<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1994
REGISTRATION NOS. 33-53495
33-53495-01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
GTE DELAWARE, L.P. GTE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED (EXACT NAME OF REGISTRANT AS SPECIFIED
IN CHARTER) IN CHARTER)
DELAWARE NEW YORK
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
06-1395851 13-1678633
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
C/O J. MICHAEL KELLY J. MICHAEL KELLY
SENIOR VICE PRESIDENT-FINANCE SENIOR VICE PRESIDENT-FINANCE
GTE CORPORATION GTE CORPORATION
ONE STAMFORD FORUM ONE STAMFORD FORUM
STAMFORD, CONNECTICUT 06904 STAMFORD, CONNECTICUT 06904
203-965-2000 203-965-2000
(Address, including zip code, and (Address, including zip code, and
telephone number, including area code, telephone number, including area code,
of Registrant's principal executive of Registrant's principal executive
offices and agent for service) offices and agent for service)
--------------
COPY OF CORRESPONDENCE TO:
GEORGE J. FORSYTH, ESQ.
MILBANK, TWEED, HADLEY & MCCLOY
1 CHASE MANHATTAN PLAZA
NEW YORK, NEW YORK 10005
212-530-5000
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of the Registration Statement.
--------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement contains three forms of Prospectus Supplement to
the Prospectus included herein: the first form is to be used in connection
with an offering by GTE Corporation of Junior Subordinated Deferrable Interest
Debentures, the second form is to be used in connection with an offering by
GTE Delaware, L.P. of fixed rate Cumulative Monthly Income Preferred
Securities, and the third form is to be used in connection with an offering by
GTE Delaware, L.P. of adjustable rate Cumulative Monthly Income Preferred
Securities.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 30, 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1994
$
GTE CORPORATION LOGO
% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES, SERIES A, DUE 2024
----------
Interest on the % Junior Subordinated Deferrable Interest Debentures,
Series A, Due 2024 (the "Series A Junior Subordinated Debentures") is payable
semi-annually on June 30 and December 31 of each year, commencing December 31,
1994. The Series A Junior Subordinated Debentures will be redeemable at the
option of GTE Corporation ("GTE"), in whole or in part, on or after , 2004
at the redemption prices set forth herein. The Series A Junior Subordinated
Debentures will be issued only in registered form in denominations of $1,000
and integral multiples thereof. See "Description of the Series A Junior
Subordinated Debentures".
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 May 31, 1994, Senior Indebtedness of
GTE aggregated approximately $6.4 billion. Senior Indebtedness includes only
indebtedness of GTE on an unconsolidated basis.
----------
SEE "INVESTMENT CONSIDERATIONS" FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN THE SERIES A JUNIOR SUBORDINATED DEBENTURES, INCLUDING THE PERIOD
AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENT OF INTEREST ON THE SERIES A
JUNIOR SUBORDINATED DEBENTURES MAY BE DEFERRED AND THE RELATED FEDERAL INCOME
TAX CONSEQUENCES.
----------
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(1) COMMISSION(2) GTE (1)(3)
----------------- ------------- -----------
<S> <C> <C> <C>
Per Series A Junior Subordinated
Debenture......................... % % %
Total.............................. $ $ $
</TABLE>
- -----
(1) Plus accrued interest, if any, from , 1994.
(2) GTE has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deducting estimated expenses of $ payable by GTE.
----------
The Series A Junior Subordinated Debentures are offered severally by the
Underwriters, as specified herein, 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 the Series A Junior Subordinated Debentures will be ready for
delivery in New York, New York, on or about , 1994.
GOLDMAN, SACHS & CO.
----------
The date of this Prospectus Supplement is , 1994.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<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 IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
FOR NORTH CAROLINA PURCHASERS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR ADEQUACY OF
THIS DOCUMENT.
----------------
INVESTMENT CONSIDERATIONS
Prospective purchasers of Series A Junior Subordinated Debentures 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 SERIES A JUNIOR SUBORDINATED DEBENTURES. The obligations of
GTE under the Series A Junior Subordinated Debentures are subordinate and
junior in right of payment to Senior Indebtedness of GTE. At May 31, 1994,
Senior Indebtedness of GTE aggregated approximately $6.4 billion. Senior
Indebtedness includes only indebtedness of GTE on an unconsolidated basis.
There are no terms in the Series A Junior Subordinated Debentures that limit
GTE's ability to incur additional indebtedness, including indebtedness that
ranks senior to the Series A Junior Subordinated Debentures. See "Description
of the Junior Subordinated Debentures--Subordination" in the accompanying
Prospectus.
OPTION TO EXTEND INTEREST PAYMENT PERIOD. GTE has the right under the
Indenture (as defined herein) 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, semi-annual interest
payments on the Series A Junior Subordinated Debentures would be deferred (but
would continue to accrue with interest thereon) 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 believes that the extension of an
interest payment period on the Series A Junior Subordinated Debentures is
unlikely. See "Description of the Series A Junior Subordinated Debentures--
Option to Extend Interest Payment Period".
Should an extended interest payment period occur, holders of the Series A
Junior Subordinated Debentures will continue to accrue income for United
States federal income tax purposes even though interest is not being paid on a
current basis. 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 related to such income if such
a holder disposes of his or her Series A Junior Subordinated Debentures prior
to the record date for payment of interest. See "United States Taxation--
United States Holders".
S-2
<PAGE>
USE OF PROCEEDS
The net proceeds, exclusive of accrued interest, from the sale of the Series
A Junior Subordinated Debentures will be used to reduce short-term
obligations, including current maturities (at May 31, 1994, totaling
approximately $2.0 billion, at an average interest cost of approximately
4.45%), and for general corporate purposes.
DESCRIPTION OF THE SERIES A JUNIOR SUBORDINATED DEBENTURES
The following description of specific terms of the Series A Junior
Subordinated Debentures offered hereby supplements and should be read in
conjunction with 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 ,
1994 (the Indenture, as so supplemented, is hereinafter referred to as the
"Indenture").
PRINCIPAL AMOUNT, INTEREST AND MATURITY
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 $
million.
The Series A Junior Subordinated Debentures are to mature , 2024 and
will bear interest at the rate per annum shown in the title thereof payable
semi-annually on June 30 and December 31, commencing December 31, 1994, to the
person in whose name the Series A Junior Subordinated Debenture is registered
at the close of business on the preceding June 15 or December 15,
respectively. 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.
FORM AND DENOMINATION
The Series A Junior Subordinated Debentures will be issued only in
registered form in denominations of $1,000 and integral multiples thereof.
S-3
<PAGE>
REDEMPTION
The Series A Junior Subordinated Debentures will be redeemable at the option
of GTE, as a whole or in part, at any time on or after , 2004 and prior
to maturity, upon not less than 30 nor more than 60 days' notice, at the
respective redemption prices (expressed in percentage of the principal amount
to be redeemed) during the twelve-month periods commencing on of the
years indicated:
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
YEAR PRICE YEAR PRICE
- ---- ---------- ---- ----------
<S> <C> <C> <C>
2004........................ % 2014........................ 100.00%
2005........................ % 2015........................ 100.00%
2006........................ % 2016........................ 100.00%
2007........................ % 2017........................ 100.00%
2008........................ % 2018........................ 100.00%
2009........................ % 2019........................ 100.00%
2010........................ % 2020........................ 100.00%
2011........................ % 2021........................ 100.00%
2012........................ % 2022........................ 100.00%
2013........................ % 2023........................ 100.00%
</TABLE>
in each case, together with accrued interest to the redemption date.
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. 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 next interest payment date or (ii) the date
GTE is required to give notice to holders of the Series A Junior Subordinated
Debentures (or, if applicable, to the New York Stock Exchange or other
applicable self-regulatory organization) of the record or payment date of such
interest payment, but in any event not less than two Business Days prior to
such record date.
PAYING AGENT AND REGISTRAR
The Bank of New York will act as paying agent and registrar for the Series A
Junior Subordinated Debentures.
S-4
<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
Junior Subordinated Debentures and represents the opinion of Sullivan &
Cromwell, special tax counsel to GTE, 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 Junior
Subordinated Debentures. Moreover, the discussion focuses on holders of Series
A Junior Subordinated Debentures who are individual citizens or residents of
the United States that hold the Series A Junior Subordinated Debentures as a
capital asset and has only limited application to corporations, estates, trusts
or non-resident aliens. Accordingly, each prospective purchaser of Series A
Junior Subordinated Debentures 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 Junior
Subordinated Debentures.
UNITED STATES HOLDERS
For purposes of this discussion, a United States Holder is a beneficial owner
who or that is (i) a citizen or resident of the United States, (ii) a domestic
corporation or (iii) otherwise subject to United States federal income taxation
on a net income basis in respect of the Series A Junior Subordinated
Debentures.
Interest on Series A Junior Subordinated Debentures will be included in the
income of a United States Holder as it accrues, rather than when it is paid,
regardless of the United States Holder's regular method of accounting for tax
purposes. United States holders may therefore include interest in income for
taxable years prior to the year in which the interest is actually received.
This should only occur, however, during an Extension Period or in the case of a
United States Holder who has not adopted a calendar tax year.
A United States Holder will generally recognize gain or loss on the sale or
retirement of a Series A Junior Subordinated Debenture equal to the difference
between the amount realized from the sale or retirement and the tax basis of
the Series A Junior Subordinated Debenture. Such gain or loss will be capital
gain or loss, and will be long-term capital gain or loss if the Series A Junior
Subordinated Debenture has been held for more than one year. The tax basis of
the Series A Junior Subordinated Debenture will generally equal the amount paid
for it, increased by the amount of any accrued but unpaid interest.
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
Junior Subordinated Debenture.
Under current United States federal income tax law, subject to the discussion
below with respect to backup withholding:
(i) Payments by GTE or any of its paying agents to any holder of a Series
A Junior Subordinated Debenture who or which is a United States Alien
Holder will not be subject to United
S-5
<PAGE>
States federal withholding tax provided that (a) the beneficial owner of
the Series A Junior Subordinated Debenture 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 Junior Subordinated Debenture is not a controlled foreign
corporation that is related to GTE through stock ownership and (c) either
(x) the beneficial owner of the Series A Junior Subordinated Debenture
certifies to GTE 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 Junior Subordinated Debenture 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 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 or its agent with a copy thereof; and
(ii) a United States Alien Holder of a Series A Junior Subordinated
Debenture will generally not be subject to United States federal
withholding tax on any gain realized on the sale or exchange of a Series A
Junior Subordinated Debenture 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 of
principal and interest on a Series A Junior Subordinated Debenture, and the
proceeds of the sale of a Series A Junior Subordinated Debenture prior to
maturity within the United States, with respect to non-corporate United States
Holders, 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 or to report all interest and dividends required to be
shown on its federal income tax returns.
Information reporting and backup withholding will not apply to payments of
principal and interest made by GTE or a paying agent to a United States Alien
Holder on a Series A Junior Subordinated Debenture if the certification
described in clause (i) (c) under "United States Alien Holders" above is
received, provided that the payor does not have actual knowledge that the
holder is a United States Holder.
Payments of the proceeds from the sale by a United States Alien Holder of a
Series A Junior Subordinated Debenture made to or through a foreign office of
a broker 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 proceeds from the sale of a Series A Junior
Subordinated Debenture to or through the United States office of a broker is
subject to information reporting and backup withholding unless the United
States Alien Holder or beneficial owner certifies as to its non-United States
status or otherwise establishes an exemption from information reporting and
backup withholding.
S-6
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, GTE has
agreed to sell to each of the Underwriters named below (the "Underwriters"),
and each of the Underwriters has severally agreed to purchase from GTE, the
principal amount of Series A Junior Subordinated Debentures set forth opposite
its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF SERIES A
JUNIOR
SUBORDINATED
UNDERWRITER DEBENTURES
----------- ----------------
<S> <C>
Goldman, Sachs & Co...................................... $
-------
$
=======
</TABLE>
The Underwriting Agreement provides that the Underwriters will be obligated
to purchase all of the Series A Junior Subordinated Debentures if any are
purchased.
The Underwriters have advised GTE that they propose initially to offer the
Series A Junior Subordinated Debentures to the public at the initial public
offering price set forth on the cover page of this Prospectus Supplement, and
to certain dealers at such price less a concession not in excess of % of the
principal amount of the Series A Junior Subordinated Debentures. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of % of the principal amount of the Series A Junior Subordinated
Debentures to certain brokers and dealers. After the Series A Junior
Subordinated Debentures are released for sale to the public, the offering
price and other selling terms may from time to time be varied by the
Underwriters.
The Series A Junior Subordinated Debentures are a new issue of securities
with no established trading market. GTE has been advised by the Underwriters
that they intend to make a market in the Series A Junior Subordinated
Debentures, but they are not obligated to do so and may discontinue such
market- making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Series A Junior Subordinated
Debentures.
GTE has 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
Statements as to United States taxation in the Prospectus Supplement under
the caption "United States Taxation" have been passed upon for GTE by Sullivan
& Cromwell, special tax counsel to GTE, and are stated herein on their
authority.
S-7
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS 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
SUPPLEMENT 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 PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
---------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Considerations................................................. S-2
Use of Proceeds........................................................... S-3
Description of the Series A Junior Subordinated Debentures................ S-3
United States Taxation.................................................... S-5
Underwriting.............................................................. S-7
Legal Matters............................................................. S-7
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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$
GTE CORPORATION LOGO
% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES, SERIES A, DUE 2024
---------------
PROSPECTUS SUPPLEMENT
---------------
GOLDMAN, SACHS & CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 30, 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1994
PREFERRED SECURITIES
GTE DELAWARE
% 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 % 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 % 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 , 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 , 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, % 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 May 31,
1994, Senior Indebtedness of GTE aggregated approximately $6.4 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.
----------
Application has been made to list the Series A Preferred Securities on the
New York Stock Exchange.
----------
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 $ (2) $
Total.......................... $ (2) $
</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, $ per Series A
Preferred Security (or $ in the aggregate); provided, that such
compensation will be $ 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 $ .
----------
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 , 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.
----------
The date of this Prospectus Supplement is , 1994.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<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.
----------------
FOR NORTH CAROLINA PURCHASERS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR ADEQUACY OF
THIS DOCUMENT.
----------------
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 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.
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 May 31, 1994, Senior Indebtedness
of GTE aggregated approximately $6.4 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 $ million, 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 quarters ended March 31, 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 quarters ended
March 31, 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>
QUARTERS ENDED
MARCH 31,
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 $ 4,826 $ 4,746
Operating Income(a)..... 3,577 3,787 3,742 4,216 2,565 1,101 1,118
Net Income (Loss)(a):
Continuing Operations.. 1,503 1,579 1,492 1,761 972 456 500
Consolidated........... 1,611 1,671 1,543 (780) 882 456 500
Per Common Share:
Net Income (Loss)(a):
Continuing Operations.. 1.75 1.82 1.69 1.95 1.03 .48 .52
Consolidated........... 1.87 1.93 1.75 (.86) .93 .48 .52
Common Dividends De-
clared................ 1.40 1.52 1.64 1.76 1.85 .455 .47
Consolidated Ratio of
Earnings to Fixed
Charges (Unaudited)(b). 2.52 2.35 2.22 2.66 2.07 2.94 3.69
Consolidated Ratio of
Earnings to Combined
Fixed Charges and
Preferred Stock
Dividends
(Unaudited)(b)......... 2.42 2.28 2.17 2.61 2.04 2.90 3.61
OPERATING AND OTHER DA-
TA:
Telephone Operations:
Revenues and Sales..... $ 15,072 $ 15,393 $ 15,652 $ 15,862 $ 15,829 $ 3,915 $ 3,865
Operating Income(c).... 3,528 3,771 3,807 4,034 2,694 1,041 1,025
Access Minutes of Use.. 39,994 44,533 47,979 51,976 55,616 13,613 14,172
Percentage Increase(d). 12.1% 11.3% 7.7% 8.3% 7.2% 9.2% 6.6%
Network Access Lines:
U.S.(e)................ 15.2 15.8 16.2 16.8 17.1 17.0 17.2
Worldwide(e)........... 17.6 18.3 20.5 21.4 22.1 21.6 22.3
U.S. Cellular-Mobile Op-
erations (Unaudited):
Service Revenues....... $ 260 $ 478 $ 675 $ 853 $ 1,082 $ 238 $ 335
Operating Income....... 4 9 10 62 134 29 50
Operating Cash Flow
(Operating Income
Before Depreciation
and Amortization)..... 43 107 183 266 356 78 113
Adjusted "POPS"(f)..... 39.2 51.7 52.2 53.1 53.0 53.2 53.1
Subscribers (In thou-
sands)................ 282 594 811 1,090 1,585 1,156 1,718
<CAPTION>
QUARTERS ENDED
MARCH 31,
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 $ 29,830 $ 28,670
Total Assets............ 36,921 40,178 42,437 42,144 41,575 41,473 41,353
Short-Term Obligations,
including Current Matu-
rities................. 1,227 3,013 2,291 2,692 1,644 2,232 2,679
Long-Term Debt and Re-
deemable Preferred
Stock.................. 13,137 14,130 16,252 14,356 13,175 13,595 12,127
Common Shareholders' Eq-
uity................... 9,516 10,264 10,854 9,964 9,482 10,097 9,612
</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) Excludes impact of non-strategic telephone properties sold in 1993.
(e) Access lines as of December 31, 1993 and March 31, 1994 exclude 440,000
net lines sold during 1993. 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 March 31, 1994, and as adjusted to reflect the
application of the estimated net proceeds from the sale of the Series A
Preferred Securities. See "Use of Proceeds".
<TABLE>
<CAPTION>
MARCH 31, 1994
--------------------
ACTUAL AS ADJUSTED
------- -----------
(IN MILLIONS)
<S> <C> <C>
Short-term obligations, including current maturities...... $ 2,679 $
======= =======
Long-term debt(a)......................................... $12,004 $12,004
------- -------
Minority interests in equity of subsidiaries.............. 1,117
------- -------
Preferred Stock, subject to mandatory redemption.......... 123 123
------- -------
Shareholders' equity:
Preferred stock......................................... 11 11
Common stock............................................ 48 48
Amounts paid in, in excess of par value................. 7,375 7,375
Reinvested earnings..................................... 2,828 2,828
Guaranteed ESOP obligations............................. (639) (639)
------- -------
Total shareholders' equity............................ 9,623 9,623
------- -------
Total capitalization (excluding short-term
obligations)......................................... $22,867 $
======= =======
</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 March 31, 1994, such Senior
Indebtedness aggregated approximately $6.3 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
short-term obligations, including current maturities (at May 31, 1994,
totaling approximately $2.0 billion, at an average interest cost of
approximately 4.45%), 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 % 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 % 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
, 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.
S-9
<PAGE>
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 , 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 , 1994, which amendment or change is
effective or such interpretation or pronouncement is announced on or after
, 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 , 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 partner in GTE Delaware or otherwise
be deemed to be a 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
Application has been made to list the Series A Preferred Securities on the
New York Stock Exchange.
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 ,
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 $ million, 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
, 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.
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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 , 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 % 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 , 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., and , 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............................................
----
Total........................................................
====
</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 $ per Series A Preferred
Security. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ 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'
arranging the investment therein of such proceeds, an amount in New York
Clearing House (next day) funds of $ per Series A Preferred Security ($
per Series A Preferred Security sold to certain institutions) for the accounts
of the several Underwriters.
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.
S-26
<PAGE>
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 Michael T.
Masin, Esq., Vice Chairman and Acting General Counsel of GTE, and on behalf of
the Underwriters by Milbank, Tweed, Hadley & McCloy, counsel to the
Underwriters. Mr. Masin 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-27
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS 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
SUPPLEMENT 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 PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
---------------
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-27
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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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PREFERRED SECURITIES
GTE DELAWARE
GUARANTEED TO THE EXTENT THE ISSUER HAS FUNDS AS SET FORTH HEREIN BY
GTE CORPORATION LOGO
% CUMULATIVE
MONTHLY INCOME PREFERRED SECURITIES,
SERIES A
---------------
PROSPECTUS SUPPLEMENT
---------------
GOLDMAN, SACHS & CO.
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 30, 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1994
PREFERRED SECURITIES
GTE DELAWARE
CUMULATIVE ADJUSTABLE RATE 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 Cumulative Adjustable Rate 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 accruing from the date of original issuance and
payable monthly in arrears on the last day of each calendar month of each year,
commencing , 1994 ("dividends"). The dividend rate will be adjusted
quarterly. The rate for the initial period from the date of initial issuance to
, 1994 will be % per annum, which is equivalent to $ per Series A
Preferred Security per annum. Thereafter, dividends on the Series A Preferred
Securities will be payable at the "Applicable Rate" from time to time in
effect. The Applicable Rate for any quarter will be equal to % of the highest
of the "Treasury Bill Rate", the "Ten Year Constant Maturity Rate" and the
"Thirty Year Constant Maturity Rate" determined in advance of such quarter. The
Applicable Rate for any quarter will not be less than % per annum nor greater
than % per annum. See "Description of the Series A Preferred Securities--
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 , 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, Adjustable Rate 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
May 31, 1994, Senior Indebtedness of GTE aggregated approximately $6.4 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.
----------
Application has been made to list the Series A Preferred Securities on the
New York Stock Exchange.
----------
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.. $ (2) $
Total............................ $ (2) $
</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, $ per Series A
Preferred Security (or $ in the aggregate); provided, that such
compensation will be $ 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 $ .
----------
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 , 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.
----------
The date of this Prospectus Supplement is , 1994.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<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.
----------------
FOR NORTH CAROLINA PURCHASERS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED UPON THE ACCURACY OR ADEQUACY OF
THIS DOCUMENT.
----------------
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 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.
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 May 31, 1994, Senior
Indebtedness of GTE aggregated approximately $6.4 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 $ million, 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
S-4
<PAGE>
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".
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 quarters ended March 31, 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 quarters ended
March 31, 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>
QUARTERS ENDED
MARCH 31,
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 $ 4,826 $ 4,746
Operating Income(a)..... 3,577 3,787 3,742 4,216 2,565 1,101 1,118
Net Income (Loss)(a):
Continuing Operations.. 1,503 1,579 1,492 1,761 972 456 500
Consolidated........... 1,611 1,671 1,543 (780) 882 456 500
Per Common Share:
Net Income (Loss)(a):
Continuing Operations.. 1.75 1.82 1.69 1.95 1.03 .48 .52
Consolidated........... 1.87 1.93 1.75 (.86) .93 .48 .52
Common Dividends De-
clared................ 1.40 1.52 1.64 1.76 1.85 .455 .47
Consolidated Ratio of
Earnings to Fixed
Charges (Unaudited)(b). 2.52 2.35 2.22 2.66 2.07 2.94 3.69
Consolidated Ratio of
Earnings to Combined
Fixed Charges and
Preferred Stock
Dividends
(Unaudited)(b)......... 2.42 2.28 2.17 2.61 2.04 2.90 3.61
OPERATING AND OTHER DA-
TA:
Telephone Operations:
Revenues and Sales..... $ 15,072 $ 15,393 $ 15,652 $ 15,862 $ 15,829 $ 3,915 $ 3,865
Operating Income(c).... 3,528 3,771 3,807 4,034 2,694 1,041 1,025
Access Minutes of Use.. 39,994 44,533 47,979 51,976 55,616 13,613 14,172
Percentage Increase(d). 12.1% 11.3% 7.7% 8.3% 7.2% 9.2% 6.6%
Network Access Lines:
U.S.(e)................ 15.2 15.8 16.2 16.8 17.1 17.0 17.2
Worldwide(e)........... 17.6 18.3 20.5 21.4 22.1 21.6 22.3
U.S. Cellular-Mobile Op-
erations (Unaudited):
Service Revenues....... $ 260 $ 478 $ 675 $ 853 $ 1,082 $ 238 $ 335
Operating Income....... 4 9 10 62 134 29 50
Operating Cash Flow
(Operating Income
Before Depreciation
and Amortization)..... 43 107 183 266 356 78 113
Adjusted "POPS"(f)..... 39.2 51.7 52.2 53.1 53.0 53.2 53.1
Subscribers (In thou-
sands)................ 282 594 811 1,090 1,585 1,156 1,718
<CAPTION>
QUARTERS ENDED
MARCH 31,
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 $ 29,830 $ 28,670
Total Assets............ 36,921 40,178 42,437 42,144 41,575 41,473 41,353
Short-Term Obligations,
including Current Matu-
rities................. 1,227 3,013 2,291 2,692 1,644 2,232 2,679
Long-Term Debt and Re-
deemable Preferred
Stock.................. 13,137 14,130 16,252 14,356 13,175 13,595 12,127
Common Shareholders' Eq-
uity................... 9,516 10,264 10,854 9,964 9,482 10,097 9,612
</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 for the cost of voluntary
S-6
<PAGE>
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) Excludes impact of non-strategic telephone properties sold in 1993.
(e) Access lines as of December 31, 1993 and March 31, 1994 exclude 440,000 net
lines sold during 1993. 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 March 31, 1994, and as adjusted to reflect the
application of the estimated net proceeds from the sale of the Series A
Preferred Securities. See "Use of Proceeds".
<TABLE>
<CAPTION>
MARCH 31, 1994
--------------------
ACTUAL AS ADJUSTED
------- -----------
(IN MILLIONS)
<S> <C> <C>
Short-term obligations, including current maturities...... $ 2,679 $
======= =======
Long-term debt(a)......................................... $12,004 $12,004
------- -------
Minority interests in equity of subsidiaries.............. 1,117
------- -------
Preferred Stock, subject to mandatory redemption.......... 123 123
------- -------
Shareholders' equity:
Preferred stock......................................... 11 11
Common stock............................................ 48 48
Amounts paid in, in excess of par value................. 7,375 7,375
Reinvested earnings..................................... 2,828 2,828
Guaranteed ESOP obligations............................. (639) (639)
------- -------
Total shareholders' equity............................ 9,623 9,623
------- -------
Total capitalization (excluding short-term
obligations)......................................... $22,867 $
======= =======
</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 March 31, 1994, such Senior
Indebtedness aggregated approximately $6.3 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
short-term obligations, including current maturities (at May 31, 1994,
totaling approximately $2.0 billion, at an average interest cost of
approximately 4.45%), 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
Dividends on the Series A Preferred Securities will be cumulative, will
accrue from the date of initial issuance thereof and will be payable monthly
in arrears, on the last day of each calendar month of each year, commencing
, 1994, when, as and if available and determined to be so payable by GTE,
as the General Partner, except as otherwise described below. Dividends in
arrears for more than one month will bear interest thereon at the rate per
annum equal to the dividend rate during the period of arrearage. 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.
The dividend rate will be adjusted quarterly. The rate for the initial
period from the date of initial issuance to , 1994 will be % per annum,
which is equivalent to $ per Series A Preferred Security per annum.
Thereafter, dividends on the Series A Preferred Securities will be payable at
the "Applicable Rate" (as defined below) from time to time in effect.
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.
Except as provided below in this paragraph, the "Applicable Rate" for any
quarter (other than the initial period) will be equal to % of the Effective
Rate (as defined below), but not less than % per annum nor more than % per
annum. The "Effective Rate" for any quarter will be equal to the highest of
the Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty
Year Constant Maturity Rate (each as defined below) for such quarter. The
Applicable Rate will be rounded to the nearest five hundredth of a percent. In
the event that GTE Delaware determines in good faith that for any reason:
(i) any one of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate or the Thirty Year Constant Maturity Rate cannot be determined for any
quarter, then the Effective Rate for such quarter will be equal to the
higher of whichever two of such rates can be so determined;
(ii) only one of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate and the Thirty Year Constant Maturity Rate can be determined for any
quarter, then the Effective Rate for such quarter will be equal to
whichever such rate can be so determined; or
(iii) none of the Treasury Bill Rate, the Ten Year Constant Maturity Rate
and the Thirty Year Constant Maturity Rate can be determined for any
quarter, then the Effective Rate for the preceding quarter will be
continued for such quarter.
Except as described below in this paragraph, the "Treasury Bill Rate" for
each quarter will be the arithmetic average of the two most recent weekly per
annum secondary market discount rates (or the one weekly per annum secondary
market discount rate, if only one such rate is published during the relevant
Calendar Period (as defined below)) for three-month U.S. Treasury bills, as
published weekly by the Federal Reserve Board (as defined below) during the
Calendar Period immediately preceding the last ten calendar days preceding the
quarter for which the dividend rate on the Series A Preferred Securities is
being determined. In the event that the Federal Reserve Board does not publish
such a weekly per annum secondary market discount rate during any such
Calendar Period, then the Treasury Bill Rate for such quarter will be the
arithmetic average of the two most recent weekly per annum secondary market
discount rates (or the one weekly per annum secondary market discount rate, if
only one such rate is published during the relevant Calendar Period) for
three-month U.S. Treasury bills, as published weekly during such Calendar
Period by any Federal Reserve Bank or by any U.S. Government department or
agency selected by GTE Delaware. In the event that a per annum secondary
market discount rate for three-month U.S. Treasury bills is not published by
the Federal Reserve Board or by any Federal Reserve Bank or by any U.S.
