<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: MARCH 10, 2000
(Date of earliest event reported)
GTE CALIFORNIA INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 1-6417 95-0510200
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION)
</TABLE>
1255 Corporate Drive, SVC04C08, Irving, Texas 75038
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code 972-507-5328
(Former name or former address, if changed since last report)
================================================================================
<PAGE> 2
GTE CALIFORNIA INCORPORATED AND SUBSIDIARY
FORM 8-K
Item 5. Other Events
GTE California Incorporated (the Company) announced today that net income
increased 19% or $131.9 million in 1999, compared to 1998. The increase is
primarily due to overall growth in revenues combined with lower cost of
services and sales and selling, general and administrative expenses, partially
offset by increases in depreciation and amortization, interest and income tax
expenses.
Revenues and sales were $3,453.5 million in 1999 compared to $3,369.6 million
in 1998. The increase of 2% or $83.9 million is primarily due to continued
growth as evidenced by a 4% increase in access lines and an 8% increase in
minutes of use. Regulatory mandates and greater demand for increased bandwidth
services by high capacity users also contributed to the increase. Partially
offsetting these increases were lower toll revenues resulting from intraLATA
(Local Access and Transport Area) toll competition and lower miscellaneous
revenues.
Operating costs and expenses were $1,949.1 million in 1999, compared to $2,117.8
million in 1998. The decrease of 8% or $168.7 million is primarily due to the
lump-sum settlement of pension obligations which resulted from an
employee-reduction program initiated in the first quarter of 1999. Reduced labor
and benefits, due to productivity improvements, and adjustments of certain
employee benefits in 1999, also contributed to the decrease. Partially
offsetting these decreases were increases resulting from a one-time special
charge associated with the employee separation program mentioned above, and 1998
favorable adjustments of certain employee benefits and other liabilities, which
reduced 1998 expenses. Further offsetting the decreases were higher depreciation
charges associated with the investment in additional network facilities
resulting from increased demand for switched access lines, and amortization of
capitalized software right-to-use fees.
REGULATORY AND COMPETITIVE TRENDS
The Company is subject to regulation by the regulatory bodies of the states of
California, Nevada and Arizona for its intrastate business operations and by
the Federal Communications Commission (FCC) for its interstate operations.
The Company provides local-exchange services to customers within its designated
franchise area. The Company also provides toll services within designated
geographic areas called Local Access and Transport Areas (LATAs) under
agreements with connecting local-exchange carriers (LECs) in conformity with
individual state regulatory orders. The Company also provides long-distance
access services directly to interexchange carriers and other customers who
provide services between LATAs.
During 1999, regulatory and legislative activity at both the state and federal
levels continued to be a direct result of the Telecommunications Act of 1996
(Telecommunications Act). Along with promoting competition in all segments of
the telecommunications industry, the Telecommunications Act was intended to
preserve and advance universal service.
The parent of the Company, GTE Corporation (GTE), continued in 1999 to meet the
wholesale requirements of new competitors. GTE has signed interconnection
agreements with other carriers, providing them the capability to purchase
unbundled network elements (UNEs), resell retail services and interconnect
facilities-based networks. Several of these interconnection agreements were the
result of the arbitration process established by the Telecommunications Act, and
incorporated prices or terms and conditions based upon the FCC rules that were
subsequently appealed to the U. S. Supreme Court (Supreme Court). GTE challenged
a number of such agreements in federal district courts during 1997.
GTE's position in these challenges was supported by a decision of the Eighth
Circuit Court (Eighth Circuit) in July 1997 which stated the FCC had
overstepped its authority in several areas concerning implementation of the
interconnection provisions of the Telecommunications Act. In January 1999, the
Supreme Court reversed in part and affirmed in part the Eighth Circuit's
decisions. The Supreme Court reversed the Eighth Circuit's determination that
1
<PAGE> 3
the FCC had no jurisdiction over pricing. As a result, the pricing rules
established by the FCC are now subject to review on their merits by the Eighth
Circuit. In addition, the Supreme Court vacated the FCC rule setting forth the
UNEs that incumbent local exchange carriers (ILECs) are required to provide to
competitive local exchange carriers (CLECs). This latter ruling led to a
proceeding before the FCC concerning what elements had to be offered and under
what conditions.
In November 1999, the FCC reaffirmed that incumbents must provide unbundled
access to five of the original seven network elements, which must be available
on either a stand-alone basis, or as a combined local service "platform" if the
elements have been previously combined by the ILEC. ILECs are no longer
required to provide unbundled operator services, including directory assistance
where alternate routing is available. In addition, in certain circumstances,
local and tandem switching need not be unbundled. However, the FCC expanded the
definition of some UNEs by specifying that components of the loop UNE must be
made available in sub-loop components, and augmenting the types of call-related
databases that must be unbundled as UNEs. The FCC also found that state
commissions can require ILECs to unbundle additional elements as long as they
are consistent with the requirements of the Telecommunications Act and the
national policy framework instituted in the FCC's order. Furthermore, the order
precludes states from removing network elements from the FCC's list of
unbundling obligations. The United States Telecom Association (USTA) has
appealed this order and GTE will participate.
