<PAGE>
PURSUANT TO RULE 424(B)(2)
TO REGISTRATION STATEMENT 33-53495
AND 33-53495-01
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 6, 1994
17,000,000 PREFERRED SECURITIES
GTE DELAWARE
9 1/4% CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES, SERIES A ("MIPS"*)
(LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT THE ISSUER HAS FUNDS AS SET FORTH HEREIN BY
GTE CORPORATION [LOGO]
--------------
The 9 1/4% Cumulative Monthly Income Preferred Securities, Series A (the
"Series A Preferred Securities"), representing the limited partner interests
offered hereby are being issued by GTE Delaware, L.P., a limited partnership
formed under the laws of the State of Delaware ("GTE Delaware"). GTE
Corporation, a New York corporation ("GTE"), is the general partner in GTE
Delaware. GTE Delaware exists for the sole purpose of issuing its limited
partnership interests and investing the proceeds thereof in debt securities of
GTE. The limited partner interests represented by the Series A Preferred
Securities will have a preference with respect to cash distributions and
amounts payable on liquidation over the general partner's interest in GTE
Delaware.
Holders of the Series A Preferred Securities will be entitled to receive
cumulative cash distributions at an annual rate of 9 1/4% of the liquidation
preference of $25 per Series A Preferred Security, accruing from the date of
original issuance and payable monthly in arrears on the last day of each
calendar month of each year, commencing October 31, 1994 ("dividends"). The
payment of dividends, out of moneys held by GTE Delaware, and payments on
liquidation of GTE Delaware or the redemption of Series A Preferred
Securities, as set forth below, are guaranteed by GTE to the extent described
herein and in the accompanying Prospectus (the "Guarantee"). See "Description
of the Guarantee" in the accompanying Prospectus. If GTE fails to make
interest payments on its debt securities purchased by GTE Delaware, GTE
Delaware will have insufficient funds to pay dividends on the Series A
Preferred Securities. The Guarantee does not cover payment of dividends when
GTE Delaware does not have sufficient funds to pay such dividends. In such
event, the remedy of a holder of Series A Preferred Securities is to enforce
the rights of GTE Delaware under the debt securities purchased by GTE Delaware
from GTE.
The Series A Preferred Securities are redeemable at the option of GTE
Delaware, in whole or in part, from time to time, on or after October 17,
1999, at $25 per Series A Preferred Security plus accrued and unpaid dividends
thereon to the date fixed for redemption (the "Redemption Price"). See
"Description of the Series A Preferred Securities--Optional Redemption".
In addition, upon the occurrence of certain special events arising from a
change in law or a change in legal interpretation, the Series A Preferred
Securities are redeemable in whole at the Redemption Price at the option of
GTE, in its capacity as the general partner of GTE Delaware (the "General
Partner"), or the General Partner may dissolve GTE Delaware and cause to be
distributed to the holders of the Series A Preferred Securities, on a pro rata
basis, 9 1/4% Junior Subordinated Deferrable Interest Debentures, Series A,
Due 2024 of GTE (the "Series A Junior Subordinated Debentures") in lieu of any
cash distribution. If the Series A Junior Subordinated Debentures are
distributed to the holders of the Series A Preferred Securities, GTE will use
its best efforts to have the Series A Junior Subordinated Debentures listed on
the New York Stock Exchange or on such other exchange as the Series A
Preferred Securities are then listed. The obligations of GTE under the Series
A Junior Subordinated Debentures are subordinate and junior in right of
payment to Senior Indebtedness (as defined in the accompanying Prospectus) of
GTE. At June 30, 1994, Senior Indebtedness of GTE aggregated approximately
$6.2 billion. Senior Indebtedness includes only indebtedness of GTE on an
unconsolidated basis. See "Description of the Series A Preferred Securities--
Special Event Redemption or Distribution" and "Description of the Series A
Junior Subordinated Debentures".
In the event of the dissolution of GTE Delaware, the holders of the Series A
Preferred Securities will be entitled to receive for each Series A Preferred
Security a liquidation preference of $25 plus accrued and unpaid dividends
thereon to the date of payment, subject to certain limitations, unless, in
connection with such dissolution, Series A Junior Subordinated Debentures are
distributed to the holders of the Series A Preferred Securities. See
"Description of the Series A Preferred Securities--Liquidation Distribution
Upon Dissolution".
--------------
SEE "INVESTMENT CONSIDERATIONS" FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN THE SERIES A PREFERRED SECURITIES, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS ON THE SERIES A PREFERRED
SECURITIES AND SERIES A JUNIOR SUBORDINATED DEBENTURES MAY BE DEFERRED AND THE
RELATED FEDERAL INCOME TAX CONSEQUENCES.
--------------
The Series A Preferred Securities have been approved for listing on the New
York Stock Exchange, subject to official notice of issuance.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE COMMISSION(1) GTE DELAWARE(2)(3)
-------------- ------------- ------------------
<S> <C> <C> <C>
Per Series A Preferred Security. $25.00 (2) $25.00
Total(4)........................ $425,000,000 (2) $425,000,000
</TABLE>
- -------
(1) GTE Delaware and GTE have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities
Act of 1933, as amended. See "Underwriting".
(2) In view of the fact that the proceeds of the sale of the Series A
Preferred Securities will ultimately be invested in Series A Junior
Subordinated Debentures, the Underwriting Agreement provides that GTE will
pay to the Underwriters, as compensation ("Underwriters' Compensation")
for their arranging the investment therein of such proceeds, $.7875 per
Series A Preferred Security (or $13,387,500 in the aggregate); provided,
that such compensation will be $.50 per Series A Preferred Security sold
to certain institutions. Therefore, to the extent that Series A Preferred
Securities are sold to such institutions, the actual amount of
Underwriters' Compensation will be less than the amount specified in the
preceding sentence. See "Underwriting".
(3) Expenses of the offering which are payable by GTE are estimated to be
$552,500.
(4) GTE Delaware has granted to the Underwriters a 30-day option to purchase,
on the same terms set forth above, up to 2,550,000 additional Series A
Preferred Securities at the Initial Public Offering Price (with an
additional Underwriting Commission) solely to cover over-allotments, if
any. If the option is exercised in full, the total Initial Public Offering
Price, Underwriting Commission (paid by GTE) and Proceeds to GTE Delaware
will be $488,750,000, $15,395,625 and $488,750,000, respectively. See
"Underwriting".
--------------
The Series A Preferred Securities offered hereby are offered severally by
the Underwriters, as specified herein, and subject to receipt and acceptance
by them and subject to their right to reject any order in whole or in part. It
is expected that delivery of the Series A Preferred Securities will be made
only in book-entry form through the facilities of The Depository Trust Company
on or about October 17, 1994.
- -------
* An application has been filed by Goldman, Sachs & Co. with the United
States Patent and Trademark Office for the registration of the MIPS
servicemark.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
CS FIRST BOSTON
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
KIDDER, PEABODY & CO. INCORPORATED
LEHMAN BROTHERS
MORGAN STANLEY & CO. INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON BROTHERS INC
SMITH BARNEY INC.
--------------
The date of this Prospectus Supplement is October 6, 1994.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
----------------
S-2
<PAGE>
GTE DELAWARE
GTE Delaware is a limited partnership which was formed under the Delaware
Revised Uniform Limited Partnership Act (the "Partnership Act") by filing a
certificate of limited partnership with the Delaware Secretary of State on May
3, 1994. The initial partners in GTE Delaware are GTE, as general partner, and
GTE Finance Corporation, a Delaware corporation and a wholly-owned subsidiary
of GTE ("GTE Finance"), as limited partner. Upon the issuance of the Series A
Preferred Securities, which securities represent limited partner interests in
GTE Delaware, GTE Finance will remain as a limited partner, but will have no
interest in the profits and dividends or in the assets of GTE Delaware. The
General Partner will agree to contribute capital to the extent required to
maintain its capital at an amount equal to at least 3% of the total capital
contributions to GTE Delaware. GTE and GTE Finance entered into a limited
partnership agreement dated as of May 3, 1994. Such limited partnership
agreement will be amended and restated in its entirety (as so amended and
restated, the "Limited Partnership Agreement") substantially in the form filed
as an exhibit to the Registration Statement of which this Prospectus
Supplement and the accompanying Prospectus form a part.
GTE Delaware is managed by the General Partner and exists for the sole
purpose of issuing its limited partnership interests and investing the
proceeds thereof in junior subordinated debentures of GTE ("Junior
Subordinated Debentures"). The rights of the holders of the Series A Preferred
Securities, including economic rights, rights to information and voting
rights, are set forth in the Limited Partnership Agreement and the Partnership
Act. See "Description of the Series A Preferred Securities".
GTE CORPORATION
GTE is the fourth-largest publicly-held telecommunications company in the
world, the largest U.S.-based local telephone company and the second-largest
provider of cellular-mobile telephone services in the United States in terms
of population in the areas served. As of June 30, 1994, through Telephone
Operations, GTE provided local telephone services to approximately 17.1
million customer access lines in 32 states within the United States and
approximately 5.2 million customer access lines in British Columbia and
Quebec, Canada, the Dominican Republic and Venezuela. Through
Telecommunications Products and Services, GTE provides cellular-mobile
communications, command, control and communication systems, information
marketing and networking services, satellite services and air-to-ground
communications, and publishes yellow pages telephone directories. As of June
30, 1994, GTE's cellular operations served a potential subscriber population
of approximately 52.9 million "POPs" in the United States.
S-3
<PAGE>
INVESTMENT CONSIDERATIONS
Prospective purchasers of Series A Preferred Securities should carefully
review the information contained elsewhere in this Prospectus Supplement and
in the accompanying Prospectus and should particularly consider the following
matters:
SUBORDINATION OF GUARANTEE AND SERIES A JUNIOR SUBORDINATED DEBENTURES.
GTE's obligations under the Guarantee are subordinate and junior in right of
payment to all other liabilities of GTE. The obligations of GTE under the
Series A Junior Subordinated Debentures described under "Description of the
Series A Junior Subordinated Debentures" are subordinate and junior in right
of payment to Senior Indebtedness of GTE. At June 30, 1994, Senior
Indebtedness of GTE aggregated approximately $6.2 billion. Senior Indebtedness
includes only indebtedness of GTE on an unconsolidated basis. There are no
terms in the Series A Preferred Securities, the Series A Junior Subordinated
Debentures or the Guarantee that limit GTE's ability to incur additional
indebtedness, including indebtedness that ranks senior to the Series A Junior
Subordinated Debentures and the Guarantee. See "Description of the Guarantee--
Status of the Guarantee" and "Description of the Junior Subordinated
Debentures--Subordination" in the accompanying Prospectus.
OPTION TO EXTEND INTEREST PAYMENT PERIOD. GTE has the right under the
Indenture to extend the interest payment period from time to time on the
Series A Junior Subordinated Debentures to a period not exceeding 60
consecutive months, and, as a consequence, monthly dividends on the Series A
Preferred Securities would be deferred (but would continue to accrue with
interest thereon) by GTE Delaware during any such extended interest payment
period. In the event that GTE exercises this right, GTE may not declare or pay
dividends on, or redeem, purchase or acquire, any of its capital stock. Prior
to the termination of any such extension period, GTE may further extend the
interest payment period, provided that such extension period together with all
such previous and further extensions thereof may not exceed 60 consecutive
months. Upon the termination of any extension period and the payment of all
amounts then due, GTE may select a new extension period, subject to the above
requirements. GTE Delaware and GTE believe that the extension of a payment
period on the Series A Junior Subordinated Debentures is unlikely. See
"Description of the Series A Preferred Securities--Dividends" and "Description
of the Series A Junior Subordinated Debentures--Option to Extend Interest
Payment Period".
Should an extended interest payment period occur, GTE Delaware will continue
to accrue income for United States federal income tax purposes which will be
allocated, but not distributed, to holders of record of Series A Preferred
Securities. As a result, such a holder will include such interest in gross
income for United States federal income tax purposes in advance of the receipt
of cash, and will not receive the cash from GTE Delaware related to such
income if such a holder disposes of his or her Series A Preferred Securities
prior to the record date for payment of dividends. See "United States
Taxation--Potential Extension of Interest Payment Period".
SPECIAL EVENT REDEMPTION OR DISTRIBUTION. Upon the occurrence of a Special
Event (as defined herein), the General Partner will elect to either (i) redeem
the Series A Preferred Securities in whole or (ii) dissolve GTE Delaware and
cause Series A Junior Subordinated Debentures to be distributed to the holders
of the Series A Preferred Securities in connection with the liquidation of GTE
Delaware. The Series A Junior Subordinated Debentures will initially be issued
at face value as a Global Security (as defined herein) and will be limited in
aggregate principal amount to approximately $438 million (assuming the
Underwriters' over-allotment option is not exercised), such amount being the
sum of the aggregate stated liquidation preference of the Series A Preferred
Securities and the General Partnership Payment (as defined herein). In the
case of a Tax Event (as defined herein), the General Partner may also elect to
cause the Series A Preferred Securities to remain outstanding. See
"Description of the Series A Preferred Securities--Special Event Redemption or
Distribution" and "Description of the Series A Junior Subordinated
Debentures--General".
S-4
<PAGE>
Under current United States federal income tax law, such a distribution
would not be a taxable event to holders of the Series A Preferred Securities.
Under a change in law, a change in legal interpretation or the other
circumstances giving rise to a Special Event, however, the dissolution could
be a taxable event to holders of the Series A Preferred Securities. In the
judgment of special tax counsel to GTE and GTE Delaware, the series of events
which would result in the recognition of taxable gain by holders of the Series
A Preferred Securities, by reason of a dissolution of GTE Delaware in response
to a Special Event, is unlikely to occur. There can be no assurance in this
regard, however. See "United States Taxation--Receipt of Series A Junior
Subordinated Debentures Upon Liquidation of GTE Delaware".