Government department or agency during such Calendar Period, then the Treasury
Bill Rate for such quarter will be the arithmetic average
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of the two most recent weekly per annum secondary market discount rates (or
the one weekly per annum secondary market discount rate, if only one such rate
is published during the relevant Calendar Period) for all of the U.S. Treasury
bills then having remaining maturities of not less than 80 nor more than 100
days, as published during such Calendar Period by the Federal Reserve Board,
or if the Federal Reserve Board does not publish such rates, by any Federal
Reserve Bank or by any U.S. Government department or agency selected by GTE
Delaware. In the event that GTE Delaware determines in good faith that for any
reason no such U.S. Treasury bill rates are published as provided above during
such Calendar Period, then the Treasury Bill Rate for such quarter will be the
arithmetic average of the per annum secondary market discount rates based upon
the closing bids during such Calendar Period for each of the issues of
marketable non-interest-bearing U.S. Treasury securities with a remaining
maturity of not less than 80 nor more than 100 days from the date of each such
quotation, as chosen and quoted daily for each business day in New York City
(or less frequently if daily quotations are not generally available) to GTE
Delaware by at least three recognized dealers in U.S. Government securities
selected by GTE Delaware. In the event that GTE Delaware determines in good
faith that for any reason GTE Delaware cannot determine the Treasury Bill Rate
for any quarter as provided above in this paragraph, the Treasury Bill Rate
for such quarter will be the arithmetic average of the per annum secondary
market discount rate based upon the closing bids during such Calendar Period
for each of the issues of marketable interest-bearing U.S. Treasury securities
with a remaining maturity of not less than 80 nor more than 100 days, as
chosen and quoted daily for each business day in New York City (or less
frequently if daily quotations are not generally available) to GTE Delaware by
at least three recognized dealers in U.S. Government securities selected by
GTE Delaware.
Except as described below in this paragraph, the "Ten Year Constant Maturity
Rate" for each quarter will be the arithmetic average of the two most recent
weekly per annum Ten Year Average Yields (as defined below) (or the one weekly
per annum Ten Year Average Yield, if only one such yield is published during
the relevant Calendar Period), as published weekly by the Federal Reserve
Board during the Calendar Period immediately preceding the last ten calendar
days preceding the quarter for which the dividend rate on the Series A
Preferred Securities is being determined. In the event that the Federal
Reserve Board does not publish such a weekly per annum Ten Year Average Yield
during such Calendar Period, then the Ten Year Constant Maturity Rate for such
quarter will be the arithmetic average of the two most recent weekly per annum
Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield,
if only one such yield is published during the relevant Calendar Period), as
published weekly during such Calendar Period by any Federal Reserve Bank or by
any U.S. Government department or agency selected by GTE Delaware. In the
event that a per annum Ten Year Average Yield is not published by the Federal
Reserve Board or by the Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then the Ten Year Constant
Maturity Rate for such quarter will be the arithmetic average of the two most
recent weekly per annum average yields to maturity (or the one weekly per
annum average yield to maturity, if only one such yield is published during
the relevant Calendar Period) for all of the actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities (as
defined below)) then having remaining maturities of not less than eight nor
more than twelve years, as published during such Calendar Period by the
Federal Reserve Board or, if the Federal Reserve Board does not publish such
yields, by any Federal Reserve Bank or by any U.S. Government department or
agency selected by GTE Delaware. In the event that GTE Delaware determines in
good faith that for any reason GTE Delaware cannot determine the Ten Year
Constant Maturity Rate for any quarter as provided above in this paragraph,
then the Ten Year Constant Maturity Rate for such quarter will be the
arithmetic average of the per annum average yields to maturity based upon the
closing bids during such Calendar Period for each of the issues of actively
traded marketable U.S. Treasury fixed interest rate securities (other than
Special Securities) with a final maturity date not less than eight or more
than twelve years from the date of each such quotation, as chosen and quoted
daily for each business day in New York City (or less frequently if daily
quotations are not generally available) to GTE Delaware by at least three
recognized dealers in U.S. Government securities selected by GTE Delaware.
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Except as described below in this paragraph, the "Thirty Year Constant
Maturity Rate" for each quarter will be the arithmetic average of the two most
recent weekly per annum Thirty Year Average Yields (as defined below) (or the
one weekly per annum Thirty Year Average Yield, if only one such yield is
published during the relevant Calendar Period), as published weekly by the
Federal Reserve Board during the Calendar Period immediately preceding the
last ten calendar days preceding the quarter for which the dividend rate on
the Series A Preferred Securities is being determined. In the event that the
Federal Reserve Board does not publish such a weekly per annum Thirty Year
Average Yield during such Calendar Period, then the Thirty Year Constant
Maturity Rate for such quarter will be the arithmetic average of the two most
recent weekly per annum Thirty Year Average Yields (or the one weekly per
annum Thirty Year Average Yield, if only one such yield is published during
the relevant Calendar Period), as published weekly during such Calendar Period
by any Federal Reserve Bank or by any U.S. Government department or agency
selected by GTE Delaware. In the event that a per annum Thirty Year Average
Yield is not published by the Federal Reserve Board or by any Federal Reserve
Bank or by any U.S. Government department or agency during such Calendar
Period, then the Thirty Year Constant Maturity Rate for such quarter will be
the arithmetic average of the two most recent weekly per annum average yields
to maturity (or the one weekly per annum average yield to maturity, if only
one such yield is published during the relevant Calendar Period) for all of
the actively traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) then having remaining maturities of not less
than twenty-eight nor more than thirty-two years, as published during such
Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board
does not publish such yields, by any Federal Reserve Bank or by any U.S.
Government department or agency selected by GTE Delaware. In the event that
GTE Delaware determines in good faith that for any reason GTE Delaware cannot
determine the Thirty Year Constant Maturity Rate for any quarter as provided
above in this paragraph, then the Thirty Year Constant Maturity Rate for such
quarter will be the arithmetic average of the per annum average yields to
maturity based upon the closing bids during such Calendar Period for each of
the issues of actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with a final maturity date not less
than twenty-eight nor more than thirty-two years from the date of each such
quotation, as chosen and quoted daily for each business day in New York City
(or less frequently if daily quotations are not generally available) to GTE
Delaware by at least three recognized dealers in U.S. Government securities
selected by GTE Delaware.
The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty
Year Constant Maturity Rate will each be rounded to the nearest one hundredth
of a percent.
The Applicable Rate with respect to each quarter (other than the initial
period) will be calculated as promptly as practicable by GTE Delaware
according to the appropriate method described above. GTE Delaware will cause
each Applicable Rate to be published in a newspaper of general circulation in
New York City before the commencement of the quarter to which it applies and
will cause notice of such Applicable Rate to be given to The Depository Trust
Company (the "Depository" or "DTC"), New York, New York, the securities
depository for the Series A Preferred Securities. See "Book-Entry-Only
Issuance--The Depository Trust Company" below.
As used above, the term "Calendar Period" means a period of fourteen
calendar days; the term "Federal Reserve Board" means the Board of Governors
of the Federal Reserve System; the term "Special Securities" means securities
which can, at the option of the holder, be surrendered at face value in
payment of any Federal estate tax or which provide tax benefits to the holder
and are priced to reflect such tax benefits or which were originally issued at
a deep or substantial discount; the term "Ten Year Average Yield" means the
average yield to maturity for actively traded marketable U.S. Treasury fixed
interest rate securities adjusted to constant maturities of ten years; and the
term "Thirty Year Average Yield" means the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate securities
adjusted to constant maturities of thirty years.
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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 , 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 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
S-13
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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 , 1994, which amendment or change is effective or such interpretation
or pronouncement is announced on or after , 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 , 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) 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.
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
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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
(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
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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.
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
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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 partner in GTE Delaware or
otherwise be deemed to be a 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.
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
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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.
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
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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
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.
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<PAGE>
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
Application has been made to list the Series A Preferred Securities on the
New York Stock Exchange.
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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<PAGE>
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 ,
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 $ million, 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
, 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.
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<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 , 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 shall bear interest at an
interest rate which will be adjusted quarterly. The rate for the initial
period from the date of initial issuance to , 1994 will be % per annum.
Thereafter, interest on the Series A Junior Subordinated Debentures will be
payable at the "Applicable Rate" in effect from time to time. The Applicable
Rate for any quarter will be equal to % of the highest of the "Treasury Bill
Rate", the "Ten Year Constant Maturity Rate" and the "Thirty Year Constant
Maturity Rate" determined in advance of such quarter. The Applicable Rate for
any quarter will not be less than % per annum nor greater than % per
annum. The "Treasury Bill Rate", the "Ten Year Constant Maturity Rate" and the
"Thirty Year Constant Maturity Rate" with respect to any quarter shall be
determined by GTE Delaware in the same manner as, and consistent with its
determinations with respect to, quarters for the purposes of dividends payable
on the Series A Preferred Securities. See "Description of the Series A
Preferred Securities--Dividends".
Such interest is payable monthly in arrears on the last day of each calendar
month of each year (each, an "Interest Payment Date"), commencing , 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
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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 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.
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<PAGE>
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.
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
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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".
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.
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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-26
<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 on an
economic basis over the course 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
(c) either (x) the beneficial owner of the Series A Preferred Security
certifies to GTE Delaware or
S-27
<PAGE>
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-28
<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., and , 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............................................
----
Total........................................................
====
</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 $ per Series A Preferred
Security. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ 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'
arranging the investment therein of such proceeds, an amount in New York
Clearing House (next day) funds of $ per Series A Preferred Security ($
per Series A Preferred Security sold to certain institutions) for the accounts
of the several Underwriters.
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.
S-29
<PAGE>
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 Michael T.
Masin, Esq., Vice Chairman and Acting General Counsel of GTE, and on behalf of
the Underwriters by Milbank, Tweed, Hadley & McCloy, counsel to the
Underwriters. Mr. Masin 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-30
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS 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
SUPPLEMENT 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 PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
---------------
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-21
Effect of Obligations under the Series A Junior Subordinated Debentures
and the Guarantee........................................................ S-25
United States Taxation.................................................... S-26
Underwriting.............................................................. S-29
Legal Matters............................................................. S-30
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>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PREFERRED SECURITIES
GTE DELAWARE
GUARANTEED TO THE EXTENT THE ISSUER HAS FUNDS AS SET FORTH HEREIN BY
GTE CORPORATION LOGO
CUMULATIVE ADJUSTABLE RATE
MONTHLY INCOME PREFERRED SECURITIES,
SERIES A
---------------
PROSPECTUS SUPPLEMENT
---------------
GOLDMAN, SACHS & CO.
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 23, 1994
$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 , 1994.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<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 short-term
obligations, including current maturities (at May 31, 1994, totaling
approximately $2.0 billion, at an average interest cost of approximately
4.45%), 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.
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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.
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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.
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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.
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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 Michael T. Masin, Esq., Vice Chairman and Acting
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. Masin will rely on the opinion of Richards, Layton & Finger, P.A. as to
certain matters of Delaware law. As of June 15, 1994, Mr. Masin was the
beneficial owner of approximately 2,600 shares of GTE Common Stock.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
----------- --------
<C> <S>
*1.1 Form of Underwriting Agreement to be used in connection with the
issuance of Preferred Securities.
1.2 Form of Underwriting Agreement to be used in connection with the
issuance of Junior Subordinated Debentures.
*4.1 Form of Indenture between GTE and The Bank of New York, as
Trustee.
4.2 Form of Supplemental Indenture to Indenture to be used in
connection with the issuance of Junior Subordinated Debentures
and fixed rate Preferred Securities.
4.3 Form of Supplemental Indenture to Indenture to be used in
connection with the issuance of Junior Subordinated Debentures
and adjustable rate Preferred Securities.
4.4 Form of Supplemental Indenture to Indenture to be used in
connection with the issuance of Junior Subordinated Debentures
only.
*4.5 Certificate of Limited Partnership of GTE Delaware.
4.6 Form of Amended and Restated Agreement of Limited Partnership of
GTE Delaware.
4.7 Form of Preferred Security (included in Exhibit 4.6 above).
4.8 Form of Junior Subordinated Debenture (included in Exhibit 4.4).
*4.9 Form of Guarantee Agreement with respect to Preferred Securities.
*5.1 Opinion of Michael T. Masin.
*5.2 Opinion of Richards, Layton & Finger.
*8.1 Opinion of Sullivan & Cromwell.
*12.1 Computations of consolidated ratio of earnings to fixed charges
and consolidated ratio of earnings to combined fixed charges and
preferred stock dividends.
23.1 Consent of Arthur Andersen & Co.
*23.2 Consent of Michael T. Masin (included in Exhibit 5.1 above).
*23.3 Consent of Sullivan & Cromwell (included in Exhibit 8.1 above).
*23.4 Consent of Richards, Layton & Finger (included in Exhibit 5.2
above).
*25.1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as Trustee under the Indenture.
</TABLE>
- -------
* Previously filed.
II-1
<PAGE>
SIGNATURES
PURSUANT TO REQUIREMENTS OF THE SECURITIES ACT OF 1933, GTE CORPORATION
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF STAMFORD AND STATE OF CONNECTICUT ON THE 30TH DAY
OF JUNE 1994.
GTE Corporation
By Charles R. Lee
-------------------------------
(Charles R. Lee)
Chairman of the Board and
Chief Executive Officer
II-2
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, GTE DELAWARE,
L.P. CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF
THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF STAMFORD AND STATE OF CONNECTICUT, ON THE 30TH DAY
OF JUNE 1994.
GTE Delaware, L.P.
By:GTE Corporation,
General Partner
By Charles R. Lee
------------------------------------
(Charles R. Lee)
Chairman of the Board and
Chief Executive Officer
II-3
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING DIRECTORS AND
OFFICERS OF GTE CORPORATION IN THE CAPACITIES AND ON THE DATE INDICATED.
Principal executive officer:
Date: June 30, 1994 By Charles R. Lee
--------------------------------------
(Charles R. Lee)
Chairman of the Board and
Chief Executive Officer
Principal financial officer:
Date: June 30, 1994 By J. Michael Kelly
--------------------------------------
(J. Michael Kelly)
Senior Vice President--Finance
Principal accounting officer:
Date: June 30, 1994 By William D. Wilson
--------------------------------------
(William D. Wilson)
Vice President and Controller
Directors:
By
--------------------------------------
(Edwin L. Artzt--Director)
James R. Barker
By--------------------------------------
Date: June 30, 1994 (James R. Barker--Director)
Edward H. Budd
By--------------------------------------
Date: June 30, 1994 (Edward H. Budd--Director)
Kent B. Foster
By--------------------------------------
Date: June 30, 1994 (Kent B. Foster--Director)
James L. Johnson
By--------------------------------------
Date: June 30, 1994 (James L. Johnson--Director)
Richard W. Jones
By--------------------------------------
Date: June 30, 1994 (Richard W. Jones--Director)
James L. Ketelsen
By--------------------------------------
Date: June 30, 1994 (James L. Ketelsen--Director)
II-4
<PAGE>
Charles R. Lee
By-----------------------------------
Date: June 30, 1994 (Charles R. Lee--Director)
Michael T. Masin
By-----------------------------------
Date: June 30, 1994 (Michael T. Masin--Director)
Sandra O. Moose
By-----------------------------------
Date: June 30, 1994 (Sandra O. Moose--Director)
Russell E. Palmer
By-----------------------------------
Date: June 30, 1994 (Russell E. Palmer--Director)
Howard Sloan
By-----------------------------------
Date: June 30, 1994 (Howard Sloan--Director)
Robert D. Storey
By-----------------------------------
Date: June 30, 1994 (Robert D. Storey--Director)
James W. Walter
By-----------------------------------
Date: June 30, 1994 (James W. Walter--Director)
Charles Wohlstetter
By-----------------------------------
Date: June 30, 1994 (Charles Wohlstetter--Director)
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE NO.
------- ----------- --------
<C> <S> <C>
*1.1 Form of Underwriting Agreement to be used in connection
with the issuance of Preferred Securities.
1.2 Form of Underwriting Agreement to be used in connection
with the issuance of Junior Subordinated Debentures.
*4.1 Form of Indenture between GTE and The Bank of New York, as
Trustee.
4.2 Form of Supplemental Indenture to Indenture to be used in
connection with the issuance of Junior Subordinated
Debentures and fixed rate Preferred Securities.
4.3 Form of Supplemental Indenture to Indenture to be used in
connection with the issuance of Junior Subordinated and
adjustable rate Preferred Securities.
4.4 Form of Supplemental Indenture to Indenture to be used in
connection with the issuance of Junior Subordinated
Debentures only.
*4.5 Certificate of Limited Partnership of GTE Delaware.
4.6 Form of Amended and Restated Agreement of Limited
Partnership of GTE Delaware.
4.7 Form of Preferred Security (included in Exhibit 4.6 above).
4.8 Form of Junior Subordinated Debenture (included in Exhibit
4.4 above).
*4.9 Form of Guarantee Agreement with respect to Preferred
Securities.
*5.1 Opinion of Michael T. Masin.
*5.2 Opinion of Richards, Layton & Finger.
*8.1 Opinion of Sullivan & Cromwell.
*12.1 Computations of consolidated ratio of earnings to fixed
charges and consolidated ratio of earnings to combined
fixed charges and preferred stock dividends.
23.1 Consent of Arthur Andersen & Co.
*23.2 Consent of Michael T. Masin (included in Exhibit 5.1
above).
*23.3 Consent of Sullivan & Cromwell (included in Exhibit 8.1
above).
*23.4 Consent of Richards, Layton & Finger (included in Exhibit
5.2 above).
*25.1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The Bank of New York, as Trustee
under the Indenture.
</TABLE>
- --------
* Previously filed.
E-1
<PAGE>
EXHIBIT 1.2
GTE CORPORATION
UNDERWRITING AGREEMENT
GTE Corporation, a New York corporation (the "Company"), proposes to
issue and sell $___,000,000 aggregate principal amount of its ___% Junior
Subordinated Deferrable Interest Debentures, Series ___, Due _____ (the "New
Debentures"). Subject to the terms and conditions set forth or incorporated by
reference herein, the Company agrees to sell and the underwriters named in
Schedule A attached hereto (the "Underwriters") agree to purchase the New
Debentures at ___% of their principal amount, plus accrued interest from
___________ to the date of payment for the New Debentures and delivery thereof.
Interest on the New Debentures will be payable semi-annually on June 30 and
December 31, commencing __________. [The New Debentures will be reoffered to the
public at ____% of their principal amount.
All the provisions contained in the Company's Standard Underwriting
Agreement Provisions (June, 1994 Edition) (the "Standard Underwriting Agreement
Provisions") annexed hereto shall be deemed to be a part of this Underwriting
Agreement to the same extent as if such provisions had been set forth in full
herein.
REDEMPTION PROVISIONS:
[The New Debentures will not be redeemable prior to maturity.]
OR
[The redemption price applicable to redemptions to and including _______
(the "initial regular redemption price") will be the initial public offering
price as defined below plus the rate of interest on the New Debentures; the
redemption price during the twelve month period beginning _______ and during the
twelve month periods beginning on each __________ thereafter through the twelve
month period ended _______ will be determined by reducing the initial regular
redemption price by an amount determined by multiplying (a) 1/__ of the amount
by which such initial regular redemption price exceeds 100% by (b) the number of
such full twelve month periods which shall have elapsed between _________ and
the date fixed for redemption; and thereafter the redemption prices during the
twelve month periods beginning _________ shall be 100%; provided, however, that
all such prices will be specified to the nearest 0.01% or if there is no nearest
0.01%, then to the next higher 0.01%.
For the purpose of determining the redemption prices of the New
Debentures, the initial public offering price of the New Debentures shall be the
price, expressed in percentage of principal amount (exclusive of accrued
interest), at which the New Debentures are to be initially offered for sale to
the public; if there is not a public offering of the New Debentures, the initial
public offering price of the New Debentures shall be deemed to be the price,
expressed in percentage of principal amount (exclusive of accrued interest), to
be paid to the Company by the Underwriters.
<PAGE>
-2-
None of the New Debentures may be called for redemption at the option of
the Company prior to ____________ if such redemption is for the purpose or in
anticipation of refunding any New Debentures by the application, directly or
indirectly, of funds borrowed by the Company at an annual cost of money
(calculated in accordance with generally accepted financial practice) less than
the annual cost of money to the Company resulting from the sale of the New
Debentures to the Underwriters. (If Applicable)]
CLOSING:
The Underwriters agree to pay for the New Debentures in New York
Clearing House (next day) funds upon delivery of such New Debentures at 10:00
A.M. (New York City time) on _________ (the "Closing Date") or at such other
time, not later than the seventh full business day thereafter, as shall be
agreed upon by the Company and the Underwriters or the firm or firms designated
as the representative or representatives, as the case may be, of the
Underwriters (the "Representative").
RESALE:
[The Underwriters represent that they intend to resell the New
Debentures, and therefore the provisions applicable to Reselling Underwriters in
the Standard Underwriting Agreement Provisions will be applicable.]
OR
[The Underwriters represent that they do not intend to resell the New
Debentures, and therefore the provisions applicable to Reselling Underwriters in
the Standard Underwriting Agreement Provisions will not be applicable.]
In witness whereof, the parties have executed this Underwriting
Agreement this ___ day of _________.
[Names of Underwriters or
Representative]
By______________________________
Title:
GTE CORPORATION
By______________________________
Title:
<PAGE>
-3-
SCHEDULE A
The names of the Underwriters and the principal amount of New
Debentures which each respectively offers to purchase are as follows:
<TABLE>
<CAPTION>
Principal
Amount
of New
Name Debentures
- ---- --------------
<S> <C>
$
--------------
Total....................... $___,000,000
</TABLE>
<PAGE>
GTE CORPORATION
STANDARD UNDERWRITING AGREEMENT PROVISIONS
(June, 1994 Edition)
<PAGE>
GTE Corporation, a New York corporation (the "Company"), may enter into
one or more underwriting agreements providing for the sale of junior
subordinated debentures to the underwriter or underwriters named therein (the
"Underwriters"). The standard provisions set forth herein will be incorporated
by reference in any such underwriting agreement ("Underwriting Agreement"). The
Underwriting Agreement, including these Standard Underwriting Agreement
Provisions incorporated therein by reference, is hereinafter referred to as
"this Agreement". Unless otherwise defined herein, terms used in this Agreement
that are defined in the Underwriting Agreement have the meanings set forth
therein.
I. SALE OF THE JUNIOR SUBORDINATED DEBENTURES
The Company proposes to issue one or more series of junior subordinated
debentures pursuant to the provisions of an Indenture dated as of June 1, 1994,
between the Company and The Bank of New York, as Trustee (the "Trustee"), as
amended by the ________ Supplemental Indenture dated as of ________ __, 1994
(the Indenture as so supplemented, is hereinafter referred to as the
"Indenture"). Pursuant to such Supplemental Indenture, the Company will
designate the title of each series, aggregate principal amount, date or dates of
maturity, dates for payment and rate of interest, redemption dates, prices,
obligations and restrictions, if any, and any other terms with respect to each
such series.
The Company has filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"),
registration statement No. 33-53495 relating to $1,000,000,000 of the Company's
junior subordinated debentures (the amount remaining unsold thereunder, from
time to time, is hereinafter referred to as the "Debentures"), including a
prospectus relating to the Debentures, and has filed with, or transmitted for
filing to, the Commission (or will promptly after the sale so file or transmit
for filing) a prospectus supplement specifically relating to a particular series
of Debentures (such particular series being hereinafter referred to as the "New
Debentures") pursuant to Rule 424(b) under the Act ("Rule 424(b)"). The term
"Registration Statement" means the registration statement referred to herein, as
amended to the date of the Purchase Agreement. The term "Basic Prospectus" means
the prospectus relating to the Debentures included in the Registration
Statement. The term "Preliminary Prospectus" means the Basic Prospectus as
supplemented by a preliminary prospectus supplement included in the Registration
Statement or filed with the Commission pursuant to Rule 424(a) of the rules and
regulations of the Act. The term "Prospectus" means the Basic Prospectus
together with the prospectus supplement specifically relating to the New
Debentures, as filed with, or transmitted for filing to, the Commission pursuant
to Rule 424(b). As used herein, the terms "Registration Statement", "Basic
Prospectus", "Preliminary Prospectus" and "Prospectus" shall include in each
case the material, if any, incorporated by reference therein.
II. UNDERWRITERS' REPRESENTATIONS AND RESALE
Each Underwriter represents and warrants that information furnished in
writing to the Company expressly for use with respect to the New Debentures will
not contain any untrue statement of a material fact and will not omit any
material fact in connection with such information necessary to make such
information not misleading.
If the Underwriters advise the Company in the Underwriting Agreement
that they intend to resell the New Debentures, the Company will assist the
Underwriters as hereinafter provided. The terms of any such resale will be set
forth in the Prospectus. The provision of Paragraphs D and E of Article VI and
Articles VIII, IX and X of this Agreement apply only to Underwriters that have
advised the Company of their intention to resell the New Debentures ("Reselling
Underwriters"). All other provisions apply to any Underwriter including a
Reselling Underwriter.
<PAGE>
-2-
III. CLOSING
The closing will be held at the office of GTE Service Corporation, 5th
Floor, One Stamford Forum, Stamford, Connecticut 06904 on the Closing Date.
Concurrent with the delivery of the New Debentures to the Underwriters or to the
Representative for the account of each Underwriter, payment of the full purchase
price of the New Debentures shall be made by certified or official bank check or
checks in New York Clearing House (next day) funds, payable to the Company or
its order, at The Bank of New York, Attention: Corporate Trust Department. Upon
notification to the Company of receipt of such check by The Bank of New York,
such check shall be deemed to be delivered at the closing. The New Debentures
shall be in the form of temporary or definitive fully-registered New Debentures
in denominations of One Thousand Dollars ($1,000) or any integral multiple
thereof, registered in such names as the Underwriters or the Representative
shall request not less than three business days before the Closing Date. The
Company agrees to make the New Debentures available to the Underwriters or the
Representative for inspection at the office of The Depository Trust Company, New
York, New York, at least twenty-four hours prior to the time fixed for the
delivery of the New Debentures on the Closing Date.
IV. CONDITIONS TO UNDERWRITERS' OBLIGATIONS
The respective obligations of the Underwriters hereunder are subject to
the following conditions:
(A) The Registration Statement shall have become effective and no stop
order suspending the effectiveness of the Registration Statement shall be in
effect, and no proceedings for such purpose shall be pending before or
threatened by the Commission; the Company (including all of its subsidiaries
taken as a whole) has not sustained since the date of the latest audited
financial statements included or incorporated by reference in the Prospectus any
material loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the Prospectus, there has
not been any material change in the capital stock or long-term debt of the
Company (including all of its subsidiaries taken as a whole) or any material
adverse change in or affecting the business, properties, business prospects,
position (financial or otherwise) or results of operations of the Company and
its subsidiaries taken as a whole, otherwise than as set forth in or
contemplated by the Prospectus; and the Underwriters or the Representative shall
have received on the Closing Date the customary form of compliance certificate,
dated the Closing Date and signed by the President or a Vice President of the
Company, including the foregoing. The officer executing such certificate may
rely upon the best of his or her knowledge as to proceedings pending or
threatened.
(B) The Underwriters or the Representative shall have received on the
Closing Date an opinion of Michael T. Masin, Vice Chairman and Acting General
Counsel of the Company, dated the Closing Date, substantially in the form set
forth in Exhibit A hereto.
(C) The Underwriters or the Representative shall have received on the
Closing Date an opinion of Milbank, Tweed, Hadley & McCloy, counsel for the
Underwriters, dated the Closing Date, substantially in the form set forth in
Exhibit B hereto.
<PAGE>
-3-
(D) The Underwriters or the Representative shall have received on the
Closing Date an opinion of Sullivan & Cromwell, special tax counsel for the
Company, confirming their opinion as to tax matters set forth in the Prospectus.
(E) The Underwriters or the Representative shall have received on the
date of this Agreement and on the Closing Date a letter from Arthur Andersen &
Co., independent public accountants for the Company, dated as of a date not more
than five business days prior to the Closing Date, to the effect set forth in
Exhibit C hereto.
V. CONDITIONS TO COMPANY'S OBLIGATIONS
The obligations of the Company hereunder are subject to the following
conditions:
(A) The Registration Statement shall have become effective and no stop
order suspending the effectiveness of the Registration Statement shall be in
effect, and no proceedings for such purpose shall be pending before or
threatened by the Commission.
(B) The Company shall have received on the Closing Date the full
purchase price of the New Debentures purchased hereunder.
VI. COVENANTS OF THE COMPANY
In further consideration of the agreements contained herein of the
Underwriters, the Company covenants to the several Underwriters as follows:
(A) To furnish to the Underwriters or the Representative a copy of the
Registration Statement including materials, if any, incorporated by reference
therein and, during the period mentioned in (D) below, to supply as many copies
of the Prospectus, any documents incorporated by reference therein and any
supplements and amendments thereto as the Underwriters or the Representative may
reasonably request. The terms "supplement" and "amendment" or "amend" as used in
this Agreement shall include all documents filed by the Company with the
Commission subsequent to the effective date of the Registration Statement, or
the date of the Basic Prospectus, as the case may be, pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which are deemed to be
incorporated by reference therein.
(B) For a period of five years, unless all of the New Debentures shall
be sooner retired, to deliver to any Underwriter who may so request, as soon as
practicable after the end of each fiscal year, a consolidated balance sheet of
the Company as of the end of such year and related consolidated statements of
income, reinvested earnings and changes in financial position for such year, all
as examined by independent public accountants, and to deliver to any Underwriter
upon request, as soon as practicable after the end of each of the first three
quarterly periods of each year a Form 10-Q of the Company as filed with the
Commission.
(C) Before amending or supplementing the Registration Statement or the
Prospectus with respect to the New Debentures, to furnish to any Underwriter or
the Representative, and to counsel for the Underwriters, a copy of each such
proposed amendment or supplement.
<PAGE>
-4-
The covenants in Paragraphs (D) and (E) apply only to Reselling
Underwriters:
(D) If in the period after the first date of resale of the New
Debentures during which, in the opinion of counsel for the Reselling
Underwriters, the Prospectus is required by law to be delivered, any event shall
occur as a result of which it is necessary to amend or supplement the Prospectus
in order to make a statement therein, in light of the circumstances when the
Prospectus is delivered to a subsequent purchaser, not materially misleading, or
if it is otherwise necessary to amend or supplement the Prospectus to comply
with law, forthwith to prepare and furnish, at its own expense (unless such
amendment shall relate to information furnished by the Underwriters or the
Representative by or on behalf of the Underwriters in writing expressly for use
in the Prospectus), to the Reselling Underwriters, the number of copies
requested by the Reselling Underwriters or the Representative of either
amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in light of the circumstances
when the Prospectus is delivered to a subsequent purchaser, be misleading or so
that the Prospectus will comply with law.