In December 1999, the FCC released another order that requires ILECs to provide
line sharing to CLECs by unbundled access to the high-frequency portion of the
local loop over which the ILEC provides voice services. The FCC's stated intent
in adopting the line sharing order is to enable competitive carriers to provide
digital subscriber line (DSL) services over the same lines simultaneously used
by ILECs to provide basic phone services.
In June 1999, the Eighth Circuit established a schedule for addressing the
issues it did not decide in 1998. Parties to this action have filed briefs and
participated in oral arguments in September 1999. The major issues are: (1) the
FCC's cost methodology used to set prices, (2) its methodology for setting
wholesale discounts, (3) the "proxy rates" it set for interconnection, UNEs,
and wholesale discounts, (4) whether ILECs should be required to combine UNEs
that are not already combined, and (5) whether the FCC can require ILECs to
provide "superior quality" to competitors than what the ILEC provides to
itself. A court decision is expected during the first quarter of 2000.
Universal Sevice
GTE is active before both state and federal regulators advocating development
and implementation of measures that will meet the requirements of the universal
service provisions of the Telecommunications Act. Specifically, GTE urges
regulators to identify and remove all hidden subsidies and to provide explicit
universal service subsidies.
In October 1998, the FCC issued an order selecting a cost model for universal
service. In July 1999, the United States Court of Appeals for the Fifth Circuit
(Fifth Circuit) affirmed in part, reversed in part, and remanded in part the
FCC's universal service regime. In October 1999, the FCC released two orders in
response to the Fifth Circuit decision. One order permits ILECs to continue to
recover their universal service contributions from access charges or to
establish end-user charges. The second order changed the contribution basis for
school/library funding to eliminate calculations based upon intrastate
revenues. In January 2000, GTE requested the Supreme Court to review the Fifth
Circuit decision allowing the FCC to base universal service support from the
results of a hypothetical cost model rather than historical costs that were
incurred to provide local service. GTE argued that the Fifth Circuit ignored
long standing legal precedent in permitting a major revision to ILEC cost
recovery mechanisms without ensuring the new process would not result in a
constitutionally prohibited "taking".
In November 1999, the FCC released an order selecting the cost inputs for the
federal universal service cost model. GTE is seeking reconsideration. Since the
FCC moved the implementation date of the new universal service mechanism for
non-rural carriers to January 2000, many state regulators awaited FCC action
before they began designing their universal service programs.
In November 1999, the FCC released an order dealing with implementation of the
new FCC federal high cost support mechanism for non-rural ILECs, including GTE.
The effective date for the new federal universal service plan is January 1,
2000. This plan will distribute federal high cost funds to states with higher
than average costs. The role of state commissions is to ensure reasonable
comparability within the borders of a state. Federal high cost support will be
calculated by comparing the nationwide average cost with each state's average
cost per line, and providing federal support for only states that exceed
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<PAGE> 4
135% of the nationwide average. To guard against rate shock, the FCC also
adopted a "hold harmless" approach so that the amount of support provided to
each non-rural carrier under the new plan will not be less than the amount
provided today. U S West has appealed this order on the basis that it fails to
provide a sufficient amount of support. This FCC order also established a May 1,
2000 deadline by which state commissions must create at least three deaveraged
price zones for UNEs. In January 2000, GTE requested the FCC grant a one year
delay to give state commissions ample opportunity to implement deaveraged retail
rates and establish state universal service funds in concert with UNE
deaveraging.
In December 1999, the FCC asked for comment on requests made by the North Dakota
and South Dakota state commissions and the Rural Utilities Service (RUS) asking
the FCC to redefine "voice grade access" in the FCC's universal service rules.
The FCC requires that, in order to be eligible for universal service support, a
carrier must offer, among other things, voice grade access to the public
switched telephone network. Current FCC rules specify that voice grade access
should occur in a frequency range between approximately 300 Hertz (Hz) - 3,000
Hz. The petitioners requested the frequency range be changed to 200 Hz - 3,500
Hz. GTE participated in this proceeding and opposed any change in FCC
requirements. The network is not designed for the proposed ubiquitous
requirement and would require a significant infrastructure investment and at
least a decade to implement.
Price Cap
The federal price cap regime allows access prices to change each year by a
measure of inflation minus a productivity factor offset. In May 1999, the U.S.
Court of Appeals for the District of Columbia (Court) released a decision
regarding the FCC's choice of a 6.5% price cap productivity factor in a 1997
order. The Court found the FCC's choice of a 6.0% base factor and a 0.5%
Consumer Productivity Dividend to be inadequately supported. The Court remanded
the matter back to the FCC for further action and established an April 2000
date by which the FCC must issue a revised decision. As a result, in November
1999, the FCC initiated a rulemaking proposal requesting comments on the
interstate price cap productivity factor. Currently, it is unknown whether the
single price cap productivity factor will be applied retroactively to July 1,
1997 and remain in effect until the next price cap performance review in 2003,
or whether one factor will apply from 1997 to 2000 and another factor apply
from 2000 to 2003.
