution of the assets of the trust to the
holders of trust preferred securities or the redemption of all of the
trust preferred securities), the lesser of:
(a) the aggregate of the liquidation amount and all accrued and unpaid
distributions on the trust preferred securities to the date of payment, to
the extent that trust has funds available for payment and
(b) the amount of assets of the trust remaining available for
distribution to holders of its trust preferred securities in liquidation of
the trust.
Our obligation to make a trust guarantee payment will be satisfied by our
direct payment of the required amounts to the holders of the applicable trust
preferred securities or by causing the applicable trust to pay the required
amounts to the holders.
Each trust guarantee will be a full and unconditional guarantee with
respect to the applicable trust preferred securities, but will not apply to any
payment of distributions when the applicable trust does not have funds "legally
and immediately" available for payment. If we do not make interest payments on
the subordinated debt securities purchased by a trust, that trust will not pay
distributions on the trust preferred securities issued by it and will not have
funds "legally and immediately" available for such payment. See "Description of
the Debt Securities -- Covenants" included in this prospectus.
We have also agreed separately to irrevocably and unconditionally guarantee
the obligations of the trusts with respect to the trust common securities (the
trust common securities guarantees) to the same extent as the trust guarantees,
except that upon an event of default under the subordinated indenture relating
to the subordinated debt securities purchased by that trust, holders of trust
preferred securities will have priority over holders of trust common securities
with respect to distributions and payments on liquidation, redemption or
otherwise.
COVENANTS
In each trust guarantee, we will covenant that, so long as any trust
preferred securities remain outstanding, if any event that would constitute an
event of default under the trust guarantee or the declaration of the applicable
trust occurs, then we will not declare or pay any dividend on, make any
24
distributions with respect to, or redeem, purchase or make any liquidation
payment with respect to, any of our capital stock, with the following
exceptions:
- purchases or acquisitions of shares of our common stock in connection
with our obligations under our employee benefit plans,
- purchases or acquisitions of shares of our common stock in connection
with our obligations under any contract or security requiring us to
purchase shares of our common stock or,
- the purchase of fractional interests in shares of our capital stock as a
result of a reclassification of our capital stock or the exchange or
conversion of one class or series of our capital stock for another class
or series of our capital stock, or make any guarantee payments with
respect to the foregoing.
Additionally, we will not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities,
including guarantees, issued by us which rank equally with or junior to the
subordinated debt securities.
MODIFICATION OF THE TRUST GUARANTEES; ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of trust preferred securities, in which case no vote will be
required, each trust guarantee may be amended only with the prior approval of
the holders of not less than a majority in liquidation amount of the outstanding
trust preferred securities of the applicable trust. The manner of obtaining this
approval of holders of the trust preferred securities will be described in an
accompanying prospectus supplement. All guarantees and agreements contained in a
trust guarantee will bind our successors, assigns, receivers, trustees and
representatives and will inure to the benefit of the holders of the trust
preferred securities of the applicable trust then outstanding.
TERMINATION
Each trust guarantee will terminate as to the trust preferred securities of
the applicable trust upon the first to occur of:
- full payment of the redemption price of all trust preferred securities of
the applicable trust;
- distribution of the assets of the trust to the holders of the trust
preferred securities of the applicable trust; and
- full payment of the amounts payable upon liquidation of the trust in
accordance with the declaration of the trust.
Each trust guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of trust preferred securities
issued by the applicable trust must restore payment of any sums paid under the
trust preferred securities or the trust guarantee.
EVENTS OF DEFAULT
An event of default under a trust guarantee will occur upon our failure to
perform any of our payment or other obligations under that trust guarantee.
The holders of a majority in liquidation amount of the trust preferred
securities to which the trust guarantee relates have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the trust guarantee trustee in respect of the trust guarantee or to direct the
exercise of any trust or power conferred upon the trust guarantee trustee under
the trust preferred securities guarantee. If the trust guarantee trustee fails
to enforce the trust guarantee, any holder of trust preferred securities
relating to the trust guarantee may institute a legal proceeding directly
against us to enforce the trust guarantee trustee's rights under the trust
guarantee, without first instituting a legal proceeding against the
25
relevant trust, the trust guarantee trustee or any other person or entity.