(E) To use its best efforts to qualify the New Debentures for offer and
sale under the securities or Blue Sky laws of such jurisdictions as the
Underwriters or the Representative shall reasonably request and to pay all
expenses (including fees and disbursements of counsel) in connection therewith
and in connection with the determination of the eligibility of the New
Debentures for investment under the laws of such jurisdictions as the
Underwriters or the Representative may designate; provided, however, that the
Company, in complying with the foregoing provisions of this paragraph, shall not
be required to qualify as a foreign company or to register or qualify as a
broker or dealer in securities in any jurisdiction or to consent to service of
process in any jurisdiction other than with respect to claims arising out of the
offering or sale of the New Debentures, and provided further that the Company
shall not be required to continue the qualification of the New Debentures beyond
one year from the date of the sale of the New Debentures.
VII. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the several Underwriters that (i)
each document, if any, filed or to be filed pursuant to the Exchange Act and
incorporated by reference in the Basic Prospectus, the Preliminary Prospectus or
the Prospectus complied or will comply when so filed in all material respects
with the Exchange Act and the rules and regulations thereunder, (ii) each part
of the Registration Statement filed with the Commission pursuant to the Act
relating to the New Debentures, when such part became effective, did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (iii) on the effective date of the Registration Statement, the date
the Preliminary Prospectus is filed pursuant to Rule 424(a), the date the
Prospectus is filed pursuant to Rule 424(b) and at all times subsequent to and
including the Closing Date, the Registration Statement, the Preliminary
Prospectus and the Prospectus, as amended or supplemented, if applicable,
complied or will comply in all material respects with the Act and the applicable
rules and regulations thereunder, (iv) on the effective date of the Registration
Statement, the Registration Statement did not contain, and as amended or
supplemented, if applicable, will not contain, any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading, on the date the Preliminary Prospectus, or
any amendment or supplement thereto, is filed pursuant to Rule 424(a), the
Preliminary Prospectus will not contain any untrue statement of a material fact
necessary in order to make the statements therein not misleading, and on the
date the Prospectus, or any amendment or supplement thereto, is filed pursuant
to Rule 424(b) and on the Closing Date, the Prospectus will not contain any
untrue statement of a material fact or omit to state a material fact necessary
<PAGE>
- 5 -
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; except that these representations and
warranties do not apply to statements or omissions in the Registration
Statement, the Preliminary Prospectus or the Prospectus based upon information
furnished to the Company by any Underwriter or the Representative by or on
behalf of any Underwriter in writing expressly for use therein or to statements
or omissions in the Statement of Eligibility of the Trustee under the Indenture,
(v) the consummation of any transaction herein contemplated will not result in a
breach of any of the terms of any agreement or instrument to which the Company
is a party, and (vi) the Indenture has been qualified under the Trust Indenture
Act of 1939, as amended.
VIII. INDEMNIFICATION
The Company agrees to indemnify and hold harmless each Reselling
Underwriter and each person, if any, who controls such Reselling Underwriter
within the meaning of either Section 15 of the Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages and liabilities based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, the Basic Prospectus, the Preliminary
Prospectus or the Prospectus (if used within the period set forth in Paragraph
(D) of Article VI hereof, and as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are based upon any
such untrue statement or omission or alleged untrue statement or omission based
upon information furnished to the Company by any Reselling Underwriter or the
Representative by or on behalf of any Reselling Underwriter in writing expressly
for use therein or by any statement or omission in the Statement of Eligibility
of the Trustee under the Indenture.
Each Reselling Underwriter agrees to indemnify and hold harmless the
Company, its directors, its officers who sign the Registration Statement and any
person controlling the Company to the same extent as the foregoing indemnity
from the Company to each Reselling Underwriter, but only with reference to
information relating to said Reselling Underwriter furnished to the Company in
writing by the Reselling Underwriter or the Representative by or on behalf of
said Reselling Underwriter expressly for use in the Registration Statement, the
Preliminary Prospectus or the Prospectus.
In case any proceeding (including any governmental investigation) shall
be instituted involving any person in respect of which indemnity may be sought
pursuant to either of the two preceding paragraphs, such person (the
"indemnified party") shall promptly notify the person or persons against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such
<PAGE>
- 6 -
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless the indemnifying party and
the indemnified party shall have mutually agreed to the retention of such
counsel. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such consent
or if there be a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment.
If the indemnification provided for in this Article VIII is unavailable
to an indemnified party under the first or second paragraph hereof or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party, in lieu of indemnifying such
indemnified party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Reselling Underwriters on the other from
the offering of the New Debentures or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the
Reselling Underwriters on the other in connection with the statement or omission
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Reselling Underwriters on the other in
connection with the offering of the New Debentures shall be deemed to be in the
same proportion as the total net proceeds from the offering of the New
Debentures received by the Company bear to the total commissions, if any,
received by all of the Reselling Underwriters in respect thereof. If there are
no commissions allowed or paid by the Company to the Reselling Underwriters in
respect of the New Debentures, the relative benefits received by the Reselling
Underwriters in the preceding sentence shall be the difference between the price
received by such Reselling Underwriters upon resale of the New Debentures and
the price paid for the New Debentures pursuant to the Underwriting Agreement.
The relative fault of the Company on the one hand and of the Reselling
Underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Reselling Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The amount paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
IX. SURVIVAL
The indemnity and contribution agreements contained in Article VIII and
the representations and warranties of the Company contained in Article VII of
this Agreement shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by any
<PAGE>
-7-
Reselling Underwriter or on behalf of any Reselling Underwriter or any person
controlling any Reselling Underwriter and (iii) acceptance of and payment for
any of the New Debentures.
X. TERMINATION BY RESELLING UNDERWRITERS
At any time prior to the Closing Date this Agreement shall be subject to
termination in the absolute discretion of any Reselling Underwriter, by notice
given to the Company, if (i) trading in securities generally on the New York
Stock Exchange shall have been suspended or materially limited, (ii) a general
moratorium on commercial banking activities in New York shall have been declared
by either Federal or New York State authorities, (iii) minimum prices shall have
been established on the New York Stock Exchange by Federal or New York State
authorities or (iv) any outbreak or escalation of hostilities involving the
United States or declaration by the United States of a national emergency or war
or other calamity or crisis shall have occurred, the effect of any of which is
such as to make it impracticable or inadvisable to proceed with the delivery of
the New Debentures on the terms and in the manner contemplated by the
Prospectus.
XI. TERMINATION BY UNDERWRITERS
If this Agreement shall be terminated by the Underwriters because of any
failure or refusal on the part of the Company to comply with the terms or to
fulfill any of the conditions of this Agreement, or if for any reason, (other
than those set forth in Article V) the Company shall be unable to perform its
obligations under this Agreement, the Company will reimburse the Underwriters
for all out-of-pocket expenses (including the fees and disbursements of counsel)
reasonably incurred by such Underwriters in connection with the New Debentures.
Except as provided herein, the Underwriters shall bear all of their expenses,
including the fees and disbursements of counsel.
XII. SUBSTITUTION OF UNDERWRITERS
If for any reason any Underwriter shall not purchase the New Debentures
it has agreed to purchase hereunder, the remaining Underwriters shall have the
right within 36 hours to make arrangements for the purchase of such New
Debentures hereunder. If they fail to do so, the Company shall have the right
within a further period of 36 hours to make arrangements satisfactory to the
Underwriters or the Representative for the puchase of such New Debentures
hereunder. If, after giving effect to any arrangements for the purchase of the
New Debentures as set forth in the preceding sentences, the aggregate number of
New Debentures which remains unpurchased does not exceed one-eleventh of the
aggregate number of New Debentures set forth in Schedule A hereto, then the
amounts of New Debentures that the remaining Underwriters are obligated,
severally, to purchase under this Agreement shall be increased in the
proportions which the total amount of New Debentures which they have
respectively agreed to purchase bears to the total amount of New Debentures
which all non-defaulting Underwriters have so agreed to purchase, or in such
other proportions as the Underwriters may specify to absorb such unpurchased New
Debentures. If after giving effect to any arrangements for the purchase of the
New Debentures as set forth in the first two sentences of this Article XII, the
aggregate number of New Debentures which remains unpurchased exceeds one-
eleventh of the aggregate number of New Debentures set forth in Schedule A
hereto, then the Company shall have the right either to elect to consummate the
sale except as to any such unpurchased New Debentures so remaining. In any such
cases, either the Underwriters or the Representative or the Company shall have
the right to postpone the Closing Date for not more than seven business days to
a mutually acceptable date. If the Company shall not elect to so consummate the
sale and any unpurchased New Debentures remain for which no satisfactory
substitute Underwriter is obtained in accordance with the above provisions, then
this Agreement shall terminate without liability on the part of any non-
defaulting Underwriter or the Company for the purchase or sale of any New
Debenture under this Agreement. No provision in this paragraph shall relieve any
defaulting Underwriter of liability to the Company for damages occasioned by
such default.
<PAGE>
-8-
XIII. MISCELLANEOUS
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
This Agreement shall be governed by and construed in accordance with
the substantive laws of the State of New York.
<PAGE>
EXHIBIT A
LETTERHEAD OF
Michael T. Masin
Vice Chairman and Acting General Counsel
________________
_____________, 199_
and the other Underwriters named in
the Underwriting Agreement dated _________ ,
199_, between GTE Corporation
and such Underwriters
Re: GTE Corporation
___% Junior Subordinated Deferrable Interest Debentures, Series _, Due____
Dear Sirs:
I have been requested by GTE Corporation, a New York corporation ("GTE"
or the "Company"), as its Vice Chairman and Acting General Counsel to furnish
you with my opinion pursuant to an Underwriting Agreement dated ______, 199_
(the "Agreement") between you and the Company, relating to the purchase and sale
of $ ___,000,000 aggregate principal amount of its __% Junior Subordinated
Deferrable Interest Debentures, Series _, Due ___ (the "New Debentures").
In this connection I have examined among other things:
(a) The Restated Certificate of Incorporation of the Company, as
amended, and the by-laws, each as presently in effect;
(b) A copy of the Indenture dated as of June 1, 1994, between the
Company and The Bank of New York, as Trustee (the "Trustee") as supplmented by a
________ Supplemental Indenture dated as of ________, 1994 (the Indenture as so
supplemented is hereinafter referred to as the "Indenture"), under which the New
Debentures are being issued;
(c) the forms of the New Debentures set forth in the ________
Supplemental Indenture;
(d) The records of the corporate proceedings of the Company relating to
the authorization, execution and delivery of the Indenture;
(e) The records of the corporate proceedings of the Company relating to
the authorization, execution and delivery of the Agreement;
(f) The record of all proceedings taken by the Company relating to the
registration of the New Debentures under the Securities Act of 1933, as amended
(the "Act"), and qualification of the Indenture under the Trust Indenture Act of
1939, as amended (the "TIA"), particularly the Registration Statement (File No.
33-53495), including the form of prospectus contained therein (unless the
context shall otherwise require, the Registration Statement as amended is
hereinafter called the "Registration Statement", the preliminary prospectus
dated _____, together with the preliminary prospectus supplement dated ____
relating to the New Debentures in the form filed under Rule 424(a) of the Act,
is hereinafter called the "Preliminary Prospectus" and the prospectus dated
_____, together with the prospectus supplement dated _____ relating to the New
Debentures in the form filed under Rule 424(b) of the Act, is hereinafter called
the "Prospectus"); and
<PAGE>
- 2 -
(g) Certain documents filed by the Company under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which are incorporated by
reference in the Prospectus (the "Incorporated Documents").
On the basis of my examination of the foregoing and of such other
documents and matters as I have deemed necessary as the basis for the opinions
hereinafter expressed, I am of the opinion that:
(1) GTE has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of New York, with
all corporate power and authority to own its properties and conduct its
business as described in the Prospectus;
(2) The Indenture and the New Debentures to be issued thereunder, have
been duly authorized; the Indenture has been duly qualified under the Trust
Indenture Act, and has been duly executed and delivered and constitutes,
and the New Debentures, when duly executed and authenticated in accordance
with the Indenture and issued and delivered under the circumstances
provided in the Prospectus, will constitute, valid and legally binding
obligations of GTE enforceable in accordance with their terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the enforcement of creditors' rights and remedies generally, as from time
to time in effect, and by applicable principles of equity and
considerations of public policy (regardless of whether enforceability is
considered in a proceeding in equity or at law); and the Indenture conforms
and the New Debentures, when duly executed, authenticated, issued and
delivered, will conform to the descriptions thereof in the Prospectus;
(3) GTE has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other United States jurisdiction in which it owns or leases property, or
conducts any business, so as to require such qualification, except where
the failure to so qualify would not result in any material adverse change
in or affecting the business, properties, business prospects, position
(financial or otherwise) or results of operations of GTE and its
subsidiaries taken as a whole;
(4) This Agreement has been duly authorized, executed and delivered by
GTE;
<PAGE>
-3-
(5) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issuance and sale of the New Debentures or the
consummation by GTE of the transactions contemplated herein, except
registration under the Act of the New Debentures and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution of the New Debentures by the Underwriters;
(6) The documents incorporated by reference in the Preliminary
Prospectus and the Prospectus (other than the financial statements, related
schedules and other financial and statistical data therein, as to which
such counsel need express no opinion), when they became effective or were
filed with the Commission, as the case may be, conformed in all material
respects to the requirements of the Act or the Exchange Act, as applicable,
and the rules and regulations of the Commission thereunder; and such
counsel has no reason to believe that any of such documents, when they
become effective or were so filed, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and
(7) The Registration Statement, the Preliminary Prospectus and the
Prospectus and any further amendments and supplements thereto (other than
the financial statements and related schedules and financial and
statistical data therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of the Act
and the rules and regulations thereunder; such counsel has no reason to
believe that, as of its effective date, the Registration Statement or any
further amendment thereto (other than the financial statements, related
schedules and other financial and statistical data therein, as to which
such counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that,
as of their respective dates, the Preliminary Prospectus, the Prospectus or
any further amendment or supplement thereto (other than the financial
statements and related schedules and financial and statistical data
therein, as to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading or that, as of the Closing Date,
either the Registration Statement or the Prospectus or any further
amendment or supplement thereto (other than the financial statements and
related schedules and financial and statistical data therein, as to which
such counsel need express no opinion) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading; and they do not know of any amendment to the Registration
Statement required to be filed.
<PAGE>
EXHIBIT B
MILBANK, TWEED, HADLEY & McCLOY
1 Chase Manhattan Plaza
New York, New York 10005
____________, 1994
GTE CORPORATION
$___,000,000 __% Junior Subordinated Deferrable Interest Debentures,
Series _, Due ____
and the other several Underwriters
referred to in the Underwriting Agreement
dated _______________________, among such
Underwriters and GTE Corporation
Dear Sirs:
We have been designated by GTE Corporation (the "Company") as counsel
for the underwriters of $___,000,000 aggregate principal amount of its __%
Junior Subordinated Deferrable Interest Debentures, Series _, Due ____ (the "New
Debentures"). Pursuant to such designation and the terms of an Underwriting
Agreement dated ___________, relating to the New Debentures (the "Underwriting
Agreement"), entered into by you with the Company, we have acted as your counsel
in connection with your several purchases this day from the Company of the New
Debentures, which are issued under an Indenture dated as of June 1, 1994,
between the Company and The Bank of New York, as trustee (the "Trustee") as
supplmented by a ________ Supplemental Indenture, dated as of ________, 1994,
(the Indenture, as so supplmented, is hereinafter referred to as the
"Indenture").
We have reviewed originals, or copies certified to our satisfaction, of
such corporate records of the Company, indentures, agreements and other
instruments, certificates of public officials and of officers and
representatives of the Company, and other documents, as we have deemed necessary
as a basis for the opinions hereinafter expressed. In such examination we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity with the original documents of all
documents submitted to us as copies, and the authenticity of the originals of
such latter documents. As to various questions of fact material to such
opinions, we have, when relevant facts were not independently established,
relied upon certifications by officers of the Company and statements contained
in the Registration Statement hereinafter mentioned.
In addition, we attended the closing held today at the offices of GTE
Service Corporation, One Stamford Forum, Stamford, Connecticut, at which the
Company caused the New Debentures to be delivered to your representatives at The
Depository Trust Company, 55 Water Street, New York, New York, for your several
accounts, against payment therefor.
On the basis of the foregoing, and having regard to legal considerations
which we deem relevant, we are of the opinion that:
1. The Company is a validly existing corporation, in good standing,
under the laws of the State of New York.
<PAGE>
-2-
2. The Underwriting Agreement has been duly authorized, executed and
delivered by and on behalf of the Company.
3. The Indenture has been duly authorized, executed, and delivered by
the Company and constitutes a legal, valid and binding agreement of the Company
enforceable in accordance with its terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
affecting the enforceability of creditors' rights. The enforceability of the
Indenture is subject to the effect of general principles of equity (regardless
of whether considered in a proceeding in equity or at law), including without
limitation (i) the possible unavailability of specific performance, injunctive
relief or any other equitable remedy and (ii) concepts of materiality,
reasonableness, good faith and fair dealing. The Indenture has been duly
qualified under the Trust Indenture Act of 1939, as amended.
4. The New Debentures have been duly authorized and conform as to legal
matters in all substantial respects to the description thereof contained in the
Registration Statement, the Preliminary Prospectus and Prospectus hereinafter
mentioned. The New Debentures (assuming due execution thereof by the Company and
due authentication and delivery by the Trustee) have been duly issued for value
by the Company and (subject to the qualifications stated in paragraph 3 above)
constitute legal, valid and binding obligations of the Company, and are entitled
to the benefits afforded by the Indenture in accordance with the terms of the
Indenture and of the New Debentures.
5. On the basis of information received by the Company from the
Securities and Exchange Commission (the "Commission"), Registration Statement
No. 33-____ with respect to the New Debentures filed with the Commission
pursuant to the Securities Act of 1933, as amended (the "Act"), became effective
under the Act on _______, and the Prospectus dated ______, as supplemented by
the Prospectus Supplement dated ______ (collectively, the "Prospectus"), became
lawful for use for the purposes specified in the Act, in connection with the
offer for sale and sale of the New Debentures in the manner therein specified,
subject to compliance with the provisions of securities of Blue Sky laws of
certain States in connection with the offer for sale or sale of the New
Debentures in such States. The term "Preliminary Prospectus" means any
preliminary prospectus or preliminary prospectus as supplemented by a
preliminary prospectus supplement included in the Registration Statement or
filed with the Commission pursuant to Rule 424(a) of the rules and regulations
of the Act. To the best of our knowledge, the Registration Statement remains in
effect at this date.
6. The Registration Statement, the Preliminary Prospectus and the
Prospectus (except any financial statements or other financial data contained or
incorporated by reference therein, as to which no opinion is expressed) comply
as to form in all material respects with the relevant requirements of the Act
and the applicable rules and regulations of the Commission thereunder.
<PAGE>
- 3 -
We are members of the bar of New York and express no opinion as to
matters governed by any laws other than the laws of the State of New York and
the Federal laws of the United States of America.
The Registration Statement was filed on Form S-3 under the Act and,
accordingly, the Preliminary Prospectus and the Prospectus do not necessarily
contain a current description of the Company's business and affairs, since Form
S-3 provides for the incorporation by reference of certain documents filed with
the Commission which contain descriptions as of various dates. We participated
in conferences with counsel for, and representatives of, the Company in
connection with the preparation of the Registration Statement, the Preliminary
Prospectus and Prospectus and we have reviewed certain documents filed by the
Company under the Exchange Act, which are incorporated by reference in the
Preliminary Prospectus and the Prospectus (such documents as have been filed
prior to the effective date of the Registration Statement and listed in the
Preliminary Prospectus and the Prospectus as being incorporated by reference are
herein called the "Incorporated Documents"). In connection with our
participation in the preparation of the Registration Statement, the Preliminary
Prospectus and the Prospectus, we have not independently verified the accuracy,
completeness or fairness of the statements contained therein or in the
Incorporated Documents, and the limitations inherent in the review made by us
and the knowledge available to us are such that we are unable to assume, and we
do not assume, any responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement, the Preliminary
Prospectus, the Prospectus or the Incorporated Documents, except as otherwise
specifically stated herein. None of the foregoing disclosed to us any
information which gave us reason to believe that the Registration Statement, the
Preliminary Prospectus, the Prospectus or the Incorporated Documents, considered
as a whole on the effective date of the Registration Statement and on the date
hereof, contained or contain any untrue statement of a material fact or omitted
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading. We express no opinion as to
any document filed by the Company under the Securities and Exchange Act of 1934,
whether prior or subsequent to such effective date, except to the extent that
such documents are Incorporated Documents read together with the Registration
Statement, the Preliminary Prospectus or the Prospectus and considered as a
whole, nor do we express any opinion as to the financial statements or other
financial data included in or omitted from, or incorporated by reference in the
Registration Statement, the Preliminary Prospectus, the Prospectus or the
Incorporated Documents.
Very truly yours,
MILBANK, TWEED, HADLEY & McCLOY
<PAGE>
EXHIBIT C
LETTER OF INDEPENDENT PUBLIC ACCOUNTANTS
The letter of independent public accountants for the Company to be
delivered pursuant to Article IV, paragraph (E) of the document entitled
Standard Purchase Agreement Provisions, June, 1994 Edition, shall be to the
effect that:
(i) They are independent certified public accountants with respect to
GTE and its subsidiaries within the meaning of the Act and the applicable
published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, prospective
financial statements and/or pro forma financial information) included or
incorporated by reference in the Registration Statement or the Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the Act or the Exchange Act, as applicable, and the related
published rules and regulations thereunder; to the extent required, they
have made a review in accordance with standards established by the American
Institute of Certified Public Accountants of the consolidated interim
financial statements, selected financial data, pro forma financial
information, prospective financial statements and/or condensed financial
statements derived from audited financial statements of GTE for the periods
specified in such letter, as indicated in their reports thereon, copies of
which have been furnished to the representatives of the Underwriters (the
"Representatives");
(iii) The unaudited selected income statement data and balance sheet
data for the five most recent fiscal years included in the Prospectus
agrees with the corresponding amounts (after restatement where applicable)
in the audited consolidated financial statements for such five fiscal years
which were included or incorporated by reference in GTE's Annual Reports on
Form 10-K for such fiscal years;
(iv) On the basis of limited procedures, not constituting an audit in
accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of GTE and its subsidiaries, inspection of the minute books of
GTE and its subsidiaries since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus,
inquiries of officials of GTE and its subsidiaries responsible for
financial and accounting matters and such other inquiries and procedures as
may be specified in such letter, nothing came to their attention that
caused them to believe that:
(A) the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included or incorporated by reference in GTE's Quarterly Reports on
Form 10-Q incorporated by reference in the Prospectus do not comply as
to form in all material respects with the applicable accounting
requirements of the Exchange Act as it applies to Form 10-Q and the
related published rules and regulations thereunder or are not in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with the basis for the audited
consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included or incorporated by
reference in GTE's Annual Report on Form 10-K for the most recent
fiscal year;
(B) any other unaudited income statement data and balance sheet
data included in the Prospectus do not agree with the corresponding
items in the unaudited consolidated financial statements from which
such data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited consolidated
financial statements included or incorporated by reference in GTE's
Annual Report on Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not included in
the Prospectus but from which were derived the unaudited condensed
financial statements referred to in clause (A) and any unaudited
income statement data and balance sheet data included in the
Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
financial statements included or incorporated by reference in GTE's
Annual Report on Form 10-K for the most recent fiscal year;
1
<PAGE>
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of those
statements;
(E) as of the date of the latest available interim financial
statements, there have been any changes in the consolidated equity
(other than issuances of capital stock upon exercise of options and
stock appreciation rights, upon earn-outs of performance shares and
upon conversions of convertible securities, in each case which were
outstanding on the date of the latest balance sheet included or
incorporated by reference in the Prospectus) or any increase in the
consolidated short-term debt or long-term debt of GTE and its
subsidiaries, or any decreases in consolidated net assets or other
items specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included or incorporated by
reference in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter;
(F) for the period from the date of the latest financial statements
included or incorporated by reference in the Prospectus to the
specified date referred to in Clause (E) whether there were any
decreases in consolidated net revenues or operating profit or the
total or per share amounts of consolidated net income or other items
specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with the
comparable period of the preceding year and with any other period of
corresponding length specified by the Representatives, except in each
case for increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter;
(G) as of a specified date not more than five days prior to the
date of such letter there have been any changes in the consolidated
equity (other than issuances of capital stock upon exercise of options
and stock appreciation rights, upon earn-outs of performance shares
and upon conversions of convertible securities, in each case which
were outstanding on the date of the latest balance sheet included or
incorporated by reference in the Prospectus) or any increase in the
consolidated short-term debt or, long-term debt of GTE and its
subsidiaries, or any decreases in consolidated net assets or or other
items specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included or incorporated by
reference in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and
(H) for the period from the date of the latest available interim
financial statements referred to in Clause (E) to the specified date
referred to in Clause (G) whether there were any material decreases in
consolidated net revenues or operating profit or the total or per
share amounts of consolidated net income or other items specified by
the Representatives, or any material increases in any items specified
by the Representatives, in each case as compared with the comparable
period of the preceding year and with any other period of
corresponding length specified by the Representatives, except in each
case for increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter;
(v) In addition to the audit referred to in their report(s) included or
incorporated by reference in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other procedures referred to in
paragraphs (iii) and (iv) above, they have carried out certain specified
procedures, not constituting an audit in accordance with generally accepted
auditing standards, with respect to certain amounts, percentages and
financial information specified by the Representatives which are derived
from the general accounting records of GTE and its subsidiaries, which
appear in the Prospectus (excluding documents incorporated by reference),
or in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives or in documents incorporated by
reference in the Prospectus specified by the Representatives, and have
compared certain of such amounts, percentages and financial information
with the accounting records of GTE and its subsidiaries and have found them
to be in agreement.
All references in this Exhibit C to the Prospectus shall be deemed to refer to
the Basic Prospectus (including the documents incorporated by reference therein)
as defined in the Underwriting Agreement as of the date of the letter delivered
on the date of the Underwriting Agreement for purposes of such letter and to the
Prospectus (including the documents incorporated by reference therein) in
relation to the New Debentures for purposes of the letter delivered on the
Closing Date.
2
<PAGE>
EXHIBIT 4.2
- --------------------------------------------------------------------------------
GTE CORPORATION
AND
THE BANK OF NEW YORK,
as Trustee
________________
FIRST SUPPLEMENTAL INDENTURE
Dated as of ________ __, 1994
TO
INDENTURE
Dated as of June 1, 1994
________________
______% Junior Subordinated Deferrable Interest Debentures, Series A,
Due 2024
- --------------------------------------------------------------------------------
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of the _____ day of _________,
1994 (the "First Supplemental Indenture"), between GTE CORPORATION, a
corporation duly organized and existing under the laws of the State of New York
(hereinafter sometimes referred to as the "Company"), and THE BANK OF NEW YORK,
a New York banking association organized and existing under the laws of the
State of New York, as trustee (hereinafter sometimes referred to as the
"Trustee") under the Indenture dated as of June 1, 1994 between the Company and
the Trustee (the "Indenture"; all terms used and not defined herein are used as
defined in the Indenture).
WHEREAS, the Company executed and delivered the Indenture to the
Trustee to provide for the future issuance of its junior subordinated debentures
(the "Debentures"), said Debentures to be issued from time to time in series as
might be determined by the Company under the Indenture, in an unlimited
aggregate principal amount which may be authenticated and delivered thereunder
as in the Indenture provided; and
WHEREAS, pursuant to the terms of the Indenture, the Company desires
to provide for the establishment of a new series of its Debentures to be known
as its _____% Junior Subordinated Deferrable Interest Debentures, Series A, Due
2024 (said series being hereinafter referred to as the "Series A Debentures"),
the form and substance of such Series A Debentures and the terms, provisions and
conditions thereof to be set forth as provided in the Indenture and this First
Supplemental Indenture; and
WHEREAS, GTE Delaware, L.P., a Delaware limited partnership ("GTE
Delaware"), has offered to the public its ___% Cumulative Monthly Income
Preferred Securities, Series A (the "Series A Preferred Securities"),
representing limited partnership interests in GTE Delaware and proposes to
invest the proceeds from such offering in the Series A Debentures; and
WHEREAS, upon the occurrence of a Special Event (as defined in the
Amended and Restated Agreement of Limited Partnership of GTE Delaware, dated
__________ ___, 1994 (the "Limited Partnership Agreement"), the Company may
dissolve GTE Delaware and cause to be distributed to the holders of the Series A
Preferred Securities, on a pro rata basis, Series A Debentures (a "Dissolution
Event"); and
WHEREAS, the Company desires and has requested the Trustee to join
with it in the execution and delivery of this First Supplemental Indenture, and
all requirements necessary to make this First Supplemental Indenture a valid
instrument, in accordance with its terms, and to make the Series A Debentures,
when executed by the Company and authenticated and delivered by the Trustee, the
valid obligations of the Company, have been
<PAGE>
performed and fulfilled, and the execution and delivery hereof have been in all
respects duly authorized:
NOW THEREFORE, in consideration of the purchase and acceptance of the
Series A Debentures by the holders thereof, and for the purpose of setting
forth, as provided in the Indenture, the form and substance of the Series A
Debentures and the terms, provisions and conditions thereof, the Company
covenants and agrees with the Trustee as follows:
ARTICLE ONE
General Terms and Conditions of
the Series A Debentures
SECTION 1.01. There shall be and is hereby authorized a series of
Debentures designated the "_____% Junior Subordinated Deferrable Interest
Debentures, Series A, Due 2024", limited in aggregate principal amount to (i)
$________, plus (ii) the amount of capital contributions made by the Company
from time to time as general partner of GTE Delaware, which amount shall be as
set forth in any written order of the Company for the authentication and
delivery of Series A Debentures. The Series A Debentures shall mature and the
principal shall be due and payable together with all accrued and unpaid interest
thereon, including Additional Interest (as hereinafter defined) on _______ __,
2024, and shall be issued in the form of registered Series A Debentures without
coupons.