S-5
<PAGE>
SUMMARY FINANCIAL AND OPERATING INFORMATION OF GTE
The selected data presented below under the captions "Income Statement Data"
and "Operating and Other Data" for each of the years in the five-year period
ended December 31, 1993 and "Balance Sheet Data" as of the end of each of such
years has been derived from the books, records and the consolidated financial
statements of GTE, which have been audited by Arthur Andersen & Co.,
independent certified public accountants. The selected data presented below as
of and for each of the six month periods ended June 30, 1994 and 1993 has been
derived from the books, records and the consolidated financial statements of
GTE, which have not been audited. The consolidated financial statements as of
December 31, 1993 and 1992, and for each of the years in the three-year period
ended December 31, 1993, and the independent auditors' report thereon, and the
consolidated financial statements as of and for each of the six month periods
ended June 30, 1994 and 1993, have been incorporated by reference herein. See
"Incorporation of Certain Documents by Reference" in the accompanying
Prospectus. This financial information should be read in conjunction with such
consolidated financial statements and the notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
YEARS ENDED DECEMBER 31, (UNAUDITED)
------------------------------------------------ ----------------------
1989 1990 1991 1992 1993 1993 1994
-------- -------- -------- -------- -------- ----------------------
(IN MILLIONS, EXCEPT PER SHARE DATA AND CELLULAR SUBSCRIBERS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues and Sales...... $ 18,251 $ 19,157 $ 19,621 $ 19,984 $ 19,748 $ 9,742 $ 9,701
Operating Income(a)..... 3,577 3,787 3,742 4,216 2,565 2,139 2,328
Net Income (Loss)(a):
Continuing Operations.. 1,503 1,579 1,492 1,761 972 889 1,093
Consolidated........... 1,611 1,671 1,543 (780) 882 889 1,093
Per Common Share:
Net Income (Loss)(a):
Continuing Operations 1.75 1.82 1.69 1.95 1.03 .94 1.14
Consolidated......... 1.87 1.93 1.75 (.86) .93 .94 1.14
Common Dividends De-
clared................ 1.40 1.52 1.64 1.76 1.85 .91 .94
Consolidated Ratio of
Earnings to Fixed
Charges (Unaudited)(b). 2.52 2.35 2.22 2.66 2.07 2.93 3.90
Consolidated Ratio of
Earnings to Combined
Fixed Charges and
Preferred Stock
Dividends
(Unaudited)(b)......... 2.42 2.28 2.17 2.61 2.04 2.88 3.85
OPERATING AND OTHER DATA:
Telephone Operations:
Revenues and Sales..... $ 15,072 $ 15,393 $ 15,652 $ 15,862 $ 15,829 $ 7,836 $ 7,849
Operating Income(c).... 3,528 3,771 3,807 4,034 2,694 1,992 2,093
Access Minutes of Use.. 39,994 44,533 47,979 51,976 55,616 27,115 28,969
Percentage Increase(d) 12.1% 11.3% 7.7% 8.3% 7.2% 7.5% 9.8%
Network Access Lines:
U.S.(e).............. 15.2 15.8 16.2 16.8 17.1 17.2 17.1
Worldwide(e)......... 17.6 18.3 20.5 21.4 22.1 21.9 22.3
U.S. Cellular-Mobile
Operations (Unaudited):
Service Revenues....... $ 260 $ 478 $ 675 $ 853 $ 1,082 $ 501 $ 711
Operating Income....... 4 9 10 62 134 74 130
Operating Cash Flow
(Operating Income
Before Depreciation
and Amortization)..... 43 107 183 266 356 178 258
Adjusted "POPs"(f)..... 39.2 51.7 52.2 53.1 53.0 53.2 52.9
Subscribers (In thou-
sands)................ 282 594 811 1,090 1,585 1,254 1,878
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
AS OF DECEMBER 31, (UNAUDITED)
------------------------------------------------ ----------------------
1989 1990 1991 1992 1993 1993 1994
-------- -------- -------- -------- -------- ----------------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Property, Plant and
Equipment-Net.......... $ 27,666 $ 28,688 $ 29,323 $ 29,820 $ 28,720 $ 29,879 $ 28,682
Total Assets............ 36,921 40,178 42,437 42,144 41,575 41,623 41,340
Short-Term Obligations,
including Current Matu-
rities................. 1,227 3,013 2,291 2,692 1,644 2,724 2,083
Long-Term Debt and
Redeemable Preferred
Stock.................. 13,137 14,130 16,252 14,356 13,175 13,370 12,454
Common Shareholders'
Equity................. 9,516 10,264 10,854 9,964 9,482 10,135 9,794
</TABLE>
- --------
(a) Operating income in 1993 was reduced by a one-time $1.8 billion pre-tax
restructuring charge primarily for the implementation of a re-engineering
plan at Telephone Operations and the reduction in the carrying value of
satellite communication and certain other assets to estimated net
realizable value. Operating income in 1993 was also reduced by a $74
million pre-tax charge
S-6
<PAGE>
for the cost of voluntary separation programs at Telephone Operations.
Consolidated net income in 1993 also included an after-tax extraordinary
charge of $90 million for the early retirement of high-coupon debt as well
as a $91 million after-tax gain on the sales of certain non-strategic
telephone properties. These special items reduced consolidated net income
by $1.2 billion, or $1.27 per share.
The consolidated net loss in 1992 included a non-cash, after-tax charge of
$2.4 billion, or $2.70 per share, for the cumulative effect of accounting
changes for postretirement health care and life insurance benefits and
income taxes; and charges totaling $100 million, or $.11 per share,
associated with the sale of the Electrical Products Group, which was
accounted for as a discontinued operation.
Operating income in 1991 was reduced by pre-tax costs of $342 million
incurred in connection with the merger and integration of GTE and Contel
Corporation. These costs, net of a gain on the transfer of certain cellular
properties, reduced 1991 net income by $204 million, or $.23 per share.
(b) For purposes of computing the consolidated ratios, earnings consist of
income from continuing operations before income taxes and fixed charges.
Fixed charges consist of interest expense, preferred stock dividends of
subsidiaries, the additional income requirement to cover preferred
dividends of subsidiaries and the portion of rent expense representing
interest. Amounts applicable to entities that are at least 50%-owned have
been added to both earnings and fixed charges, and amounts applicable to
minority interests have been deducted from both earnings and fixed
charges. Excluding from 1993 the effect of the one-time restructuring
charge, the cost of voluntary separation programs at Telephone Operations
and the gain on the sale of non-strategic telephone properties (see note
(a)), the consolidated ratio of earnings to fixed charges would have been
3.31 and the consolidated ratio of earnings to combined fixed charges and
preferred stock dividends would have been 3.26.
(c) Operating income of Telephone Operations in 1993 was reduced by a one-time
$1.4 billion pre-tax restructuring charge primarily for the implementation
of a re-engineering plan and a $74 million pre-tax charge for the cost of
voluntary separation programs.
(d) Percentage increases as of December 31, 1993 and June 30, 1993 and 1994
exclude the impact of non-strategic properties sold.
(e) Excluding non-strategic properties sold in 1993 and 1994, access lines as
of June 30, 1993 and December 31, 1993 would have been 16.4 million and
16.6 million in the United States, respectively, and 21.1 million and 21.6
million worldwide, respectively. Worldwide access lines include 2.0
million, 1.8 million and 1.6 million lines served by Compania Anonima
Nacional Telefonos de Venezuela ("CANTV") in Venezuela in 1993-1991,
respectively. GTE acquired operating control of CANTV in 1991.
(f) Represents total United States population served times GTE's percentage
interest in the market.
S-7
<PAGE>
CAPITALIZATION OF GTE
The following table sets forth the consolidated short-term obligations and
capitalization of GTE as of June 30, 1994, and as adjusted to reflect the
application of the estimated net proceeds from the sale of the Series A
Preferred Securities (assuming the Underwriters' over-allotment option is not
exercised). See "Use of Proceeds".
<TABLE>
<CAPTION>
JUNE 30, 1994
--------------------
ACTUAL AS ADJUSTED
------- -----------
(IN MILLIONS)
<S> <C> <C>
Short-term obligations, including current maturities...... $ 2,083 $ 1,672
======= =======
Long-term debt(a)......................................... $12,332 $12,332
------- -------
Minority interests in equity of subsidiaries.............. 1,095 1,520
------- -------
Preferred Stock, subject to mandatory redemption.......... 122 122
------- -------
Shareholders' equity:
Preferred stock......................................... 11 11
Common stock............................................ 48 48
Amounts paid in, in excess of par value................. 7,409 7,409
Reinvested earnings..................................... 2,971 2,971
Guaranteed ESOP obligations............................. (634) (634)
------- -------
Total shareholders' equity............................ 9,805 9,805
------- -------
Total capitalization (excluding short-term
obligations)......................................... $23,354 $23,779
======= =======
</TABLE>
- --------
(a) Senior Indebtedness of GTE, for purposes of the subordination provisions
of the Series A Junior Subordinated Debentures, includes only indebtedness
of GTE on an unconsolidated basis. As of June 30, 1994, such Senior
Indebtedness aggregated approximately $6.2 billion.
USE OF PROCEEDS
The proceeds from the sale of the Series A Preferred Securities will be
invested in the Series A Junior Subordinated Debentures issued pursuant to the
Indenture described herein, and ultimately will be used by GTE to reduce
external short-term obligations, including current maturities (at August 31,
1994, totaling approximately $225 million, at an average interest cost of
approximately 5.09%), and for general corporate purposes.
S-8
<PAGE>
DESCRIPTION OF THE SERIES A PREFERRED SECURITIES
GENERAL
All of the partnership interests in GTE Delaware, other than the Series A
Preferred Securities offered hereby, are owned directly or indirectly by GTE.
The Limited Partnership Agreement authorizes and creates the Series A
Preferred Securities, which represent limited partner interests in GTE
Delaware (the "Preferred Securities"). Preferred Securities may be issued from
time to time in one or more series as described in the accompanying
Prospectus. The limited partner interests represented by the Series A
Preferred Securities will have a preference with respect to dividends and
amounts payable on liquidation over the General Partner's interest in GTE
Delaware. The Limited Partnership Agreement does not permit the issuance of
any Preferred Securities ranking, as to participation in profits and dividends
and in the assets of GTE Delaware, senior or junior to the Series A Preferred
Securities or the incurrence of any indebtedness by GTE Delaware. The summary
of certain terms and provisions of the Series A Preferred Securities set forth
below does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the Limited Partnership Agreement and the
Partnership Act.
DIVIDENDS
The dividends payable on each Series A Preferred Security will be fixed at a
rate per annum of 9 1/4% of the stated liquidation preference of $25 per
Preferred Security. Dividends in arrears for more than one month will bear
interest thereon at the rate per annum of 9 1/4% thereof. The term "dividends"
as used herein includes any such interest payable unless otherwise stated. The
amount of dividends payable for any period will be computed on the basis of a
360-day year of twelve 30-day months.
Dividends on the Series A Preferred Securities will be cumulative, will
accrue from the date of initial issuance and will be payable monthly in
arrears, on the last day of each calendar month of each year, commencing
October 31, 1994, when, as and if available and determined to be so payable by
GTE, as the General Partner, except as otherwise described below. GTE has the
right under the Indenture to extend the interest payment period from time to
time on the Series A Junior Subordinated Debentures to a period not exceeding
60 consecutive months, and, as a consequence, monthly dividends on the Series
A Preferred Securities would be deferred (but would continue to accrue with
interest) by GTE Delaware during any such extended interest payment period. In
the event that GTE exercises this right, GTE may not declare or pay dividends
on, or redeem, purchase or acquire, any of its capital stock. Prior to the
termination of any such extension period, GTE may further extend the interest
payment period, provided that such extension period together with all such
previous and further extensions thereof may not exceed 60 consecutive months.
Upon the termination of any extension period and the payment of all amounts
then due, GTE may select a new extension period, subject to the above
requirements. See "Description of the Series A Junior Subordinated
Debentures--Interest" and "--Option to Extend Interest Payment Period".
Dividends on the Series A Preferred Securities must be paid on the dates
payable to the extent that GTE Delaware has (i) funds legally available for
the payment of such dividends and (ii) cash on hand sufficient to permit such
payments. It is anticipated that GTE Delaware's earnings available for
distribution to the holders of the Series A Preferred Securities will be
limited to payments under the Series A Junior Subordinated Debentures in which
GTE Delaware will invest the proceeds from the issuance and sale of the Series
A Preferred Securities and the General Partner's capital contribution. See
"Description of the Series A Junior Subordinated Debentures". The payment of
dividends, out of moneys held by GTE Delaware, are guaranteed by GTE as set
forth under "Description of the Guarantee" in the accompanying Prospectus.
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Dividends on the Series A Preferred Securities will be payable to the
holders thereof as they appear on the books and records of GTE Delaware on the
relevant record dates, which, as long as the Series A Preferred Securities
remain in book-entry-only form, will be one business day (as defined below)
prior to the relevant payment dates. Subject to any applicable laws and
regulations and the provisions of the Limited Partnership Agreement, each such
payment will be made as described under "Book-Entry-Only Issuance--The
Depository Trust Company" below. In the event the Series A Preferred
Securities shall not continue to remain in book-entry-only form, the General
Partner shall have the right to select relevant record dates which shall be
more than one Business Day prior to the relevant payment dates. In the event
that any date on which dividends are payable on the Series A Preferred
Securities is not a Business Day, then payment of the dividend payable on such
date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date. A "Business Day" shall
mean any day other than a day on which banking institutions in The City of New
York are authorized or required by law to close.
CERTAIN RESTRICTIONS ON GTE DELAWARE
If dividends have not been paid in full on the Series A Preferred
Securities, GTE Delaware shall not:
(i) pay, or set aside for payment, any dividends on any other series of
Preferred Securities, unless the amount of any dividends declared on any
other series of Preferred Securities is paid on such other series of
Preferred Securities and the Series A Preferred Securities on a pro rata
basis on the date such dividends are paid on such other series of Preferred
Securities, so that
(x) the aggregate amount of dividends paid on the Series A Preferred
Securities bears to the aggregate amount of dividends paid on such
other series of Preferred Securities the same ratio as
(y) the aggregate of all accrued and unpaid dividends in respect of
the Series A Preferred Securities bears to the aggregate of all accrued
and unpaid dividends in respect of such other series of Preferred
Securities; or
(ii) redeem, purchase or otherwise acquire any other Preferred
Securities;
until, in each case, such time as all accrued and unpaid dividends on the
Series A Preferred Securities shall have been paid in full for all dividend
periods terminating on or prior to, in the case of clause (i), such payment
and, in the case of clause (ii), the date of such redemption, purchase or
acquisition.
As of the date of this Prospectus Supplement, there are no series of
Preferred Securities outstanding.
OPTIONAL REDEMPTION
The Series A Preferred Securities are redeemable, at the option of GTE
Delaware, in whole or in part, from time to time, on or after October 17,
1999, upon not less than 30 nor more than 60 days' notice, at the Redemption
Price. In the event that fewer than all the outstanding Series A Preferred
Securities are to be so redeemed, the Series A Preferred Securities to be
redeemed will be selected as described under "Book-Entry-Only Issuance--The
Depository Trust Company" below. If a partial redemption would result in the
delisting of the Series A Preferred Securities, GTE Delaware may only redeem
the Series A Preferred Securities in whole.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If a Tax Event or an Investment Company Event (each, as defined below, and,
each, a "Special Event") shall occur and be continuing, the General Partner
shall elect to either (i) redeem the Series A Preferred Securities in whole
(and not in part), upon not less than 30 or more than 60 days' notice at
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the Redemption Price within 90 days following the occurrence of such Special
Event; provided, that, if at the time there is available to the General
Partner the opportunity to eliminate, within such 90 day period, the Special
Event by taking some ministerial action, such as filing a form or making an
election, or pursuing some other similar reasonable measure, which has no
adverse effect on GTE Delaware or GTE, the General Partner will pursue such
measure in lieu of redemption, or (ii) dissolve GTE Delaware and cause Series
A Junior Subordinated Debentures to be distributed to the holders of the
Series A Preferred Securities in liquidation of GTE Delaware, within 90 days
following the occurrence of such Special Event. In the case of a Tax Event,
the General Partner may also elect to cause the Series A Preferred Securities
to remain outstanding.