Interstate Access Revision
Effective July 1999, access charges were further reduced using a 6.5%
productivity factor in compliance with FCC requirements to reflect the impacts
of access charge reform and in making GTE's 1999 Annual Filing. The total
annual financial impact of the reduction was $113 million. Similar filings
during 1997 and 1998 had already resulted in price reductions.
In July 1999, GTE, along with a coalition of local exchange and long-distance
companies (CALLS), submitted a proposal for interstate access charge and
universal service reform to the FCC. The proposal would accelerate the shift in
non-usage sensitive access revenue recovery from per-minute to flat-rated
charges, set a schedule for elimination of the price cap productivity factor,
and provide more explicit support for universal service. The FCC has announced
that it wishes to reach a rapid decision on the CALLS proposal.
In August 1999, the FCC released an order pertaining to access reform and
pricing flexibility. The order grants price cap LECs immediate flexibility
under certain circumstances to deaverage certain access services and permits
the introduction of new services on a streamlined basis, without prior FCC
approval.
Advanced Telecommunications Services
The Telecommunications Act required the FCC to "encourage the deployment on a
reasonable and timely basis of advanced telecommunications capability to all
Americans." Further, the FCC was required to conduct a proceeding aimed at
determining the availability of advanced telecommunications, and to take action
to remove barriers to infrastructure investment and to promote competition.
In March 1999, the FCC released an order adopting a number of new collocation
rules designed to make competitive entry easier and less costly. These rules
specify how ILECs will manage such items as alternate collocation arrangements,
security, space preparation cost allocation, provisioning intervals, and space
exhaustion. GTE has asked a federal district court to review this order.
In November 1999, the FCC released an order concluding that an ILEC's offering
of DSL services to Internet Service Providers (ISPs) pursuant to volume and
term discount plans that are a component of the ISPs high-speed Internet service
3
<PAGE> 5
are not a retail offering, and thus not subject to the discounted resale
obligation. The order also concluded that an ILECs DSL offering to end users is
a retail offering if the ILEC performs certain consumer-oriented functions, such
as provisioning of customer premises equipment and wiring, marketing, billing
and collection, and accepting repair requests directly from the end user. The
FCC concluded that these services are subject to discounted resale obligation,
regardless of whether the service is classified as telephone exchange service
(local tariff) or exchange access service (access tariff).
Number Portability
In December 1998, the FCC released an order establishing cost recovery rules
for local number portability (LNP) that permitted the recovery of
carrier-specific costs directly related to the provision of long-term LNP via a
federally tariffed end-user monthly charge. GTE subsequently filed an LNP
tariff with the FCC, and in March 1999 instituted an end-user number
portability fee. This charge is levied on all business and residential
customers. In June 1999, GTE's tariffed LNP charge was reviewed and accepted by
the FCC at $0.36 per access line per month.
Internet Service Traffic
ILECs are required to provide open access to all ISPs, while cable television
operators are not. Several major cable television operators providing Internet
access through cable modem facilities are only offering their affiliated ISPs
to consumers. Cable television operators that do allow customers to select
non-affiliated ISPs often require the customer to also pay for their affiliated
ISP's service (i.e., to pay twice for the same service). GTE has been active in
encouraging municipalities engaged in reviewing cable television mergers or
franchise renewals to require cable modem open access as a condition for
approval. The City of Portland, Oregon was first to adopt such a requirement
and AT&T Corp. has appealed that decision. Arguments took place in November
1999 before the Ninth Circuit Court.
In October 1999, GTE filed an antitrust lawsuit contending that cable TV
providers' refusal to provide ISPs with "open access" to cable modem platforms
is a violation of federal antitrust law. The lawsuit filed in the U.S. District
Court in Pittsburgh, names Tele-Communications, Inc., (now a unit of AT&T
Corp.), Comcast Corp., and Excite@Home and seeks an injunction to require open
access and damages.
GTE's interconnection contracts with CLECs specify that parties compensate each
other for the exchange of local traffic, defined as traffic that is originated
by an end user of one party and terminating to the end user of the other party
within GTE's current local serving area. It is GTE's position that ISP traffic
does not satisfy the definition of local traffic, and that no compensation
should be paid to CLECs that carry this traffic to their ISP customers. In a
recent ruling, the FCC has clarified that ISP traffic is largely interstate and
is not local traffic. Nevertheless, the FCC permitted state commissions to
arbitrate whether ILECs should pay as reciprocal compensation for ISP-bound
traffic, based upon existing interconnection agreements, until the FCC reaches
a decision on a long-term compensation scheme. GTE has challenged this FCC
conclusion in federal district court. A decision is expected in the second
quarter of 2000. Prior to a court decision, GTE will be engaged in numerous
state proceedings defending requests for reciprocal compensation payments.