SECTION 1.02. Except as provided in Section 1.03 herein, the Series A
Debentures shall be issued in certificated form. Principal and interest on the
Series A Debentures issued in certificated form will be payable, the transfer of
such Series A Debentures will be registrable and such Series A Debentures will
be exchangeable for the Series A Debentures bearing identical terms and
provisions at the office or agency of the Company in the Borough of Manhattan,
The City and State of New York; provided, however, that payment of interest
-------- -------
may be made at the option of the Company by check mailed to the registered
holder at such address as shall appear in the Debenture register.
Notwithstanding the foregoing, so long as the holder of the Series A Debentures
is GTE Delaware, the payment of the principal of and interest on (including
Additional Interest, if any) on the Series A Debentures will be made at such
place and to such account as may be designated by GTE Delaware.
SECTION 1.03. In connection with a Dissolution Event, the Series A
Debentures in certificated form may be presented to the Trustee by GTE Delaware
in exchange for a Global Debenture in an aggregate principal amount equal to all
Outstanding Series A Debentures, to be registered in the name of the Depository,
or its nominee, and delivered by the Trustee to the Depository for
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<PAGE>
crediting to the accounts of its participants pursuant to the instructions of
GTE Delaware. The Company upon any such presentation shall execute a Global
Debenture in such aggregate principal amount and deliver the same to the Trustee
for authentication and delivery as hereinabove and in the Indenture provided.
Payments on the Series A Debentures issued as a Global Debenture will be made to
the Depository. The Depository for the Series A Debentures shall be The
Depository Trust Company, New York, New York.
SECTION 1.04. Each Series A Debenture will bear interest at the rate
of _____% per annum from the original date of issuance until the principal
thereof becomes due and payable, and on any overdue principal and (to the extent
that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the same rate per annum, payable monthly in
arrears on the last day of each calendar month of each year (each, an "Interest
Payment Date", commencing on _______, 1994), to the person in whose name such
Series A Debenture or any predecessor Series A Debenture is registered, at the
close of business on the regular record date for such interest installment,
which shall be the close of business on the business day next preceding that
Interest Payment Date. If pursuant to the provisions of Section 2.11(c) of the
Indenture the Series A Junior Subordinated Debentures are no longer represented
by a Global Debenture, the Company may select a regular record date for such
interest installment which shall be any date not later than fifteen days
preceding an Interest Payment Date. Any such interest installment not punctually
paid or duly provided for shall forthwith cease to be payable to the registered
holders on such regular record date, and may be paid to the person in whose name
the Series A Debenture (or one or more Predecessor Debentures) is registered at
the close of business on a special record date to be fixed by the Trustee for
the payment of such defaulted interest, notice whereof shall be given to the
registered holders of the Series A Debentures not less than 10 days prior to
such special record date, or may be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange on which the
Series A Debentures may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture hereinafter referred
to.
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 Debentures is not a business day, then
payment of 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.
If at any time when GTE Delaware is the holder of the Series A
Debentures, GTE Delaware shall be required to pay any interest on dividends in
arrears in respect of the Series A
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<PAGE>
Preferred Securities pursuant to the terms thereof, then the Company will pay as
interest (the "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, the Company shall also pay as Additional
Interest such amounts as shall be required so that the net amount received and
retained by GTE Delaware after paying any such taxes, duties, assessments or
governmental charges will not be less than the amounts GTE Delaware would have
received had no such taxes, duties, assessments or governmental charges been
imposed.
ARTICLE TWO
Mandatory Prepayment and Optional Redemption
of the Series A Debentures
SECTION 2.01. If GTE Delaware redeems the Series A Preferred
Securities in accordance with the terms thereof, the Series A 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 all accrued and unpaid interest thereon, including Additional
Interest, if any (the "Mandatory Prepayment Price"). 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 earlier time as the Company and GTE Delaware shall
agree.
SECTION 2.02. At such time as there are no Series A Preferred
Securities remaining outstanding and subject to the terms of Article Three of
the Indenture, the Company shall have the right to redeem the Series A
Debentures, in whole or in part, from time to time, on or after ___________,
1999, at a redemption price equal to 100% of the principal amount to be redeemed
plus any accrued and unpaid interest thereon, including any Additional Interest,
if any, to the date of such redemption (the "Optional Redemption Price"). Any
redemption pursuant to this paragraph will be made upon not less than 30 nor
more than 60 days' notice, at the Optional Redemption Price. If the Series A
Debentures are only partially redeemed pursuant to this Section, the Debentures
will be redeemed pro rata or by lot or by any other method utilized by the
Trustee; provided, that if at the time of redemption, the Series A Debentures
are registered as a Global Debenture, the Depository shall determine by lot the
principal amount of such Series A Debentures held by each Series A
Debentureholder to be redeemed.
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<PAGE>
ARTICLE THREE
Extension of Interest Payment Period
SECTION 3.01. The Company shall have the right, at any time during
the term of the Series A Debentures, from time to time to extend the interest
payment period, of such Series A Debentures for up to 60 consecutive months (the
"Extended Interest Payment Period"), at the end of which period the Company
shall pay all interest accrued and unpaid thereon (together with interest
thereon at the rate specified for the Series A Debentures to the extent
permitted by applicable law); provided that, during such Extended Interest
Payment Period the Company 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 or make any guarantee payments with respect to the foregoing.
Prior to the termination of any such Extended Interest Payment Period, the
Company may further extend such period, provided that such period together with
all such further extensions thereof shall not exceed 60 consecutive months. Upon
the termination of any Extended Interest Payment Period and upon the payment of
all accrued and unpaid interest and any Additional Interest then due, the
Company may select a new Extended Interest Payment Period, subject to the
foregoing requirements. No interest during an Extended Interest Payment Period,
except at the end thereof, shall be due and payable.
SECTION 3.02. (a) If GTE Delaware is the sole holder of the
Series A Debentures at the time the Company selects an Extended Interest Payment
Period, the Company shall give both GTE Delaware and the Trustee written notice
of its selection of such Extended Interest Payment Period one business day prior
to the earlier of (i) the next succeeding date on which dividends on the Series
A Preferred Securities are payable or (ii) the date GTE Delaware is required to
give notice of the record date or the date such dividends are payable to the New
York Stock Exchange or other applicable self-regulatory organization or to
holders of the Series A Preferred Securities, but in any event not less than one
business day prior to such record date. The Company shall cause GTE Delaware to
give notice of the Company's selection of such Extended Interest Payment Period
to the holders of the Series A Preferred Securities.
(b) If GTE Delaware is not the sole holder of the Series A Debentures
at the time the Company selects an Extended Interest Payment Period, the Company
shall give the holders of the Series A Debentures and the Trustee written notice
of its selection of such Extended Interest Payment Period 10 business days prior
to the earlier of (i) the next succeeding Interest Payment Date or (ii) the date
the Company is required to give notice of the record or payment date of such
interest payment to the New York Stock Exchange or other applicable self-
regulatory organization or to holders of the Series A Debentures, but in any
event not less than two business days prior to such record date.
(c) The month in which any notice is given pursuant to paragraphs (a)
or (b) of this Section shall constitute one of the
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<PAGE>
60 months which comprise the maximum Extended Interest Payment Period.
ARTICLE FOUR
Right of Set-Off
SECTION 4.01. Notwithstanding anything to the contrary in the
Indenture or herein, the Company shall have the right to set-off any payment it
is otherwise required to make thereunder or hereunder with and to the extent the
Company has heretofore made, or is concurrently on the date of such payment
making, a payment under the Guarantee, dated as of ________, executed by the
Company and furnished to GTE Delaware for the benefit of the holders of the
Series A Preferred Securities.
ARTICLE FIVE
Covenant to List on Exchange
SECTION 5.01. If the Series A Debentures are to be issued as a Global
Debenture in connection with the distribution of the Series A Debentures to the
holders of the Series A Preferred Securities upon a Dissolution Event, the
Company will use its best efforts to list such 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.
ARTICLE SIX
Form of Series A Debenture
SECTION 6.01. The Series A Debentures and the Trustee's Certificate
of Authentication to be endorsed thereon are to be substantially in the
following forms:
(FORM OF FACE OF DEBENTURE)
[If the Debenture is to be a Global Debenture, insert - This Debenture
is a Global Debenture within the meaning of the Indenture hereinafter referred
to and is registered in the name of a Depository or a nominee of a Depository.
This Debenture is exchangeable for Debentures registered in the name of a person
other than the Depository or its nominee only in the limited circumstances
described in the Indenture, and no transfer of this Debenture (other than a
transfer of this Debenture as a whole by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository) may be registered except in limited circumstances.
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<PAGE>
Unless this Debenture is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York) to the issuer or its
agent for registration of transfer, exchange or payment, and any Debenture
issued is registered in the name of Cede & Co. or such other name as requested
by an authorized representative of The Depository Trust Company and any payment
hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede &
Co., has an interest herein.]
No.__________________ $__________________
CUSIP No. __________
GTE CORPORATION
___% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE, SERIES A, DUE 2024
GTE CORPORATION, a corporation duly organized and existing under the
laws of the State of New York (herein referred to as the "Company", which term
includes any successor corporation under the Indenture), for value received,
hereby promises to pay to or registered assigns, the principal sum
of Dollars on , 2024, and to pay interest on
said principal sum from , 1994 or from the most recent interest payment
date (each such date, an "Interest Payment Date") to which interest has been
paid or duly provided for, monthly in arrears on the last day of each calendar
month of each year commencing , 1994 at the rate of % per annum plus
----
Additional Interest, if any, until the principal hereof shall have become due
and payable, and on any overdue principal and premium, if any, and (to the
extent that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the same rate per annum. The amount of
interest payable on any Interest Payment Date shall 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 this Debenture is not a business day, then payment of
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. The interest
installment so payable, and punctually paid or duly provided for, on any
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<PAGE>
Interest Payment Date will, as provided in the Indenture, be paid to the person
in whose name this Debenture (or one or more Predecessor Debentures, as defined
in said Indenture) is registered at the close of business on the regular record
date for such interest installment, [which shall be the close of business on the
business day next preceding such Interest Payment Date]. [If pursuant to the
provisions of Section 2.11(c) of the Indenture the Series A Junior Subordinated
Debentures are no longer represented by a Global Debenture--which shall be the
close of business on the ___ business day next preceding such Interest Payment
Date.] Any such interest installment not punctually paid or duly provided for
shall forthwith cease to be payable to the registered holders on such regular
record date, and may be paid to the person in whose name this Debenture (or one
or more Predecessor Debentures) is registered at the close of business on a
special record date to be fixed by the Trustee for the payment of such defaulted
interest, notice whereof shall be given to the registered holders of this series
of Debentures not less than 10 days prior to such special record date, or may be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Debentures may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture hereinafter referred to. The principal of (and
premium, if any) and the interest on this Debenture shall be payable at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, The City and State of New York, in any coin or currency of the United
States of America which at the time of payment is legal tender for payment of
public and private debts; provided, however, that payment of interest may be
--------- -------
made at the option of the Company by check mailed to the registered holder at
such address as shall appear in the Debenture register. Notwithstanding the
foregoing, so long as the holder of this Debenture is GTE Delaware, L.P. ("GTE
Delaware"), the payment of the principal of (and premium, if any) and interest
(including Additional Interest, if any) in this Debenture will be made at such
place and to such account as may be designated by GTE Delaware.
The indebtedness evidenced by this Debenture is, to the extent
provided in the Indenture, subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness, and this Debenture is issued
subject to the provisions of the Indenture with respect thereto. Each Holder of
this Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his attorney-in-fact for
any and all such purposes. Each Holder hereof, by his acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such Holder upon
said provisions.
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<PAGE>
This Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any purpose
until the Certificate of Authentication hereon shall have been signed by or on
behalf of the Trustee.
Unless the Certificate of Authentication hereon has been executed by
the Trustee referred to on the reverse side hereof, this Debenture shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
The provisions of this Debenture are contained on the reverse side
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Instrument to be
executed.
Dated____________________
GTE CORPORATION
By_________________
Chairman
Attest:
__________________________________
Secretary
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<PAGE>
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures of the series of Debentures described in
the within-mentioned Indenture.
The Bank of New York
- ----------------------- -----------------------
as Trustee or as Authentication Agent
By__________________________ By__________________________
Authorized Signatory Authorized Signatory
(FORM OF REVERSE OF DEBENTURE)
This Debenture is one of a duly authorized series of Debentures of the
Company (herein sometimes referred to as the "Debentures"), specified in the
Indenture, all issued or to be issued in one or more series under and pursuant
to an Indenture dated as of June 1, 1994 duly executed and delivered between
the Company and The Bank of New York, a New York banking association duly
organized and existing under the laws of the State of New York, as Trustee
(herein referred to as the "Trustee"), as supplemented by the First Supplemental
Indenture dated as of ________, 1994 between the Company and the Trustee (said
Indenture as so supplemented being hereinafter referred to as the "Indenture"),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a description of the rights, limitations of rights, obligations, duties
and immunities thereunder of the Trustee, the Company and the holders of the
Debentures. By the terms of the Indenture, the Debentures are issuable in series
which may vary as to amount, date of maturity, rate of interest and in other
respects as in the Indenture provided. This series of Debentures is limited in
aggregate principal amount as specified in said First Supplemental Indenture.
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<PAGE>
If GTE Delaware redeems its __% Cumulative Monthly Income Preferred
Securities, Series A (the "Series A Preferred Securities") in accordance with
the terms thereof, this Debenture 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 interest accrued thereon,
including Additional Interest (the "Mandatory Prepayment Price"). Any Mandatory
Prepayment shall be made prior to 12:00 noon, New York time, on the date of such
redemption or at such earlier time as the Company and GTE Delaware shall agree.
At such time as there are no Series A Preferred Securities remaining outstanding
and subject to the terms of Article Three of the Indenture, the Company shall
have the right to redeem this Debenture at the option of the Company, without
premium or penalty, in whole or in part at any time on or after __________, 1999
(an "Optional Redemption"), at a redemption price equal to 100% of the principal
amount plus any accrued but unpaid interest, including any Additional Interest,
if any, to the date of such redemption (the "Optional Redemption Price"). Any
redemption pursuant to this paragraph will be made upon not less than 30 nor
more than 60 days' notice, at the Optional Redemption Price. If the Debentures
are only partially redeemed by the Company pursuant to an Optional Redemption,
the Debentures will be redeemed pro rata or by lot or by any other method
utilized by the Trustee; provided that if at the time of redemption, the
Debentures are registered as a Global Debenture, the Depository shall determine
by lot the principal amount of such Debentures held by each Debentureholder to
be redeemed.
In the event of redemption of this Debenture in part only, a new
Debenture or Debentures of this series for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Debenture upon compliance by the Company with
certain conditions set forth therein.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not
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<PAGE>
less than a majority in aggregate principal amount of the Debentures of each
series affected at the time outstanding, as defined in the Indenture, to execute
supplemental indentures for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or of modifying in any manner the rights of the Holders
of the Debentures; provided, however, that no such supplemental indenture shall
(i) extend the fixed maturity of any 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 Debenture so affected or (ii) reduce
the aforesaid percentage of Debentures, the holders of which are required to
consent to any such supplemental indenture, without the consent of the holders
of each Debenture then outstanding and affected thereby. The Indenture also
contains provisions permitting the Holders of a majority in aggregate principal
amount of the Debentures of all series at the time outstanding affected thereby,
on behalf of the Holders of the Debentures of such series, to waive any past
default in the performance of any of the covenants contained in the Indenture,
or established pursuant to the Indenture with respect to such series, and its
consequences, except a default in the payment of the principal of or premium, if
any, or interest on any of the Debentures of such series. Any such consent or
waiver by the registered Holder of this Debenture (unless revoked as provided in
the Indenture) shall be conclusive and binding upon such Holder and upon all
future Holders and owners of this Debenture and of any Debenture issued in
exchange herefor or in place hereof (whether by registration of transfer or
otherwise), irrespective of whether or not any notation of such consent or
waiver is made upon this Debenture.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Debenture at the time and place and at the
rate and in the money herein prescribed.
The Company shall have the right at any time during the term of the
Debentures, from time to time to extend the interest payment period of such
Debentures to up to 60 consecutive months (the "Extended Interest Payment
Period"), at the end of which period the Company shall pay all interest then
accrued and unpaid (together with interest thereon at the rate specified for the
Debentures to the extent that payment of such interest is enforceable under
applicable law); provided that, during such
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Extended Interest Payment Period the Company 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 or make any guarantee payments with respect
to the foregoing. Prior to the termination of any such Extended Interest Payment
Period, the Company may further extend such Extended Interest Payment Period,
provided that such Period together with all such further extensions thereof
shall not exceed 60 consecutive months. At the termination of any such Extended
Interest Payment Period and upon the payment of all accrued and unpaid interest
and any additional amounts then due, the Company may select a new Extended
Interest Payment Period.
As provided in the Indenture and subject to certain limitations
therein set forth, this Debenture is transferable by the registered holder
hereof on the Debenture Register of the Company, upon surrender of this
Debenture for registration of transfer at the office or agency of the Company in
the Borough of Manhattan, The City and State of New York accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Company or the Trustee duly executed by the registered holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Debentures of
authorized denominations and for the same aggregate principal amount and series
will be issued to the designated transferee or transferees. No service charge
will be made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this
Debenture, the Company, the Trustee, any paying agent and any Debenture
Registrar may deem and treat the registered holder hereof as the absolute owner
hereof (whether or not this Debenture shall be overdue and notwithstanding any
notice of ownership or writing hereon made by anyone other than the Debenture
Registrar) for the purpose of receiving payment of or on account of the
principal hereof and premium, if any, and interest due hereon and for all other
purposes, and neither the Company nor the Trustee nor any paying agent nor any
Debenture Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
[The Debentures of this series are issuable only in registered form
without coupons in denominations of $25 and any integral multiple thereof.]
[This Global Debenture is
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<PAGE>
exchangeable for Debentures in definitive form only under certain limited
circumstances set forth in the Indenture. Debentures of this series so issued
are issuable only in registered form without coupons in denominations of $25 and
any integral multiple thereof.] As provided in the Indenture and subject to
certain limitations [herein and] therein set forth, Debentures of this series
[so issued] are exchangeable for a like aggregate principal amount of Debentures
of this series of a different authorized denomination, as requested by the
Holder surrendering the same.
All terms used in this Debenture which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
ARTICLE SEVEN
Original Issue of Series A Debentures
SECTION 7.01. Series A Debentures in the aggregate principal amount of
$________ plus the amount of capital contributions made by the Company from time
to time as general partner of GTE Delaware, may, upon execution of this First
Supplemental Indenture, or from time to time thereafter, be executed by the
Company and delivered to the Trustee for authentication, and the Trustee shall
thereupon authenticate and deliver said Debentures to or upon the written order
of the Company, signed by its Chairman, its President, or any Vice President and
its Treasurer or an Assistant Treasurer, without any further action by the
Company.
ARTICLE EIGHT
Sundry Provisions.
SECTION 8.01. Except as otherwise expressly provided in this First
Supplemental Indenture or in the form of Series A Debenture or otherwise clearly
required by the context hereof or thereof, all terms used herein or in said form
of Series A Debenture that are defined in the Indenture shall have the several
meanings respectively assigned to them thereby.
SECTION 8.02. The Indenture, as supplemented by this First
Supplemental Indenture, is in all respects ratified and confirmed, and this
First Supplemental Indenture shall be deemed part of the Indenture in the manner
and to the extent herein and therein provided.
SECTION 8.03. The recitals herein contained are made by the Company
and not by the Trustee, and the Trustee assumes no responsibility for the
correctness thereof. The Trustee makes no representation as to the validity or
sufficiency of this First Supplemental Indenture.
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<PAGE>
SECTION 8.04. This First Supplemental Indenture may be executed in
any number of counterparts each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, on the date or dates indicated in the
acknowledgments and as of the day and year first above written.
GTE CORPORATION
By______________________
Vice President
Attest:
___________________
Secretary
THE BANK OF NEW YORK
as Trustee
By_____________________
Attest:
_____________________________
Assistant Treasurer
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<PAGE>
STATE OF CONNECTICUT )
COUNTY OF FAIRFIELD ) ss.: Stamford, _________ __, 1994
On the ___day _________, in the year one thousand nine hundred ninety-
four, before me personally came ____________ to me known, who, being by me duly
sworn, did depose and say that he resides at
______________________________________________; that he is ______________ of GTE
CORPORATION, one of the corporations described in and which executed the above
instrument; that he knows the corporate seal of said corporation; that the seal
affixed to the said instrument is such corporation seal; that it was so affixed
by authority of the Board of Directors of said corporation, and that he signed
his name thereto by like authority.
___________________________
STATE OF NEW YORK)
COUNTY OF ) ss.: _______ __, 1994
On the __ day of ______, in the year one thousand nine hundred ninety-
four, before me personally came to me known, who, being by me
duly sworn, did depose and say that (s)he resides at ___________________, of
____________________, one of the corporations described in and which executed
the above instrument; that he knows the corporate seal of said corporation; that
the seal affixed to said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said corporation and that he
signed his name thereto by like authority.
________________________________
NOTARY PUBLIC
My Commission Expires
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<PAGE>
EXHIBIT 4.3
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GTE CORPORATION
AND
THE BANK OF NEW YORK,
as Trustee
________________
FIRST SUPPLEMENTAL INDENTURE
Dated as of ________ __, 1994
TO
INDENTURE
Dated as of June 1, 1994
________________
Adjustable Rate Junior Subordinated Deferrable Interest Debentures,
Series A, Due 2024
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<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of the _____ day of _________,
1994 (the "First Supplemental Indenture"), between GTE CORPORATION, a
corporation duly organized and existing under the laws of the State of New York
(hereinafter sometimes referred to as the "Company"), and THE BANK OF NEW YORK,
a New York banking association organized and existing under the laws of the
State of New York, as trustee (hereinafter sometimes referred to as the
"Trustee") under the Indenture dated as of June 1, 1994 between the Company
and the Trustee (the "Indenture"; all terms used and not defined herein are used
as defined in the Indenture).
WHEREAS, the Company executed and delivered the Indenture to the
Trustee to provide for the future issuance of its junior subordinated debentures
(the "Debentures"), said Debentures to be issued from time to time in series as
might be determined by the Company under the Indenture, in an unlimited
aggregate principal amount which may be authenticated and delivered thereunder
as in the Indenture provided; and
WHEREAS, pursuant to the terms of the Indenture, the Company desires
to provide for the establishment of a new series of its Debentures to be known
as its Adjustable Rate Junior Subordinated Deferrable Interest Debentures,
Series A, Due 2024 (said series being hereinafter referred to as the "Series A
Debentures"), the form and substance of such Series A Debentures and the terms,
provisions and conditions thereof to be set forth as provided in the Indenture
and this First Supplemental Indenture; and
WHEREAS, GTE Delaware, L.P., a Delaware limited partnership ("GTE
Delaware"), has offered to the public its Cumulative Adjustable Rate Monthly
Income Preferred Securities, Series A (the "Series A Preferred Securities"),
representing limited partnership interests in GTE Delaware and proposes to
invest the proceeds from such offering in the Series A Debentures; and
WHEREAS, upon the occurrence of a Special Event (as defined in the
Amended and Restated Agreement of Limited Partnership of GTE Delaware, dated
__________ ___, 1994 (the "Limited Partnership Agreement"), the Company may
dissolve GTE Delaware and cause to be distributed to the holders of the Series A
Preferred Securities, on a pro rata basis, Series A Debentures (a "Dissolution
Event"); and
WHEREAS, the Company desires and has requested the Trustee to join
with it in the execution and delivery of this First Supplemental Indenture, and
all requirements necessary to make this First Supplemental Indenture a valid
instrument, in accordance with its terms, and to make the Series A Debentures,
when executed by the Company and authenticated and delivered by the Trustee, the
valid obligations of the Company, have been
<PAGE>
performed and fulfilled, and the execution and delivery hereof have been in all
respects duly authorized:
NOW THEREFORE, in consideration of the purchase and acceptance of the
Series A Debentures by the holders thereof, and for the purpose of setting
forth, as provided in the Indenture, the form and substance of the Series A
Debentures and the terms, provisions and conditions thereof, the Company
covenants and agrees with the Trustee as follows:
ARTICLE ONE
General Terms and Conditions of
the Series A Debentures
SECTION 1.01. There shall be and is hereby authorized a series of
Debentures designated the "Adjustable Rate Junior Subordinated Deferrable
Interest Debentures, Series A, Due 2024", limited in aggregate principal
amount to (i) $________, plus (ii) the amount of capital contributions made by
the Company from time to time as general partner of GTE Delaware, which amount
shall be as set forth in any written order of the Company for the authentication
and delivery of Series A Debentures. The Series A Debentures shall mature and
the principal shall be due and payable together with all accrued and unpaid
interest thereon, including Additional Interest (as hereinafter defined) on
_______ __, 2024, and shall be issued in the form of registered Series A
Debentures without coupons.
SECTION 1.02. Except as provided in Section 1.03 herein, the Series A
Debentures shall be issued in certificated form. Principal and interest on the
Series A Debentures issued in certificated form will be payable, the transfer of
such Series A Debentures will be registrable and such Series A Debentures will
be exchangeable for the Series A Debentures bearing identical terms and
provisions at the office or agency of the Company in the Borough of Manhattan,
The City and State of New York; provided, however, that payment of interest may
-------- -------
be made at the option of the Company by check mailed to the registered holder at
such address as shall appear in the Debenture register. Notwithstanding the
foregoing, so long as the holder of the Series A Debentures is GTE Delaware, the
payment of the principal of and interest on (including Additional Interest, if
any) on the Series A Debentures will be made at such place and to such account
as may be designated by GTE Delaware.
SECTION 1.03. In connection with a Dissolution Event, the Series A
Debentures in certificated form may be presented to the Trustee by GTE Delaware
in exchange for a Global Debenture in an aggregate principal amount equal to all
Outstanding Series A Debentures, to be registered in the name of the Depository,
or its nominee, and delivered by the Trustee to the Depository for
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<PAGE>
crediting to the accounts of its participants pursuant to the instructions of
GTE Delaware. The Company upon any such presentation shall execute a Global
Debenture in such aggregate principal amount and deliver the same to the Trustee
for authentication and delivery as hereinabove and in the Indenture provided.
Payments on the Series A Debentures issued as a Global Debenture will be made to
the Depository. The Depository for the Series A Debentures shall be The
Depository Trust Company, New York, New York.
SECTION 1.04. Each Series A Debenture shall bear interest at a
variable rate from the date it is made until maturity. The interest rate will
be adjusted quarterly. The rate for the initial period from the original date of
issuance to ____ __, 1994 will be ___% per annum. Thereafter, interest on the
Series A Debentures will be payable at the "Applicable Rate" (as defined below)
from time to time in effect. The interest rate on any overdue principal and (to
the extent that payment of such interest is enforceable under applicable law) on
any overdue installment of interest will be at the same rate per annum, during
such overdue period. Interest is payable monthly in arrears on the last day of
each calendar month of each year (each, an "Interest Payment Date", commencing
on _______, 1994), to the person in whose name such Series A Debenture or any
predecessor Series A Debenture is registered, at the close of business on the
regular record date for such interest installment, which shall be the close of
business on the business day next preceding that Interest Payment Date. If
pursuant to the provisions of Section 2.11(c) of the Indenture the Series A
Debentures are no longer represented by a Global Debenture, the Company may
select a regular record date for such interest installment which shall be any
date not later than fifteen days preceding an Interest Payment Date. Any such
interest installment not punctually paid or duly provided for shall forthwith
cease to be payable to the registered holders on such regular record date, and
may be paid to the person in whose name the Series A Debenture (or one or more
Predecessor Debentures) is registered at the close of business on a special
record date to be fixed by the Trustee for the payment of such defaulted
interest, notice whereof shall be given to the registered holders of the Series
A Debentures not less than 10 days prior to such special record date, or may be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Series A Debentures may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in the Indenture hereinafter referred to.
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 Debentures is not a business day, then
payment of 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.
If at any time when GTE Delaware is the holder of the Series A
Debentures, GTE Delaware shall be required to pay any interest on dividends in
arrears in respect of the Series A
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<PAGE>
Preferred Securities pursuant to the terms thereof, then the Company will pay as
interest (the "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, the Company shall also pay as Additional
Interest such amounts as shall be required so that the net amount received and
retained by GTE Delaware after paying any such taxes, duties, assessments or
governmental charges will not be less than the amounts GTE Delaware would have
received had no such taxes, duties, assessments or governmental charges been
imposed.