"Tax Event" means that the General Partner shall have obtained an opinion of
nationally recognized independent tax counsel experienced in such matters to
the effect that, as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein, (b) any amendment to or change in an interpretation or application of
such laws or regulations by any legislative body, court, governmental agency
or regulatory authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination on or after
such date) or (c) any interpretation or pronouncement that provides for a
position with respect to such laws or regulations that differs from the
generally accepted position on October 17, 1994, which amendment or change is
effective or such interpretation or pronouncement is announced on or after
October 17, 1994, there is more than an insubstantial risk that (i) GTE
Delaware is subject to federal income tax with respect to interest received on
the Series A Junior Subordinated Debentures, (ii) interest payable to GTE
Delaware on the Series A Junior Subordinated Debentures will not be deductible
for federal income tax purposes or (iii) GTE Delaware is subject to more than
a de minimis amount of other taxes, duties or other governmental charges.
"Investment Company Event" means the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law") to the effect that GTE Delaware is or
will be considered an "investment company" which is required to be registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), which
Change in 1940 Act Law becomes effective on or after October 17, 1994;
provided, that no Investment Company Event shall be deemed to have occurred if
the General Partner obtains a written opinion of nationally recognized
independent counsel experienced in practice under the 1940 Act to the effect
that the General Partner has successfully issued an additional or supplemental
irrevocable and unconditional guarantee (x) of accrued and unpaid dividends
(whether or not determined to be paid out of moneys legally available
therefor) on the Series A Preferred Securities and (y) of the full amount of
the Liquidation Distribution (as hereinafter defined) on the Series A
Preferred Securities upon a liquidation of GTE Delaware (regardless of the
amount of assets of GTE Delaware otherwise available for distribution in such
liquidation) to avoid such Change in 1940 Act Law so that in the opinion of
such counsel, notwithstanding such Change in 1940 Act Law, GTE Delaware is not
required to be registered as an "investment company" within the meaning of the
1940 Act.
After the date fixed for any distribution of Series A Junior Subordinated
Debentures, upon dissolution of GTE Delaware, (i) the Series A Preferred
Securities will no longer be deemed to be outstanding, (ii) The Depository
Trust Company (the "Depository" or "DTC") or its nominee, as the record holder
of the Series A Preferred Securities, will receive a registered global
certificate or certificates representing the Series A Junior Subordinated
Debentures to be delivered upon such distribution and (iii) any certificates
representing Series A Preferred Securities not held by DTC or its nominee will
be deemed to represent Series A Junior Subordinated Debentures having a
principal amount equal to the aggregate of the stated liquidation preference
of, and accrued and unpaid dividends on, such Series A Preferred Securities
until such certificates are presented to GTE or its agent for transfer or
reissuance.
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MANDATORY REDEMPTION
Upon the repayment of the Series A Junior Subordinated Debentures at
maturity, the proceeds from such repayment will be applied to redeem the
Series A Preferred Securities, in whole, upon not less than 30 nor more than
60 days' notice, at the Redemption Price.
REDEMPTION PROCEDURES
GTE Delaware may not redeem fewer than all the outstanding Series A
Preferred Securities unless all accrued and unpaid dividends have been paid on
all Series A Preferred Securities for all monthly dividend periods terminating
on or prior to the date of redemption.
If GTE Delaware gives a notice of redemption in respect of Series A
Preferred Securities (which notice will be irrevocable), then, by 12:00 noon,
New York time, on the redemption date, GTE Delaware will irrevocably deposit
with DTC funds sufficient to pay the applicable Redemption Price and will give
DTC irrevocable instructions and authority to pay the Redemption Price to the
holders of the Series A Preferred Securities. See "Book-Entry-Only Issuance--
The Depository Trust Company". If notice of redemption shall have been given
and funds deposited as required, then upon the date of such deposit, all
rights of holders of such Series A Preferred Securities so called for
redemption will cease, except the right of the holders of such Series A
Preferred Securities to receive the Redemption Price, but without interest on
such Redemption Price. In the event that any date fixed for redemption of
Series A Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day. In the event that payment of the Redemption Price in respect of Series A
Preferred Securities is improperly withheld or refused and not paid either by
GTE Delaware or by GTE pursuant to the Guarantee described under "Description
of the Guarantee" in the accompany Prospectus, dividends on such Series A
Preferred Securities will continue to accrue at the then applicable rate, from
the original redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), GTE or its subsidiaries may at any
time and from time to time purchase outstanding Series A Preferred Securities
by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution, winding-up or
termination of GTE Delaware, the holders of the Series A Preferred Securities
at the time will be entitled to receive out of the assets of GTE Delaware
available for distribution to partners after satisfaction of liabilities of
creditors as required by the Partnership Act, before any distribution of
assets is made to the General Partner, but together with the holders of every
other series of Preferred Securities outstanding, an amount equal to, in the
case of holders of Series A Preferred Securities, the aggregate of the stated
liquidation preference of $25 per Series A Preferred Security and accrued and
unpaid dividends thereon to the date of payment (the "Liquidation
Distribution"), unless, in connection with such dissolution, winding-up or
termination, Series A Junior Subordinated Debentures in an aggregate principal
amount equal to the Liquidation Distribution have been distributed on a pro
rata basis to the holders of the Series A Preferred Securities.
If, upon any such dissolution, the Liquidation Distribution can be paid only
in part because GTE Delaware has insufficient assets available to pay in full
the aggregate Liquidation Distribution and the aggregate maximum liquidation
distributions on any other series of Preferred Securities, then the amounts
payable directly by GTE Delaware on the Series A Preferred Securities and on
such other series of Preferred Securities shall be paid on a pro rata basis,
so that
(i) the aggregate amount paid in respect of the Liquidation Distribution
bears to the aggregate amount paid as liquidation distributions on the
other series of Preferred Securities the same ratio as
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(ii) the aggregate Liquidation Distribution bears to the aggregate
maximum liquidation distributions on the other series of Preferred
Securities.
Pursuant to the Limited Partnership Agreement, GTE Delaware shall be
dissolved and its affairs shall be wound up: (i) on December 31, 2093, the
expiration of the term of GTE Delaware, (ii) upon the bankruptcy of the
General Partner, (iii) upon the assignment by the General Partner of its
entire interest in GTE Delaware when the assignee is not admitted to GTE
Delaware as a general partner of GTE Delaware in accordance with the Limited
Partnership Agreement, or the filing of a certificate of dissolution or its
equivalent with respect to the General Partner, or the revocation of the
General Partner's charter and the expiration of 90 days after the date of
notice to the General Partner of revocation without a reinstatement of its
charter, or any other event occurs which causes the General Partner to cease
to be a general partner of GTE Delaware under the Partnership Act, unless the
business of GTE Delaware is continued in accordance with the Partnership Act,
(iv) in accordance with the provisions of the Series A Preferred Securities,
(v) upon the entry of a decree of a judicial dissolution or (vi) upon the
written consent of all partners of GTE Delaware.
MERGER, CONSOLIDATION OR AMALGAMATION OF GTE DELAWARE
GTE Delaware may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described below. GTE Delaware may, without the consent of the holders of the
Series A Preferred Securities, consolidate, amalgamate, merge with or into, or
be replaced by a limited partnership or a trust organized as such under the
laws of any state of the United States of America; provided, that (i) such
successor entity either (x) expressly assumes all of the obligations of GTE
Delaware under the Series A Preferred Securities or (y) substitutes for the
Series A Preferred Securities other securities having substantially the same
terms as the Series A Preferred Securities (the "Successor Securities") so
long as the Successor Securities rank, with respect to participation in the
profits and dividends or in the assets of the successor entity, at least as
high as the Series A Preferred Securities rank with respect to participation
in the profits and dividends or in the assets of GTE Delaware, (ii) GTE
expressly acknowledges such successor entity as the holder of the Series A
Junior Subordinated Debentures, (iii) the Series A Preferred Securities or any
Successor Securities are listed, or any Successor Securities will be listed
upon notification of issuance, on any national securities exchange or other
organization on which the Series A Preferred Securities are then listed, (iv)
such merger, consolidation, amalgamation or replacement does not cause the
Series A Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation or replacement does not adversely
affect the powers, preferences and other special rights of the holders of the
Series A Preferred Securities (including any Successor Securities) in any
material respect, (vi) such successor entity has a purpose substantially
identical to that of GTE Delaware and (vii) prior to such merger,
consolidation, amalgamation or replacement, GTE has received an opinion of
nationally recognized independent counsel to GTE Delaware experienced in such
matters to the effect that (x) such successor entity will be treated as a
partnership for federal income tax purposes, (y) following such merger,
consolidation, amalgamation or replacement, GTE and such successor entity will
be in compliance with the 1940 Act without registering thereunder as an
investment company and (z) such merger, consolidation, amalgamation or
replacement will not adversely affect the limited liability of the holders of
the Series A Preferred Securities.
VOTING RIGHTS
Except as provided below and under "Description of the Guarantee--Amendments
and Assignment" in the accompanying Prospectus and as otherwise required by
law and the Limited Partnership Agreement, the holders of the Series A
Preferred Securities will have no voting rights.
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If (i) GTE Delaware fails to pay dividends in full on the Series A Preferred
Securities for 18 consecutive monthly dividend periods; (ii) an Event of
Default (as defined in the Indenture) occurs and is continuing on the Series A
Junior Subordinated Debentures; or (iii) GTE is in default on any of its
payment or other obligations under the Guarantee (as described under
"Description of the Guarantee--Certain Covenants of GTE" in the accompanying
Prospectus), then the holders of the Series A Preferred Securities, together
with the holders of any other series of Preferred Securities having the right
to vote for the appointment of a special representative of GTE Delaware and
the limited partners (a "Special Representative") in such event, acting as a
single class, will be entitled by the majority vote of such holders to appoint
and authorize a Special Representative to enforce GTE Delaware's creditor
rights under the Series A Junior Subordinated Debentures, to enforce the
rights of the holders of the Series A Preferred Securities under the Guarantee
and to enforce the rights of the holders of the Series A Preferred Securities
to receive dividends on the Series A Preferred Securities. The Special
Representative shall not be admitted as a general partner in GTE Delaware or
otherwise be deemed to be a general partner in GTE Delaware and shall have no
liability for the debts, obligations or liabilities of GTE Delaware. For
purposes of determining whether GTE Delaware has failed to pay dividends in
full for 18 consecutive monthly dividend periods, dividends shall be deemed to
remain in arrears, notwithstanding any payments in respect thereof, until full
cumulative dividends have been or contemporaneously are paid with respect to
all monthly dividend periods terminating on or prior to the date of payment of
such full cumulative dividends. Not later than 30 days after such right to
appoint a Special Representative arises, the General Partner will convene a
meeting for the purpose of appointing a Special Representative. If the General
Partner fails to convene such meeting within such 30-day period, the holders
of 10% in liquidation preference of the outstanding Preferred Securities will
be entitled to convene such meeting. The provisions of the Limited Partnership
Agreement relating to the convening and conduct of the meetings of the
partners will apply with respect to any such meeting. Any Special
Representative so appointed shall cease to be a Special Representative of GTE
Delaware and the limited partners if GTE Delaware (or GTE pursuant to the
Guarantee) shall have paid in full all accrued and unpaid dividends on the
Preferred Securities or such default or breach, as the case may be, shall have
been cured, and GTE, in its capacity as the General Partner shall continue the
business of GTE Delaware without dissolution. Notwithstanding the appointment
of any such Special Representative, GTE shall continue as General Partner and
shall retain all rights under the Indenture, including the right to extend the
interest payment period from time to time to a period not exceeding 60
consecutive months as provided under "Description of the Series A Junior
Subordinated Debentures--Option to Extend Interest Payment Period".
If any proposed amendment to the Limited Partnership Agreement provides for,
or the General Partner otherwise proposes to effect, (i) any action which
would adversely affect the powers, preferences or special rights of the Series
A Preferred Securities, whether by way of amendment to the Limited Partnership
Agreement or otherwise (including, without limitation, the authorization or
issuance of any limited partner interests in GTE Delaware ranking, as to
participation in the profits and dividends or in the assets of GTE Delaware,
senior to the Series A Preferred Securities), or (ii) the dissolution,
winding-up or termination of GTE Delaware, other than (x) in connection with
the distribution of Series A Junior Subordinated Debentures upon the
occurrence of a Special Event or (y) as described under "Merger, Consolidation
or Amalgamation of GTE Delaware" above, then the holders of outstanding Series
A Preferred Securities will be entitled to vote on such amendment or proposal
of the General Partner (but not on any other amendment or proposal) as a class
with all other holders of series of Preferred Securities similarly affected,
and such amendment or proposal shall not be effective except with the approval
of the holders of 66 2/3% in liquidation preference of such outstanding
Preferred Securities having a right to vote on the matter; provided, however,
that no such approval shall be required if the dissolution, winding-up or
termination of GTE Delaware is proposed or initiated upon the initiation of
proceedings, or after proceedings have been initiated, for the dissolution,
winding-up, liquidation or termination of GTE.
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The rights attached to the Series A Preferred Securities will be deemed not
to be adversely affected by the creation or issue of, and no vote will be
required for the creation of, any further limited partner interests of GTE
Delaware ranking pari passu with the Series A Preferred Securities with regard
to participation in the profits and dividends or in the assets of GTE
Delaware. Holders of Series A Preferred Securities have no preemptive rights.
So long as any Series A Junior Subordinated Debentures are held by GTE
Delaware, the General Partner shall not (i) direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
executing any trust or power conferred on the Trustee with respect to such
series, (ii) waive any past default which is waivable under Section 6.06 of
the Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of all the Series A Junior Subordinated Debentures shall be due
and payable or (iv) consent to any amendment, modification or termination of
the Indenture, where such consent shall be required, without, in each case,
obtaining the prior approval of the holders of at least 66 2/3% in liquidation
preference of all series of Preferred Securities affected thereby, acting as a
single class; provided, however, that where a consent under the Indenture
would require the consent of each holder affected thereby, no such consent
shall be given by the General Partner without the prior consent of each holder
of all series of Preferred Securities affected thereby. The General Partner
shall not revoke any action previously authorized or approved by a vote of any
series of Preferred Securities. The General Partner shall notify all holders
of the Series A Preferred Securities of any notice of default received from
the Trustee with respect to the Series A Junior Subordinated Debentures.