However, if we have failed to make a guarantee payment, a holder of trust
preferred securities may directly institute a proceeding against us for
enforcement of the trust guarantee for such payment. We waive any right or
remedy to require that any action be brought first against the trust or any
other person or entity before proceeding directly against us.
STATUS OF THE TRUST GUARANTEES
The trust guarantees will constitute our unsecured obligations and will
rank:
- subordinate and junior in right of payment to all of our other
liabilities, except those obligations or liabilities made equal in
priority or subordinate by their terms;
- equally with the most senior preferred or preference stock that we may
issue and with any guarantee that we may enter into in respect of any
preferred or preference stock of any our affiliates; and
- senior to our common stock.
The terms of the trust preferred securities provide that each holder of
trust preferred securities of the applicable trust, by acceptance of the
securities, agrees to the subordination provisions and other terms of the trust
guarantee relating to the applicable trust preferred securities.
The trust guarantees will constitute a guarantee of payment and not of
collection. Accordingly, the guaranteed party may institute a legal proceeding
directly against the guarantor to enforce its rights under the trust guarantee
without instituting a legal proceeding against any other person or entity.
INFORMATION CONCERNING THE TRUST GUARANTEE TRUSTEE
Prior to the occurrence of a default with respect to a trust guarantee and
after the curing or waiving of all events of default with respect to that trust
guarantee, the trust guarantee trustee undertakes to perform only those duties
as are specifically set forth in that trust guarantee. In case an event of
default has occurred and has not been cured or waived, the guarantee trustee
will exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to these provisions, the trust
guarantee trustee is under no obligation to exercise any of the powers vested in
it by a trust guarantee at the request of any holder of trust preferred
securities, unless offered reasonable indemnity against the costs, expenses and
liabilities which might be incurred through the exercise of those powers.
We and our affiliates may, from time to time, maintain a banking
relationship with the trust guarantee trustee.
GOVERNING LAW
The trust guarantees will be governed by, and construed in accordance with,
the laws of the State of New York.
26
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES,
THE SUBORDINATED DEBT SECURITIES AND THE GUARANTEES
As long as we make payments of interest and other payments when due on the
subordinated debt securities, those payments will be sufficient to cover
distributions and other payments due on the trust preferred securities,
primarily because:
- the aggregate principal amount of the subordinated debt securities will
be equal to the sum of the aggregate stated liquidation preference of the
trust securities;
- the interest rate and interest and other payment dates of the
subordinated debt securities will match the distribution rate and
distribution and other payment dates for the trust preferred securities;
- we will pay any and all costs, expenses and liabilities of the trusts,
except the trusts' obligations to holders of its trust preferred
securities under the terms of such trust preferred securities; and
- the declaration of each trust prohibits the trust from engaging in any
activity that is not consistent with the limited purposes of the trust.
We irrevocably guarantee payments of distributions and other amounts due on
the trust preferred securities of a trust, to the extent the trust has funds
available for the payment of such distributions as described in "Description of
Trust Guarantees" in this prospectus. Taken together, our obligations under the
subordinated debt securities, the subordinated indenture, the declarations of
the trusts and the trust guarantees provide a full, irrevocable and
unconditional guarantee of payments of distributions and other amounts due on
the trust preferred securities. No single document standing alone or operating
in conjunction with fewer than all of the other documents constitutes such a
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of each of
the trust's obligations under its trust preferred securities. If we do not make
payments on the subordinated debt securities, the trusts will not pay
distributions or other amounts due on the trust preferred securities. The trust
guarantees do not cover payment of distributions when the applicable trust does
not have sufficient funds to pay the distributions. In this event, the remedies
of a holder of the trust preferred securities of the trust are described in this
prospectus under "Description of the Trust Guarantees -- Events of Default." Our
obligations under the trust guarantees are unsecured and are subordinate and
junior in right of payment to all of our other liabilities.