Except as provided below in this paragraph, the "Applicable Rate" for
any quarter (other than the initial period) will be equal to ____% of the
Effective Rate (as defined below), but not less than ____% per annum nor more
than ____% per annum. The "Effective Rate" for any quarter will be equal to the
highest of the Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Thirty Year Constant Maturity Rate (each as defined below) for such quarter. The
Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year
Constant Maturity Rate with respect to any quarter shall be determined by GTE
Delaware in the same manner as, and consistent with its determinations with
respect to quarters for the purpose of dividends payable on the Series A
Preferred Securities, as described below. The Applicable Rate will be rounded to
the nearest five hundredth of a percent. In the event that GTE Delaware
determines in good faith that for any reason:
(i) any one of the Treasury Bill Rate, the Ten Year Constant
Maturity Rate or the Thirty Year Constant Maturity Rate cannot be determined
for any quarter, then the Effective Rate for such quarter will be equal to the
higher of whichever two of such rates can be so determined;
(ii) only one of the Treasury Bill Rate, the Ten Year Constant
Maturity Rate or the Thirty Year Constant Maturity Rate can be determined for
any quarter, then the Effective Rate for such quarter will be equal to whichever
such rate can be so determined; or
(iii) none of the Treasury Bill Rate, the Ten Year Constant
Maturity Rate or the Thirty Year Constant Maturity Rate can be determined for
any quarter, then the Effective Rate for the preceding quarter will be
continued for such quarter.
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<PAGE>
Except as described below in this paragraph, the "Treasury Bill
Rate" for each quarter will be the arithmetic average of the two most recent
weekly per annum secondary market discount rates (or the one weekly per annum
secondary market discount rate, if only one such rate is published during the
relevant Calendar Period (as defined below)) for three-month U.S. Treasury
bills, as published weekly by the Federal Reserve Board (as defined below)
during the Calendar Period immediately preceding the last ten calendar days
preceding the quarter for which the interest rate on the Series A Debentures
is being determined. In the event that the Federal Reserve Board does not
publish such a weekly per annum secondary market discount rate during any such
Calendar Period, then the Treasury Bill Rate for such quarter will be the
arithmetic average of the two most recent weekly per annum secondary market
discount rates (or the one weekly per annum secondary market discount rate, if
only one such rate is published during the relevant Calendar Period) for
three-month U.S. Treasury bills, as published weekly during such Calendar
Period by any Federal Reserve Bank or by any U.S. Government department or
agency selected by GTE Delaware. In the event that a per annum secondary
market discount rate for three-month U.S. Treasury bills is not published by
the Federal Reserve Board or by any Federal Reserve Bank or by any U.S.
Government department or agency during such Calendar Period, then the Treasury
Bill Rate for such quarter will be the arithmetic average of the two most
recent weekly per annum secondary market discount rates (or the one weekly
per annum secondary market discount rate, if only one such rate is published
during the relevant Calendar Period) for all of the U.S. Treasury bills then
having remaining maturities of not less than 80 nor more than 100 days, as
published during such Calendar Period by the Federal Reserve Board, or if the
Federal Reserve Board does not publish such rates, by any Federal Reserve Bank
or by any U.S. Government department or agency selected by GTE Delaware. In
the event that GTE Delaware determines in good faith that for any reason no
such U.S. Treasury bill rates are published as provided above during such
Calendar Period, then the Treasury Bill Rate for such quarter will be the
arithmetic average of the per annum secondary market discount rates based upon
the closing bids during such Calendar Period for each of the issues of
marketable non-interest-bearing U.S. Treasury securities with a remaining
maturity of not less than 80 nor more than 100 days from the date of each such
quotation, as chosen and quoted daily for each business day in New York City
(or less frequently if daily quotations are not generally available) to GTE
Delaware by at least three recognized dealers in U.S. Government securities
selected by GTE Delaware. In the event that GTE Delaware determines in good
faith that for any reason GTE Delaware cannot determine the Treasury Bill Rate
for any quarter as provided above in this paragraph, the Treasury Bill Rate
for such quarter will be the arithmetic average of the per annum secondary
market discount rates based upon the closing bids during such Calendar Period
for each of the issues of marketable interest-bearing U.S. Treasury securities
with a remaining maturity of not less than 80 nor more than 100 days, as
chosen and quoted daily for each business day in New York City (or less
frequently if daily quotations are not generally available) to GTE Delaware by
at least three recognized dealers in U.S. Government securities selected by
GTE Delaware.
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<PAGE>
Except as described below in this paragraph, the "Ten Year Constant
Maturity Rate" for each quarter will be the arithmetic average of the two most
recent weekly per annum Ten Year Average Yields (as defined below) (or the
one weekly per annum Ten Year Average Yield, if only one such yield is
published during the relevant Calendar Period), as published weekly by the
Federal Reserve Board during the Calendar Period immediately preceding the
last ten calendar days preceding the quarter for which the interest rate on the
Series A Debentures is being determined. In the event that the Federal Reserve
Board does not publish such a weekly per annum Ten Year Average Yield during
such Calendar Period, then the Ten Year Constant Maturity Rate for such
quarter will be the arithmetic average of the two most recent weekly per annum
Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield,
if only one such yield is published during the relevant Calendar Period), as
published weekly during such Calendar Period by any Federal Reserve Bank or by
any U.S. Government department or agency selected by GTE Delaware. In the
event that a per annum Ten Year Average Yield is not published by any Federal
Reserve Bank or by any U.S. Government department or agency during such
Calendar Period, then the Ten Year Constant Maturity Rate for such quarter
will be the arithmetic average of the two most recent weekly per annum average
yields to maturity (or the one weekly per annum average yield to maturity, if
only one such yield is published during the relevant Calendar Period) for all
of the actively traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities (as defined below)) then having remaining
maturities of not less than eight nor more than twelve years, as published
during such Calendar Period by the Federal Reserve Board or, if the Federal
Reserve Board does not publish such yields, by any Federal Reserve Bank or by
any U.S. Government department or agency selected by GTE Delaware. In the
event that GTE Delaware determines in good faith that for any reason GTE
Delaware cannot determine the Ten Year Constant Maturity Rate for any quarter
as provided above in this paragraph, then the Ten Year Constant Maturity Rate
for such quarter will be the arithmetic average of the per annum average
yields to maturity based upon the closing bids during such Calendar Period for
each of the issues of actively traded marketable U.S. Treasury fixed interest
rate securities (other than Special Securities) with a final maturity date not
less than eight or more than twelve years from the date of each such
quotation, as chosen and quoted daily for each business day in New York City
(or less frequently if daily quotations are not generally available) to GTE
Delaware by at least three recognized dealers in U.S. Government securities
selected by GTE Delaware.
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<PAGE>
Except as described below in this paragraph, the "Thirty Year
Constant Maturity Rate" for each quarter will be the arithmetic average of the
two most recent weekly per annum Thirty Year Average Yields (as defined below)
(or the one weekly per annum Thirty Year Average Yield, if only one such yield
is published during the relevant Calendar Period), as published weekly by the
Federal Reserve Board during the Calendar Period immediately preceding the
last ten calendar days preceding the quarter for which the interest rate on
the Series A Debentures is being determined. In the event that the Federal
Reserve Board does not publish such a weekly per annum Thirty Year Average
Yield during such Calendar Period, then the Thirty Year Constant Maturity Rate
for such quarter will be the arithmetic average of the two most recent weekly
per annum Thirty Year Average Yields (or the one weekly per annum Thirty Year
Average Yield, if only one such yield is published during the relevant
Calendar Period), as published weekly during such Calendar Period by any
Federal Reserve Bank or by any U.S. Government department or agency selected
by GTE Delaware. In the event that a per annum Thirty Year Average Yield is
not published by the Federal Reserve Board or by any Federal Reserve Bank or
by any U.S. Government department or agency during such Calendar Period, then
the Thirty Year Constant Maturity Rate for such quarter will be the arithmetic
average of the two most recent weekly per annum average yields to maturity (or
the one weekly per annum average yield to maturity, if only one such yield is
published during the relevant Calendar Period) for all of the actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) then having remaining maturities of not less than twenty-eight nor
more than thirty-two years, as published during such Calendar Period by the
Federal Reserve Board or, if the Federal Reserve Board does not publish such
yields, by any Federal Reserve Bank or by any U.S. Government department or
agency selected by GTE Delaware. In the event that GTE Delaware determines in
good faith that for any reason GTE Delaware cannot determine the Thirty Year
Constant Maturity Rate for any quarter as provided above in this paragraph,
then the Thirty Year Constant Maturity Rate for such quarter will be the
arithmetic average of the per annum average yields to maturity based upon the
closing bids during such Calendar Period for each of the issues of actively
traded marketable U.S. Treasury fixed interest rate securities (other than
Special Securities) with a final maturity date not less than twenty-eight nor
more than thirty-two years from the date of each such quotation, as chosen and
quoted daily for each business day in New York City (or less frequently if
daily quotations are not generally available) to GTE Delaware by at least
three recognized dealers in U.S. Government securities selected by GTE
Delaware.
The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Thirty Year Constant Maturity Rate will each be rounded to the nearest one
hundredth of a percent.
The Applicable Rate with respect to each quarter (other than the
initial period) will be calculated as promptly as practicable by GTE Delaware
according to the appropriate method described above. GTE Delaware will cause
each Applicable Rate to be published in a newspaper of general circulation in
New York City before the commencement of the quarter to which it applies and
will cause notice of such Applicable Rate to be given to the Depository Trust
Company ("DTC"), New York, NY, the securities depository for the Series A
Debentures.
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<PAGE>
As used above, the term "Calendar Period" means a period of fourteen
calendar days; the term "Federal Reserve Board" means the Board of Governors
of the Federal Reserve System; the term "Special Securities" means securities
which can, at the option of the holder, be surrendered at face value in
payment of any Federal estate tax or which provide tax benefits to the holder
and are priced to reflect such tax benefits or which were originally issued at
a deep or substantial discount; the term "Ten Year Average Yield" means the
average yield to maturity for actively traded marketable U.S. Treasury fixed
interest rate securities (adjusted to constant maturities of ten years); and the
term "Thirty Year Average Yield" means the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of thirty years).
ARTICLE TWO
Mandatory Prepayment and Optional Redemption
of the Series A Debentures
SECTION 2.01. If GTE Delaware redeems the Series A Preferred
Securities in accordance with the terms thereof, the Series A 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 all accrued and unpaid interest thereon, including Additional
Interest, if any (the "Mandatory Prepayment Price"). 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 earlier time as the Company and GTE Delaware shall
agree.
SECTION 2.02. At such time as there are no Series A Preferred
Securities remaining outstanding and subject to the terms of Article Three of
the Indenture, the Company shall have the right to redeem the Series A
Debentures, in whole or in part, from time to time, on or after ___________,
1999, at a redemption price equal to 100% of the principal amount to be redeemed
plus any accrued and unpaid interest thereon, including any Additional Interest,
if any, to the date of such redemption (the "Optional Redemption Price"). Any
redemption pursuant to this paragraph will be made upon not less than 30 nor
more than 60 days' notice, at the Optional Redemption Price. If the Series A
Debentures are only partially redeemed pursuant to this Section, the Debentures
will be redeemed pro rata or by lot or by any other method utilized by the
Trustee; provided, that if at the time of redemption, the Series A Debentures
are registered as a Global Debenture, the Depository shall determine by lot the
principal amount of such Series A Debentures held by each Series A
Debentureholder to be redeemed.
-8-
<PAGE>
ARTICLE THREE
Extension of Interest Payment Period
SECTION 3.01. The Company shall have the right, at any time during
the term of the Series A Debentures, from time to time to extend the interest
payment period, of such Series A Debentures for up to 60 consecutive months (the
"Extended Interest Payment Period"), at the end of which period the Company
shall pay all interest accrued and unpaid thereon (together with interest
thereon at the rate specified for the Series A Debentures to the extent
permitted by applicable law); provided that, during such Extended Interest
Payment Period the Company 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 or make any guarantee payments with respect to the foregoing.
Prior to the termination of any such Extended Interest Payment Period, the
Company may further extend such period, provided that such period together with
all such further extensions thereof shall not exceed 60 consecutive months. Upon
the termination of any Extended Interest Payment Period and upon the payment of
all accrued and unpaid interest and any Additional Interest then due, the
Company may select a new Extended Interest Payment Period, subject to the
foregoing requirements. No interest during an Extended Interest Payment Period,
except at the end thereof, shall be due and payable.
SECTION 3.02. (a) If GTE Delaware is the sole holder of the
Series A Debentures at the time the Company selects an Extended Interest Payment
Period, the Company shall give both GTE Delaware and the Trustee written notice
of its selection of such Extended Interest Payment Period one business day prior
to the earlier of (i) the next succeeding date on which dividends on the Series
A Preferred Securities are payable or (ii) the date GTE Delaware is required to
give notice of the record date or the date such dividends are payable to the New
York Stock Exchange or other applicable self-regulatory organization or to
holders of the Series A Preferred Securities, but in any event not less than one
business day prior to such record date. The Company shall cause GTE Delaware to
give notice of the Company's selection of such Extended Interest Payment Period
to the holders of the Series A Preferred Securities.
(b) If GTE Delaware is not the sole holder of the Series A Debentures
at the time the Company selects an Extended Interest Payment Period, the Company
shall give the holders of the Series A Debentures and the Trustee written notice
of its selection of such Extended Interest Payment Period 10 business days prior
to the earlier of (i) the next succeeding Interest Payment Date or (ii) the date
the Company is required to give notice of the record or payment date of such
interest payment to the New York Stock Exchange or other applicable self-
regulatory organization or to holders of the Series A Debentures, but in any
event not less than two business days prior to such record date.
(c) The month in which any notice is given pursuant to paragraphs (a)
or (b) of this Section shall constitute one of the
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<PAGE>
60 months which comprise the maximum Extended Interest Payment Period.
ARTICLE FOUR
Right of Set-Off
SECTION 4.01. Notwithstanding anything to the contrary in the
Indenture or herein, the Company shall have the right to set-off any payment it
is otherwise required to make thereunder or hereunder with and to the extent the
Company has heretofore made, or is concurrently on the date of such payment
making, a payment under the Guarantee, dated as of ________, executed by the
Company and furnished to GTE Delaware for the benefit of the holders of the
Series A Preferred Securities.
ARTICLE FIVE
Covenant to List on Exchange
SECTION 5.01. If the Series A Debentures are to be issued as a Global
Debenture in connection with the distribution of the Series A Debentures to the
holders of the Series A Preferred Securities upon a Dissolution Event, the
Company will use its best efforts to list such 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.
ARTICLE SIX
Form of Series A Debenture
SECTION 6.01. The Series A Debentures and the Trustee's Certificate
of Authentication to be endorsed thereon are to be substantially in the
following forms:
(FORM OF FACE OF DEBENTURE)
[If the Debenture is to be a Global Debenture, insert - This Debenture
is a Global Debenture within the meaning of the Indenture hereinafter referred
to and is registered in the name of a Depository or a nominee of a Depository.
This Debenture is exchangeable for Debentures registered in the name of a person
other than the Depository or its nominee only in the limited circumstances
described in the Indenture, and no transfer of this Debenture (other than a
transfer of this Debenture as a whole by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository) may be registered except in limited circumstances.
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<PAGE>
Unless this Debenture is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York) to the issuer or its
agent for registration of transfer, exchange or payment, and any Debenture
issued is registered in the name of Cede & Co. or such other name as requested
by an authorized representative of The Depository Trust Company and any payment
hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede &
Co., has an interest herein.]
No.__________________ $__________________
CUSIP No. __________
GTE CORPORATION
ADJUSTABLE RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE,
SERIES A, DUE 2024
GTE CORPORATION, a corporation duly organized and existing under the
laws of the State of New York (herein referred to as the "Company", which term
includes any successor corporation under the Indenture), for value received,
hereby promises to pay to or registered assigns, the principal sum
of Dollars on , 2024, and to pay interest on
said principal sum from , 1994 to , 1994 at the initial rate of
% per annum and thereafter from the most recent interest payment date (each
such date, an "Interest Payment Date") to which interest has been paid or duly
provided for, monthly in arrears on the last day of each calendar month of each
year commencing , 1994 at the Applicable Rate (as defined in the First
Supplemental Indenture) adjusted quarterly, determined by GTE Delaware in the
manner described in the First Supplemental Indenture, plus Additional Interest,
----
if any, until the principal hereof shall have become due and payable, and on any
overdue principal and premium, if any, and (to the extent that payment of such
interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum during such overdue period. The amount of
interest payable on any Interest Payment Date shall 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 this Debenture is not a business day, then payment of
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. The interest
installment so payable, and punctually paid or duly provided for, on any
-11-
<PAGE>
Interest Payment Date will, as provided in the Indenture, be paid to the
person in whose name this Debenture (or one or more Predecessor Debentures, as
defined in said Indenture) is registered at the close of business on the
regular record date for such interest installment, [which shall be the close
of business on the business day next preceding such Interest Payment Date].
[If pursuant to the provisions of Section 2.11(c) of the Indenture the Series
A Debentures are no longer represented by a Global Debenture--which shall be
the close of business on the ___ business day next preceding such Interest
Payment Date.] Any such interest installment not punctually paid or duly
provided for shall forthwith cease to be payable to the registered holders on
such regular record date, and may be paid to the person in whose name this
Debenture (or one or more Predecessor Debentures) is registered at the close
of business on a special record date to be fixed by the Trustee for the
payment of such defaulted interest, notice whereof shall be given to the
registered holders of this series of Debentures not less than 10 days prior to
such special record date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Debentures may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture hereinafter referred
to. The principal of (and premium, if any) and the interest on this Debenture
shall be payable at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City and State of New York, in any coin
or currency of the United States of America which at the time of payment is
legal tender for payment of public and private debts; provided, however,
-------- -------
that payment of interest may be made at the option of the Company by check
mailed to the registered holder at such address as shall appear in the Debenture
register. Notwithstanding the foregoing, so long as the holder of this Debenture
is GTE Delaware, L.P. ("GTE Delaware"), the payment of the principal of (and
premium, if any) and interest (including Additional Interest, if any) in this
Debenture will be made at such place and to such account as may be designated by
GTE Delaware.
The indebtedness evidenced by this Debenture is, to the extent
provided in the Indenture, subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness, and this Debenture is issued
subject to the provisions of the Indenture with respect thereto. Each Holder of
this Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his attorney-in-fact for
any and all such purposes. Each Holder hereof, by his acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such Holder upon
said provisions.
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<PAGE>
This Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any purpose
until the Certificate of Authentication hereon shall have been signed by or on
behalf of the Trustee.
Unless the Certificate of Authentication hereon has been executed by
the Trustee referred to on the reverse side hereof, this Debenture shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
The provisions of this Debenture are contained on the reverse side
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Instrument to be
executed.
Dated____________________
GTE CORPORATION
By_________________
Chairman
Attest:
__________________________________
Secretary
-13-
<PAGE>
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures of the series of Debentures described in
the within-mentioned Indenture.
The Bank of New York
- ----------------------- -----------------------
as Trustee or as Authentication Agent
By__________________________ By__________________________
Authorized Signatory Authorized Signatory
(FORM OF REVERSE OF DEBENTURE)
This Debenture is one of a duly authorized series of Debentures of the
Company (herein sometimes referred to as the "Debentures"), specified in the
Indenture, all issued or to be issued in one or more series under and pursuant
to an Indenture dated as of June 1, 1994 duly executed and delivered between
the Company and The Bank of New York, a New York banking association duly
organized and existing under the laws of the State of New York, as Trustee
(herein referred to as the "Trustee"), as supplemented by the First Supplemental
Indenture dated as of ________, 1994 between the Company and the Trustee (said
Indenture as so supplemented being hereinafter referred to as the "Indenture"),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a description of the rights, limitations of rights, obligations, duties
and immunities thereunder of the Trustee, the Company and the holders of the
Debentures. By the terms of the Indenture, the Debentures are issuable in series
which may vary as to amount, date of maturity, rate of interest and in other
respects as in the Indenture provided. This series of Debentures is limited in
aggregate principal amount as specified in said First Supplemental Indenture.
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<PAGE>
If GTE Delaware redeems its Cumulative Adjustable Rate Monthly Income
Preferred Securities, Series A (the "Series A Preferred Securities") in
accordance with the terms thereof, this Debenture 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 interest accrued
thereon, including Additional Interest (the "Mandatory Prepayment Price"). Any
Mandatory Prepayment shall be made prior to 12:00 noon, New York time, on the
date of such redemption or at such earlier time as the Company and GTE Delaware
shall agree. At such time as there are no Series A Preferred Securities
remaining outstanding and subject to the terms of Article Three of the
Indenture, the Company shall have the right to redeem this Debenture at the
option of the Company, without premium or penalty, in whole or in part at any
time on or after __________, 1999 (an "Optional Redemption"), at a redemption
price equal to 100% of the principal amount plus any accrued but unpaid
interest, including any Additional Interest, if any, to the date of such
redemption (the "Optional Redemption Price"). Any redemption pursuant to this
paragraph will be made upon not less than 30 nor more than 60 days' notice, at
the Optional Redemption Price. If the Debentures are only partially redeemed by
the Company pursuant to an Optional Redemption, the Debentures will be redeemed
pro rata or by lot or by any other method utilized by the Trustee; provided that
if at the time of redemption, the Debentures are registered as a Global
Debenture, the Depository shall determine by lot the principal amount of such
Debentures held by each Debentureholder to be redeemed.
In the event of redemption of this Debenture in part only, a new
Debenture or Debentures of this series for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Debenture upon compliance by the Company with
certain conditions set forth therein.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not
-15-
<PAGE>
less than a majority in aggregate principal amount of the Debentures of each
series affected at the time outstanding, as defined in the Indenture, to execute
supplemental indentures for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or of modifying in any manner the rights of the Holders
of the Debentures; provided, however, that no such supplemental indenture shall
(i) extend the fixed maturity of any 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 Debenture so affected or (ii) reduce
the aforesaid percentage of Debentures, the holders of which are required to
consent to any such supplemental indenture, without the consent of the holders
of each Debenture then outstanding and affected thereby. The Indenture also
contains provisions permitting the Holders of a majority in aggregate principal
amount of the Debentures of all series at the time outstanding affected thereby,
on behalf of the Holders of the Debentures of such series, to waive any past
default in the performance of any of the covenants contained in the Indenture,
or established pursuant to the Indenture with respect to such series, and its
consequences, except a default in the payment of the principal of or premium, if
any, or interest on any of the Debentures of such series. Any such consent or
waiver by the registered Holder of this Debenture (unless revoked as provided in
the Indenture) shall be conclusive and binding upon such Holder and upon all
future Holders and owners of this Debenture and of any Debenture issued in
exchange herefor or in place hereof (whether by registration of transfer or
otherwise), irrespective of whether or not any notation of such consent or
waiver is made upon this Debenture.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Debenture at the time and place and at the
rate and in the money herein prescribed.
The Company shall have the right at any time during the term of the
Debentures, from time to time to extend the interest payment period of such
Debentures to up to 60 consecutive months (the "Extended Interest Payment
Period"), at the end of which period the Company shall pay all interest then
accrued and unpaid (together with interest thereon at the rate specified for the
Debentures to the extent that payment of such interest is enforceable under
applicable law); provided that, during such
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<PAGE>
Extended Interest Payment Period the Company 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 or make any guarantee payments with respect
to the foregoing. Prior to the termination of any such Extended Interest Payment
Period, the Company may further extend such Extended Interest Payment Period,
provided that such Period together with all such further extensions thereof
shall not exceed 60 consecutive months. At the termination of any such Extended
Interest Payment Period and upon the payment of all accrued and unpaid interest
and any additional amounts then due, the Company may select a new Extended
Interest Payment Period.
As provided in the Indenture and subject to certain limitations
therein set forth, this Debenture is transferable by the registered holder
hereof on the Debenture Register of the Company, upon surrender of this
Debenture for registration of transfer at the office or agency of the Company in
the Borough of Manhattan, The City and State of New York accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Company or the Trustee duly executed by the registered holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Debentures of
authorized denominations and for the same aggregate principal amount and series
will be issued to the designated transferee or transferees. No service charge
will be made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this
Debenture, the Company, the Trustee, any paying agent and any Debenture
Registrar may deem and treat the registered holder hereof as the absolute owner
hereof (whether or not this Debenture shall be overdue and notwithstanding any
notice of ownership or writing hereon made by anyone other than the Debenture
Registrar) for the purpose of receiving payment of or on account of the
principal hereof and premium, if any, and interest due hereon and for all other
purposes, and neither the Company nor the Trustee nor any paying agent nor any
Debenture Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
[The Debentures of this series are issuable only in registered form
without coupons in denominations of $25 and any integral multiple thereof.]
[This Global Debenture is
-17-
<PAGE>
exchangeable for Debentures in definitive form only under certain limited
circumstances set forth in the Indenture. Debentures of this series so issued
are issuable only in registered form without coupons in denominations of $25 and
any integral multiple thereof.] As provided in the Indenture and subject to
certain limitations [herein and] therein set forth, Debentures of this series
[so issued] are exchangeable for a like aggregate principal amount of Debentures
of this series of a different authorized denomination, as requested by the
Holder surrendering the same.
All terms used in this Debenture which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
ARTICLE SEVEN
Original Issue of Series A Debentures
SECTION 7.01. Series A Debentures in the aggregate principal amount of
$________ plus the amount of capital contributions made by the Company from time
to time as general partner of GTE Delaware, may, upon execution of this First
Supplemental Indenture, or from time to time thereafter, be executed by the
Company and delivered to the Trustee for authentication, and the Trustee shall
thereupon authenticate and deliver said Debentures to or upon the written order
of the Company, signed by its Chairman, its President, or any Vice President and
its Treasurer or an Assistant Treasurer, without any further action by the
Company.
ARTICLE EIGHT
Sundry Provisions.
SECTION 8.01. Except as otherwise expressly provided in this First
Supplemental Indenture or in the form of Series A Debenture or otherwise clearly
required by the context hereof or thereof, all terms used herein or in said form
of Series A Debenture that are defined in the Indenture shall have the several
meanings respectively assigned to them thereby.
SECTION 8.02. The Indenture, as supplemented by this First
Supplemental Indenture, is in all respects ratified and confirmed, and this
First Supplemental Indenture shall be deemed part of the Indenture in the manner
and to the extent herein and therein provided.
SECTION 8.03. The recitals herein contained are made by the Company
and not by the Trustee, and the Trustee assumes no responsibility for the
correctness thereof. The Trustee makes no representation as to the validity or
sufficiency of this First Supplemental Indenture.
-18-
<PAGE>
SECTION 8.04. This First Supplemental Indenture may be executed in
any number of counterparts each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
-19-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, on the date or dates indicated in the
acknowledgments and as of the day and year first above written.
GTE CORPORATION
By______________________
Vice President
Attest:
___________________
Secretary
THE BANK OF NEW YORK
as Trustee
By_____________________
Attest:
_____________________________
Assistant Treasurer
-20-
<PAGE>
STATE OF CONNECTICUT )
COUNTY OF FAIRFIELD ) ss.: Stamford, _________ __, 1994
On the ___day _________, in the year one thousand nine hundred ninety-
four, before me personally came ____________ to me known, who, being by me duly
sworn, did depose and say that he resides at
______________________________________________; that he is ______________ of GTE
CORPORATION, one of the corporations described in and which executed the above
instrument; that he knows the corporate seal of said corporation; that the seal
affixed to the said instrument is such corporation seal; that it was so affixed
by authority of the Board of Directors of said corporation, and that he signed
his name thereto by like authority.
___________________________
STATE OF NEW YORK)
COUNTY OF ) ss.: _______ __, 1994
On the __ day of ______, in the year one thousand nine hundred ninety-
four, before me personally came to me known, who, being by me
duly sworn, did depose and say that (s)he resides at ___________________, of
____________________, one of the corporations described in and which executed
the above instrument; that he knows the corporate seal of said corporation; that
the seal affixed to said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said corporation and that he
signed his name thereto by like authority.
________________________________
NOTARY PUBLIC
My Commission Expires
-21-
<PAGE>
EXHIBIT 4.4
- --------------------------------------------------------------------------------
GTE CORPORATION
AND
THE BANK OF NEW YORK,
as Trustee
________________
FIRST SUPPLEMENTAL INDENTURE
Dated as of ________ __, 1994
TO
INDENTURE
Dated as of June 1, 1994
________________
______% Junior Subordinated Deferrable Interest Debentures, Series A, Due 2024
- --------------------------------------------------------------------------------
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of the _____ day of _________,
1994 (the "First Supplemental Indenture"), between GTE CORPORATION, a
corporation duly organized and existing under the laws of the State of New York
(hereinafter sometimes referred to as the "Company"), and THE BANK OF NEW YORK,
a New York banking association organized and existing under the laws of the
State of New York, as trustee (hereinafter sometimes referred to as the
"Trustee") under the Indenture dated as of June 1, 1994 between the Company
and the Trustee (the "Indenture"; all terms used and not defined herein are used
as defined in the Indenture).
WHEREAS, the Company executed and delivered the Indenture to the
Trustee to provide for the future issuance of its junior subordinated debentures
(the "Debentures"), said Debentures to be issued from time to time in series as
might be determined by the Company under the Indenture, in an unlimited
aggregate principal amount which may be authenticated and delivered thereunder
as in the Indenture provided; and
WHEREAS, pursuant to the terms of the Indenture, the Company desires
to provide for the establishment of a new series of its Debentures to be known
as its _____% Junior Subordinated Deferrable Interest Debentures, Series A, Due
2024 (said series being hereinafter referred to as the "Series A Debentures"),
the form and substance of such Series A Debentures and the terms, provisions and
conditions thereof to be set forth as provided in the Indenture and this First
Supplemental Indenture; and
WHEREAS, the Company desires and has requested the Trustee to join
with it in the execution and delivery of this First Supplemental Indenture, and
all requirements necessary to make this First Supplemental Indenture a valid
instrument, in accordance with its terms, and to make the Series A Debentures,
when executed by the Company and authenticated and delivered by the Trustee, the
valid obligations of the Company, have been
<PAGE>
performed and fulfilled, and the execution and delivery hereof have been in all
respects duly authorized:
NOW THEREFORE, in consideration of the purchase and acceptance of the
Series A Debentures by the holders thereof, and for the purpose of setting
forth, as provided in the Indenture, the form and substance of the Series A
Debentures and the terms, provisions and conditions thereof, the Company
covenants and agrees with the Trustee as follows:
ARTICLE ONE
General Terms and Conditions of
the Series A Debentures
SECTION 1.01. There shall be and is hereby authorized a series of
Debentures designated the "_____% Junior Subordinated Deferrable Interest
Debentures, Series A, Due 2024", limited in aggregate principal amount to
$______, which amount shall be as set forth in any written order of the Company
for the authentication and delivery of Series A Debentures. The Series A
Debentures shall mature and the principal shall be due and payable together with
all accrued and unpaid interest thereon on _______ __, 2024, and shall be issued
in the form of registered Series A Debentures without coupons.