4
<PAGE> 6
GTE CALIFORNIA INCORPORATED AND SUBSIDIARY
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1999 1998
--------- --------
(Dollars in Millions)
<S> <C> <C>
Selected Income Statement Items:
Revenues and sales $ 3,453.5 $ 3,369.6
Operating costs and expenses 1,949.1 2,117.8
--------- ---------
Operating income 1,504.4 1,251.8
Interest expense - net 135.4 118.4
Other - net -- (2.7)
Income taxes 555.6 454.6
--------- ---------
Net income $ 813.4 $ 681.5
========= =========
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998
--------- --------
(Dollars in Millions)
<S> <C> <C>
Selected Balance Sheet Items:
Property, plant and equipment, net $ 3,824.8 $ 3,912.1
Total assets 5,944.3 5,605.5
Long-term debt 1,691.4 1,691.2
Shareholders' equity 1,858.7 1,763.4
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1999 1998
--------- --------
(Dollars in Millions)
<S> <C> <C>
Other Items:
Cash from operations $ 1,125.3 $ 1,089.0
Cash used in investing 576.8 688.0
Cash used in financing 553.3 394.5
Dividends declared on common stock 726.0 711.5
</TABLE>
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<PAGE> 7
Item 7. Financial Statements and Exhibits
(a) Financial Statements - None
(b) Pro Forma Financial Information - None
(c) Exhibits
1.1 Revised Form of Purchase Agreement, including
Standard Purchase Agreement Provisions (March 2000
Edition), pertaining to Registration Statement on
Form S-3 (File No. 333-63651) (to be first used on
or about March 10, 2000).
4.3 Form of New Debenture pertaining to Registration
Statement on Form S-3 (File No. 333-63651) (to be
first used on or about March 10, 2000).
12 Statements re: Calculation of the Consolidated Ratio
of Earnings to Fixed Charges
26.1 Revised Form of Invitation for Bids pertaining to
Registration Statement on Form S-3 (File No.
333-63651) (to be first used on or about March 10,
2000).
<PAGE> 8
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GTE California Incorporated
---------------------------
(Registrant)
Date: March 10, 2000 /s/ Stephen L. Shore
--------------- ----------------------------
Stephen L. Shore
Controller
(Principal Accounting Officer)
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------
<S> <C>
1.1 Revised Form of Purchase Agreement, including Standard Purchase
Agreement Provisions (March 2000 Edition), pertaining to
Registration Statement on Form S-3 (File No. 333-63651) (to be first
used on or about March 10, 2000).
4.3 Form of New Debenture pertaining to Registration Statement on Form
S-3 (File No. 333-63651) (to be first used on or about March 10,
2000).
12 Statements re: Calculation of the Consolidated Ratio of Earnings to
Fixed Charges
26.1 Revised Form of Invitation for Bids pertaining to Registration
Statement on Form S-3 (File No. 333-63651) (to be first used on or
about March 10, 2000).
</TABLE>
<PAGE> 1
EXHIBIT 1.1
GTE CALIFORNIA INCORPORATED
PURCHASE AGREEMENT
GTE California Incorporated, a California corporation (the "Company"),
proposes to issue and sell $____,000,000 aggregate principal amount of its
_____% 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 purchaser or purchasers named in Schedule A attached
hereto (the "Purchasers") severally agree to purchase the New Debentures at
_______% of their principal amount, plus accrued interest, if any, from
____________ to the date of payment for the New Debentures and delivery
thereof. Interest on the New Debentures will be payable semi-annually on
_____________ and _____________, commencing ______________. The New Debentures
will be reoffered to the public at _______% of their principal amount.
All the provisions contained in the Company's Standard Purchase
Agreement Provisions (March 2000 Edition) (the "Standard Purchase Agreement
Provisions") annexed hereto shall be deemed to be a part of this Purchase
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 New Debentures will not be redeemable prior to _____. Thereafter,
the New Debentures will be redeemable on not less than 30 nor more than 60
days' notice given as provided in the Indenture, as a whole or in part, at the
option of the Company at the redemption price set forth below. 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 Purchasers.]
<PAGE> 2
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OR
[The New Debentures may be redeemed on not less than 30 nor more than
60 days' notice given as provided in the Indenture, as a whole or from time to
time in part, at the option of the Company, at a redemption price equal to the
greater of (i) 100% of the principal amount thereof and (ii) the sum of the
present values of the remaining scheduled payments of principal and interest
thereon discounted to the date of redemption on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate plus __
basis points, plus, in either case, accrued and unpaid interest on the
principal amount being redeemed to such redemption date.
"Treasury Rate" means, with respect to any redemption date, (i) the
yield, under the heading which represents the average for the immediately
preceding week, appearing in the most recently published statistical release
published by the Board of Governors of the Federal Reserve System designated as
"Statistical Release H.15(519)" or any successor publication which is published
weekly by the Board of Governors of the Federal Reserve System and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant Maturities,"
for the maturity corresponding to the Comparable Treasury Issue (if no maturity
is within three months before or after the Remaining Life, yields for the two
published maturities most closely corresponding to the Comparable Treasury
Issue shall be determined and the Treasury Rate shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding to the nearest
month) or (ii) if such release (or any successor release) is not published
during the week preceding the calculation date or does not contain such yields,
the rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, calculated using a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such redemption date. The Treasury Rate shall be
calculated on the third Business Day preceding the redemption date.