Any required approval of holders of Series A Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the partners in GTE Delaware or pursuant
to written consent. GTE Delaware will cause a notice of any meeting at which
holders of Series A Preferred Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to be taken, to
be mailed to each holder of record of Series A Preferred Securities. Each such
notice will include a statement setting forth (i) the date of such meeting or
the date by which such action is to be taken, (ii) a description of any
resolution proposed for adoption at such meeting on which such holders are
entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents.
No vote or consent of the holders of Series A Preferred Securities will be
required for GTE Delaware to redeem and cancel Series A Preferred Securities
in accordance with the Limited Partnership Agreement.
Notwithstanding that holders of Series A Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Series A Preferred Securities and any other series of Preferred Securities
that are entitled to vote or consent with such Series A Preferred Securities
as a single class at such time that are owned by GTE or any entity owned more
than 50% by GTE, either directly or indirectly, shall not be entitled to vote
or consent and shall, for purposes of such vote or consent, be treated as if
they were not outstanding.
Holders of the Series A Preferred Securities will have no rights to remove
or replace the General Partner.
BOOK-ENTRY-ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
DTC will act as securities depository for the Series A Preferred Securities.
The Series A Preferred Securities will be issued only as fully-registered
securities registered in the name of Cede & Co. (DTC's nominee). One or more
fully-registered global Series A Preferred Security certificates will be
issued, representing in the aggregate the total number of Series A Preferred
Securities, and will be deposited with DTC.
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DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). DTC holds securities
that its participants ("Participants") deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations ("Direct Participants"). DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc.
(the "New York Stock Exchange"), the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants").
The rules applicable to DTC and its Participants are on file with the
Securities and Exchange Commission.
Purchases of Series A Preferred Securities within the DTC system must be
made by or through Direct Participants, which will receive a credit for the
Series A Preferred Securities on DTC's records. The ownership interest of each
actual purchaser of each Series A Preferred Security ("Beneficial Owner") is
in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the
Beneficial Owners purchased Series A Preferred Securities. Transfers of
ownership interests in the Series A Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Series A Preferred Securities,
except in the event that use of the book-entry system for the Series A
Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Series A
Preferred Securities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Series A Preferred Securities are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Series A Preferred Securities are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in such
series to be redeemed.
Although voting with respect to the Series A Preferred Securities is
limited, in those cases where a vote is required, neither DTC nor Cede & Co.
will itself consent or vote with respect to Series A Preferred Securities.
Under its usual procedures, DTC would mail an Omnibus Proxy to GTE Delaware as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Series A Preferred Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Dividend payments on the Series A Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective
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holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payments on such payment date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices and will be the responsibility of such Participant and not of DTC,
GTE Delaware or GTE, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of dividends to DTC is the
responsibility of GTE Delaware, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments
to the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as securities depository with
respect to the Series A Preferred Securities at any time by giving reasonable
notice to GTE Delaware. Under such circumstances, in the event that a
successor securities depository is not obtained, Series A Preferred Security
certificates are required to be printed and delivered. Additionally, GTE
Delaware (with the consent of GTE) may decide to discontinue use of the system
of book-entry transfers through DTC (or a successor depository). In that
event, certificates for the Series A Preferred Securities will be printed and
delivered. In each of the above circumstances, the General Partner will
appoint a paying agent with respect to the Series A Preferred Securities.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that GTE Delaware believes to be reliable, but
GTE Delaware takes no responsibility for the accuracy thereof.
REGISTRAR AND TRANSFER AGENT
The First National Bank of Boston will act as registrar and transfer agent
for the Series A Preferred Securities.
Registration of transfers of Series A Preferred Securities will be effected
without charge by or on behalf of GTE Delaware, but upon payment (with the
giving of such indemnity as GTE Delaware or GTE may require) in respect of any
tax or other government charges which may be imposed in relation to it.
GTE Delaware will not be required to register or cause to be registered the
transfer of Series A Preferred Securities after such Series A Preferred
Securities have been called for redemption.
MISCELLANEOUS
The Series A Preferred Securities have been approved for listing on the New
York Stock Exchange, subject to official notice of issuance.
The General Partner is authorized and directed to conduct its affairs and to
operate GTE Delaware in such a way that GTE Delaware will not be deemed to be
an "investment company" required to be registered under the 1940 Act or taxed
as a corporation for federal income tax purposes and so that the Series A
Junior Subordinated Debentures will be treated as indebtedness of GTE for
federal income tax purposes. In this connection, the General Partner is
authorized to take any action, not inconsistent with applicable law, the
certificate of limited partnership or the Limited Partnership Agreement, that
the General Partner determines in its discretion to be necessary or desirable
for such purposes, as long as such action does not adversely affect the
interests of the holders of the Series A Preferred Securities.
Holders of the Series A Preferred Securities have no preemptive rights.
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DESCRIPTION OF THE SERIES A JUNIOR SUBORDINATED DEBENTURES
Set forth below is a description of the specific terms of the Series A
Junior Subordinated Debentures in which GTE Delaware will invest with the
proceeds of the issuance and sale of (i) the Series A Preferred Securities and
(ii) the General Partner's capital contribution with respect to the Series A
Preferred Securities (the "General Partnership Payment"). This description
supplements the description of the general terms and provisions of the Junior
Subordinated Debentures set forth in the accompanying Prospectus under the
caption "Description of the Junior Subordinated Debentures". The following
description does not purport to be complete and is qualified in its entirety
by reference to the description in the accompanying Prospectus and the
Indenture, dated as of June 1, 1994, between GTE and The Bank of New York, as
Trustee, as supplemented by a First Supplemental Indenture, dated as of
October 6, 1994 (the Indenture, as so supplemented, is hereinafter referred to
as the "Indenture").
Under certain circumstances involving the dissolution of GTE Delaware
following the occurrence of a Special Event, Series A Junior Subordinated
Debentures may be distributed to the holders of the Series A Preferred
Securities in liquidation of GTE Delaware. See "Description of the Series A
Preferred Securities--Special Event Redemption or Distribution".
GENERAL
The Series A Junior Subordinated Debentures will be issued as a series of
Junior Subordinated Debentures under the Indenture. The Series A Junior
Subordinated Debentures will be limited in aggregate principal amount to
approximately $438 million (assuming the Underwriters' over-allotment option
is not exercised), such amount being the sum of the aggregate stated
liquidation preference of the Series A Preferred Securities and the General
Partnership Payment.
The entire principal amount of the Series A Junior Subordinated Debentures
will become due and payable, together with any accrued and unpaid interest
thereon, including Additional Interest (as hereinafter defined), if any, on
October 17, 2024.
The Series A Junior Subordinated Debentures if distributed to holders of
Series A Preferred Securities in dissolution will initially be so issued as a
Global Security (as defined below). As described herein, under certain limited
circumstances Series A Junior Subordinated Debentures may be issued in
certificated form in exchange for a Global Security (as defined below). See
"Book-Entry and Settlement" below. In the event that Series A Junior
Subordinated Debentures are issued in certificated form, such Series A Junior
Subordinated Debentures will be in denominations of $25 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Payments on Series A Junior Subordinated Debentures issued as a Global
Security will be made to DTC, as the depository for the Series A Junior
Subordinated Debentures. In the event Series A Junior Subordinated Debentures
are issued in certificated form, principal and interest will be payable, the
transfer of the Series A Junior Subordinated Debentures will be registrable
and Series A Junior Subordinated Debentures will be exchangeable for Series A
Junior Subordinated Debentures of other denominations of a like aggregate
principal amount at the corporate trust office of the Trustee in The City of
New York; provided, that payment of interest may be made at the option of GTE
by check mailed to the address of the persons entitled thereto.
If the Series A Junior Subordinated Debentures are distributed to the
holders of Series A Preferred Securities upon the dissolution of GTE Delaware,
GTE will use its best efforts to list the Series A Junior Subordinated
Debentures on the New York Stock Exchange or on such other exchange as the
Series A Preferred Securities are then listed and traded on the same part of
any such exchange.
S-18
<PAGE>
MANDATORY PREPAYMENT
If GTE Delaware redeems Series A Preferred Securities in accordance with the
terms thereof, the Series A Junior Subordinated Debentures will become due and
payable in a principal amount equal to the aggregate stated liquidation
preference of the Series A Preferred Securities so redeemed, together with any
accrued and unpaid interest, including Additional Interest, if any. Any
payment pursuant to this provision shall be made prior to 12:00 noon, New York
time, on the date of such redemption or at such other time on such earlier
date as the parties thereto shall agree.
OPTIONAL REDEMPTION
If there shall be no Series A Preferred Securities outstanding, GTE shall
have the right to redeem the Series A Junior Subordinated Debentures, in whole
or in part, from time to time, on or after October 17, 1999, upon not less
than 30 nor more than 60 days' notice, at a redemption price equal to 100% of
the principal amount to be redeemed plus any accrued and unpaid interest,
including Additional Interest, if any, to the redemption date.
INTEREST
Each Series A Junior Subordinated Debenture will bear interest at the rate
of 9 1/4% per annum from the original date of issuance, payable monthly in
arrears on the last day of each calendar month of each year (each, an
"Interest Payment Date"), commencing October 31, 1994, to the person in whose
name such Series A Junior Subordinated Debenture is registered, subject to
certain exceptions, at the close of business on the Business Day next
preceding such Interest Payment Date. In the event the Series A Junior
Subordinated Debentures shall not continue to remain in book-entry-only form,
GTE shall have the right to select record dates which shall be more than one
Business Day prior to the Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Series A Junior Subordinated Debentures is not a
Business Day, then payment of the interest payable on such date will be made
on the next succeeding day which is a Business Day (and without any interest
or other payment in respect of any such delay), except that, if such Business
Day is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date. A "Business Day" shall mean any day other than
a day on which banking institutions in The City of New York are authorized or
required by law to close.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
GTE shall have the right at any time during the term of the Series A Junior
Subordinated Debentures to extend the interest payment period from time to
time to a period not exceeding 60 consecutive months (the "Extension Period"),
at the end of which Extension Period GTE shall pay all interest then accrued
and unpaid (together with interest thereon at the rate specified for the
Series A Junior Subordinated Debentures to the extent permitted by applicable
law); provided, that, during any such Extension Period, GTE shall not declare
or pay any dividend on, or redeem, purchase, acquire or make a liquidation
payment with respect to, any of its capital stock. Prior to the termination of
any such Extension Period, GTE may further extend the interest payment period,
provided that such Extension Period together with all such previous and
further extensions thereof may not exceed 60 consecutive months. Upon the
termination of any Extension Period and the payment of all amounts then due,
GTE may select a new Extension Period, subject to the above requirements. No
interest during an Extension Period, except at the end thereof, shall be due
and payable. If GTE Delaware shall be the sole holder of the Series A Junior
Subordinated Debentures, GTE shall give GTE Delaware notice of its selection
S-19
<PAGE>
of such Extension Period one Business Day prior to the earlier of (i) the date
the dividends on the Series A Preferred Securities are payable or (ii) the
date GTE Delaware is required to give notice to the New York Stock Exchange or
other applicable self-regulatory organization or to holders of the Series A
Preferred Securities of the record date or the date such dividend is payable,
but in any event not less than one Business Day prior to such record date. GTE
shall cause GTE Delaware to give notice of GTE's selection of such Extension
Period to the holders of the Series A Preferred Securities. If GTE Delaware
shall not be the sole holder of the Series A Junior Subordinated Debentures,
GTE shall give the holders of the Series A Junior Subordinated Debentures
notice of its selection of such Extension Period ten Business Days prior to
the earlier of (i) the Interest Payment Date or (ii) the date GTE is required
to give notice to the New York Stock Exchange or other applicable self-
regulatory organization, or to holders of the Series A Junior Subordinated
Debentures, of the record or payment date of such related interest payment,
but in any event not less than two Business Days prior to such record date.
ADDITIONAL INTEREST
If at any time GTE Delaware shall be required to pay any interest on
dividends in arrears in respect of the Series A Preferred Securities pursuant
to the terms thereof, then GTE will pay as interest to GTE Delaware as the
holder of the Series A Junior Subordinated Debentures ("Additional Interest")
an amount equal to such interest on dividends in arrears. In addition, if GTE
Delaware would be required to pay any taxes, duties, assessments or
governmental charges of whatever nature (other than withholding taxes) imposed
by the United States, or any other taxing authority, then, in any such case,
GTE also will pay as Additional Interest such amounts as shall be required so
that the net amounts received and retained by GTE Delaware after paying any
such taxes, duties, assessments or governmental charges will be not less than
the amounts GTE Delaware would have received had no such taxes, duties,
assessments or governmental charges been imposed.
SET-OFF
Notwithstanding anything to the contrary in the Indenture, GTE shall have
the right to set-off any payment it is otherwise required to make thereunder
with and to the extent GTE has theretofore made, or is concurrently on the
date of such payment making, a payment under the Guarantee.
EVENTS OF DEFAULT
In the case any Event of Default (as defined in the Indenture) shall occur
and be continuing, GTE Delaware will have the right to declare the principal
of and the interest on the Series A Junior Subordinated Debentures (including
any Additional Interest) and any other amounts payable under the Indenture to
be forthwith due and payable and to enforce its other rights as a creditor
with respect to the Series A Junior Subordinated Debentures. See "Enforcement
of Certain Rights by Special Representative" below for a discussion of certain
rights available to holders of the Series A Preferred Securities upon the
occurrence of an Event of Default.
ENFORCEMENT OF CERTAIN RIGHTS BY SPECIAL REPRESENTATIVE
If (i) GTE Delaware fails to pay dividends in full on the Series A Preferred
Securities for 18 consecutive monthly dividend periods; (ii) an Event of
Default occurs and is continuing on the Series A Junior Subordinated
Debentures; or (iii) GTE is in default on any of its payment of other
obligations under the Guarantee, under the terms of the Series A Preferred
Securities, the holders of outstanding Series A Preferred Securities will have
the rights referred to under "Description of the Series A Preferred
Securities--Voting Rights", including the right to appoint a Special
Representative, which Special Representative shall be authorized to exercise
GTE Delaware's right to accelerate the principal amount of the Series A Junior
Subordinated Debentures and to enforce GTE Delaware's other creditor rights
under the Series A Junior Subordinated Debentures. Notwithstanding the
appointment of any such Special Representative, GTE shall continue as General
Partner and shall retain all rights under the Indenture, including the right
to extend the interest payment period from time to time to a period not
exceeding 60 consecutive months.
S-20
<PAGE>
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Series A Preferred Securities in connection
with the dissolution of GTE Delaware as a result of the occurrence of a
Special Event, the Series A Junior Subordinated Debentures will be issued in
the form of one or more global certificates (each, a "Global Security")
registered in the name of the nominee of DTC. Except under the limited
circumstances described below, Series A Junior Subordinated Debentures
represented by the Global Security will not be exchangeable for, and will not
otherwise be issuable as, Series A Junior Subordinated Debentures in
definitive form. The Global Securities described above may not be transferred
except by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or to a successor depository or its nominee.