SECTION 1.02. Except as provided in Section 1.03 herein, the Series A
Debentures shall be issued in certificated form. Principal and interest on the
Series A Debentures issued in certificated form will be payable, the transfer of
such Series A Debentures will be registrable and such Series A Debentures will
be exchangeable for the Series A Debentures bearing identical terms and
provisions at the office or agency of the Company in the Borough of Manhattan,
The City and State of New York; provided, however, that payment of interest may
-------- -------
be made at the option of the Company by check mailed to the registered holder at
such address as shall appear in the Debenture register.
-2-
<PAGE>
SECTION 1.03. Each Series A Debenture will bear interest at the rate
of _____% per annum from the original date of issuance until the principal
thereof becomes due and payable, and on any overdue principal and (to the
extent that payment of such interest is enforceable under applicable law) on
any overdue installment of interest at the same rate per annum, payable
semi-annually on June 30 and December 31 (each, an "Interest Payment Date",
commencing on December 31, 1994), to the person in whose name such Series A
Debenture or any predecessor Series A Debenture is registered, at the close of
business on the preceding June 15 or December 15, respectively. Any such
interest installment not punctually paid or duly provided for shall forthwith
cease to be payable to the registered holders on such regular record date, and
may be paid to the person in whose name the Series A Debenture (or one or more
Predecessor Debentures) is registered at the close of business on a special
record date to be fixed by the Trustee for the payment of such defaulted
interest, notice whereof shall be given to the registered holders of the Series
A Debentures not less than 10 days prior to such special record date, or may be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Series A Debentures may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in the Indenture hereinafter referred to.
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 Debentures is not a business day, then
payment of 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 it made on such date.
-3-
<PAGE>
ARTICLE TWO
Redemption of the Series A Debentures
SECTION 2.01. The Series A Debentures will be redeemable at the
option of GTE, as a whole or in part, at anytime on or after , 2004 and
prior to maturity, upon not less than 30 nor more than 60 days' notice, at the
applicable percentage of the principal amount thereof specified in the form of
Debenture set forth herein under the heading "Redemption Price" during the
respective twelve-month periods beginning _______ of the years shown therein,
together with accrued interest to the date fixed for redemption.
-4-
<PAGE>
ARTICLE THREE
Extension of Interest Payment Period
SECTION 3.01. The Company shall have the right, at any time during
the term of the Series A Debentures, from time to time to extend the interest
payment period, of such Series A Debentures for up to 60 consecutive months (the
"Extended Interest Payment Period"), at the end of which period the Company
shall pay all interest accrued and unpaid thereon (together with interest
thereon at the rate specified for the Series A Debentures to the extent
permitted by applicable law); provided that, during such Extended Interest
Payment Period the Company 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 or make any guarantee payments with respect to the foregoing.
Prior to the termination of any such Extended Interest Payment Period, the
Company may further extend such period, provided that such period together with
all such further extensions thereof shall not exceed 60 consecutive months. Upon
the termination of any Extended Interest Payment Period and upon the payment
of all accrued and unpaid interest then due, the Company may select a new
Extended Interest Payment Period, subject to the foregoing requirements. No
interest during an Extended Interest Payment Period, except at the end
thereof, shall be due and payable.
SECTION 3.02. (a) The Company shall give the holders of the Series A
Debentures and the Trustee written notice of its selection of such Extended
Interest Payment Period 10 business days prior to the earlier of (i) the next
succeeding Interest Payment Date or (ii) the date the Company is required to
give notice to holders of the Series A Debentures (or, if applicable, to the New
York Stock Exchange or other applicable self-regulatory organization) of the
record or payment date of such interest payment, but in any event not less than
two business days prior to such record date.
(b) The month in which any notice is given pursuant to paragraph (a)
of this Section shall constitute one of the
-5-
<PAGE>
60 months which comprise the maximum Extended Interest Payment Period.
ARTICLE FOUR
Form of Series A Debenture
SECTION 4.01. The Series A Debentures and the Trustee's Certificate
of Authentication to be endorsed thereon are to be substantially in the
following forms:
(FORM OF FACE OF DEBENTURE)
-6-
<PAGE>
No.__________________ $__________________
CUSIP No. __________
GTE CORPORATION
___% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE, SERIES A, DUE 2024
GTE CORPORATION, a corporation duly organized and existing under the
laws of the State of New York (herein referred to as the "Company", which term
includes any successor corporation under the Indenture), for value received,
hereby promises to pay to or registered assigns, the principal sum
of Dollars on , 2024, and to pay interest on
said principal sum from , 1994 or from the most recent interest payment
date (each such date, an "Interest Payment Date") to which interest has been
paid or duly provided for, semi-annually on June 30 and December 31 commencing
December 31, 1994 at the rate of % per annum until the principal hereof shall
have become due and payable, and on any overdue principal and premium, if any,
and (to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the same rate per
annum. The amount of interest payable on any Interest Payment Date shall 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 this Debenture is not a
business day, then payment of 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 calendar year, such payment shall be made on the immediately
preceding business day, in each case with the same force and effect if made on
such date. The interest installment so payable, and punctually paid or duly
provided for, on any
-7-
<PAGE>
Interest Payment Date will, as provided in the Indenture, be paid to the
person in whose name this Debenture (or one or more Predecessor Debentures, as
defined in said Indenture) is registered at the close of business on the
preceding June 15 or December 15, respectively. Any such interest
installment not punctually paid or duly provided for shall forthwith cease to
be payable to the registered holders on such regular record date, and may be
paid to the person in whose name this Debenture (or one or more Predecessor
Debentures) is registered at the close of business on a special record date to
be fixed by the Trustee for the payment of such defaulted interest, notice
whereof shall be given to the registered holders of this series of Debentures
not less than 10 days prior to such special record date, or may be paid at any
time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Debentures may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in the
Indenture hereinafter referred to. The principal of (and premium, if any) and
the interest on this Debenture shall be payable at the office or agency of the
Company maintained for that purpose in the Borough of Manhattan, The City and
State of New York, in any coin or currency of the United States of America which
at the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
- -------- -------
Company by check mailed to the registered holder at such address as shall
appear in the Debenture register.
The indebtedness evidenced by this Debenture is, to the extent
provided in the Indenture, subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness, and this Debenture is issued
subject to the provisions of the Indenture with respect thereto. Each Holder of
this Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his attorney-in-fact for
any and all such purposes. Each Holder hereof, by his acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such Holder upon
said provisions.
-8-
<PAGE>
This Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any purpose
until the Certificate of Authentication hereon shall have been signed by or on
behalf of the Trustee.
Unless the Certificate of Authentication hereon has been executed by
the Trustee referred to on the reverse side hereof, this Debenture shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
The provisions of this Debenture are contained on the reverse side
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Instrument to be
executed.
Dated____________________
GTE CORPORATION
By_________________
Chairman
Attest:
__________________________________
Secretary
-9-
<PAGE>
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures of the series of Debentures described in
the within-mentioned Indenture.
The Bank of New York
- ----------------------- -----------------------
as Trustee or as Authentication Agent
By__________________________ By__________________________
Authorized Signatory Authorized Signatory
(FORM OF REVERSE OF DEBENTURE)
This Debenture is one of a duly authorized series of Debentures of the
Company (herein sometimes referred to as the "Debentures"), specified in the
Indenture, all issued or to be issued in one or more series under and pursuant
to an Indenture dated as of June 1, 1994 duly executed and delivered between
the Company and The Bank of New York, a New York banking association duly
organized and existing under the laws of the State of New York, as Trustee
(herein referred to as the "Trustee"), as supplemented by the First Supplemental
Indenture dated as of ________, 1994 between the Company and the Trustee (said
Indenture as so supplemented being hereinafter referred to as the "Indenture"),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a description of the rights, limitations of rights, obligations, duties
and immunities thereunder of the Trustee, the Company and the holders of the
Debentures. By the terms of the Indenture, the Debentures are issuable in series
which may vary as to amount, date of maturity, rate of interest and in other
respects as in the Indenture provided. This series of Debentures is limited in
aggregate principal amount as specified in said First Supplemental Indenture.
-10-
<PAGE>
The Debentures will be redeemable at the option of GTE, as a whole or
in part, at any time on or after , 2004 and prior to maturity, upon not less
than 30 nor more than 60 days' notice, at the respective redemption prices
(expressed in percentage of the principal amount to be redeemed) during the
twelve month periods commencing on of the years indicated:
Redemption Redemption
Year Price Year Price
---- ---------- ---- ----------
2004 % 2014 %
2005 % 2015 %
2006 % 2016 %
2007 % 2017 %
2008 % 2018 %
2009 % 2019 %
2010 % 2020 %
2011 % 2021 %
2012 % 2022 %
2013 % 2023 %
in each case, together with accrued interest to the redemption date. If the
Debentures are only partially redeemed by the Company, the Debentures will be
redeemed pro rata or by lot or by any other method utilized by the Trustee.
In the event of redemption of this Debenture in part only, a new
Debenture or Debentures of this series for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Debenture upon compliance by the Company with
certain conditions set forth therein.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not
-11-
<PAGE>
less than a majority in aggregate principal amount of the Debentures of each
series affected at the time outstanding, as defined in the Indenture, to execute
supplemental indentures for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or of modifying in any manner the rights of the Holders
of the Debentures; provided, however, that no such supplemental indenture shall
(i) extend the fixed maturity of any 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 Debenture so affected or (ii) reduce
the aforesaid percentage of Debentures, the holders of which are required to
consent to any such supplemental indenture, without the consent of the holders
of each Debenture then outstanding and affected thereby. The Indenture also
contains provisions permitting the Holders of a majority in aggregate principal
amount of the Debentures of all series at the time outstanding affected thereby,
on behalf of the Holders of the Debentures of such series, to waive any past
default in the performance of any of the covenants contained in the Indenture,
or established pursuant to the Indenture with respect to such series, and its
consequences, except a default in the payment of the principal of or premium, if
any, or interest on any of the Debentures of such series. Any such consent or
waiver by the registered Holder of this Debenture (unless revoked as provided in
the Indenture) shall be conclusive and binding upon such Holder and upon all
future Holders and owners of this Debenture and of any Debenture issued in
exchange herefor or in place hereof (whether by registration of transfer or
otherwise), irrespective of whether or not any notation of such consent or
waiver is made upon this Debenture.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Debenture at the time and place and at the
rate and in the money herein prescribed.
The Company shall have the right at any time during the term of the
Debentures, from time to time to extend the interest payment period of such
Debentures to up to 60 consecutive months (the "Extended Interest Payment
Period"), at the end of which period the Company shall pay all interest then
accrued and unpaid (together with interest thereon at the rate specified for the
Debentures to the extent that payment of such interest is enforceable under
applicable law); provided that, during such
-12-
<PAGE>
Extended Interest Payment Period the Company 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 or make any guarantee payments with respect
to the foregoing. Prior to the termination of any such Extended Interest Payment
Period, the Company may further extend such Extended Interest Payment Period,
provided that such Period together with all such further extensions thereof
shall not exceed 60 consecutive months. At the termination of any such Extended
Interest Payment Period and upon the payment of all accrued and unpaid interest
and any additional amounts then due, the Company may select a new Extended
Interest Payment Period.
As provided in the Indenture and subject to certain limitations
therein set forth, this Debenture is transferable by the registered holder
hereof on the Debenture Register of the Company, upon surrender of this
Debenture for registration of transfer at the office or agency of the Company in
the Borough of Manhattan, The City and State of New York accompanied by a
written instrument or instruments of transfer in form satisfactory to the
Company or the Trustee duly executed by the registered holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Debentures of
authorized denominations and for the same aggregate principal amount and series
will be issued to the designated transferee or transferees. No service charge
will be made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this
Debenture, the Company, the Trustee, any paying agent and any Debenture
Registrar may deem and treat the registered holder hereof as the absolute owner
hereof (whether or not this Debenture shall be overdue and notwithstanding any
notice of ownership or writing hereon made by anyone other than the Debenture
Registrar) for the purpose of receiving payment of or on account of the
principal hereof and premium, if any, and interest due hereon and for all other
purposes, and neither the Company nor the Trustee nor any paying agent nor any
Debenture Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
The Debentures of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
-13-
<PAGE>
As provided in the Indenture and subject to certain limitations herein and
therein set forth, Debentures of this series so issued are exchangeable for a
like aggregate principal amount of Debentures of this series of a different
authorized denomination, as requested by the Holder surrendering the same.
All terms used in this Debenture which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
ARTICLE FIVE
Original Issue of Series A Debentures
SECTION 5.01. Series A Debentures in the aggregate principal amount of
$________, may, upon execution of this First Supplemental Indenture, or from
time to time thereafter, be executed by the Company and delivered to the
Trustee for authentication, and the Trustee shall thereupon authenticate and
deliver said Debentures to or upon the written order of the Company, signed by
its Chairman, its President, or any Vice President and its Treasurer or an
Assistant Treasurer, without any further action by the Company.
ARTICLE SIX
Paying Agent and Registrar
SECTION 6.01. The Bank of New York will be the paying agent and
Registrar for the Series A Debentures.
ARTICLE SEVEN
Sundry Provisions.
SECTION 7.01. Except as otherwise expressly provided in this First
Supplemental Indenture or in the form of Series A Debenture or otherwise clearly
required by the context hereof or thereof, all terms used herein or in said form
of Series A Debenture that are defined in the Indenture shall have the several
meanings respectively assigned to them thereby.
SECTION 7.02. The Indenture, as supplemented by this First
Supplemental Indenture, is in all respects ratified and confirmed, and this
First Supplemental Indenture shall be deemed part of the Indenture in the manner
and to the extent herein and therein provided.
SECTION 7.03. The recitals herein contained are made by the Company
and not by the Trustee, and the Trustee assumes no responsibility for the
correctness thereof. The Trustee makes no representation as to the validity or
sufficiency of this First Supplemental Indenture.
-14-
<PAGE>
SECTION 7.04. This First Supplemental Indenture may be executed in
any number of counterparts each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, on the date or dates indicated in the
acknowledgments and as of the day and year first above written.
GTE CORPORATION
By______________________
Vice President
Attest:
___________________
Secretary
THE BANK OF NEW YORK
as Trustee
By_____________________
Attest:
_____________________________
Assistant Treasurer
-16-
<PAGE>
STATE OF CONNECTICUT )
COUNTY OF FAIRFIELD ) ss.: Stamford, _________ __, 1994
On the ___day _________, in the year one thousand nine hundred ninety-
four, before me personally came ____________ to me known, who, being by me duly
sworn, did depose and say that he resides at
______________________________________________; that he is ______________ of GTE
CORPORATION, one of the corporations described in and which executed the above
instrument; that he knows the corporate seal of said corporation; that the seal
affixed to the said instrument is such corporation seal; that it was so affixed
by authority of the Board of Directors of said corporation, and that he signed
his name thereto by like authority.
___________________________
STATE OF NEW YORK)
COUNTY OF ) ss.: _______ __, 1994
On the __ day of ______, in the year one thousand nine hundred ninety-
four, before me personally came to me known, who, being by me
duly sworn, did depose and say that (s)he resides at ___________________, of
____________________, one of the corporations described in and which executed
the above instrument; that he knows the corporate seal of said corporation; that
the seal affixed to said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said corporation and that he
signed his name thereto by like authority.
________________________________
NOTARY PUBLIC
My Commission Expires
-17-
<PAGE>
EXHIBIT 4.6
AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
GTE Delaware, L.P.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I
FORMATION AND CONTINUATION OF THE PARTNERSHIP;
ADMISSION OF SERIES A PREFERRED SECURITY HOLDERS;
WITHDRAWAL OF INITIAL LIMITED PARTNER
<S> <C> <C>
Section 1.1 Formation and Continuation of the
Partnership............................. 1
Section 1.2 Name.................................... 2
Section 1.3 Business of the Partnership............. 2
Section 1.4 Term.................................... 2
Section 1.5 Registered Agent and Office............. 2
Section 1.6 Principal Place of Business............. 2
Section 1.7 Name and Business Address of General
Partner................................. 2
Section 1.8. Admission of Holders of Preferred
Securities; Withdrawal of Initial
Limited Partner......................... 3
<CAPTION>
ARTICLE II
DEFINED TERMS
<S> <C> <C>
Section 2.1 Definitions............................. 3
Section 2.2 Headings................................ 8
<CAPTION>
ARTICLE III
CAPITAL CONTRIBUTIONS, REPRESENTATION OF
PREFERRED SECURITY HOLDER'S INTEREST; CAPITAL ACCOUNTS
<S> <C> <C>
Section 3.1 Capital Contributions................... 9
Section 3.2 Preferred Security Holder's Interest
Represented by Preferred Securities..... 9
Section 3.3 Capital Accounts........................ 10
Section 3.4 Interest on Capital Contributions....... 10
Section 3.5 Withdrawal and Return of Capital
Contributions........................... 10
<CAPTION>
ARTICLE IV
ALLOCATIONS
<S> <C> <C>
Section 4.1 Profits and Losses...................... 10
Section 4.2 Other Allocation Provisions............. 11
Section 4.3. Allocations for Income Tax Purposes..... 13
Section 4.4. Withholding............................. 13
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ARTICLE V
DIVIDENDS
Page
----
<S> <C> <C>
Section 5.1 Dividends................................ 14
Section 5.2 Limitations on Distributions............. 14
<CAPTION>
ARTICLE VI
ISSUANCE OF PREFERRED SECURITIES
<S> <C> <C>
Section 6.1 General Provisions Regarding Preferred
Securities............................... 14
<CAPTION>
ARTICLE VII
BOOKS OF ACCOUNT, RECORDS AND REPORTS
<S> <C> <C>
Section 7.1 Books and Records........................ 18
Section 7.2 Accounting Method........................ 18
<CAPTION>
ARTICLE VIII
POWERS, RIGHTS AND DUTIES
OF THE LIMITED PARTNERS
<S> <C> <C>
Section 8.1 Limitations.............................. 19
Section 8.2 Liability................................ 19
Section 8.3 Priority................................. 19
<CAPTION>
ARTICLE IX
POWERS, RIGHTS AND DUTIES
OF THE GENERAL PARTNER
<S> <C> <C>
Section 9.1 Authority................................ 19
Section 9.2 Powers and Duties of General Partner..... 19
Section 9.3 Liability................................ 21
Section 9.4 Exculpation.............................. 21
Section 9.5 Fiduciary Duty........................... 21
Section 9.6 Indemnification.......................... 22
Section 9.7 Outside Businesses....................... 23
Section 9.8 Limits on General Partner's Powers....... 23
Section 9.9 Tax Matters Partner...................... 24
Section 9.10 Expenses................................. 24
<CAPTION>
ARTICLE X
TRANSFERS OF INTERESTS BY PARTNERS
<S> <C> <C>
Section 10.1 Transfer of Interests.................... 24
Section 10.2 Transfer of LP Certificates.............. 25
Section 10.3 Persons Deemed Preferred Security
Holders.................................. 25
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 10.4 Book Entry Interests..................... 25
Section 10.5 Notices to Clearing Agency............... 26
Section 10.6 Appointment of Additional Successor
Agency................................... 26
Section 10.7 Definitive LP Certificates............... 26
<CAPTION>
ARTICLE XI
DISSOLUTION; LIQUIDATION AND DISTRIBUTION OF ASSETS
<S> <C> <C>
Section 11.1 Withdrawal of Partners................... 27
Section 11.2 Dissolution of the Partnership........... 27
Section 11.3 Liquidation.............................. 28
Section 11.4 Distribution in Liquidation.............. 28
Section 11.5 Rights of Limited Partner................ 29
Section 11.6 Termination.............................. 29
<CAPTION>
ARTICLE XII
AMENDMENTS AND MEETINGS
<S> <C> <C>
Section 12.1 Amendments............................... 29
Section 12.2 Amendment of Certificate................. 29
Section 12.3 Meetings of the Partners................. 29
<CAPTION>
ARTICLE XIII
MISCELLANEOUS
<S> <C> <C>
Section 13.1 Notices.................................. 30
Section 13.2 Entire Agreement......................... 31
Section 13.3 Governing Law............................ 31
Section 13.4 Effect................................... 31
Section 13.5 Pronouns and Number...................... 31
Section 13.6 Captions................................. 31
Section 13.7 Partial Enforceability................... 31
Section 13.8 Counterparts............................. 31
Section 13.9 Waiver of Partition...................... 32
Section 13.10 Remedies................................. 32
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
OF
GTE DELAWARE, L.P.
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of GTE Delaware,
L.P. (the "Partnership"), dated as of _______ __, 1994, among GTE Corporation, a
-----------
New York Corporation ("GTE"), as the general partner, GTE Finance Corporation, a
---
Delaware corporation, as the initial limited partner (the "Initial Limited
---------------
Partner") and such other Persons (as defined herein) who become Limited Partners
- -------
(as defined herein) as provided herein.
WHEREAS, GTE and the Initial Limited Partner entered into an Agreement
of Limited Partnership, dated as of May 3, 1994, (the "Original Limited
Partnership Agreement"); ----------------
- ---------------------
WHEREAS, the Certificate of Limited Partnership of the Partnership was
filed with the Office of the Secretary of State of the State of Delaware on
May 3, 1994;
WHEREAS, the Partners desire to continue the Partnership as a limited
partnership under the Act (as defined herein) and to amend and restate the
Original Limited Partnership Agreement in its entirety;
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree to amend
and restate the Original Limited Partnership Agreement in its entirety and
hereby agree as follows:
ARTICLE I
FORMATION AND CONTINUATION OF THE PARTNERSHIP;
ADMISSION OF SERIES A PREFERRED SECURITY HOLDERS;
WITHDRAWAL OF INITIAL LIMITED PARTNER
Section 1.1 Formation and Continuation of the Partnership. The
---------------------------------------------
Partnership was formed as a limited partnership under the Act by the filing by
the General Partner of the Certificate (as defined herein) with the Office of
the Secretary of State of the State of Delaware on May 3, 1994 and the
entering into by the General Partner and the Initial Limited Partner of the
Original Limited Partnership Agreement. The parties hereto agree to continue
the Partnership as a limited partnership under the Act. The General Partner,
for itself and as agent for the Limited Partners, shall make every reasonable
effort to assure that
<PAGE>
all certificates and documents, are properly executed and shall accomplish all
filing, recording, publishing and other acts necessary or appropriate for
compliance with all the requirements for the continuation of the Partnership as
a limited partnership under the Act and under all other laws of the State of
Delaware or such other jurisdictions in which the General Partner determines
that the Partnership may conduct business. The rights, liabilities and duties of
the Partners shall be as provided in the Act except as modified by this
Agreement. Where not otherwise specified in this Agreement, the Act governs the
rights and obligations of the parties to this Agreement.
Section 1.2 Name. The name of the Partnership is "GTE Delaware,
----
L.P.", as such name may be modified from time to time by the General Partner
following written notice to the Limited Partners. The Partnership business may
be conducted under the name of the Partnership or any other name deemed
advisable by the General Partner.
Section 1.3 Business of the Partnership. The sole purpose of the
---------------------------
Partnership is (a) to issue limited partnership interests in the Partnership,
including, without limitation, Preferred Securities (as defined below), and to
use the proceeds thereof to purchase Junior Subordinated Debentures (as herein-
after defined) or other similar debt instruments of GTE and (b) except as
otherwise limited herein, to enter into, make and perform all contracts and
other undertakings, and engage in all activities and transactions as the General
Partner may reasonably deem necessary or advisable to the carrying out of the
foregoing purpose of the Partnership.
Section 1.4 Term. The term of the Partnership commenced on the
----
date the Certificate was filed with the Secretary of State of the State of
Delaware and shall continue until December 31, 2093, unless dissolved before
such date in accordance with the provisions of this Agreement.
Section 1.5 Registered Agent and Office. The Partnership's
---------------------------
registered agent and office in the State of Delaware shall be The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801. At any time, the General Partner may designate
another registered agent and/or registered office.
Section 1.6 Principal Place of Business. The principal place of
---------------------------
business of the Partnership shall be at c/o GTE Corporation, One Stamford Forum,
Stamford, Connecticut 06904. Upon ten days written notice to the Limited
Partners, the General Partner may change the location of the Partnership's
principal place of business.
Section 1.7 Name and Business Address of General Partner. The name
--------------------------------------------
and address of the General Partner are as follows:
2
<PAGE>
GTE Corporation
One Stamford Forum
Stamford, Connecticut 06904
Attention: Corporate Secretary
The General Partner may change its name or business address from time to time,
in which event the General Partner shall promptly notify the Limited Partners of
any such change.
Section 1.8. Admission of Holders of Preferred Securities.
--------------------------------------------
(a) Without necessity for execution of this Agreement, upon receipt by
a Person of an LP Certificate and payment of the Purchase Price for the
Preferred Securities represented by such LP Certificate in connection with the
initial issuance by the Partnership of such Preferred Securities, which shall be
deemed to constitute a request by such Person that the books and records of the
Partnership reflect such Person's admission as a Limited Partner, such Person
shall be admitted to the Partnership as a Limited Partner and shall become bound
by this Agreement.
(b) Following the first admission of Preferred Security Holders to
the Partnership as Limited Partners pursuant to paragraph (a) above, the Initial
Limited Partner shall receive the return of its capital contribution without
interest or deduction, but will continue to be a limited partner of the
Partnership. While the Initial Limited Partner shall continue to be a limited
partner of the Partnership, the Initial Limited Partner shall only have such
rights, if any, as are expressly provided to the Initial Limited Partner
pursuant to this Agreement.
(c) The name and mailing address of each Partner and the amount
contributed by such Partner to the capital of the Partnership shall be listed on
the books and records of the Partnership. The General Partner shall be required
to update the books and records from time to time as necessary to accurately
reflect the information therein.
ARTICLE II
DEFINED TERMS
Section 2.1 Definitions. Unless the context otherwise requires, the
-----------
terms defined in this Article II shall, for the purposes of this Agreement, have
the meanings herein specified.
"Act" means the Delaware Revised Uniform Limited Partnership Act,
---
6 Del.C. Section 17-101, et seq., as amended from time to time.
------ -- ---
"Action" has the meaning set forth in Section 6.1.
------ -----------
"Affiliate" means, with respect to a specified Person, (a) any Person
---------
directly or indirectly owning, controlling or holding with power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person,
3
<PAGE>
(b) any Person 10% or more of whose outstanding voting securities or other
ownership interests are directly or indirectly owned, controlled or held with
power to vote by the specified Person, (c) any Person directly or indirectly
controlling, controlled by, or under common control with the specified Person,
(d) a partnership in which the specified Person is a general partner, (e) any
officer or director of the specified Person, and (f) if the specified Person is
an officer, director, general partner or employee, any other entity for which
the specified Person acts in any such capacity.
"Agreement" means this Amended and Restated Agreement of Limited
---------
Partnership of the Partnership, as amended, modified, supplemented or restated
from time to time.
"Book Entry Interests" means a beneficial interest in the LP
--------------------
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 10.4.
------------
"Business Day" means any day other than a day on which banking
------------
institutions in The City of New York are authorized or required by law to close.
"Capital Account" has the meaning set forth in Section 3.3.
--------------- -----------
"Certificate" means the Certificate of Limited Partnership of the
-----------
Partnership filed with the Secretary of State of the State of Delaware on
May 3, 1994, and any and all amendments thereto and restatements thereof.
"Clearing Agency" means an organization registered as a "Clearing
---------------
Agency" pursuant to Section 17A of the Exchange Act that is acting as depository
for the Preferred Securities and in whose name shall be registered a global LP
Certificate and which shall undertake to effect book entry transfers and pledges
of the Preferred Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section ((S)) of the Code refers not only
to such specific section but also to any corresponding provision of any federal
tax statute enacted after the date of this Agreement, as such specific section
or corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
4
<PAGE>
"Covered Person" means any Partner, any Affiliate of a Partner or any
--------------
officers, directors, shareholders, partners, employees, representatives or
agents of a Partner or its respective Affiliates, or any employee or agent of
the Partnership or its Affiliates or any Special Representative.
"Dividends" means the distributions of income paid or payable to any
---------
Limited Partner who is a Preferred Security Holder pursuant to the terms of the
Preferred Securities held by such Limited Partner, including any interest
payable in respect of arrears.
"DTC" means The Depository Trust Company, the initial Clearing Agency.
---
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Fiscal Year" means (i) the period commencing upon the formation of
-----------
the Partnership and ending on December 31, 1994, and (ii) any subsequent twelve
(12) month period commencing on January 1 and ending on December 31.
"General Partner" means GTE, its successors and assigns, and any
---------------
additional or successor general partner in the Partnership admitted as a general
partner of the Partnership to this Agreement.
"GTE" has the meaning set forth in the forepart of this Agreement.
---
"Guarantee" means the Guarantee Agreement dated as of _____ __, 1994
---------
of GTE in respect of the Series A Preferred Securities.
"Holders" means, with respect to a series of Preferred Securities,
-------
Preferred Security Holders in whose name an LP Certificate representing
Preferred Securities of such series is registered.
"Indemnified Person" means the General Partner, any Special
------------------
Representative, any Affiliate of the General Partner or any Special
Representative or any officers, directors, shareholders, partners, employees,
representatives or agents of the General Partner or any Special Representative,
or any employee or agent of the Partnership or its Affiliates.