Notwithstanding anything to the contrary in the subordinated indenture and
to the extent set forth in the subordinated indenture, we have the right to
set-off any payment we are otherwise required to make under the subordinated
indenture with and to the extent we have made, or are concurrently on the date
of such payment making, a payment under a trust guarantee.
A holder of trust preferred securities of a trust may institute a legal
proceeding directly against us to enforce its rights under the trust guarantee
without first instituting a legal proceeding against the trust guarantee
trustee, the trust or any other person or entity.
The trust preferred securities of a trust evidence a beneficial interest in
the trust. The trusts exist for the sole purpose of issuing the trust securities
and investing the proceeds in subordinated debt securities. A principal
difference between the rights of a holder of trust preferred securities and a
holder of subordinated debt securities is that a holder of subordinated debt
securities is entitled to receive from us the principal amount of and interest
accrued on subordinated debt securities held, while a holder of trust preferred
securities is entitled to receive distributions from a trust, or from us under
the trust guarantee, if and to the extent the trust has funds available for the
payment of such distributions.
Upon any voluntary or involuntary termination, winding-up or liquidation of
a trust involving the liquidation of the subordinated debt securities, the
holders of the trust preferred securities of the trust will be entitled to
receive, out of assets held by the trust and after satisfaction of liabilities
to creditors of the trust as provided by applicable law, the liquidation
distribution in cash. Upon any voluntary or involuntary liquidation or
bankruptcy of us, the property trustees of a trust, as holder of the
subordinated debt
27
securities of the trust, would be a subordinated creditor of us, subordinated in
right of payment to all of our senior debt, but entitled to receive payment in
full of principal and interest, before any of our stockholders receive payments
or distributions. Since we are the guarantor under the trust guarantees and we
have agreed to pay for all costs, expenses and liabilities of the trusts other
than the trusts' obligations to the holders of the trust preferred securities,
the positions of a holder of trust preferred securities and a holder of
subordinated debt securities relative to other creditors and to our shareholders
in the event of our liquidation or bankruptcy would be substantially the same.
A default or event of default under any of our senior debt will not
constitute a default or event of default under the subordinated indenture.
However, in the event of payment defaults under, or acceleration of, our senior
debt, the subordination provisions of the subordinated indenture provide that no
payments may be made on the subordinated debt securities until our senior debt
has been paid in full or any payment default under our senior debt has been
cured or waived. Our failure to make required payments on a series of
subordinated debt securities would constitute an event of default under the
subordinated indenture.
28
PLAN OF DISTRIBUTION
We may sell our securities through agents, underwriters or dealers, or
directly to purchasers.
We may designate agents to solicit offers to purchase our securities.
- We will name any agent involved in offering or selling our securities,
and any commissions that we will pay to the agent, in our prospectus
supplement.
- Unless we indicate otherwise in our prospectus supplement, our agents
will act on a best efforts basis for the period of their appointment.
- Our agents may be deemed to be underwriters under the Securities Act of
1933 of any of our securities that they offer or sell.
We may use one or more underwriters in the offer or sale of our securities.
- If we use an underwriter, we will execute an underwriting agreement with
the underwriter(s) at the time that we reach an agreement for the sale of
our securities.
- We will include the names of the managing underwriter(s), as well as any
other underwriters, and the terms of the transaction, including the
compensation the underwriters and dealers will receive, in our prospectus
supplement.
- The underwriters will use our prospectus supplement to sell our
securities.
We may use a dealer to sell our securities.
- If we use a dealer, we, as principal, will sell our securities to the
dealer.
- The dealer will then sell our securities to the public at varying prices
that the dealer will determine at the time it sells our securities.
- We will include the name of the dealer and the terms of our transactions
with the dealer in our prospectus supplement.
We may directly solicit offers to purchase our securities, and we may
directly sell our securities to institutional or other investors. We will
describe the terms of our direct sales in our prospectus supplement.
We may indemnify agents, underwriters, and dealers against certain
liabilities, including liabilities under the Securities Act of 1933. Our agents,
underwriters, and dealers, or their affiliates, may be customers of, engage in
transactions with or perform services for us, in the ordinary course of
business.
We may authorize our agents and underwriters to solicit offers by certain
institutions to purchase our securities at the public offering price under
delayed delivery contracts.