"Business Day" means any calendar day that is not a Saturday, Sunday
or legal holiday in New York, New York and on which commercial banks are open
for business in New York, New York.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term ("Remaining Life") of the New Debentures to be redeemed that
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of such New Debentures.
"Independent Investment Banker" means ____________________ or, if such
firm is unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing appointed by
the Trustee.
<PAGE> 3
-3-
"Comparable Treasury Price" means (i) the average of three Reference
Treasury Dealer Quotations for such redemption date, or (ii) if the Independent
Investment Banker is unable to obtain three such Reference Treasury Dealer
Quotations, the average of all such quotations obtained.
"Reference Treasury Dealer" means (i)___________________, __________
and ________________, and their respective successors, provided, however, that
if any of the foregoing shall cease to be a primary U.S. Government securities
dealer in The City of New York (a "Primary Treasury Dealer"), the Company shall
substitute therefor another Primary Treasure Dealer and (ii) any other Primary
Treasury Dealer selected by the Independent Investment Banker and approved in
writing by the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined
by the Independent Investment Banker, or the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Independent Investment Banker at
3:30 p.m., New York City time, on the third Business Day preceding such
redemption date.
In the event of redemption of this Debenture in part only, a new
Debenture of like tenor for the unredeemed portion hereof and otherwise having
the same terms as this Debenture shall be issued in the name of the holder
hereof upon the presentation and surrender hereof.]
CLOSING:
The Purchasers agree to pay for the New Debentures, at the option of
the Company, by certified or official bank check or checks or by wire transfer
in each case in same 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 Purchasers or the firm or firms
designated as the representative or representatives, as the case may be, of the
Purchasers (the "Representative"). The Company shall advise the Representative
not later than the business day immediately preceding the Closing Date of its
decision whether to accept payment for the New Debentures by certified or
official bank check or by wire transfer and, if the Company chooses to accept
payment by wire transfer, the Company shall provide the Representative on such
date immediately preceding the Closing Date with the appropriate wire transfer
instructions.
DENOMINATION OF THE NEW DEBENTURES:
[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
Purchasers or the Representative shall request not less than two business days
before the Closing Date. The Company agrees to make the New Debentures
available to the Purchasers or the Representative for inspection at the office
of U.S. Bank Trust National Association (formerly known as First Trust of
California, National Association), Los Angeles, California or 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.]
<PAGE> 4
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OR
[The New Debentures shall be in the form of one or more Global
Debentures which shall represent, and shall be denominated in an amount equal to
the aggregate principal amount of, the New Debentures and shall be registered in
the name of The Depository Trust Company or its nominee. The Company agrees to
make the New Debentures available to the Purchasers or the Representative for
inspection at the office of U.S. Bank Trust National Association (formerly known
as First Trust of California, National Association), Los Angeles, California or
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.]
RESALE:
[The Purchasers represent that they intend to resell the New
Debentures, and therefore the provisions applicable to Reselling Purchasers in
the Standard Purchase Agreement Provisions will be applicable.]
OR
[The Purchasers represent that they do not intend to resell the New
Debentures, and therefore the provisions applicable to Reselling Purchasers in
the Standard Purchase Agreement Provisions will not be applicable.]
In witness whereof, the parties have executed this Purchase Agreement
this _____ day of ___________.
[Names of Purchasers or
Representative]
By:
---------------------------
Title:
GTE CALIFORNIA INCORPORATED
By:
---------------------------
Vice President
<PAGE> 5
-5-
SCHEDULE A
The names of the Purchasers and the principal amount of New Debentures
which each respectively agrees to purchase are as follows:
<TABLE>
<CAPTION>
Principal
Amount
of New
Name Debentures
- ---- --------------
<S> <C>
$ ,000,000
-------------
Total........................... $ ,000,000
=============
</TABLE>
<PAGE> 6
GTE CALIFORNIA INCORPORATED
STANDARD PURCHASE AGREEMENT PROVISIONS
(March 2000 Edition)
<PAGE> 7
GTE California Incorporated, a California corporation (the "Company"),
may enter into one or more purchase agreements providing for the sale of
debentures to the purchaser or purchasers named therein (the "Purchasers"). The
standard provisions set forth herein will be incorporated by reference in any
such purchase agreement ("Purchase Agreement"). The Purchase Agreement,
including these Standard Purchase 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 Purchase
Agreement have the meanings set forth therein.
I. SALE OF THE DEBENTURES
The Company proposes to issue one or more series of debentures
pursuant to the provisions of an Indenture dated as of December 1, 1993, as
amended and supplemented by the First Supplemental Indenture dated as of April
15, 1996 (as amended and supplemented, the "Indenture"), between the Company
and U.S. Bank Trust National Association (formerly known as First Trust of
California, National Association), as successor trustee to Bank of America
National Trust and Savings Association (the "Trustee"). In a supplemental
indenture to the Indenture, a resolution of the Board of Directors of the
Company or an officers' certificate pursuant to a supplemental indenture or
board resolution specifically authorizing each new series of debentures, the
Company will designate the title of each new series of debentures, and the
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. 333-63651 relating to $300,000,000 of the Company's
debentures registered thereunder (from time to time, is hereinafter referred to
as the "Debentures"), including a prospectus which relates 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 "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" and "Prospectus" shall include in each case the
material, if any, incorporated by reference therein.