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 such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Series A Junior
Subordinated Debentures in definitive form and will not be considered the
Holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Series A Junior Subordinated
Debentures shall be exchangeable, except for another Global Security of like
denomination and tenor to be registered in the name of DTC or its nominee or
to a successor depository or its nominee. Accordingly, each beneficial owner
must rely on the procedures of DTC and, if such person is not a Participant,
on the procedures of the Participant through which such person owns its
interest, to exercise any rights of a Holder under the Indenture.
THE DEPOSITORY. DTC will act as security depository for the Series A Junior
Subordinated Debentures. For a description of DTC and the specific terms of
the depository arrangements, see "Description of the Series A Preferred
Securities--Book-Entry-Only Issuance--The Depository Trust Company". As of the
date of this Prospectus Supplement, the description therein of DTC's book-
entry system and DTC's practices as they relate to purchases, transfers,
notices and payments with respect to the Series A Preferred Securities apply
in all material respects to any debt obligations represented by one or more
Global Securities held by DTC.
Neither GTE, the Trustee, any paying agent nor any other agent of GTE or the
Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a Global Security for such Series A Junior Subordinated
Debentures or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITORY'S SERVICES. A Global Security shall be
exchangeable for Series A Junior Subordinated Debentures registered in the
names of persons other than DTC or its nominee only if (i) DTC notifies GTE
that it is unwilling or unable to continue as a depository for such Global
Security and no successor depository shall have been appointed, or if any time
DTC ceases to be a clearing agency registered under the Exchange Act at a time
when DTC is required to be so registered to act as such depository, (ii) GTE
in its sole discretion determines that such Global Security shall be so
exchangeable or (iii) there shall have occurred an Event of Default with
respect to such Series A Junior Subordinated Debentures. Any Global Security
that is exchangeable pursuant to the preceding sentence shall be exchangeable
for Series A Junior Subordinated Debentures registered in such names as the
Depository shall direct. It is expected that such instructions will be based
upon directions received by the Depository from its Participants with respect
to ownership of beneficial interests in such Global Security.
MISCELLANEOUS
For restrictions on certain actions of the General Partner with respect to
Series A Junior Subordinated Debentures held by GTE Delaware, see "Description
of the Series A Preferred Securities--Voting Rights".
S-21
<PAGE>
EFFECT OF OBLIGATIONS UNDER THE
SERIES A JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
As set forth in the Limited Partnership Agreement, the sole purpose of GTE
Delaware is to issue limited partnership interests in GTE Delaware, including,
without limitation, the Series A Preferred Securities, and to use the proceeds
thereof to purchase the Series A Junior Subordinated Debentures or other
similar debt instruments of GTE.
As long as payments of interest and other payments are made when due on the
Series A Junior Subordinated Debentures, such payments will be sufficient to
cover dividends and payments due on the Series A Preferred Securities
primarily because (i) the aggregate principal amount of Series A Junior
Subordinated Debentures will be equal to the sum of the aggregate stated
liquidation preference of the Series A Preferred Securities and the General
Partnership Payment; (ii) the interest rate and interest and other payment
dates on the Series A Junior Subordinated Debentures will match the dividend
rate and dividend and other payment dates for the Series A Preferred
Securities; (iii) the Limited Partnership Agreement provides that GTE, as
General Partner, shall pay for all, and GTE Delaware shall not be obligated to
pay, directly or indirectly, for any, costs and expenses of GTE Delaware; and
(iv) the Limited Partnership Agreement further provides that the General
Partner shall not cause or permit GTE Delaware to, among other things, engage
in any activity that is not consistent with the purposes of GTE Delaware.
If GTE fails to make interest or other payments on the Series A Junior
Subordinated Debentures when due, the Limited Partnership Agreement provides a
mechanism whereby the holders of the Series A Preferred Securities may enforce
the rights of GTE Delaware under the Series A Junior Subordinated Debentures
through the appointment of a Special Representative. Payments of dividends and
other payments due on the Series A Preferred Securities out of moneys held by
GTE Delaware are guaranteed by GTE to the extent set forth under "Description
of the Guarantee" in the accompanying Prospectus. The Limited Partnership
Agreement also provides, and GTE, under the Guarantee, acknowledges, that a
Special Representative may be appointed to enforce the Guarantee if GTE is in
default on any of its payment obligations under the Guarantee. In addition, if
the General Partner or the Special Representative fails to enforce the
Guarantee, a holder of a Series A Preferred Security may institute a legal
proceeding directly against GTE to enforce its rights under the Guarantee
without first instituting a legal proceeding against GTE Delaware or any other
person or entity.
GTE and GTE Delaware believe that the above mechanisms and obligations,
taken together, are substantially equivalent to a full and unconditional
guarantee by GTE of payments due on the Series A Preferred Securities.
S-22
<PAGE>
UNITED STATES TAXATION
GENERAL
This section is a summary of certain United States federal income tax
considerations that may be relevant to prospective purchasers of Series A
Preferred Securities and represents the opinion of Sullivan & Cromwell,
special tax counsel to GTE and GTE Delaware, insofar as it relates to matters
of law and legal conclusions. This section is based upon current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), existing and
proposed regulations thereunder and current administrative rulings and court
decisions, all of which are subject to change. Subsequent changes may cause
tax consequences to vary substantially from the consequences described below.
No attempt has been made in the following discussion to comment on all
United States federal income tax matters affecting purchasers of Series A
Preferred Securities. Moreover, the discussion focuses on holders of Series A
Preferred Securities who are individual citizens or residents of the United
States that hold the Series A Preferred Securities as a capital asset and has
only limited application to corporations, estates, trusts or non-resident
aliens. Accordingly, each prospective purchaser of Series A Preferred
Securities should consult, and should depend on, his or her own tax advisor in
analyzing the federal, state, local and foreign tax consequences of the
purchase, ownership or disposition of Series A Preferred Securities.
INCOME FROM SERIES A PREFERRED SECURITIES
In the opinion of Sullivan & Cromwell, GTE Delaware will be a partnership
for federal income tax purposes. Accordingly, each holder of Series A
Preferred Securities (a "Preferred Securityholder") will be required to
include in gross income the Preferred Securityholder's distributive share of
the net income of GTE Delaware. Such income will not exceed the dividends
received on such Series A Preferred Securities, except in limited
circumstances as described below under "Potential Extension of Interest
Payment Period". No portion of such income will be eligible for the dividends
received deduction.
DISPOSITION OF SERIES A PREFERRED SECURITIES
Gain or loss will be recognized on a sale of Series A Preferred Securities,
including a redemption for cash, equal to the difference between the amount
realized and the Preferred Securityholder's tax basis for the Series A
Preferred Securities sold. Gain or loss recognized by a Preferred
Securityholder on the sale or exchange of a Series A Preferred Security held
for more than one year will generally be taxable as long-term capital gain or
loss.
RECEIPT OF SERIES A JUNIOR SUBORDINATED DEBENTURES UPON LIQUIDATION OF GTE
DELAWARE
Under certain circumstances, as described under the caption "Description of
the Series A Preferred Securities--Special Event Redemption or Distribution",
Series A Junior Subordinated Debentures may be distributed to the holders of
the Series A Preferred Securities in liquidation of GTE Delaware. Under
current United States federal income tax law, such a distribution would be
treated as a non-taxable exchange to each holder of Series A Preferred
Securities and would result in the holder of Series A Preferred Securities
receiving an aggregate tax basis in the Series A Junior Subordinated
Debentures equal to such holder's aggregate tax basis in its Series A
Preferred Securities. A holder's holding period in the Series A Junior
Subordinated Debentures so received in liquidation of GTE Delaware would
include the period for which the Series A Preferred Securities were held by
such holder. Under a change in law, a change in legal interpretation or the
other circumstances giving rise to a Special Event, however, the dissolution
could be a taxable event to holders of the Series A Preferred Securities. In
the judgment of special tax counsel to GTE and GTE Delaware, the series of
events which would result in the recognition of taxable gain by holders of the
Series A Preferred Securities, by reason of a dissolution of GTE Delaware in
response to a Special Event, is unlikely to occur. There can be no assurance
in this regard, however.
S-23
<PAGE>
GTE DELAWARE INFORMATION RETURNS AND AUDIT PROCEDURES
GTE, as the General Partner in GTE Delaware, will furnish each Series A
Preferred Securityholder with a Schedule K-1 each year setting forth such
Series A Preferred Securityholder's allocable share of income for the prior
calendar year. GTE is required to furnish such Schedule K-1 as soon as
practicable following the end of the year, but in any event prior to March 31.
Any person who holds Series A Preferred Securities as a nominee for another
person is required to furnish to GTE Delaware (a) the name, address and
taxpayer identification number of the beneficial owner and the nominee; (b)
information as to whether the beneficial owner is (i) a person that is not a
United States person, (ii) a foreign government, an international organization
or any wholly-owned agency or instrumentality of either of the foregoing, or
(iii) a tax-exempt entity; (c) the amount and description of Series A
Preferred Securities held, acquired or transferred for the beneficial owner;
and (d) certain information including the dates of acquisitions and transfers,
means of acquisitions and transfers, and acquisition cost for purchases, as
well as the amount of net proceeds from sales. Brokers and financial
institutions are required to furnish additional information, including whether
they are United States persons and certain information on Series A Preferred
Securities they acquire, hold or transfer for their own accounts. A penalty of
$50 per failure (up to a maximum of $100,000 per calendar year) is imposed by
the Code for failure to report such information to GTE Delaware. The nominee
is required to supply the beneficial owners of the Series A Preferred
Securities with the information furnished to GTE Delaware.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD
Under the Indenture, GTE has the right to extend from time to time the
interest payment period on the Series A Junior Subordinated Debentures to a
period not exceeding 60 consecutive months. In the event that the interest
payment period is extended, GTE Delaware will continue to accrue income equal
to the amount of the interest payment due at the end of the Extension Period,
on an economic basis over the length of the Extension Period.
Accrued income will be allocated, but not distributed, to holders of record
on the Business Day preceding the last day of each calendar month. As a
result, holders of record during an Extension Period will include interest in
gross income in advance of the receipt of cash, and any such holders who
dispose of Series A Preferred Securities prior to the record date for the
payment of dividends following such Extension Period will include interest in
gross income but will not receive any cash related thereto from GTE Delaware.
The tax basis of a Series A Preferred Security will be increased by the amount
of any interest that is included in income without a receipt of cash, and will
be decreased again when and if such cash is subsequently received from GTE
Delaware.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder who or which is (i) a nonresident alien individual or (ii) a foreign
corporation, partnership or estate or trust, in either case not subject to
United States federal income tax on a net income basis in respect of a Series
A Preferred Security.
Under current United States federal income tax law, subject to the
discussion below with respect to backup withholding:
(i) Payments by GTE Delaware or any of its paying agents to any holder of
a Series A Preferred Security who or which is a United States Alien Holder
will not be subject to United States federal withholding tax provided that
(a) the beneficial owner of the Series A Preferred Security does not
actually or constructively own 10%, or more of the total combined voting
power of all classes of capital stock of GTE entitled to vote, (b) the
beneficial owner of the Series A Preferred Security is not a controlled
foreign corporation that is related to GTE through stock ownership and
S-24
<PAGE>
(c) either (x) the beneficial owner of the Series A Preferred Security
certifies to GTE Delaware or its agent, under penalties of perjury, that it
is a United States Alien Holder and provides its name and address or (y)
the holder of the Series A Preferred Security is a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution"), and such holder certifies to GTE Delaware or its agent under
penalties of perjury that such statement has been received from the
beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes GTE Delaware or its agent with a copy
thereof; and
(ii) a United States Alien Holder of a Series A Preferred Security will
generally not be subject to United States federal withholding tax on any
gain realized on the sale or exchange of a Series A Preferred Security
unless such holder is present in the United States for 183 days or more in
the taxable year of sale and either has a "tax home" in the United States
or certain other requirements are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments to
noncorporate United States holders of the proceeds of the sale of Series A
Preferred Securities within the United States and "backup withholding" at a
rate of 31% will apply to such payments if the United States holder fails to
provide an accurate taxpayer identification number.
Payments of the proceeds from the sale by a United States Alien Holder of
Series A Preferred Securities made to or through a foreign office of a broker
generally will not be subject to information reporting or backup withholding,
except that, if the broker is a United States person, a controlled foreign
corporation for United States tax purposes, or a foreign person 50% or more of
whose gross income is effectively connected with a United States trade or
business for a specified three-year period, information reporting may apply to
such payments. Payments of the proceeds from the sale of Series A Preferred
Securities to or through the United States office of a broker is subject to
information reporting and backup withholding unless the holder or beneficial
owner certifies as to its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding.