"Indenture" means the Indenture dated as of June 1, 1994 between GTE
---------
and The Bank of New York, as Trustee, pursuant to which the Series A Junior
Subordinated Debentures are issued and other series of junior subordinated
debentures of GTE may be issued.
5
<PAGE>
"Initial Limited Partners" means GTE Finance Corporation, a Delaware
------------------------
Corporation.
"Initial Series A Limited Partner" means the Persons admitted as
--------------------------------
Limited Partners pursuant to Section 1.8(a) in connection with the initial
--------------
issuance by the Partnership of Series A Preferred Securities.
"Interest" means the entire ownership interest of a Partner in the
--------
Partnership at any particular time, including, without limitation, its interest
in the capital, profits, losses and distributions of the Partnership.
"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 40 Act Law") to the effect that the Partnership 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 40 Act Law becomes effective on or after ______ , 1994; provided,
--------
however, that no Investment Company Event shall be deemed to have occurred
- -------
if the General Partner obtains a written opinion of nationally recognized
independent counsel to the Partnership 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 (i) of accrued and
unpaid dividends (whether or not determined to be paid out of monies legally
available therefor) on the Preferred Securities and (ii) of the full amount of
the Liquidation Distribution on the Series A Preferred Securities upon a
liquidation of the Partnership (regardless of the amount of assets of the
Partnership otherwise available for distribution in such liquidation) to avoid
such Change in 40 Act Law so that in the opinion of such counsel,
notwithstanding such Change in 40 Act Law, the Partnership is not required to be
registered as an "investment company" within the meaning of the 1940 Act.
"Junior Subordinated Debentures" means the Series A Junior
------------------------------
Subordinated Debentures and any other series of debentures issued by GTE under
the Indenture.
"Limited Partner" means any Person who is admitted to the Partnership
---------------
as a limited partner of the Partnership pursuant to the terms of this Agreement.
"Liquidation Distribution" has the meaning set forth in Section 6.2.
------------------------ -----------
"Loss Carried Forward Amount" means as of the first day of any month
---------------------------
for any Series, an amount equal to the excess of (x) all Net Loss allocated to
the Holders of such series of Preferred Securities from the date of issuance of
such series of Preferred Securities through and including the day prior to the
first day of such month pursuant to Section 4.1(b)(ii) over (y) the amount of
------------------
Net Income allocated to the Holders of such series of Preferred Securities
pursuant to Section 4.1(a)(ii) in all prior calendar months.
6
<PAGE>
"LP Certificate" means a certificate substantially in the form
--------------
attached hereto as Annex A, evidencing the Preferred Securities held by a
-------
Limited Partner.
"Majority in liquidation preference of the Preferred Securities"
--------------------------------------------------------------
means Holder(s) of a series of Preferred Securities or, as the context may
require, Holder(s) of more than one series of Preferred Securities voting as a
class, who are the record owners of Preferred Securities whose liquidation
preference (including the stated preference amount that would be paid on
redemption or maturity, plus accrued and unpaid dividends, whether or not
declared, to the date upon which the voting percentages are determined)
represents more than 50% of the above stated liquidation preference of all
Preferred Securities of such series or, as applicable, multiple series.
"Net Income" and "Net Loss", respectively, for any period means the
---------- --------
income and loss, respectively, of the Partnership for such period as determined
in accordance with the method of accounting followed by the Partnership for
federal income tax purposes, including, for all purposes, any income exempt from
tax and any expenditures of the Partnership which are described in Code Section
705(a)(2)(B); provided, however, that any item allocated under Section 4.2
-------- ------- -----------
shall be excluded from the computation of Net Income and Net Loss.
"Partners" means the General Partner and the Limited Partners,
--------
collectively, where no distinction is required by the context in which the term
is used.
"Partnership" means the limited partnership formed pursuant to this
-----------
Agreement under the name "GTE Delaware, L.P."
"Paying Agent" has the meaning set forth in Section 10.7.
------------ ------------
"Person" means any individual, corporation, limited liability company,
------
association, partnership, trust or other entity.
"Preferred Securities" means the limited partner interests in the
--------------------
Partnership described in Article VI.
----------
"Preferred Security Holder" has the meaning set forth in Section 10.3.
------------------------- ------------
"Preferred Security Owner" means, with respect to a Book Entry
------------------------
Interest, a Person who is the beneficial owner of such Book Entry Interest, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).
"Pricing Agreement" means a Pricing Agreement between the Partnership
-----------------
and GTE relating to the issuance of the Preferred Securities.
"Purchase Price" for any Preferred Security means the amount paid for
--------------
such Preferred Security in the initial sale by the Partnership of such Preferred
Security.
"Regulations" means a Treasury Regulation promulgated under the Code.
-----------
"Securities Act" means the Securities Act of 1933, as amended.
--------------
7
<PAGE>
"Series A Junior Subordinated Debentures" means the ___% Junior
---------------------------------------
Subordinated Deferrable Interest Debentures, Series A, Due 2024 issued by GTE.
"Series A Preferred Securities" has the meaning specified in Section
----------------------------- -------
6.2 of this Agreement.
- ---
"66-2/3% in liquidation preference of the Preferred Securities" means
-------------------------------------------------------------
Holder(s) of a series of Preferred Securities or, as the context may require,
Holder(s) of more than one series of Preferred Securities voting as a class, who
are the record owners of Preferred Securities whose liquidation preference
(including the stated preference amount that would be paid on redemption or
maturity, plus accrued and unpaid dividends, whether or not declared, to the
date upon which the voting percentages are determined) represents more than
66-2/3% of the above stated liquidation preference of all Preferred Securities
of such series or, as applicable, multiple series.
"Special Event" means a Tax Event or an Investment Company Act Event.
-------------
"Special Representative" has the meaning specified in Section 6.2(g)
----------------------
hereof.
"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 __________,
1994, which amendment or change is effective or such interpretation or
pronouncement is announced on or after __________, 1994, there is more than an
insubstantial risk that (i) the Partnership is subject to federal income tax
with respect to interest received on the Series A Junior Subordinated
Debentures, (ii) interest payable to the Partnership on the Series A Junior
Subordinated Debentures will not be deductible for federal income tax purposes
or (iii) the Partnership is subject to more than a de minimus amount of other
-- -------
taxes, duties or other governmental charges.
"Tax Matters Partner" means the General Partner designated as such in
-------------------
Section 9.9 hereof.
- -----------
"10% in liquidation preference of the Preferred Securities" means
--------------------------------------------------------
Holders(s) of a series of Preferred Securities or, as the context may require,
Holder(s) of more than one series of Preferred Securities voting as a class, who
are the record owners of Preferred Securities whose liquidation preference
(including the stated preference amount that would be paid on redemption or
maturity, plus accrued and unpaid dividends, whether or not declared, to the
date upon which the voting percentages are determined) represents more than 10%
of the above stated liquidation preference of all Preferred Securities of such
series or, as applicable, multiple series.
"Treasury Regulations" means the income tax regulations, including
--------------------
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"Underwriting Agreement" means an Underwriting Agreement, among the
----------------------
Partnership and the underwriters named therein relating to the issuance of the
Preferred Securities.
Section 2.2 Headings. The headings and subheadings in this Agreement
--------
are included for convenience and identification only and are in no way intended
to describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
8
<PAGE>
ARTICLE III
CAPITAL CONTRIBUTIONS, REPRESENTATION OF
PREFERRED SECURITY HOLDER'S INTEREST; CAPITAL ACCOUNTS
Section 3.1 Capital Contributions.
---------------------
(a) The General Partner has, on or prior to the date hereof,
contributed an aggregate of $_______ to the capital of the Partnership, which
amount is equal to at least 3% of the total capital contributions to the
Partnership on the date hereof, after taking into account the contribution of
the Initial Series A Limited Partner referred to in paragraph (c) of this
-------------
Section 3.1 Subject to Section 4.1(c), the General Partner shall from
--------------
time to time make such additional capital contributions as are necessary to
maintain its Capital Account balance at least equal to 3% of the aggregate
positive Capital Account balances of all Partners.
(b) The Initial Limited Partner has, prior to the date hereof,
contributed the amount of $50 to the capital of the Partnership which amount is
being returned to the Initial Limited Partner.
(c) The Initial Series A Limited Partner has, on the date hereof,
contributed to the capital of the Partnership the amount of the Purchase Price
for the Series A Preferred Securities acquired by it.
(d) Each Person who acquires a Preferred Security after the date
hereof in connection with the initial issuance by the Partnership of such
Preferred Security shall, in connection with the acquisition of such Preferred
Security, contribute to the capital of the Partnership an amount equal to the
Purchase Price for such Preferred Security.
(e) No Limited Partner shall at any time be required to make any
additional capital contributions to the Partnership.
Section 3.2 Preferred Security Holder's Interest Represented by
---------------------------------------------------
Preferred Securities. A Preferred Security Holder's interest in the Partnership
- --------------------
shall be represented by the Preferred Securities held by such Preferred Security
Holder. Each Preferred Security Holder's respective Preferred Securities shall
be set forth on the books and records of the Partnership. Each Limited
Partner, including a Preferred Security Holder, hereby agrees that its interest
in the Partnership and in its Preferred Securities shall for all purposes be
personal property. No Limited Partner, including a Preferred Security Holder,
shall have an interest in specific Partnership property.
9
<PAGE>
Section 3.3 Capital Accounts. An individual capital account (a
----------------
"Capital Account") shall be established and maintained on the books of the
- ----------------
Partnership for each Partner in compliance with Regulation (S)(S)1.704-
1(b)(2)(iv) and 1.704-2, as amended. Subject to the preceding sentence, each
Capital Account will be credited with the capital contributions made and the
profits allocated to such Partner (or predecessor in interest) and debited by
the distributions made and losses allocated to the Partner (or predecessor
thereof).
Section 3.4 Interest on Capital Contributions. No Partner shall be
---------------------------------
entitled to interest on or with respect to any capital contribution to the
Partnership.
Section 3.5 Withdrawal and Return of Capital Contributions.
----------------------------------------------
No Partner shall be entitled to withdraw any part of such Partner's capital
contribution to the Partnership or to receive any distributions from the
Partnership, except as provided in this Agreement.
ARTICLE IV
ALLOCATIONS
Section 4.1 Profits and Losses. Except as provided in Section 4.2,
------------------ -----------
(a) the Partnership's Net Income for each calendar month shall be
allocated as follows:
(i) First, to the Holders of each series of Preferred Securities as of
the record date in such calendar month for the payment of Dividends on such
series of Preferred Securities in an amount equal to the excess of (x) all
Dividends accrued on such series of Preferred Securities (in accordance
with the Action creating such series) from their date of issuance through
and including the close of such calendar month over (y) the amount of Net
Income allocated to the Holders of such series of Preferred Securities
pursuant to this Section 4.1(a)(i) in all prior calendar months; provided,
----------------- --------
however, that (A) as to any series of Preferred Securities as to which
-------
Dividends are not cumulative, no Dividend shall be deemed to accrue until
the Partnership has actually paid (or set aside money to pay) such Dividend
and (B) Dividends as to Preferred Securities that are cumulative and are
not payable at the end of each calendar month shall be deemed to accrue in
a manner consistent with the Action creating such Preferred Securities.
Amounts allocated to all Holders of any series of Preferred Securities
shall be allocated among such Holders in proportion to the number of
Preferred Securities of such series held by such Holders.
(ii) Second, 100% to the Holders of any series of Preferred
Securities up to an amount equal to the Loss Carried Forward Amount for
such series as of the first day of such month. Amounts allocated to all
Holders of any series of Preferred Securities shall be allocated among such
Holders in proportion to the number of Preferred Securities of such series
held by such Holders.
10
<PAGE>
(iii) Any remaining Net Income shall be allocated to the General
Partner.
(b) The Partnership's Net Loss for any Fiscal Period shall be
allocated as follows:
(i) First, to the General Partner until the General Partner's Capital
Account is reduced to zero; provided, however, that the aggregate amount of
-------- -------
Net Losses allocated to the General Partner pursuant to this Section
-------
4.1(b)(i) shall not exceed the sum of 3% of the total capital contributions
---------
of all Partners plus the aggregate Net Income allocated to the General
Partner pursuant to Section 4.1.
-----------
(ii) Second, to the Holders of each series of Preferred Securities in
proportion to the aggregate Capital Account balances of the Holders of such
series of Preferred Securities (calculated taking into account only
contributions, distributions and allocations related to such series), until
the Capital Account balances of such Holders are reduced to zero; provided,
--------
however, that the General Partner shall make appropriate adjustments in
-------
these allocations, in accordance with Section 4.1(c) with respect to any
--------------
Preferred Securities as to which Net Income has been allocated with respect
to Dividends that accrued but were not paid. Amounts allocated to the
Holders of any series of Preferred Securities shall be allocated among such
Holders in proportion to the number of Preferred Securities of such series
held by such Holders.
(iii) Any remaining Net Loss shall be allocated to the General
Partner.
(c) The General Partner shall make such changes to the allocations in
Sections 4.1(a) and 4.1(b) in the year of the Partnership's liquidation as it
- --------------- ------
deems reasonably necessary so that amounts distributed to the Preferred Security
Holders in such year in accordance with Section 11.4(a)(ii) shall equal their
-------------------
Liquidation Distributions; provided, however, that no allocation pursuant to
-------- -------
this Section 4.1(c) may result in the General Partner being required to make any
--------------
Capital Contributions pursuant to Section 3.1.
-----------
Section 4.2 Other Allocation Provisions.
---------------------------
11
<PAGE>
(a) For purposes of determining the profits, losses or any other
items allocable to any period, profits, losses and any such other items shall be
determined on a daily, monthly or other basis, as determined by the General
Partner using any method that is permissible under (S)706 of the Code and the
Regulations.
(b) The Partners are aware of the income tax consequences of the
allocations made by this Article IV and hereby agree to be bound by the
----------
provisions of this Article IV in reporting their shares of Partnership income
----------
and loss for income tax purposes.
(c) Notwithstanding anything to the contrary that may be expressed or
implied in this Article IV, the interest of the General Partner in each item of
----------
income, gain, loss, deduction and credit will be equal to at least (i) at any
time that aggregate capital contributions to the Partnership are equal to or
less than $50,000,000, 1% of each such item and (ii) at any time that aggregate
capital contributions to the Partnership are greater than $50,000,000, at least
1%, multiplied by a fraction (not exceeding one and not less than 0.2), the
numerator of which is $50,000,000 and the denominator of which is the lesser of
the aggregate Capital Account balances of the Capital Accounts of all Partners
at such time and the aggregate capital contributions to the Partnership of all
Partners at such time, of such item.
(d) (i) If during any taxable year, a Partner unexpectedly receives
an adjustment, allocation or distribution described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), which causes or increases a deficit balance
in the Partner's Adjusted Capital Account (as defined below), there shall be
allocated to the Partner items of Partnership income and gain (consisting of a
pro rata portion of each item of Partnership income, including gross income and
gain for such year) in an amount and manner sufficient to eliminate such
deficit. The foregoing is intended to be a "qualified income offset" provision
as described in Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted and applied in all respects in accordance with that Regulation.
A Partner's "Adjusted Capital Account" at any time shall equal the
------------------------
Partner's Capital Account at such time (x) increased by the sum of (A) the
amount of the Partner's share of Partnership minimum gain (as defined in
Regulations Section 1.704-2(g)(1) and (3)) and (ii) the amount of the Partner's
share of the minimum gain attributable to a "partner non-recourse debt" (as
defined in Regulations Section 1.704-2(i)(5)) and (y) decreased by reasonably
excepted adjustments, allocations and distributions described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
12
<PAGE>
(ii) While the Partnership Agreement does not provide certain
provisions required by Regulations Sections 1.704-1(b) and 1.704-2 because those
provisions apply to transactions that are not expected to occur, the Partners
intend that the allocations under Section 4.1 conform to Regulations (S)1.704-
-----------
1(b) and 1.704-2 (including, without limitation, the minimum gain chargeback,
chargeback of partner nonrecourse debt minimum gain and partner nonrecourse debt
provisions of such Regulation), and the General Partner shall make such changes
in the allocations under Section 4.1 as it believes are reasonably necessary to
-----------
meet the requirements of such Regulations.
(e) Solely for the purpose of adjusting the Capital Accounts of the
Partners, and not for tax purposes, if any property is distributed in kind to
any Partner, the difference between its fair market value and its book value at
the time of distribution shall be treated as gain or loss recognized by the
Partnership and allocated pursuant to the provisions of Section 4.1; provided,
----------- --------
however, that Net Income and Net Loss allocated as a result of the distribution
- -------
of any series of Junior Subordinated Debentures to the Holders of any series of
Preferred Securities or to the General Partner (or both) shall be allocated to
the Partner receiving the Junior Subordinated Debentures in proportion to the
amount of Subordinated Debentures distributed to them. For this purpose, the
fair market value of any property shall be determined by the General Partner in
its sole discretion, provided, however, that the value of any Junior
-------- -------
Subordinated Debenture shall at all times be treated as equal to the value of
any Preferred Security if the interest rate on and principle amount of the
Junior Subordinated Debenture is the same as the Dividend payable on and the
liquidation preference with respect to the Preferred Security.
Section 4.3. Allocations for Income Tax Purposes. The income, gains,
-----------------------------------
losses, deductions and credits of the Partnership shall be allocated in the same
manner as the items entering into the computation of Net Income and Net Loss
were allocated under Sections 4.1 and 4.2; provided, however, that solely for
------------ --- -------- -------
federal, state and local income and franchise tax purposes and not for book or
Capital Account purposes, income, gain, loss and deduction with respect to any
property properly carried on the Partnership's books at a value other than the
tax basis of such property shall be allocated in a manner determined in the
General Partner's discretion, so as to take into account (consistently with Code
Section 704(c) principles) the difference between such property's book value and
its tax basis.
Section 4.4. Withholding. The Partnership shall comply with
-----------
withholding requirements under federal, state and local law and shall remit
amounts withheld to and file required forms with applicable jurisdictions. To
the extent that Partnership is required to withhold and pay over any amounts to
any authority with respect to distributions or allocations to any
13
<PAGE>
Partner, the amount withheld shall be deemed to be a distribution in the amount
of the withholding to the Partner. In the event of any claimed over-
withholding, Partners shall be limited to an action against the applicable
jurisdiction. If the amount withheld was not withheld from actual
distributions, the Partnership may reduce subsequent distributions by the amount
of such withholding. Each Partner agrees to furnish the Partnership with any
representations and forms as shall reasonably be requested by the Partnership to
assist it in determining the extent of, and in fulfilling, its withholding
obligations.
ARTICLE V
DIVIDENDS
Section 5.1 Dividends. Limited Partners shall receive periodic
---------
Dividends, if any, redemption payments and liquidation distributions in
accordance with the applicable terms of the Preferred Securities. Subject to
the rights of the Preferred Securities, all remaining cash shall be distributed
to the General Partner at such time as the General Partner shall determine.
Section 5.2 Limitations on Distributions. Notwithstanding any
----------------------------
provision to the contrary contained in this Agreement, the Partnership shall not
make a distribution to any Partner on account of its interest in the Partnership
if such distribution would violate Section 17-607 of the Act or other applicable
law.
ARTICLE VI
ISSUANCE OF PREFERRED SECURITIES
Section 6.1 General Provisions Regarding Preferred Securities.
-------------------------------------------------
(a) The aggregate number of Preferred Securities which the
Partnership shall have authority to issue is unlimited.
(b) The powers, preferences, special rights and limitations of the
Preferred Securities shall be as follows:
(i) The payment of Dividends and payments on dissolution of the
Partnership or on redemption in respect of Preferred Securities shall be
guaranteed by GTE pursuant to the Guarantee. The Preferred Security Holders
hereby authorize the General Partner to hold the Guarantee on behalf of the
Preferred Security Holders. 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
Preferred Security Holders. The Holders of not less than 10% in liquidation
14
<PAGE>
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, a Preferred Security Holder may institute a legal
proceeding directly against the Guarantor to enforce its rights under the
Guarantee, without first instituting a legal proceeding against the
Partnership or any other Person or entity. The Preferred Security Holders,
by acceptance of such Preferred Securities, hereby agree to the
subordination provisions and other terms of the Guarantee;
(ii) The Preferred Securities may be issued from time to time by the
Partnership as Preferred Securities of one or more series and the General
Partner is expressly authorized, prior to issuance, in a written action or
actions (each, an "Action") providing for the issue of Preferred Securities
------
of each particular series, to fix the following:
(A) the distinctive designation of such series which shall
distinguish it from other series;
(B) 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;
(C) 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;
(D) whether Dividends on the 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 the Preferred
Securities of such series shall be cumulative;
(E) the amount or amounts which shall be paid out of the assets
of the Partnership to the Holders of the Preferred Securities of such
series upon voluntary or involuntary dissolution, winding up or
termination of the Partnership;
(F) the price or prices at which, the period or periods within
which and the terms and conditions upon which the Preferred Securities
of such series may be redeemed or purchased, in whole or in part, at
the option of the Partnership or the General Partner;
(G) the obligation, if any, of the Partnership 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 the Preferred
15
<PAGE>
Securities of such series shall be purchased or redeemed, in whole or
in part, pursuant to such obligation;
(H) the voting rights, if any, of the 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 the Preferred Securities
of one or more series, or of both, as a condition to specified action
or amendments to this Agreement; and
(I) any other relative rights, powers, preferences or
limitations of the Preferred Securities of the series not inconsistent
with this Agreement or with applicable law.
In connection with the foregoing and without limiting the
generality thereof, the General Partner is hereby expressly authorized,
without the vote or approval of any Preferred Security Holder, (i) to take
any Action to create under the provisions of this Agreement a series of
Preferred Securities that was not previously outstanding and (ii) to admit
Preferred Security Holders as Limited Partners in the Partnership. Without
the vote or approval of any Preferred Security Holder, the General Partner
may execute, swear to, acknowledge, deliver, file and record whatever
documents may be required in connection with the issue from time to time of
Preferred Securities in one or more series as shall be necessary,
convenient or desirable to reflect the issue of such series. The General
Partner shall do all things it deems to be appropriate or necessary to
comply with the Act and is authorized and directed to do all things it
deems to be necessary or permissible in connection with any future
issuance, including compliance with any statute, rule, regulation or
guideline of any federal, state or other governmental agency or any
securities exchange.
Any Action or Actions taken by the General Partner pursuant to
the provisions of this paragraph (ii) shall be deemed an amendment and
--------------
supplement to and part of this Agreement.
16
<PAGE>
(iii) The proceeds received by the Partnership from the issuance of
any series of Preferred Securities, together with the proceeds of any
capital contribution of the General Partner made at the time of such
issuance, shall be invested by the Partnership in Junior Subordinated
Debentures with (A) an aggregate principal amount equal to such aggregate
proceeds and (B) an interest rate equal to the Dividend rate of such series
of Preferred Securities.
(iv) So long as any series of Junior Subordinated Debentures are held
by the Partnership, the General Partner shall not (i) direct the time,
method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee with
respect to 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 Junior Subordinated Debentures
of such series shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture 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 of Junior
Subordinated Debentures 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 affected thereby. The General Partner shall notify
all Holders of any series of Preferred Securities of any notice of default
received from the Trustee with respect to the related series of Junior
Subordinated Debentures.
(iv) The Partnership may not issue any limited partner interests in
the Partnership (including, without limitation, any series of Preferred
Securities), unless such series of Preferred Securities ranks pari passu
---- -----
with each other series of Preferred Securities then outstanding as regards
(A) participation in profits and Dividends of the Partnership and (B)
participation in the assets of the Partnership. All Preferred Securities
shall rank senior to the General Partner's Interest in respect of the right
to receive Dividends and the right to receive payments out of the assets of
the Partnership upon voluntary or involuntary dissolution, winding up or
termination of the Partnership. All Preferred Securities redeemed,
purchased or otherwise acquired by the Partnership (including Preferred
Securities surrendered for conversion or exchange) shall be canceled.
(v) No Holder of a Preferred Security shall be entitled as a matter
of right to subscribe for or purchase,
17
<PAGE>
or have any preemptive right with respect to, any part of any new or
additional issue of Preferred Securities of any class whatsoever, or of
securities convertible into any Preferred Securities of any class
whatsoever, whether now or hereafter authorized and whether issued for cash
or other consideration or by way of a Dividend.
ARTICLE VII
BOOKS OF ACCOUNT, RECORDS AND REPORTS
Section 7.1 Books and Records.
-----------------
(a) Proper and complete records and books of account of the
Partnership shall be kept by the General Partner in which shall be entered fully
and accurately all transactions and other matters relative to the Partnership's
business as are usually entered into records and books of account maintained by
Persons engaged in businesses of a like character, including a Capital Account
for each Partner. The books and records of the Partnership, together with a
certified copy of this Agreement and of the Certificate, shall at all times be
maintained at the principal office of the Partnership and shall be open to the
inspection and examination of the Limited Partners or their duly authorized
representatives for a proper purpose reasonably related to its Interest during
reasonable business hours.
(b) Notwithstanding any other provision of this Agreement, the
General Partner may, to the maximum extent permitted by applicable law, keep
confidential from the Partners any information the disclosure of which the
General Partner reasonably believes is not in the best interests of the
Partnership or is adverse to the interests of the Partnership or which the
Partnership or the General Partner is required by law or by an agreement with
any Person to keep confidential.
(c) Within three months after the close of each Fiscal Year, the
General Partner shall transmit to each Partner, a statement indicating such
Partner's share of each item of Partnership income, gain, loss, deduction or
credit for such Fiscal Year for federal income tax purposes.
Section 7.2 Accounting Method. For both financial and tax reporting
-----------------
purposes and for purposes of determining profits and losses, the books and
records of the Partnership shall be kept on the accrual method of accounting
applied in a consistent manner and shall reflect all Partnership transactions
and be appropriate and adequate for the Partnership's business.
18
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ARTICLE VIII
POWERS, RIGHTS AND DUTIES
OF THE LIMITED PARTNERS
Section 8.1 Limitations. The Limited Partners shall not
-----------
participate in the management or control of the Partnership's business,
property or other assets nor shall the Limited Partners
transact any business for the Partnership, nor shall the Limited Partners have
the power to act for or bind the Partnership, said powers being vested solely
and exclusively in the General Partner, provided, however, that the Limited
-------- -------
Partners shall have such rights as are set forth herein, including any Action.
The Limited Partners shall have no interest in the properties or assets of the
General Partner, or any equity therein, or in any proceeds of any sales thereof
(which sales shall not be restricted in any respect, by virtue of acquiring or
owning an Interest.
Section 8.2 Liability. Subject to the provisions of the Act, no
---------
Limited Partner shall be liable for the repayment, satisfaction or discharge of
any debts or other obligations of the Partnership in excess of the Capital
Account balance of such Limited Partner.
Section 8.3 Priority. Except as may be provided in any Action, no
--------
Limited Partner shall have priority over any other Limited Partner as to
Partnership allocations or distributions.
ARTICLE IX
POWERS, RIGHTS AND DUTIES
OF THE GENERAL PARTNER
Section 9.1 Authority. Subject to the limitations provided in this
---------
Agreement, the General Partner shall have exclusive and complete authority and
discretion to manage the operations and affairs of the Partnership and to make
all decisions regarding the business of the Partnership. Any action taken by
the General Partner shall constitute the act of and serve to bind the
Partnership. In dealing with the General Partner acting on behalf of the
Partnership, no Person shall be required to inquire into the authority of the
General Partner to bind the Partnership. Persons dealing with the Partnership
are entitled to rely conclusively on the power and authority of the General
Partner as set forth in this Agreement.
Section 9.2 Powers and Duties of General Partner. Except as
------------------------------------
otherwise specifically provided herein, the General Partner shall have all
rights and powers of a general partner under the Act, and shall have all
authority, rights and powers in the management of the Partnership business to do
any and all other acts and things necessary, proper, convenient or advisable
19
<PAGE>
to effectuate the purposes of this Agreement, including by way of illustration
but not by way of limitation, the following:
(a) to secure the necessary goods and services required in performing
the General Partner's duties for the Partnership;
(b) to exercise all powers of the Partnership, on behalf of the
Partnership, in connection with enforcing the Partnership's rights and
interest under the Junior Subordinated Debentures and the Guarantee;
(c) to issue Preferred Securities, and series thereof, in accordance
with this Agreement;
(d) to establish a record date with respect to all actions to be
taken hereunder that require a record date be established, including with
respect to Dividends and voting rights and to make determinations as to the
payment of Dividends, and make all other required payments to Preferred
Security Holders and to the General Partner as the Partnership's paying
agent;
(e) to open, maintain and close bank accounts and to draw checks and
other orders for the payment of money;
(f) to bring or defend, pay, collect, compromise, arbitrate, resort
to legal action, or otherwise adjust claims or demands of or against the
Partnership;
(g) to deposit, withdraw, invest, pay, retain and distribute the
Partnership's funds in a manner consistent with the provisions of this
Agreement;
(h) to take all action which may be necessary or appropriate for the
preservation and the continuation of the Partnership's valid existence,
rights, franchises and privileges as a limited partnership under the laws
of the State of Delaware and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the Limited
Partner or to enable the Partnership to conduct the business in which it
is engaged;
(i) to take all action not inconsistent with applicable law, the
Certificate or this Agreement as long as such action does not adversely
affect the interests of the Preferred Security Holders, necessary to
conduct its affairs and to operate the Partnership in such a way that the
Partnership would not be deemed 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 Junior Subordinated Debentures will be treated
as indebtedness of GTE for federal income tax purposes;
(j) to cause the Partnership to enter into and perform, on behalf of
the Partnership an Underwriting Agreement and a Pricing Agreement and to
cause the Partnership to purchase the Junior Subordinated Debentures
without any further act, vote or approval of any Partner; and
(k) to execute and deliver any and all documents or instruments,
perform all duties and powers and do all things
20
<PAGE>
for and on behalf of the Partnership in all matters necessary or desirable
or incidental to the foregoing.