II. PURCHASERS' REPRESENTATIONS AND RESALE
Each Purchaser 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 Purchasers advise the Company in the Purchase Agreement that
they intend to resell the New Debentures, the Company will assist the
Purchasers as hereinafter provided. The terms of any such resale will be set
forth in the Prospectus. The provisions of Paragraphs C and D of Article VI and
Articles VIII, IX and X of this Agreement apply only to Purchasers that have
advised the Company of their intention to resell the New Debentures ("Reselling
Purchasers"). All other provisions apply to any Purchaser including a Reselling
Purchaser.
<PAGE> 8
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III. CLOSING
The closing will be held at the office of Milbank, Tweed, Hadley &
McCloy LLP, One Chase Manhattan Plaza, New York, New York, on the Closing Date.
Concurrent with the delivery of the New Debentures to the Purchasers or to the
Representative for the account of each Purchaser, payment of the full purchase
price of the New Debentures shall be made, at the option of the Company, by
certified or official bank check or checks in same day funds, payable to the
Company or its order, at The Bank of New York, Attention: Corporate Trust
Department, or by wire transfer in same day funds to The Bank of New York for
the account of the Company. Upon receipt of such check or wire transfer by The
Bank of New York, such check or wire transfer shall be deemed to be delivered
at the closing.
IV. CONDITIONS TO PURCHASERS' OBLIGATIONS
The respective obligations of the Purchasers 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; since the latest date as of which information is
given in the Registration Statement, there shall have been no material adverse
change in the business, business prospects, properties, financial condition or
results of operations of the Company; and the Purchasers 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) At the Closing Date, there shall be in full force and effect an
order or orders, satisfactory to counsel for the Purchasers, of the California
Public Utility Commission and of such other regulatory authorities, if any, as
may have jurisdiction over the issue and sale of the New Debentures by the
Company to the Purchasers, authorizing such issue and sale as herein and in the
Registration Statement provided, and none of such orders shall contain any
conditions inconsistent with the provisions of this Agreement or of the
Registration Statement.
(C) The Purchasers or the Representative shall have received on the
Closing Date an opinion of William G. Mundy, Esq., Vice President-General
Counsel of the Company, or other counsel to the Company satisfactory to the
Purchasers and counsel to the Purchasers, dated the Closing Date, substantially
in the form set forth in Exhibit A hereto.
(D) The Purchasers or the Representative shall have received on the
Closing Date an opinion of Milbank, Tweed, Hadley & McCloy LLP, counsel for the
Purchasers, dated the Closing Date, substantially in the form set forth in
Exhibit B hereto.
(E) The Purchasers or the Representative shall have received on the
Closing Date a letter from Arthur Andersen LLP, independent public accountants
for the Company, dated as of the Closing Date, to the effect set forth in
Exhibit C hereto.
<PAGE> 9
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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) At the Closing Date, there shall be in full force and effect an
order or orders, satisfactory to the Company, of the California Public Utility
Commission and of such other regulatory authorities, if any, as may have
jurisdiction over the issue and sale of the New Debentures by the Company to
the Purchasers.
(C) 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
Purchasers, the Company covenants to the several Purchasers as follows:
(A) To furnish to the Purchasers or the Representative a copy of the
Registration Statement including materials, if any, incorporated by reference
therein and, during the period mentioned in (C) below, to supply as many copies
of the Prospectus, any documents incorporated by reference therein and any
supplements and amendments thereto as the Purchasers 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) Before amending or supplementing the Registration Statement or the
Prospectus with respect to the New Debentures, to furnish to any Purchaser or
the Representative, and to counsel for the Purchasers, a copy of each such
proposed amendment or supplement.
The covenants in Paragraphs (C) and (D) apply only to Reselling
Purchasers:
(C) If in the period after the first date of resale of the New
Debentures during which, in the opinion of counsel for the Reselling
Purchasers, 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
Purchasers or the Representative by or on behalf of the Purchasers in writing
expressly for use in the Prospectus), to the Reselling Purchasers, the number
of copies requested by the Reselling Purchasers 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.