S-25
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, GTE
Delaware has agreed to sell to each of the Underwriters named below, and each
of the Underwriters, for whom Goldman, Sachs & Co., Bear, Stearns & Co. Inc.,
CS First Boston Corporation, Dean Witter Reynolds Inc., A.G. Edwards & Sons,
Inc., Kidder, Peabody & Co. Incorporated, Lehman Brothers Inc., Morgan Stanley
& Co. Incorporated, PaineWebber Incorporated, Prudential Securities
Incorporated, Salomon Brothers Inc and Smith Barney Inc., are acting as
Representatives, has severally agreed to purchase from GTE Delaware the
respective number of Series A Preferred Securities set forth opposite its name
below:
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Goldman, Sachs & Co. .......................................... 1,020,600
Bear, Stearns & Co. Inc. ...................................... 1,020,400
CS First Boston Corporation.................................... 1,020,400
Dean Witter Reynolds Inc. ..................................... 1,020,400
A.G. Edwards & Sons, Inc. ..................................... 1,020,400
Kidder, Peabody & Co. Incorporated............................. 1,020,400
Lehman Brothers Inc. .......................................... 1,020,400
Morgan Stanley & Co. Incorporated.............................. 1,020,400
PaineWebber Incorporated....................................... 1,020,400
Prudential Securities Incorporated............................. 1,020,400
Salomon Brothers Inc .......................................... 1,020,400
Smith Barney Inc. ............................................. 1,020,400
Alex. Brown & Sons Incorporated................................ 175,000
Dillon, Read & Co. Inc. ....................................... 175,000
Donaldson, Lufkin & Jenrette Securities Corporation............ 175,000
Kemper Securities, Inc. ....................................... 175,000
Oppenheimer & Co., Inc. ....................................... 175,000
Wertheim Schroder & Co. Incorporated........................... 175,000
Advest, Inc. .................................................. 65,000
Arthurs, Lestrange & Company Incorporated...................... 65,000
Robert W. Baird & Co. Incorporated............................. 65,000
William Blair & Company........................................ 65,000
J.C. Bradford & Co. ........................................... 65,000
JW Charles Securities, Inc. ................................... 65,000
Commerzbank Capital Markets Corporation........................ 65,000
Cowen & Company................................................ 65,000
Craigie Incorporated........................................... 65,000
Credit Lyonnais Securities (USA) Inc. ......................... 65,000
Crowell, Weedon & Co. ......................................... 65,000
Dain Bosworth Incorporated..................................... 65,000
Davenport & Co. of Virginia, Inc. ............................. 65,000
Doft & Co., Inc. .............................................. 65,000
Fahnestock & Co. Inc. ......................................... 65,000
Ferris, Baker Watts, Incorporated.............................. 65,000
First Albany Corporation....................................... 65,000
First of Michigan Corporation.................................. 65,000
Furman Selz Incorporated....................................... 65,000
Gruntal & Co. Incorporated..................................... 65,000
J.J.B. Hilliard, W.L. Lyons, Inc. ............................. 65,000
</TABLE>
S-26
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Howard, Weil, Labouisse, Friedrichs Incorporated............... 65,000
Howe Barnes Investments, Inc. ................................. 65,000
Interstate/Johnson Lane Corporation............................ 65,000
Janney Montgomery Scott Inc. .................................. 65,000
Edward D. Jones & Co. ......................................... 65,000
Josephthal Lyon & Ross Incorporated............................ 65,000
Kennedy, Cabot & Co. .......................................... 65,000
Legg Mason Wood Walker Incorporated............................ 65,000
McDonald & Company Securities, Inc. ........................... 65,000
McGinn, Smith & Co., Inc. ..................................... 65,000
Mendham Capital Group, Inc. ................................... 65,000
Mesirow Financial, Inc. ....................................... 65,000
Montgomery Securities.......................................... 65,000
Morgan Keegan & Company, Inc. ................................. 65,000
The Ohio Company............................................... 65,000
Olde Discount Corporation...................................... 65,000
Parker/Hunter Incorporated..................................... 65,000
Piper, Jaffray Inc. ........................................... 65,000
Principal Financial Securities, Inc. .......................... 65,000
Pryor, McClendon, Counts & Co., Inc. .......................... 65,000
Ragen MacKenzie Incorporated................................... 65,000
Rauscher Pierce Refsnes, Inc. ................................. 65,000
Raymond James & Associates, Inc. .............................. 65,000
Redwood Securities Group, Inc. ................................ 65,000
The Robinson-Humphrey Company, Inc. ........................... 65,000
Rodman & Renshaw, Inc. ........................................ 65,000
Roney & Co. ................................................... 65,000
Scott & Stringfellow, Inc. .................................... 65,000
Stephens Inc. ................................................. 65,000
Sterne, Agee & Leach, Inc. .................................... 65,000
Stifel, Nicolaus & Company, Incorporated....................... 65,000
Sutro & Co. Incorporated....................................... 65,000
Tucker Anthony Incorporated.................................... 65,000
Utendahl Capital Partners, L.P. ............................... 65,000
Wheat, First Securities, Inc. ................................. 65,000
Yamaichi International (America), Inc. ........................ 65,000
----------
Total........................................................ 17,000,000
==========
</TABLE>
The Underwriters propose to offer the Series A Preferred Securities in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and in part to certain securities
dealers at such price less a concession of $.50 per Series A Preferred
Security. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $.25 per Series A Preferred Security to certain
brokers and dealers. After the Series A Preferred Securities are released for
sale to the public, the offering price and other selling terms may from time
to time be varied by the Representatives.
In view of the fact that the proceeds of the sale of the Series A Preferred
Securities will ultimately be used to purchase the Series A Junior
Subordinated Debentures, the Underwriting Agreement provides that GTE will pay
as compensation ("Underwriters' Compensation"), for the Underwriters'
S-27
<PAGE>
arranging the investment therein of such proceeds, an amount in New York
Clearing House (next day) funds of $.7875 per Series A Preferred Security
($.50 per Series A Preferred Security sold to certain institutions) for the
accounts of the several Underwriters.
GTE Delaware has granted the Underwriters an option for 30 days after the
date of this Prospectus Supplement exercisable in whole or in part to purchase
up to 2,550,000 additional Series A Preferred Securities to cover over-
allotments, if any, at the initial public offering price (with an additional
underwriting commission), as set forth on the cover page of this Prospectus
Supplement. If the Underwriters exercise their over-allotment option, the
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of Series A
Preferred Securities to be purchased by each of them, as shown in the
foregoing table, bears to the number of Series A Preferred Securities
initially offered hereby.
GTE and GTE Delaware have agreed, during the period beginning from the date
of the Underwriting Agreement and continuing to and including the earlier of
(i) the date, after the closing date, on which the distribution of the Series
A Preferred Securities and the Guarantee ceases, as determined by the
Underwriters, or (ii) 90 days after the closing date, not to offer, sell,
contract to sell, or otherwise dispose of any Series A Preferred Securities,
any limited partnership interests of GTE Delaware, or any preferred stock or
any other securities of GTE Delaware or GTE which are substantially similar to
the Series A Preferred Securities including the Guarantee, or any securities
convertible into or exchangeable for Series A Preferred Securities, limited
partnership interests, preferred stock or such substantially similar
securities of either GTE Delaware or GTE, without the prior written consent of
the Underwriters.
Prior to this offering, there has been no public market for the Series A
Preferred Securities. In order to meet one of the requirements for listing the
Series A Preferred Securities on the New York Stock Exchange, the Underwriters
will undertake to sell lots of 100 or more Series A Preferred Securities to a
minimum of 400 beneficial holders.
GTE Delaware and GTE have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended.
Certain of the Underwriters engage in transactions with, and from time to
time have performed services for, GTE and its subsidiaries in the ordinary
course of business.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Series A
Preferred Securities, the validity of the Limited Partnership Agreement and
the formation of GTE Delaware are being passed upon by Richards, Layton &
Finger, P.A., special Delaware counsel to GTE and GTE Delaware. The validity
of the Indenture, the Guarantee and the Series A Junior Subordinated
Debentures will be passed upon on behalf of GTE Delaware and GTE by William P.
Barr, Esq., Senior Vice President and General Counsel of GTE, and on behalf of
the Underwriters by Milbank, Tweed, Hadley & McCloy, counsel to the
Underwriters. Mr. Barr will rely on Richards, Layton & Finger, P.A. as to
certain matters of Delaware law. Statements as to United States taxation in
the Prospectus Supplement in the second paragraph under the caption
"Investment Considerations--Special Event Redemption or Distribution", and
under the caption "United States Taxation", have been passed upon for GTE and
GTE Delaware by Sullivan & Cromwell, special tax counsel to GTE and GTE
Delaware, and are stated herein on their authority.
S-28
<PAGE>
$1,000,000,000
GTE CORPORATION [LOGO]
JUNIOR SUBORDINATED DEBENTURES
GTE DELAWARE
PREFERRED SECURITIES
---------------
GTE Corporation, a New York corporation ("GTE"), may from time to time offer
its junior subordinated debentures (the "Junior Subordinated Debentures") in
one or more series and in amounts, at prices and on terms to be determined at
the time of the offering. The Junior Subordinated Debentures when issued will
be unsecured and subordinate and junior in right of payment to Senior
Indebtedness (as defined herein) of GTE.
GTE Delaware, L.P. ("GTE Delaware"), a Delaware special purpose limited
partnership in which GTE is the general partner, may offer, from time to time,
its preferred securities, representing limited partner interests (the
"Preferred Securities"), in one or more series. The payment of periodic cash
distributions ("dividends") with respect to Preferred Securities of any
series, out of moneys held by GTE Delaware, and payments on liquidation or
redemption with respect to the Preferred Securities are guaranteed by GTE to
the extent described herein (the "Guarantee"). GTE's obligations under the
Guarantee are subordinate and junior in right of payment to all other
liabilities of GTE and pari passu with the most senior preferred stock issued
by GTE. Junior Subordinated Debentures also may be issued and sold from time
to time in one or more series by GTE to GTE Delaware in connection with the
investment of the proceeds from the offering of Preferred Securities. The
Junior Subordinated Debentures subsequently may be distributed pro rata to
holders of Preferred Securities in connection with the dissolution of GTE
Delaware upon the occurrence of certain events as may be described in an
accompanying Prospectus Supplement (the "Prospectus Supplement").
Specific terms of the particular Junior Subordinated Debentures and
Preferred Securities of any series in respect of which this Prospectus is
being delivered (the "Offered Securities") will be set forth in the
accompanying Prospectus Supplement with respect to such series, which will
describe, without limitation and where applicable, the following: (i) in the
case of Junior Subordinated Debentures, the specific designation, aggregate
principal amount, denomination, maturity, premium, if any, interest rate (or
the method of determining such rate), if any, dates on which premium, if any,
and interest, if any, will be payable, any redemption provisions, any sinking
fund provisions, the initial public offering price, any listing on a
securities exchange and any other terms and (ii) in the case of Preferred
Securities, the specific designation, number of Preferred Securities, dividend
rate (or the method of determining such rate), dates on which dividends will
be payable, liquidation preference, voting rights, any redemption provisions,
terms for any conversion or exchange into other securities, the initial public
offering price, any listing on a securities exchange, and any other rights,
preferences, privileges, limitations and restrictions.
The Offered Securities may be offered in amounts, at prices and on terms to
be determined at the time of offering; provided, however, that the aggregate
initial public offering price of all Offered Securities shall not exceed
$1,000,000,000.
The Prospectus Supplement relating to any series of Offered Securities will
contain information concerning certain United States federal income tax
considerations, if applicable to the Offered Securities.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
---------------
The Offered Securities will be sold directly, through agents, underwriters
or dealers as designated from time to time, or through a combination of such
methods. If agents or any dealers or underwriters are involved in the sale of
the Offered Securities in respect of which this Prospectus is being delivered,
the names of such agents, dealers or underwriters and any applicable
commissions or discounts will be set forth in or may be calculated from the
Prospectus Supplement with respect to such Offered Securities.
The date of this Prospectus is July 6, 1994.
<PAGE>
AVAILABLE INFORMATION
GTE is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). These reports, proxy statements and
other information can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, as well as at the following Regional Offices: 7 World
Trade Center, New York, New York 10048; and 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street at prescribed rates
and can be inspected at the New York, Chicago and Pacific Stock Exchanges.
This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, the "Registration Statement") filed by GTE Delaware and GTE with the
Commission under the Securities Act of 1933, as amended (the "Securities
Act"). Reference is made to the Registration Statement for further information
with respect to GTE, GTE Delaware and the Securities offered hereby.
Statements contained or incorporated by reference herein concerning the
provisions of documents are necessarily summaries of such documents, and each
statement is qualified in its entirety by reference to the Registration
Statement.
No separate financial statements of GTE Delaware have been included herein.
GTE and GTE Delaware do not consider that such financial statements would be
material to holders of Preferred Securities because GTE Delaware is a newly
formed special purpose entity, has no operating history, has no independent
operations and is not engaged in, and does not propose to engage in, any
activity other than as set forth below. GTE Delaware is a limited partnership
formed under the laws of the State of Delaware. GTE is the sole general
partner in GTE Delaware and, as of the date hereof, directly or indirectly
beneficially owns all of GTE Delaware's partnership interests. See "GTE
Delaware".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
GTE's Annual Report on Form 10-K for the fiscal year ended December 31, 1993
and its Quarterly Report on Form 10-Q for the period ended March 31, 1994, as
filed with the Commission pursuant to the Exchange Act, are incorporated
herein by reference. All documents filed by GTE pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the securities
offered hereby shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing such documents. Any
statement contained herein or in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
GTE hereby undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, on the written or oral request of
any such person, including any beneficial owner, a copy of any or all of the
documents referred to above which have been or may be incorporated in this
Prospectus by reference, other than exhibits to such documents unless such
exhibits are specifically incorporated by reference into the information that
the Prospectus incorporates. Requests for such copies should be directed to
Mr. R.J. Tuccillo, Assistant Secretary of GTE, at One Stamford Forum,
Stamford, CT 06904. Mr. Tuccillo's telephone number is (203) 965-2942.
2
<PAGE>
GTE DELAWARE
GTE Delaware is a limited partnership formed under the laws of the State of
Delaware. GTE Delaware exists for the sole purpose of issuing its limited
partnership interests and investing the net proceeds thereof in Junior
Subordinated Debentures. All of its partnership interests, as of the date
hereof, are beneficially owned, directly or indirectly, by GTE. GTE is the
sole general partner in GTE Delaware (the "General Partner"). GTE Finance
Corporation, a Delaware corporation and wholly-owned subsidiary of GTE ("GTE
Finance"), is, as of the date hereof, the sole limited partner in GTE
Delaware. Upon the issuance of Preferred Securities, which securities
represent limited partner interests in GTE Delaware, GTE Finance will remain
as a limited partner, but will have no interest in the profits and dividends
or in the assets of GTE Delaware. GTE Delaware has a term of approximately 99
years, unless earlier dissolved. GTE Delaware's registered office in the State
of Delaware is c/o The Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, New Castle County, Delaware 19801, telephone:
(302) 658-7581. All of GTE Delaware's business and affairs will be conducted
by GTE, as the sole general partner. The principal place of business of GTE
Delaware is c/o GTE Corporation, One Stamford Forum, Stamford, Connecticut
06904, telephone number (203) 965-2000.
GTE CORPORATION
GTE is the fourth-largest publicly-held telecommunications company in the
world, the largest U.S.-based local telephone company and the second-largest
provider of cellular-mobile telephone services in the United States in terms
of population in the areas served. As of March 31, 1994, through Telephone
Operations, GTE provided local telephone services to approximately 17.2
million customer access lines in 33 states within the United States and
approximately 5.1 million customer access lines in British Columbia and
Quebec, Canada, the Dominican Republic and Venezuela. Through
Telecommunications Products and Services, GTE provides cellular-mobile
communications, command, control and communication systems, information
marketing and networking services, satellite services and air-to-ground
communications, and publishes yellow pages telephone directories. As of March
31, 1994, GTE's cellular operations served a potential subscriber population
of approximately 53.1 million "POPs" in the United States. The location of the
principal executive offices of GTE is One Stamford Forum, Stamford,
Connecticut 06904, telephone number (203) 965-2000.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
AND EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS OF GTE CORPORATION
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------ THREE MONTHS ENDED
1989 1990 1991 1992 1993 MARCH 31, 1994
---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C>
Consolidated ratio of earnings to
fixed charges (unaudited)(a)...... 2.52 2.35 2.22 2.66 2.07 3.69
Consolidated ratio of earnings to
combined fixed charges and
preferred stock dividends
(unaudited)(a).................... 2.42 2.28 2.17 2.61 2.04 3.61
</TABLE>
- --------
(a) For purposes of computing the consolidated ratios, earnings consist of
income from continuing operations before income taxes and fixed charges.