- If we use delayed delivery contracts, we will disclose that we are using
them in the prospectus supplement and will tell you when we will demand
payment and delivery of the securities under the delayed delivery
contracts.
- These delayed delivery contracts will be subject only to the conditions
that we set forth in the prospectus supplement.
- We will indicate in our prospectus supplement the commission that
underwriters and agents soliciting purchases of our securities under
delayed delivery contracts will be entitled to receive.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be customers of, El Paso in the ordinary course of
business.
Other than common stock, all securities offered will be a new issue of
securities with no established trading market. Any underwriter to whom
securities are sold by us or any El Paso Trust for public offering
29
and sale may make a market in such securities, but such underwriters will not be
obligated to do so and may discontinue any market making at any time without
notice. The securities may or may not be listed on a national securities
exchange or a foreign securities exchange, except for the common stock which is
listed and traded on the NYSE and PSE. Any common stock sold by this prospectus
will be listed for trading on the NYSE, subject to official notice of issuance.
We cannot give you any assurance as to the liquidity of or the trading markets
for any securities.
LEGAL MATTERS
The validity of the common stock, preferred stock, senior debt securities,
subordinated debt securities and trust guarantees will be passed upon for El
Paso and the El Paso Trusts by Andrews & Kurth L.L.P., Houston, Texas. The
validity of the trust preferred securities under Delaware Law will be passed
upon for the El Paso Trusts by Potter Anderson & Corroon LLP. If the securities
are being distributed in an underwritten offering, the validity of the
securities will be passed upon for the underwriters by counsel identified in the
related prospectus supplement.
EXPERTS
Our consolidated financial statements as of December 31, 2000 and 1999, and
for each of the three years in the period ended December 31, 2000, incorporated
by reference in this prospectus from the 2000 Annual Report on Form 10-K, have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The audited supplemental combined financial statements incorporated by
reference in this prospectus from the Current Report on Form 8-K dated March 23,
2001, except as they relate to El Paso CGP Company (formerly The Coastal
Corporation), have been audited by PricewaterhouseCoopers LLP, independent
accountants, and, insofar as they relate to El Paso CGP Company (formerly The
Coastal Corporation), by other accountants, whose report thereon appears
therein. Such financial statements have been so included in reliance on the
reports of such independent accountants given on the authority of such firms as
experts in auditing and accounting.
The consolidated financial statements and related financial statement
schedule of El Paso CGP Company (formerly The Coastal Corporation) incorporated
in this prospectus by reference from El Paso's Current Report on Form 8-K dated
March 23, 2001, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
Information related to the estimated proved reserves attributable to
certain oil and gas properties of subsidiaries of El Paso CGP Company as of
December 31, 2000 and estimates of future net cash flows and present value of
the reserves have been incorporated by reference in El Paso's Current Report on
Form 8-K dated March 23, 2001, which is incorporated herein by reference, in
reliance on the reserve report, dated January 29, 2001, prepared by Huddleston &
Co., Inc., independent petroleum engineers.
30
17,647,059 SHARES
(EL PASO LOGO)
COMMON STOCK
PROSPECTUS SUPPLEMENT
JPMORGAN
December 20, 2001
You should rely on the information contained or incorporated by reference in
this prospectus supplement and the accompanying prospectus. We have not
authorized anyone to provide you with information different from that contained
in this prospectus supplement and the accompanying prospectus. We are offering
to sell, and seeking offers to buy common stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus
supplement and the accompanying prospectus is accurate only as of the date of
this prospectus supplement and the date of the prospectus, regardless of the
time of delivery of this prospectus supplement and the accompanying prospectus
or of any sale of our common stock.
No action is being taken in any jurisdiction outside the United States to permit
a public offering of the common stock or possession or distribution of this
prospectus supplement and the accompanying prospectus in that jurisdiction.
Persons who come into possession of this prospectus supplement and the
accompanying prospectus in jurisdictions outside the United States are required
to inform themselves about and to observe any restrictions as to this offering
and the distribution of this prospectus supplement and the accompanying
prospectus applicable to that jurisdiction.