<PAGE> 10
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(D) 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
Purchasers or the Representative shall reasonably request and to pay all
expenses (including fees and disbursements of counsel) in connection therewith;
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 Purchasers that (i)
each document, if any, filed or to be filed pursuant to the Exchange Act and
incorporated by reference in the Basic 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
Prospectus is filed pursuant to Rule 424(b) and at all times subsequent to and
including the Closing Date, the Registration Statement 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, 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 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 or the Prospectus based upon information furnished to
the Company by any Purchaser or the Representative by or on behalf of any
Purchaser in writing expressly for use therein or to statements or omissions in
the Statement of Eligibility of the Trustee under the Indenture, (v) there are
no legal or governmental proceedings required to be described in the Prospectus
which are not described as required, (vi) 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 or any statute or any
order, rule or regulation of any court or governmental agency or body by which
the Company is bound, and (vii) 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
Purchaser and each person, if any, who controls such Reselling Purchaser 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 or the Prospectus (if used
within the period set forth in Paragraph (C) of Article VI hereof, and as
amended or supplemented if the Company shall have
<PAGE> 11
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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 Purchaser or the
Representative by or on behalf of any Reselling Purchaser in writing expressly
for use therein or by any statement or omission in the Statement of Eligibility
of the Trustee under the Indenture. The foregoing agreement, insofar as it
relates to the Prospectus, shall not inure to the benefit of any Reselling
Purchaser (or to the benefit of any person controlling such Reselling
Purchaser) on account of any losses, claims, damages or liabilities arising
from the sale of any New Debentures by said Reselling Purchaser to any person
if a copy of the Prospectus (as amended or supplemented, if prior to
distribution of the Prospectus to the Reselling Purchaser, the Company shall
have made any supplements or amendments which have been furnished to said
Reselling Purchaser) shall not have been sent or given by or on behalf of such
Reselling Purchaser to such person at or prior to the written confirmation of
the sale of the New Debentures to such person and such statement or omission is
cured in the Prospectus.
Each Reselling Purchaser 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 Purchaser, but only with reference
to information relating to said Reselling Purchaser furnished to the Company in
writing by the Reselling Purchaser or the Representative by or on behalf of
said Reselling Purchaser expressly for use in the Registration Statement 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 proceeding
(provided, however, that if such indemnified party shall object to the
selection of counsel after having been advised by such counsel that there may
be one or more legal defenses available to the indemnified party which are
different from or additional to those available to the indemnifying party, the
indemnifying party shall designate other counsel reasonably satisfactory to the
indemnified party) and the indemnifying party 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 severally 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
<PAGE> 12
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benefits received by the Company on the one hand and the Reselling Purchasers
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 Purchasers 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
Purchasers 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 Purchasers in respect
thereof. If there are no commissions allowed or paid by the Company to the
Reselling Purchasers in respect of the New Debentures, the relative benefits
received by the Reselling Purchasers in the preceding sentence shall be the
difference between the price received by such Reselling Purchasers upon resale
of the New Debentures and the price paid for the New Debentures pursuant to the
Purchase Agreement. The relative fault of the Company on the one hand and of
the Reselling Purchasers 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 Purchasers
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 this Article VIII 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 Reselling Purchaser or on behalf of any Reselling Purchaser or any
persons controlling any Reselling Purchaser and (iii) acceptance of and payment
for any of the New Debentures.
X. TERMINATION BY RESELLING PURCHASERS
At any time prior to the Closing Date this Agreement shall be subject
to termination in the absolute discretion of the Reselling Purchasers, 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 material 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.
<PAGE> 13
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XI. TERMINATION BY PURCHASERS
If this Agreement shall be terminated by the Purchasers 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 Purchasers for
all out-of-pocket expenses (including the fees and disbursements of counsel)
reasonably incurred by such Purchasers in connection with the New Debentures.
Except as provided herein, the Purchasers shall bear all of their expenses,
including the fees and disbursements of counsel.
XII. SUBSTITUTION OF PURCHASERS
If for any reason any Purchaser shall not purchase the New Debentures
it has agreed to purchase hereunder, the remaining Purchasers shall have the
right within 24 hours to make arrangements satisfactory to the Company for the
purchase of such New Debentures hereunder. If they fail to do so, the amounts
of New Debentures that the remaining Purchasers 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 Purchasers
have so agreed to purchase, or in such other proportions as the Purchasers may
specify to absorb such unpurchased New Debentures, provided that such aggregate
increases shall not exceed 10% of the total amount of the New Debentures set
forth in Schedule A to the Purchase Agreement. If any unpurchased New
Debentures still remain, the Company shall have the right either to elect to
consummate the sale except as to any such unpurchased New Debentures so
remaining or, within the next succeeding 24 hours, to make arrangements
satisfactory to the remaining Purchasers for the purchase of such New
Debentures. In any such cases, either the Purchasers 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 Purchaser is obtained in accordance with the
above provisions, then this Agreement shall terminate without liability on the
part of any non-defaulting Purchaser or the Company for the purchase or sale of
any New Debenture under this Agreement. No provision in this paragraph shall
relieve any defaulting Purchaser of liability to the Company for damages
occasioned by such default.
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> 14
EXHIBIT A
WILLIAM G. MUNDY
Vice President-General Counsel
GTE California Incorporated
600 Hidden Ridge
Irving, TX 75038
-------------
and the other several Purchasers
referred to in the Purchase Agreement
dated ____________________, among such
Purchasers and GTE California Incorporated
Re: GTE California Incorporated
___% Debentures, Series __, Due ____
Dear Sirs:
I have been requested by GTE California Incorporated, a California
corporation (the "Company"), as its Vice President-General Counsel to furnish
you with my opinion pursuant to a Purchase Agreement dated ______ (the
"Agreement") between you and the Company, relating to the purchase and sale of
$___,000,000 aggregate principal amount of its ___% Debentures, Series __, Due
____ (the "New Debentures").
In this connection I have examined among other things:
(a) The Restated Articles of Incorporation of the Company, as amended,
and the By-laws of the Company, each as presently in effect;
(b) A copy of the Indenture dated as of December 1, 1993, as amended
and supplemented by the First Supplemental Indenture dated as of April 15, 1996
(as amended and supplemented, the "Indenture"), between the Company and U.S.