Fixed charges consist of interest expense, preferred stock dividends of
subsidiaries, the additional income requirement to cover preferred stock
dividends of subsidiaries and the portion of rent expense representing
interest. Amounts applicable to entities that are at least 50%-owned have
been added to both earnings and fixed charges, and amounts applicable to
minority interests have been deducted from both earnings and fixed
charges. Excluding from 1993 the effect of the one-time restructuring
charge, the cost of voluntary separation programs at Telephone Operations
and the gain on the sale of non-strategic telephone properties, the
consolidated ratio of earnings to fixed charges would have been 3.31 and
the consolidated ratio of earnings to combined fixed charges and preferred
stock dividends would have been 3.26.
3
<PAGE>
USE OF PROCEEDS
GTE Delaware will invest all proceeds received from the sale of Preferred
Securities in Junior Subordinated Debentures. Unless otherwise specified in
the Prospectus Supplement, the net proceeds to be received by GTE from the
sale of Junior Subordinated Debentures will be used to reduce external short-
term obligations, including current maturities (at May 31, 1994, totaling
approximately $1.0 billion, at an average interest cost of approximately
4.34%), and for general corporate purposes.
DESCRIPTION OF THE PREFERRED SECURITIES
GTE Delaware may issue, from time to time, Preferred Securities, in one or
more series, having terms described in the Prospectus Supplement relating
thereto. The limited partnership agreement of GTE Delaware will be amended and
restated (as so amended and restated, "Limited Partnership Agreement") to
authorize the establishment of one or more series of Preferred Securities,
having such terms, including dividends, redemption, voting, liquidation rights
and such other preferred, deferred or other special rights or such
restrictions as shall be set forth therein or otherwise established by the
General Partner pursuant thereto. Reference is made to the Prospectus
Supplement relating to the Preferred Securities of a particular series for
specific terms, including (i) the distinctive designation of such series which
shall distinguish it from other series; (ii) the number of Preferred
Securities included in such series, which number may be increased or decreased
from time to time unless otherwise provided by the General Partner in creating
the series; (iii) the annual dividend rate (or method of determining such
rate) for Preferred Securities of such series and the date or dates upon which
such dividends shall be payable, provided, however, dividends on any series of
Preferred Securities shall be payable on a monthly basis to holders of such
series of Preferred Securities as of a record date in each month during which
such series of Preferred Securities are outstanding; (iv) whether dividends on
Preferred Securities of such series shall be cumulative, and, in the case of
Preferred Securities of any series having cumulative dividend rights, the date
or dates or method of determining the date or dates from which dividends on
Preferred Securities of such series shall be cumulative; (v) the amount or
amounts which shall be paid out of the assets of GTE Delaware to the holders
of Preferred Securities of such series upon voluntary or involuntary
dissolution, winding-up or termination of GTE Delaware; (vi) the price or
prices at which, the period or periods within which and the terms and
conditions upon which Preferred Securities of such series may be redeemed or
purchased, in whole or in part, at the option of GTE Delaware or the General
Partner; (vii) the obligation, if any, of GTE Delaware to purchase or redeem
Preferred Securities of such series and the price or prices at which, the
period or periods within which and the terms and conditions upon which
Preferred Securities of such series shall be purchased or redeemed, in whole
or in part, pursuant to such obligation; (viii) the voting rights, if any, of
Preferred Securities of such series in addition to those required by law,
including the number of votes per Preferred Security and any requirement for
the approval by the holders of Preferred Securities, or of Preferred
Securities of one of more series, or of both, as a condition to specified
action or amendments to the Limited Partnership Agreement; and (ix) any other
relative rights, preferences, privileges, limitations or restrictions of
Preferred Securities of the series not inconsistent with the Limited
Partnership Agreement or with applicable law. All Preferred Securities offered
hereby will be guaranteed by GTE to the extent set forth below under
"Description of the Guarantee". Any applicable federal income tax
considerations applicable to any offering of Preferred Securities will be
described in the Prospectus Supplement relating thereto.
4
<PAGE>
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee which
will be executed and delivered by GTE for the benefit of the holders from time
to time of Preferred Securities. The summary does not purport to be complete
and is subject in all respects to the provisions of, and is qualified in its
entirety by reference to, the Guarantee, which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
GENERAL
GTE will irrevocably and unconditionally agree, to the extent set forth
herein, to pay in full, to the holders of the Preferred Securities of each
series, the Guarantee Payments (as defined below) (except to the extent paid
by GTE Delaware), as and when due, regardless of any defense, right of set-off
or counterclaim which GTE Delaware may have or assert. The following payments
with respect to any series of Preferred Securities to the extent not paid by
GTE Delaware (the "Guarantee Payments") will be subject to the Guarantee
(without duplication): (i) any accrued and unpaid dividends which are required
to be paid on the Preferred Securities of such series, to the extent GTE
Delaware shall have funds legally available therefor, (ii) the redemption
price, including all accrued and unpaid dividends (the "Redemption Price"),
payable out of funds legally available therefor with respect to any Preferred
Securities called for redemption by GTE Delaware and (iii) upon a liquidation
of GTE Delaware, the lesser of (a) the aggregate of the liquidation preference
and all accrued and unpaid dividends on the Preferred Securities of such
series to the date of payment and (b) the amount of assets of GTE Delaware
remaining available for distribution to holders of Preferred Securities of
such series in liquidation of GTE Delaware. GTE's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts
by GTE to the holders of Preferred Securities or by causing GTE Delaware to
pay such amounts to such holders.
CERTAIN COVENANTS OF GTE
In the Guarantee, GTE will covenant that, so long as any Preferred
Securities remain outstanding, GTE will not declare or pay any dividend on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any
of its capital stock or make any guarantee payment with respect to the
foregoing if at such time GTE shall be in default with respect to its payment
or other obligations under the Guarantee or there shall have occurred any
event that would constitute an Event of Default under the Indenture.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required),
the Guarantee may be changed only with the prior approval of the holders of
not less than 66 2/3% in liquidation preference of the outstanding Preferred
Securities. The manner of obtaining any such approval of holders of the
Preferred Securities of each series will be as set forth in an accompanying
Prospectus Supplement. All guarantees and agreements contained in the
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of GTE and shall inure to the benefit of the holders of the
Preferred Securities then outstanding.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect as to the
Preferred Securities of any series upon full payment of the Redemption Price
of all Preferred Securities of such series, and will terminate completely upon
full payment of the amounts payable upon liquidation of GTE Delaware. The
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of Preferred Securities of any series must
restore payment of any sums paid under such series of Preferred Securities or
the Guarantee.
5
<PAGE>
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of GTE and will rank
(i) subordinate and junior in right of payment to all liabilities of GTE, (ii)
pari passu with the most senior preferred or preference stock now or hereafter
issued by GTE and with any guarantee now or hereafter entered into by GTE in
respect of any preferred or preference stock of any affiliate of GTE and (iii)
senior to GTE's common stock. The Limited Partnership Agreement provides that
each holder of Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection.
The Guarantee will be deposited with the General Partner to be held for the
benefit of the holders of each series of the Preferred Securities. In the
event of the appointment of a Special Representative to, among other things,
enforce the Guarantee, the Special Representative may take possession of the
Guarantee for such purpose. If no Special Representative has been appointed to
enforce the Guarantee, the General Partner has the right to enforce the
Guarantee on behalf of the holders of each series of the Preferred Securities.
The holders of not less than 10% in aggregate liquidation preference of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available in respect of the
Guarantee, including the giving of directions to the General Partner or the
Special Representative, as the case may be. If the General Partner or the
Special Representative fails to enforce the Guarantee as above provided, any
holder of Preferred Securities may institute a legal proceeding directly
against GTE to enforce its rights under the Guarantee, without first
instituting a legal proceeding against GTE Delaware or any other person or
entity. The Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by GTE Delaware and by
complete performance of all obligations under the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
6
<PAGE>
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Junior Subordinated Debentures may be issued from time to time in one or
more series under an Indenture, dated as of June 1, 1994 (the "Indenture"),
between GTE and The Bank of New York, as Trustee (the "Trustee"). The
following summary does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference
to, the Indenture, which is filed as an exhibit to the Registration Statement
of which this Prospectus forms a part. Whenever particular provisions or
defined terms in the Indenture are referred to herein, such provisions or
defined terms are incorporated by reference herein. Section and Article
references used herein are references to provisions of the Indenture unless
otherwise noted.
GENERAL
The Junior Subordinated Debentures will be unsecured, subordinated
obligations of GTE. The Indenture does not limit the aggregate principal
amount of Junior Subordinated Debentures which may be issued thereunder and
provides that the Junior Subordinated Debentures may be issued thereunder from
time to time in one or more series.
The Junior Subordinated Debentures are issuable in one or more series
pursuant to an indenture supplemental to the Indenture or a resolution of
GTE's Board of Directors or a special committee thereof (each, a "Supplemental
Indenture") (Section 2.01). The aggregate principal amount of Junior
Subordinated Debentures relating to Preferred Securities of any series will be
set forth in the Prospectus Supplement for such series and will be equal to
the sum of the aggregate liquidation preference of the Preferred Securities
for such series and the General Partner's capital contribution with respect to
the Preferred Securities for such series. Junior Subordinated Debentures
relating to Preferred Securities of any series subsequently may be distributed
pro rata to holders of Preferred Securities of such series in connection with
the dissolution of GTE Delaware upon the occurrence of certain events
described in the Prospectus Supplement relating to the Preferred Securities of
such series.
Reference is made to the Prospectus Supplement which will accompany this
Prospectus for the following terms of the series of Junior Subordinated
Debentures being offered thereby: (i) the specific title of such Junior
Subordinated Debentures; (ii) any limit on the aggregate principal amount of
such Junior Subordinated Debentures; (iii) the date or dates on which the
principal of such Junior Subordinated Debentures is payable; (iv) the rate or
rates at which such Junior Subordinated Debentures will bear interest or the
method of determination of such rate or rates; (v) the date or dates from
which such interest shall accrue, the interest payment dates on which such
interest will be payable or the manner of determination of such interest
payment dates and the record dates for the determination of holders to whom
interest is payable on any such interest payment dates; (vi) the right, if
any, to extend the interest payment periods and the duration of such
extension; (vii) the period or periods within which, the price or prices at
which and the terms and conditions upon which such Junior Subordinated
Debentures may be redeemed, in whole or in part, at the option of GTE; (viii)
the obligation, if any, of GTE to redeem or purchase such Junior Subordinated
Debentures pursuant to any sinking fund or analogous provisions or at the
option of the holder thereof and the period or periods, the price or prices at
which, and the terms and conditions upon which, such Junior Subordinated
Debentures shall be redeemed or purchased, in whole or part, pursuant to such
obligation; (ix) the form of such Junior Subordinated Debentures; (x) if other
than denominations of $25 or any integral multiple thereof, the denominations
in which such Junior Subordinated Debentures shall be issuable; (xi) any and
all other terms with respect to such series; and (xii) whether such Junior
Subordinated Debentures are issuable as a global security, and in such case,
the identity of the depository. (Section 2.01).
The Indenture does not contain any provisions that afford holders of Junior
Subordinated Debentures protection in the event of a highly leveraged
transaction involving GTE.
7
<PAGE>
SUBORDINATION
The Indenture provides that the Junior Subordinated Debentures are
subordinate and junior in right of payment to all Senior Indebtedness (as
defined below) of GTE as provided in the Indenture. No payment of principal of
(including redemption and sinking fund payments), premium, if any, or interest
on, the Junior Subordinated Debentures may be made if any Senior Indebtedness
is not paid when due, any applicable grace period with respect to such default
has ended and such default has not been cured or waived, or if the maturity of
any Senior Indebtedness has been accelerated because of a default. Upon any
distribution of assets of GTE to creditors upon any dissolution, winding-up,
liquidation or reorganization, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all principal of,
and premium, if any, and interest due or to become due on, all Senior
Indebtedness must be paid in full before the holders of the Junior
Subordinated Debentures are entitled to receive or retain any payment. The
rights of the holders of the Junior Subordinated Debentures will be subrogated
to the rights of the holders of Senior Indebtedness to receive payments or
distributions applicable to Senior Indebtedness until all amounts owing on the
Junior Subordinated Debentures are paid in full. (Sections 14.01 to 14.03).
However, since Senior Indebtedness currently is not secured and ranks pari
passu with other unsecured indebtedness of GTE, rights of subrogation
currently do not improve the position of the holders of the Junior
Subordinated Debentures in relation to the holders of any other unsecured
indebtedness of GTE.
The term "Senior Indebtedness" shall mean the principal of, premium, if any,
interest on and any other payment due pursuant to any of the following,
whether outstanding at the date of execution of the Indenture or thereafter
incurred, created or assumed:
(a) all indebtedness of GTE evidenced by notes, debentures, bonds or
other securities sold by GTE for money;
(b) all indebtedness of others of the kinds described in the preceding
clause (a) assumed by or guaranteed in any manner by GTE or in effect
guaranteed by GTE; and
(c) all renewals, extensions or refundings of indebtedness of the kinds
described in any of the preceding clauses (a) and (b);
unless, in the case of any particular indebtedness, renewal, extension or
refunding, the instrument creating or evidencing the same or the assumption or
guarantee of the same expressly provides that such indebtedness, renewal,
extension or refunding is not superior in right of payment to or is pari passu
with the Junior Subordinated Debentures. Such Senior Indebtedness shall
continue to be Senior Indebtedness and entitled to the benefits of the
subordination provisions irrespective of any amendment, modification or waiver
of any term of such Senior Indebtedness. (Section 1.01).
The Indenture does not limit the aggregate amount of Senior Indebtedness
which may be issued. As of May 31, 1994, Senior Indebtedness of GTE aggregated
approximately $6.4 billion.
CERTAIN COVENANTS OF GTE
GTE will covenant that it will not declare or pay any dividend on, or
redeem, purchase, acquire or make a distribution or liquidation payment with
respect to, any of its capital stock, if at such time (i) there shall have
occurred any event that would constitute an Event of Default under the
Indenture, (ii) GTE shall be in default with respect to its payment of any
obligations under the Guarantee or (iii) GTE shall have given notice of its
selection of an extended interest payment period as provided in the Indenture
and such period, or any extension thereof, shall be continuing. (Section
4.06). GTE will also covenant (i) to remain the sole general partner of GTE
Delaware and maintain 100% ownership of the general partnership interests
thereof; provided that any permitted successor of GTE under the
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Indenture may succeed to GTE's duties as General Partner, (ii) to contribute
capital to the extent required to maintain its capital at an amount equal to
at least 3% of the total capital contributions to GTE Delaware, (iii) not to
voluntarily dissolve, wind-up or terminate GTE Delaware, except in connection
with the distribution of Junior Subordinated Debentures to the holders of
Preferred Securities in liquidation of GTE Delaware and in connection with
certain mergers, consolidations or amalgamations permitted by the Limited
Partnership Agreement, (iv) to timely perform all of its duties as the general
partner in GTE Delaware (including the duty to pay dividends on the Preferred
Securities) and (v) to use its reasonable efforts to cause GTE Delaware to
remain a limited partnership and otherwise continue to be treated as a
partnership for United States federal income tax purposes. (Section 4.07).