Section 9.3 Liability. Except as expressly set forth in this
---------
Agreement, (a) the General Partner shall not be personally liable for the
return of any portion of the capital contributions (or any return thereon) of
the Limited Partners; (b) the return of such capital contributions (or any
return thereon) shall be made solely from assets of the Partnership; and (c) the
General Partner shall not be required to pay to the Partnership or to any
Limited Partner any deficit in any Limited Partner's Capital Account upon
dissolution or otherwise. No Limited Partner shall have the right to demand or
receive property other than cash for its respective Interest in the Partnership.
Section 9.4 Exculpation. (a) No Indemnified Person shall be liable,
-----------
responsible or accountable in damages or otherwise to the Partnership or any
Covered Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith on behalf
of the Partnership and in a manner reasonably believed to be within the scope of
the authority conferred on such Indemnified Person by this Agreement or by law
except that an Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's gross negligence or
willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Partnership and upon such information, opinions,
reports or statements presented to the Partnership by any Person as to matters
the Indemnified Person reasonably believes are within such other Persons's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Partnership, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which distributions to Partners might properly be paid.
Section 9.5 Fiduciary Duty.
--------------
(a) To the extent that, at law or in equity, an Indemnified Person
has duties (including fiduciary duties) and liabilities relating thereto to the
Partnership or to any other Covered Person, an Indemnified Person acting under
this Agreement shall not be liable to the Partnership or to any other Covered
Person for its good faith reliance on the provisions of this Agreement. The
provisions of this Agreement, to the extent that they restrict the duties and
liabilities of an Indemnified Person otherwise existing at law or in equity, are
agreed by the parties hereto to replace such other duties and liabilities of
such Indemnified Person.
21
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(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between Covered Persons, or (ii) whenever
this Agreement or any other agreement contemplated herein or therein provides
that an Indemnified Person shall act in a manner that is, or provides terms that
are, fair and reasonable to the Partnership or any Partner, the Indemnified
Person shall resolve such conflict of interest, taking such action or providing
such terms, considering in each case the relative interest of each party
(including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Agreement or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
(c) Whenever in this Agreement an Indemnified Person is permitted or
required to make a decision (i) in its "discretion" or under a grant of similar
authority, the Indemnified Person shall be entitled to consider only such
interests and factors a it desires, including its own interests, and shall have
no duty or obligation to give any consideration to any interest of or factors
affecting the Partnership or any other Person, or (ii) in its "good faith" or
under another express standard, the Indemnified Person shall act under such
express standard and shall not be subject to any other or different standard
imposed by this Agreement or other applicable law.
Section 9.6 Indemnification.
---------------
(a) To the fullest extent permitted by applicable law, the
Partnership shall indemnify and hold harmless each Indemnified Person from and
against any loss, damage or claim incurred by such Indemnified Person by reason
of any act or omission performed or omitted by such Indemnified Person in good
faith on behalf of the Partnership and in a manner reasonably believed to be
within the scope of authority conferred on such Indemnified Person by this
Agreement, except that no Indemnified Person shall be entitled to be indemnified
in respect of any loss, damage or claim incurred by such Indemnified Person by
reason of gross negligence or willful misconduct with respect to such acts or
omissions; provided, however, that any indemnity under this Section 9.6 shall be
-------- ------- -----------
provided out of and to the extent of Partnership assets only, and no Covered
Person shall have any personal liability on account thereof.
(b) To the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by an Indemnified Person in defending any claim,
demand, action, suit or proceeding shall, from time to time, be advanced by the
Partnership prior to the final disposition of such claim, demand, action, suit
or
22
<PAGE>
proceeding upon receipt by the Partnership of an undertaking by or on behalf of
the Indemnified Person to repay such amount if it shall be determined that the
Indemnified Person is not entitled to be indemnified as authorized in Section
-------
9.6(a).
- ------
Section 9.7 Outside Businesses. Any Partner or Affiliate thereof
------------------
may engage in or possess an interest in other business ventures of any nature of
description, independently or with others, similar or dissimilar to the business
of the Partnership, and the Partnership and the Partners shall have no rights by
virtue of this Agreement in and to such independent ventures or the income or
profits derived therefrom and the pursuit of any such venture, even if
competitive with the business of the Partnership, shall not be deemed wrongful
or improper. No Partner or Affiliate thereof shall be obligated to present any
particular investment opportunity to the Partnership even if such opportunity is
of a character that, if presented to the Partnership, could be taken by the
Partnership, and any Partner or Affiliate thereof shall have the right to take
for its own account (individually or as a partner or fiduciary) or to recommend
to others any such particular investment opportunity.
Section 9.8 Limits on General Partner's Powers. Anything in this
----------------------------------
Agreement to the contrary notwithstanding, the General Partner shall not cause
or permit the Partnership to
(a) acquire any assets other than as expressly provided herein;
(b) possess Partnership property for other than a Partnership
purpose;
(c) admit a Person as a Partner, except as expressly provided in this
Agreement;
(d) make any loans to the General Partner or its affiliates, other
than loans represented by the Junior Subordinated Debentures or other
similar debt instruments of GTE;
(e) perform any act that would subject any Limited Partner to
liability as a general partner in any jurisdiction;
(f) engage in any activity that is not consistent with the purposes
of the Partnership, as set forth in Section 1.3;
-----------
(g) confess a judgment against the Partnership;
23
<PAGE>
(h) without the written consent of 66-2/3% in liquidation preference
of the outstanding Preferred Securities have an order for relief entered
with respect to the Partnership or commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consent to the entry of an order for relief in an involuntary
case under any such law, or consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a
substantial part of the Partnership's property, or make any assignment for
the benefit of creditors of the Partnership; it being understood that
nothing in this paragraph (h) is to effect the ability of the Partnership
-------------
to dissolve pursuant to this Agreement; or
(i) subject to Section 1.3, borrow money or become liable for the
-----------
borrowings of any third party or to engage in any financial or other trade
or business.
Section 9.9 Tax Matters Partner. (a) For purposes of Code Section
-------------------
6231(a)(7), the "Tax Matters Partner" shall be the General Partner as long as it
-------------------
remains the general partner of the Partnership. The Tax Matters Partner shall
keep the Limited Partners fully informed of any inquiry, examination or
proceeding.
(b) The General Partner shall not make an election in accordance with
(S)754 of the Code.
(c) The General Partner and the Preferred Security Holders
acknowledge that they intend, for U.S. federal income tax purposes, that the
Partnership shall be treated as a partnership and that the General Partner and
the Preferred Security Holders shall be treated as Partners of such Partnership
for such purposes.
Section 9.10 Expenses. The General Partner shall pay for all, and the
--------
Partnership shall not be obligated to pay, directly or indirectly, for any,
costs and expenses of the Partnership (including, but not limited to, costs and
expenses relating to the organization of, and offering of limited partner
interests in, the Partnership and costs and expenses relating to the operation
of the Partnership, including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services and computing or
accounting equipment, paying agent(s), registrar(s), transfer agent(s),
duplicating, travel and telephone and costs and expenses incurred in connection
with the acquisition, financing, and disposition of Partnership assets).
ARTICLE X
TRANSFERS OF INTERESTS BY PARTNERS
Section 10.1 Transfer of Interests. (a) Preferred Securities shall
---------------------
be freely transferable by a Preferred Security Holder.
(b) The General Partner may not assign its interest in the Partnership
in whole or in part under any circumstances except to a successor of GTE as
permitted under the Indenture. The admission of such successor as a general
partner of the Partnership shall be effective upon the filing of an amendment to
the Certificate with the Secretary of State of the State of Delaware which
indicates that such successor has been admitted as a general partner in the
Partnership. If the General Partner assigns its entire Interest to a successor
of GTE as permitted under the Indenture, the General Partner shall be deemed to
have ceased to be a general partner in the Partnership simultaneously with the
admission of the successor as a general partner in the Partnership. Any such
successor general partner in the Partnership is hereby authorized to and shall
continue the business of the Partnership without dissolution.
(c) No Interest shall be transferred, in whole or in part, except in
accordance with the terms and conditions set forth in this Agreement. Any
transfer or purported transfer of any Interest not made in accordance with this
Agreement shall be null and void.
24
<PAGE>
Section 10.2 Transfer of LP Certificates. The General Partner shall
---------------------------
provide for the registration of LP Certificates and of transfers of LP
Certificates. Upon surrender for registration of transfer of any LP Certificate,
the General Partner shall cause one or more new LP Certificates to be issued in
the name of the designated transferee or transferees. Every LP Certificate
surrendered for registration of transfer shall be accompanied by a written
instrument of transfer in form satisfactory to the General Partner duly executed
by the Preferred Security Holder or his or her attorney duly authorized in
writing. Each LP Certificate surrendered for registration of transfer shall be
canceled by the General Partner. A transferee of an LP Certificate shall be
admitted to the Partnership as a Limited Partner and shall be entitled to the
rights and subject to the obligations of a Preferred Security Holder hereunder
upon the receipt by a transferee of an LP Certificate. By acceptance of an LP
Certificate, each transferee shall be deemed to have requested admission as a
Limited Partner and to have agreed to be bound by this Agreement. The transferor
of an LP Certificate, in whole, shall cease to be a Limited Partner at the time
that the transferee of such LP Certificate is admitted to the Partnership as a
Limited Partner in accordance with this Section 10.2.
------------
Section 10.3 Persons Deemed Preferred Security Holders. The
-----------------------------------------
Partnership may treat the Person in whose name any LP Certificate shall be
registered on the books and records of the Partnership as the sole holder of
such LP Certificate and of the Preferred Securities represented by such LP
Certificate (the "Preferred Security Holder") for purposes of receiving
-------------------------
Dividends and for all other purposes whatsoever and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such LP
Certificate or in the Preferred Securities represented by such LP Certificate on
the part of any other Person, whether or not the Partnership shall have actual
or other notice thereof.
Section 10.4 Book Entry Interests. The LP Certificates, on original
--------------------
issuance, will be issued in the form of a global LP Certificate or LP
Certificates representing the Book Entry Interests, to be delivered to DTC, the
initial Clearing Agency, by, or on behalf of, the Partnership. Such LP
Certificate or LP Certificates shall initially be registered on the books and
records of the Partnership in the name of Cede & Co., the nominee of DTC, and no
Preferred Security Owner will receive a definitive LP Certificate representing
such Preferred Security Owner's interests in such LP Certificate, except as
provided in Section 10.7. Unless and until definitive, fully registered LP
------------
Certificates (the "Definitive LP Certificates") have been issued to the
--------------------------
Preferred Security Owners pursuant to Section 10.7:
------------
(i) The provisions of this Section shall be in full force and effect;
(ii) The Partnership and the General Partner shall be entitled to deal
with the Clearing Agency for all purposes of this Agreement (including the
payment of Dividends on the LP Certificates and receiving approvals, votes
or consents hereunder) as the Preferred Security Holder and the sole holder
of the LP Certificates and shall have no obligation to the Preferred
Security Owner;
25
<PAGE>
(iii) To the extent that the provisions of this Section conflict with
any other provisions of this Agreement, the provisions of this Section
shall control; and
(iv) The rights of the Preferred Security Owners shall be exercised
only through the Clearing Agency and shall be limited to those established
by law and agreements between such Preferred Security Owners and the
Clearing Agency and/or the Clearing Agency Participants. DTC will make
book entry transfers among the Clearing Agency Participants and receive and
transmit payments of Dividends on the LP Certificates to such Clearing
Agency Participants.
Section 10.5 Notices to Clearing Agency. Whenever a notice or other
--------------------------
communication to the Preferred Security Holders is required under this
Agreement, unless and until Definitive LP Certificates shall have been issued to
the Preferred Security Owners pursuant to Section 10.7, the General Partner
------------
shall give all such notices and communications specified herein to be given to
the Preferred Security Holders to the Clearing Agency, and shall have no
obligations to the Preferred Security Owners.
Section 10.6 Appointment of Successor Clearing Agency. If any
----------------------------------------
Clearing Agency elects to discontinue its services as securities depository with
respect to the Preferred Securities, the General Partner may, in its sole
discretion, appoint a successor Clearing Agency with respect to the Preferred
Securities.
Section 10.7 Definitive LP Certificates; Appointment of Paying
-------------------------------------------------
Agent(s). If (i) a Clearing Agency elects to discontinue its services as
- --------
securities depository with respect to the Preferred Securities and a successor
Clearing Agency is not appointed within 90 days after such discontinuance
pursuant to Section 10.6 or (ii) the Partnership elects to terminate the book
------------
entry system through the Clearing Agency, then (a) Definitive LP Certificates
shall be prepared by the Partnership and (b) the General Partner shall
authorize one or more Persons (each, a "Paying Agent") to pay Dividends,
--------------
redemption payments or liquidation payments on behalf of the Partnership with
respect to the Preferred Securities. Upon surrender of the global LP Certificate
or LP Certificates representing the Book Entry Interests by the Clearing Agency,
accompanied by registration instructions, the General Partner shall cause
Definitive LP Certificates to be delivered to Preferred Security Owners in
accordance with the instructions of the Clearing Agency. Neither the General
Partner nor the Partnership shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Any Person receiving a Definitive LP Certificate in
accordance with this Article X shall be admitted to the Partnership as a Limited
---------
Partner upon receipt of such Definitive LP Certificate and shall be registered
on the books and records of the Partnership as a Preferred Security Holder. The
Clearing Agency or the nominee of the Clearing Agency, as the case may be, shall
cease to be a Limited Partner under this Section 10.7 at the time that at
------------
least one additional person is admitted to the Partnership as a Limited Partner
in accordance with this Section 10.7. The Definitive LP Certificates shall be
------------
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the General Partner, as evidenced by its execution
thereof.
26
<PAGE>
ARTICLE XI
WITHDRAWAL; DISSOLUTION;
LIQUIDATION AND DISTRIBUTION OF ASSETS
Section 11.1 Withdrawal of Partners. Subject to the further
----------------------
provisions of this Section 11.1 and except as provided in Article X, no Partner
------------
shall at any time retire or withdraw from the Partnership. Any Partner retiring
or withdrawing in contravention of this Section 11.1 shall indemnify, defend and
------------
hold harmless the Partnership and the other Partners from and against any
losses, expenses, judgments, fines, settlements or damages suffered or incurred
by the Partnership or such other Partners arising out of or resulting from such
retirement or withdrawal. No permitted transfer of all or any portion of a
Partner's Interest in the Partnership in accordance with Article X shall
---------
constitute a withdrawal in violation of this Section 11.1. Further, the
------------
withdrawal of a Holder in connection with the redemption of its entire Interest
in the Partnership in accordance with the terms hereof or of an Action, shall
not constitute a violation of this Section 11.1.
------------
Section 11.2 Dissolution of the Partnership.
------------------------------
(a) The Partnership shall not be dissolved by the admission of
additional or successor Partners in accordance with the terms of this Agreement.
The death, withdrawal, bankruptcy or dissolution of a Limited Partner, or the
occurrence of any other event which terminates the Interest of a Limited Partner
in the Partnership, shall not, in and of itself, cause the Partnership to be
dissolved and its affairs wound up. To the fullest extent permitted by
applicable law, upon the occurrence of such event, the General Partner may,
without any further act, vote or approval of any Partner, admit any Person to
the Partnership as an additional or substitute limited partner in the
Partnership, which admission shall be effective as of the date of the occurrence
of such event, and the business of the Partnership shall be continued without
dissolution.
(b) The Partnership shall be dissolved and its affairs shall be wound
up upon the occurrence of any of the following events:
(i) The expiration of the term of the Partnership, as provided in
Section 1.4 hereof;
- -----------
(ii) Upon the bankruptcy of the General Partner;
(iii) Upon the assignment by the General Partner of its entire
interest in the Partnership when the assignee is not admitted to the Partnership
as a general partner of the Partnership in accordance with Section 10.1, 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 the
Partnership under the Act, unless the business of the Partnership is continued
in accordance with the Act (any remaining general partner of the Partnership is
hereby authorized to and shall continue the business of the Partnership without
dissolution);
(iv) In accordance with any Action;
(v) the entry of a decree of judicial dissolution under Section
17-802 of the Act; or
(vi) the written consent of all Partners.
27
<PAGE>
(c) Upon dissolution of the Partnership, the Liquidator shall
promptly notify the Partners of such dissolution.
Section 11.3 Liquidation. (a) In the event of the dissolution of the
-----------
Partnership for any reason, the General Partner (or, if the Partnership is
dissolved pursuant to Section 11.2(b)(ii), then a liquidating trustee appointed
by 66 2/3% in liquidation preference of the Preferred Securities
(the General Partner or such person so appointed is hereinafter referred to as
the "Liquidator")), shall commence to wind up the affairs of the Partnership and
----------
to liquidate the Partnership's assets; provided, however, that a reasonable time
-------- -------
shall be allowed for the orderly liquidation of the assets of the Partnership
and the satisfaction of liabilities to creditors so as to enable the Partners to
minimize the normal losses attendant upon liquidation. The Partners shall
continue to share all income, losses and distributions during the period of
liquidation in accordance with Articles IV and V. Subject to the provisions of
----------- -
this Article XI, the Liquidator shall have full right and unlimited discretion
----------
to determine the time, manner and terms of any sale or sales of Partnership
property pursuant to such liquidation, giving due regard to the activity and
condition of the relevant market and general financial and economic conditions.
(b) The Liquidator shall have all of the rights and powers with
respect to the assets and liabilities of the Partnership in connection with the
liquidation and termination of the Partnership that the General Partner would
have with respect to the assets and liabilities of the Partnership during the
term of the Partnership, and the Liquidator is hereby expressly authorized and
empowered to execute any and all documents necessary or desirable to effectuate
the liquidation and termination of the Partnership and the transfer of any
assets.
(c) Notwithstanding the foregoing, a Liquidator which is not the
General Partner shall not be deemed a Partner in this Partnership and shall not
have any of the economic interests in the Partnership of a Partner; and such
Liquidator may be compensated for its services to the Partnership at normal,
customary and competitive rates for its services to the Partnership as
reasonably determined by a majority-in-interest of the Limited Partners.
Section 11.4 Distribution in Liquidation.
---------------------------
(a) Upon the winding up of the Partnership, the assets of the
Partnership shall be distributed in the following order of priority:
(i) to creditors of the Partnership, including Preferred Security
Holders who are creditors, to the extent otherwise permitted by law, in
satisfaction of the liabilities of the Partnership (whether by payment or
the making of reasonable provision for payment thereof), other
28
<PAGE>
than liabilities for distributions (including Dividends) to Partners; and
(ii) to the Partners in proportion to the Partners' positive Capital
Account balances.
Section 11.5 Rights of Limited Partners. Each Limited Partner shall
--------------------------
look solely to the assets of the Partnership for all distributions with respect
to the Partnership and such Partner's capital contribution (including return
thereof), and such Partner's share of profits or losses thereof, and shall have
no recourse therefor (upon dissolution or otherwise) against the General
Partner. No Partner shall have any right to demand or receive property other
than cash upon dissolution and termination of the Partnership.
Section 11.6 Termination. The Partnership shall terminate when all
-----------
of the assets of the Partnership shall have been disposed of and the assets
shall have been distributed as provided in Section 11.4. The Liquidator shall
------------
then execute and cause to be filed a certificate of cancellation of the
Certificate.
ARTICLE XII
AMENDMENTS AND MEETINGS
Section 12.1 Amendments. Except as otherwise provided in this
----------
Agreement or by any applicable terms of any Action establishing a series of
Preferred Securities, this Agreement may be amended by, and only by, a written
instrument executed by the General Partner; provided, however, that (i) no
-------- -------
amendment shall be made, and any such purported amendment shall be void and
ineffective, to the extent the result thereof would be to cause the Partnership
to be treated as anything other than a partnership for purposes of United States
income taxation and (ii) any amendment which would adversely affect the powers,
preferences or special rights of any series of Preferred Securities may be
effected only as permitted by the terms of such series of Preferred Securities.
Section 12.2 Amendment of Certificate. In the event this Agreement
------------------------
shall be amended pursuant to Section 12.1, the General Partner shall amend the
------------
Certificate to reflect such change if it deems such amendment of the Certificate
to be necessary or appropriate.
Section 12.3 Meetings of the Partners.
------------------------
(a) Meetings of the Limited Partners who are Holders of any series
or, in the case of a class vote, of multiple series of Preferred Securities may
be called at any time by the General Partner (or as provided in any Action
establishing a series of Preferred Securities) to consider and act on any matter
on which Limited Partners are entitled to act under the terms of this Agreement
or the Act. The General Partner shall call a meeting of Holders of any series
or, in the case of a class vote, multiple series, if directed to do so by
Holders of not less than 10% in liquidation preference of the Preferred
Securities. Such direction shall be given by delivering to the General Partner
one or more calls in writing stating that the signing Limited Partners wish to
call a meeting and indicating the general or specific purpose for which the
meeting is to be called. Any Limited Partner calling a meeting shall specify the
LP Certificates as to which the Limited Partners exercising the right to call a
meeting and only those specified Interests shall be counted for purposes of
determining whether the required percentage set forth in the proceeding sentence
has been met. Except to the extent otherwise provided in any such Action, the
following provisions shall apply to meetings of Partners.
29
<PAGE>
(b) Notice of any such meeting shall be given to all Limited Partners
having a right to vote thereat not less than 7 Business Days nor more than 60
days prior to the date of such meeting. Whenever a vote, consent or approval of
Limited Partners is permitted or required under this Agreement, such vote,
consent or approval may be given at a meeting of Limited Partners. Further, any
action that may be taken at a meeting of the Limited Partners may be taken
without a meeting if a consent in writing setting forth the action so taken is
signed by Limited Partners owning not less than the minimum Interests that would
be necessary to authorize or take such action at a meeting at which all Limited
Partners having a right to vote thereon were present and voting. Prompt notice
of the taking of action without a meeting shall be given to the Limited Partners
entitled to vote who have not consented in writing. The General Partner may
specify that any written ballot submitted to the Limited Partners for the
purpose of taking any action without a meeting shall be returned to the
partnership within the time specified by the General Partner.
(c) Each Limited Partner may authorize any Person to act for it by
proxy on all matters in which a Limited Partner is entitled to participate,
including waiving notice of any meeting, or voting or participating at a
meeting. No proxy shall be valid after the expiration of 11 months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the Limited Partner executing it. Except as otherwise
provided herein, in any Action or pursuant to Section 12.3(e), all matters
---------------
relating to the giving, voting or validity of proxy shall be governed by the
General Corporation Law of the State of Delaware relating to proxies, and
judicial interpretations thereunder, as if the Partnership were a Delaware
corporation and the Limited Partners were stockholders of a Delaware
corporation.
(d) Each meeting of Partners shall be conducted by the General
Partner or by such other Person that the General Partner may designate.
(e) The General Partner, in its sole discretion, shall establish all
other provisions relating to meetings of Limited Partners, including notice of
the time, place or purpose of any meeting at which any matter is to be voted on
by any Limited Partners, waiver of any such notice, action by consent without a
meeting, the establishment of a record date, quorum requirements, voting in
person or by proxy or any other matter with respect to the exercise of any such
right to vote.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Notices. All notices provided for in this Agreement
-------
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail, as follows:
(a) if given to the Partnership, in care of the General Partner at
the Partnership's mailing address set forth below:
GTE Delaware, L.P.
c/o GTE Corporation
One Stamford Forum
30
<PAGE>
Stamford, Connecticut 06904
Attention: Corporate Secretary
(b) if given to the General Partner, at its mailing address set forth
below:
GTE Corporation
One Stamford Forum
Stamford, Connecticut 06904
Attention: Corporate Secretary
(c) if given to any other Partner at the address set forth on the
books and records of the Partnership.
All such notices shall be deemed to have been given when received.
Section 13.2 Entire Agreement. This Agreement constitutes the
----------------
entire agreement among the parties. It supersedes any prior agreement or
understandings among them, and it may not be modified or amended in any manner
other than as set forth herein.
Section 13.3 Governing Law. This Agreement and the rights of the
-------------
parties hereunder shall be governed by and interpreted in accordance with the
law of the State of Delaware and all rights and remedies shall be governed by
such laws without regard to principles of conflict of laws.
Section 13.4 Effect. Except as herein otherwise specifically
------
provided, this Agreement shall be binding upon and inure to the benefit of the
parties and their legal representatives, successors and assigns.
Section 13.5 Pronouns and Number. Wherever from the context it
-------------------
appears appropriate, each term stated in either the singular or the plural shall
include the singular and the plural, and pronouns stated in either the
masculine, feminine or neuter shall include the masculine, feminine and neuter.
Section 13.6 Captions. Captions contained in this Agreement are
--------
inserted only as a matter of convenience and in no way define, limit or extend
the scope or intent of this Agreement or any provision hereof.
Section 13.7 Partial Enforceability. If any provision of this
----------------------
Agreement, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Agreement, or the application of
such provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
Section 13.8 Counterparts. This Agreement may contain more than one
------------
counterpart of the signature page and this
31
<PAGE>
Agreement may be executed by the affixing of the signature of each of the
Partners to one of such counterpart signature pages. All of such counterpart
signatures pages shall be read as though one, and they shall have the same force
and effect as though all of the signers had signed a single signature page.
Section 13.9 Waiver of Partition. Each Partner hereby irrevocably
-------------------
waives any and all rights (if any) that such Partner may have to maintain any
action for partition of any of the Partnership's property.
Section 13.10 Remedies. The failure of any party to seek redress for
--------
violation of, or to insist upon the strict performance of, any provision of this
Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation. The
rights and remedies provided by this Agreement are cumulative and the use of any
one right or remedy by any party shall not preclude or waive its right to use
any or all other remedies. Said rights and remedies are given in addition to
any other rights the parties may have by law, statute, ordinance or otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above stated.
General Partner:
GTE CORPORATION,
a New York Corporation
By:_____________________
Name:
Title:
Initial Limited Partner:
GTE FINANCE CORPORATION,
a Delaware Corporation
By:________________________
Name:
Title:
32
<PAGE>
Annex A
Certificate Number Number of Preferred Securities
- ---------------------------------------------------
R-1
CUSIP NO.
Certificate Evidencing Preferred Securities
of
GTE Delaware, L.P.
_________________ Monthly Income Preferred Securities, Series A
(liquidation preference $25 per Preferred Security)
GTE Delaware, L.P., a limited partnership formed under the laws of the
State of Delaware (the "Partnership"), hereby certifies that __________ (the
-----------
"Holder") is the registered owner of _______ (__________) preferred securities
- -------
of the Partnership representing limited partner interests in the Partnership
of a series designated the ________________ Monthly Income Preferred Securities,
Series A (liquidation preference $25 per Preferred Security)(the "Series A
--------
Preferred Securities"). The Series A Preferred Securities are fully paid and
- --------------------
nonassessable limited partner interests in the Partnership, as to which the
limited partners in the Partnership who hold the Series A Preferred Securities
(the "Preferred Security Holders"), in their capacities as limited partners in
--------------------------
the Partnership, will, assuming such Preferred Security Holders do not
participate in the control of the business of the Partnership, have no liability
solely by reason of being Preferred Security Holders in excess of their share of
the Partnership's assets and undistributed profits (subject to the obligation of
a Preferred Security Holder to repay any funds wrongfully distributed to it) and
are transferable on the books and records of the Partnership, in person or by a
duly authorized attorney, upon surrender of this certificate duly endorsed and
in proper form for transfer. The powers, preferences and special rights and
limitations of the Series A Preferred Securities are set forth in, and this
certificate and the Series A Preferred Securities represented hereby are issued
and shall in all respects be subject to the terms and provisions of, the Amended
and Restated Agreement of Limited Partnership of the Partnership dated as of ___
__, 1994, as the same may be amended from time to time (the "Limited Partnership
-------------------
Agreement") authorizing the issuance of the Series A Preferred Securities and
- ---------
determining the powers, preferences, and other special rights and limitations,
regarding Dividends, voting, return of capital and otherwise, and other matters
relating to the Series A Preferred Securities. Capitalized terms used herein but
not defined shall have the meaning given them in the Limited Partnership
Agreement. The Holder is entitled to the benefits of the Guarantee Agreement of
GTE Corporation, a New York corporation ("GTE"), dated as of
---
<PAGE>
_______, 1994 (the "Guarantee") to the extent provided therein. The Partnership
---------
will furnish a copy of the Limited Partnership Agreement and the Guarantee to
the Holder without charge upon written request to the Partnership at its
principal place of business or registered office.
The Holder, by accepting this certificate, is deemed to have agreed
that (i) the ____% Junior Subordinated Deferrable Interest Debentures, Series
A, Due 2024 acquired by the Partnership with the proceeds from the issuance of
the Series A Preferred Security are subordinated and junior in right of payment
to all Senior Indebtedness of GTE as and to the extent provided in the
Indenture, and (ii) the Guarantee ranks subordinate and junior in right of
payment to all liabilities of GTE, pari passu with the most senior preferred or
---- -----
preference stock now or hereafter issued by GTE and with any guarantee now or
hereafter issued by GTE in respect of any preferred or preference stock of any
Affiliate of GTE, and senior to GTE's common stock, as and to the extent
provided in the Guarantee. Upon receipt of this certificate, the Holder is
admitted to the Partnership as a Limited Partner, is bound by the Limited
Partnership Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, the Partnership has executed this certificate this
day of ____________, 199_
GTE DELAWARE, L.P.
By: GTE CORPORATION,
its General Partner
By:________________________
2
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Amendment No.2 to the Registration Statement on Form S-3 of
our report dated February 1, 1994, included in GTE Corporation's Annual Report
on Form 10-K for the year ended December 31, 1993, and to the reference to our
Firm under the caption "Experts" in this Registration Statement.
ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
Stamford, Connecticut
June 23, 1994