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Junior Subordinated Debentures of each series will be issued in registered
form and in either certificated form or will be represented by one or more
global securities. If not represented by one or more global securities, Junior
Subordinated Debentures may be presented for registration of transfer (with
the form of transfer endorsed thereon duly executed) or exchange, at the
office of the Debenture Registrar or at the office of any transfer agent
designated by GTE for such purpose with respect to any series of Junior
Subordinated Debentures and referred to in an applicable Prospectus
Supplement, without service charge and upon payment of any taxes and other
governmental charges as described in the relevant Indenture. Such transfer or
exchange will be effected upon the Debenture Registrar or such transfer agent,
as the case may be, being satisfied with the documents of title and identity
of the person making the request. GTE has appointed the Trustee as Debenture
Registrar with respect to the Junior Subordinated Debentures. (Section 2.05).
If a Prospectus Supplement refers to any transfer agents (in addition to the
Debenture Registrar) initially designated by GTE with respect to any series of
Junior Subordinated Debentures, GTE may at any time rescind the designation of
any such transfer agent or approve a change in the location through which any
such transfer agent acts, except that GTE will be required to maintain a
transfer agent in each Place of Payment for such series. (Section 4.02). GTE
may at any time designate additional transfer agents with respect to any
series of Junior Subordinated Debentures.
In the event of any redemption in part, GTE shall not be required to (i)
issue, register the transfer of or exchange any Junior Subordinated Debenture
during a period beginning at the opening of business 15 days before any
selection for redemption of Junior Subordinated Debentures of like tenor and
of the series of which such Junior Subordinated Debenture is a part, and
ending at the close of business on the earliest date in which the relevant
notice of redemption is deemed to have been given to all holders of Junior
Subordinated Debentures of like tenor and of such series to be redeemed and
(ii) register the transfer of or exchange any Junior Subordinated Debentures
so selected for redemption, in whole or in part, except the unredeemed portion
of any Junior Subordinated Debenture being redeemed in part. (Section 2.05).
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and premium (if any) on any Junior Subordinated Debenture will
be made only against surrender to the Paying Agent of such Junior Subordinated
Debenture. Unless otherwise indicated in an applicable Prospectus Supplement,
principal of and any premium and interest, if any, on Junior Subordinated
Debentures will be payable, subject to any applicable laws and regulations, at
the office of such Paying Agent or Paying Agents as GTE may designate from
time to time, except that at the option of GTE payment of any interest may be
made by check mailed to the address of the person entitled thereto as such
address shall appear in the Debenture Register with respect to such Junior
Subordinated Debentures. (Section 4.03). Unless otherwise indicated in an
applicable Prospectus Supplement, payment of interest on a Junior Subordinated
Debenture on any Interest Payment Date will be made to
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the person in whose name such Junior Subordinated Debenture (or Predecessor
Security) is registered at the close of business on the Regular Record Date
for such interest payment. (Section 2.03).
GTE will act as Paying Agent with respect to the Junior Subordinated
Debentures. GTE may at any time designate additional Paying Agents or rescind
the designation of any Paying Agents or approve a change in the office through
which any Paying Agent acts, except that GTE will be required to maintain a
Paying Agent in each Place of Payment for each series of the respective Junior
Subordinated Debentures. (Sections 4.02 and 4.03).
All moneys paid by GTE to a Paying Agent for the payment of the principal of
or premium or interest, if any, on any Junior Subordinated Debenture of any
series which remain unclaimed at the end of two years after such principal,
premium, if any, or interest shall have become due and payable will be repaid
to GTE and the holder of such Junior Subordinated Debenture will thereafter
look only to GTE for payment thereof. (Section 11.05).
GLOBAL DEBENTURES
If any Junior Subordinated Debentures of a series are represented by one or
more global securities, the applicable Prospectus Supplement will describe the
circumstances, if any, under which beneficial owners of interests in any such
Global Debenture may exchange such interests for Junior Subordinated
Debentures of such series and of like tenor and principal amount in any
authorized form and denomination. Principal of and any premium and interest on
a Global Debenture will be payable in the manner described in the applicable
Prospectus Supplement. (Section 2.11).
The specific terms of the depository arrangement with respect to any portion
of a series of Junior Subordinated Debentures to be represented by a Global
Debenture will be described in the applicable Prospectus Supplement.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting GTE and the Trustee, with the
consent of the holders of not less than a majority in principal amount of the
Junior Subordinated Debentures of each series which are affected by the
modification, to modify the Indenture or any supplemental indenture affecting
that series or the rights of the holders of that series of Junior Subordinated
Debentures; provided, that no such modification may, without the consent of
the holder of each outstanding Junior Subordinated Debenture affected thereby,
(i) extend the fixed maturity of any Junior Subordinated Debentures of any
series, or reduce the principal amount thereof, or reduce the rate or extend
the time of payment of interest thereon, or reduce any premium payable upon
the redemption thereof, without the consent of the holder of each Junior
Subordinated Debenture so affected or (ii) reduce the percentage of Junior
Subordinated Debentures, the holders of which are required to consent to any
such supplemental indenture, without the consent of the holders of each Junior
Subordinated Debenture then outstanding and affected thereby. (Section 9.02).
In addition, GTE and the Trustee may execute, without the consent of any
holder of Junior Subordinated Debentures, any supplemental indenture for
certain other usual purposes including the creation of any new series of
Junior Subordinated Debentures. (Sections 2.01, 9.01 and 10.01).
EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of
Default" with respect to each series of Junior Subordinated Debentures:
(a) failure for 10 days to pay interest on the Junior Subordinated
Debentures of that series, including any Additional Interest in respect
thereof, when due; or
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(b) failure to pay principal or premium, if any, on the Junior
Subordinated Debentures of that series when due whether at maturity, upon
redemption by declaration or otherwise, or to make any sinking fund payment
with respect to that series; or
(c) failure to observe or perform any other covenant (other than those
specifically relating to another series) contained in the Indenture for 90
days after notice; or
(d) the dissolution, winding-up or termination of GTE Delaware, except in
connection with the distribution of Junior Subordinated Debentures to the
holders of Preferred Securities in liquidation of GTE Delaware and in
connection with certain mergers, consolidations or amalgamations permitted
by the Limited Partnership Agreement; or
(e) certain events in bankruptcy, insolvency or reorganization of GTE.
(Section 6.01).
The holders of a majority in aggregate outstanding principal amount of any
series of the Junior Subordinated Debentures have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the Trustee for that series. (Section 6.06). The Trustee or the holders of
not less than 25% in aggregate outstanding principal amount of any particular
series of the Junior Subordinated Debentures may declare the principal due and
payable immediately on default with respect to such series, but the holders of
a majority in aggregate outstanding principal amount of such series may annul
such declaration and waive the default if the default has been cured and a sum
sufficient to pay all matured installments of interest and principal and any
premium has been deposited with the Trustee. (Sections 6.01 and 6.06).
The holders of a majority in aggregate outstanding principal amount of all
series of the Junior Subordinated Debentures affected thereby may, on behalf
of the holders of all the Junior Subordinated Debentures of such series, waive
any past default, except a default in the payment of principal, premium, if
any, or interest. (Section 6.06). GTE is required to file annually with the
Trustee a certificate as to whether or not GTE is in compliance with all the
conditions and covenants under the Indenture. (Section 5.03(d)).
CONSOLIDATION, MERGER AND SALE
The Indenture does not contain any covenant which restricts GTE's ability to
merge or consolidate with or into any other corporation, sell or convey all or
substantially all of its assets to any person, firm or corporation or
otherwise engage in restructuring transactions. (Section 10.01).
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, GTE will be discharged from any and all
obligations in respect of the Junior Subordinated Debentures of any series
(except in each case for certain obligations to register the transfer or
exchange of Junior Subordinated Debentures, replace stolen, lost or mutilated
Junior Subordinated Debentures, maintain paying agencies and hold moneys for
payment in trust) if GTE deposits with the Trustee, in trust, moneys or
Government Obligations, in an amount sufficient to pay all the principal of,
and interest on, the Junior Subordinated Debentures of such series on the
dates such payments are due in accordance with the terms of such Junior
Subordinated Debentures. (Sections 11.01 and 11.02).
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by,
and construed in accordance with, the laws of the State of New York. (Section
13.05).
INFORMATION CONCERNING THE TRUSTEE
The Trustee, prior to default, undertakes to perform only such duties as are
specifically set forth in the Indenture and, after default, shall exercise the
same degree of care as a prudent individual would
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exercise in the conduct of his or her own affairs. (Section 7.01). Subject to
such provision, the Trustee is under no obligation to exercise any of the
powers vested in it by the Indenture at the request of any holder of Junior
Subordinated Debentures, unless offered reasonable indemnity by such holder
against the costs, expenses and liabilities which might be incurred thereby.
(Section 7.02). The Trustee is not required to expand or risk its own funds or
otherwise incur personal financial liability in the performance of its duties
if the Trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it. (Section 7.01).
GTE maintains a deposit account and banking relationship with the Trustee.
The Trustee serves as trustee under other indentures pursuant to which
unsecured debt securities of GTE are outstanding.
MISCELLANEOUS
GTE will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly-owned
subsidiary of GTE; provided, that, in the event of any such assignment, GTE
will remain liable for all such obligations. GTE Delaware may not assign any
of its rights under the Indenture without the prior written consent of GTE.
Subject to the foregoing, the Indenture will be binding upon and inure to the
benefit of the parties thereto and their respective successors and assigns.
The Indenture provides that it may not otherwise be assigned by the parties
thereto. (Section 13.11).
PLAN OF DISTRIBUTION
GTE may sell any series of Junior Subordinated Debentures, and GTE Delaware
may sell any series of Preferred Securities, being offered hereby in one or
more of the following ways from time to time: (i) to underwriters for resale
to the public or to institutional investors; (ii) directly to institutional
investors; or (iii) through agents to the public or to institutional
investors. The Prospectus Supplement with respect to each series of Offered
Securities will set forth the terms of the offering of such Offered
Securities, including the name or names of any underwriters or agents, the
purchase price of such Offered Securities and the proceeds to GTE or GTE
Delaware, as the case may be, from such sale, any underwriting discounts or
agency fees and other item's constituting underwriters' or agents'
compensation, any initial public offering price, any discounts or concessions
allowed or reallowed or paid to dealers and any securities exchanges on which
such Offered Securities may be listed.
If underwriters are used in the sale, such Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale.
Unless otherwise set forth in the Prospectus Supplement, the obligations of
the underwriters to purchase any series of Offered Securities will be subject
to certain conditions precedent and the underwriters will be obligated to
purchase all of such series of Offered Securities, if any are purchased. In
the event of a default of one or more of the underwriters involving not more
than one-eleventh of the aggregate number or aggregate principal amount of
Offered Securities offered for sale, the non-defaulting underwriters would be
required to purchase the Offered Securities agreed to be purchased by such
defaulting underwriter or underwriters. In the event of a default in excess of
one-eleventh of the aggregate number or aggregate principal amount of Offered
Securities, then GTE and/or GTE Delaware may, at their or its option, sell to
the non-defaulting underwriters all of the Offered Securities which such
underwriters have committed to purchase.
Underwriters and agents may be entitled under agreements entered into with
GTE and/or GTE Delaware to indemnification by GTE and/or GTE Delaware against
certain civil liabilities, including
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liabilities under the Securities Act of 1933, or to contribution with respect
to payments which the underwriters or agents may be required to make in
respect thereof. Underwriters and agents may be customers of, engage in
transactions with, or perform services for GTE in the ordinary course of
business.
Each series of Offered Securities will be a new issue of securities and will
have no established trading market. Any underwriters to whom Offered
Securities are sold by GTE or GTE Delaware for public offering and sale may
make a market in such Offered Securities, but such underwriters will not be
obligated to do so and may discontinue any market making at any time without
notice. The Offered Securities may or may not be listed on a national
securities exchange.
EXPERTS
The consolidated financial statements included in GTE's Annual Report on
Form 10-K for the year ended December 31, 1993, which is incorporated by
reference in this Prospectus, have been audited by Arthur Andersen & Co.,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated herein in reliance upon the authority of said
firm as experts in giving said report.
LEGAL OPINIONS
Certain legal matters in connection with the Offered Securities will be
passed upon for GTE by William P. Barr, Esq., Senior Vice President and
General Counsel, and for the purchasers or underwriters by Milbank, Tweed,
Hadley & McCloy, New York, New York. Certain matters of Delaware law relating
to the validity of the Preferred Securities will be passed upon by Richards,
Layton & Finger, P.A., as special Delaware counsel for GTE and GTE Delaware.
Mr. Barr will rely on the opinion of Richards, Layton & Finger, P.A. as to
certain matters of Delaware law.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE PRO-
SPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUP-
PLEMENT AND THE PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPEC-
TUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS COR-
RECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GTE Delaware.............................................................. S-3
GTE Corporation........................................................... S-3
Investment Considerations................................................. S-4
Summary Financial and Operating Information of GTE........................ S-6
Capitalization of GTE..................................................... S-8
Use of Proceeds........................................................... S-8
Description of the Series A Preferred Securities.......................... S-9
Description of the Series A Junior Subordinated Debentures................ S-18
Effect of Obligations under the Series A Junior Subordinated Debentures
and the Guarantee........................................................ S-22
United States Taxation.................................................... S-23
Underwriting.............................................................. S-26
Legal Matters............................................................. S-28
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
GTE Delaware.............................................................. 3
GTE Corporation........................................................... 3
Consolidated Ratios of Earnings to Fixed Charges and Earnings to Combined
Fixed Charges and Preferred Stock Dividends of GTE Corporation........... 3
Use of Proceeds........................................................... 4
Description of the Preferred Securities................................... 4
Description of the Guarantee.............................................. 5
Description of the Junior Subordinated Debentures......................... 7
Plan of Distribution...................................................... 12
Experts................................................................... 13
Legal Opinions............................................................ 13
</TABLE>
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17,000,000 PREFERRED SECURITIES
GTE DELAWARE
GUARANTEED TO THE EXTENT THE ISSUER HAS FUNDS AS SET FORTH HEREIN BY
GTE CORPORATION LOGO
9 1/4% CUMULATIVE
MONTHLY INCOME PREFERRED SECURITIES,
SERIES A
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
CS FIRST BOSTON
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
KIDDER, PEABODY & CO. INCORPORATED
LEHMAN BROTHERS
MORGAN STANLEY & CO. INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON BROTHERS INC
SMITH BARNEY INC.
REPRESENTATIVES OF THE UNDERWRITERS
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