Bank Trust National Association (formerly known as First Trust of California,
National Association), as successor trustee to Bank of America National Trust
and Savings Association (the "Trustee"), under which the New Debentures are
being issued;
(c) [The Supplemental Indenture, dated as of ____________ (the
"Supplemental Indenture") between the Company and the Trustee] [The resolutions
of the Board of Directors adopted ____________ (the "Board Resolution")] [The
certificate, dated ____________, of authorized officers of the Company pursuant
to authorization from the Board of Directors of the Company (the "Officers'
Certificate")] specifically authorizing the New Debentures, including the
issuance and sale of the New Debentures;
(d) The form of the New Debentures set forth in the [Supplemental
Indenture] [Board Resolution] [Officers' Certificate];
(e) The records of the corporate proceedings of the Company relating
to the authorization, execution and delivery of the Indenture and the
[Supplemental Indenture] [Board Resolution] [Officers' Certificate];
(f) The records of the corporate proceedings of the Company relating
to the authorization, execution and delivery of the Agreement;
<PAGE> 15
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(g) 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");
(h) Statutes, permits and other documents relating to the Company's
franchises;
(i) The records of proceedings and orders issued by the California
Public Utility Commission authorizing the issuance and sale of the New
Debentures; and
(j) Registration Statement No. 333-63651 (hereinafter called the
"Registration Statement"), 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 (hereinafter called the "Prospectus"),
and all 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. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of California, is a duly
licensed and qualified foreign corporation in good standing under the laws of
the States of Arizona and Nevada, and has adequate corporate power to own and
operate its properties and to carry on the business in which it is now engaged.
There are no states or jurisdictions in which the qualification or licensing of
the Company as a foreign corporation is necessary where the failure to be
qualified or licensed would have a material adverse effect on the Company.
2. All legal proceedings necessary to the authorization, issue and
sale of the New Debentures to you have been taken by the Company.
3. The Agreement has been duly and validly authorized, executed and
delivered by the Company.
4. The Indenture is in proper form, has been duly authorized, has been
duly executed by the Company and the Trustee, 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 and
other laws affecting the enforcement of creditors' rights and the availability
of equitable remedies. The Indenture has been duly qualified under the TIA.
5. The New Debentures conform as to legal matters with the statements
concerning them in the Registration Statement and Prospectus and have been duly
authorized and executed by the Company and (assuming due authentication and
delivery thereof by the Trustee) have been duly issued for value by the Company
and (subject to the qualifications set forth in paragraph 4 above) constitute
legal, valid and binding obligations of the Company enforceable in accordance
with their terms and are entitled to the benefits afforded by the Indenture.
6. The issuance and sale of the New Debentures, as contemplated by the
Agreement, have been duly authorized by the California Public Utility
Commission, and such authorization is in full force and effect and, except as
may be required by the securities or Blue Sky laws of certain jurisdictions,
<PAGE> 16
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no other authorization, approval or consent of any governmental regulatory
authority is required for the issuance and sale of the New Debentures.
7. The Company holds valid and subsisting franchises, licenses and
permits adequate for the conduct of its business in the territory served by it,
except for limited areas where the Company operates by sufferance, and none of
the franchises, licenses or permits of the Company contain any unduly
burdensome restrictions.
8. Registration Statement No. 333-63651 became effective on September
28, 1998, and, to the best of my knowledge, no proceedings under Section 8 of
the Act looking toward the possible issuance of a stop order with respect
thereto are pending or threatened and the Registration Statement remains in
effect on the date hereof. The Registration Statement and the Prospectus comply
as to form in all material respects with the relevant provisions of the Act and
of the Exchange Act as to the Incorporated Documents and the applicable rules
and regulations of the Securities and Exchange Commission thereunder, except
that I express no opinion as to the financial statements or other financial
data contained therein. The Prospectus is 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. I have no reason to believe that
the Registration Statement or the Incorporated Documents, considered as a whole
on the effective date of the Registration Statement, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading or that the Prospectus and the Incorporated Documents, considered as
a whole on the date hereof, contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that in each case I express no opinion as to the financial
statements or other financial data contained therein.
Without my prior written consent, this opinion may not be relied upon
by any person or entity other than the addressee, quoted in whole or in part,
or otherwise referred to in any report or document, or furnished to any other
person or entity, except that Milbank, Tweed, Hadley & McCloy LLP may rely upon
this opinion as if this opinion were separately addressed to them.
Very truly yours,
William G. Mundy
Vice President-General Counsel
c: Milbank, Tweed, Hadley & McCloy LLP
<PAGE> 17
EXHIBIT B
MILBANK, TWEED, HADLEY & McCLOY LLP
1 Chase Manhattan Plaza
New York, New York 10005
----------
GTE CALIFORNIA INCORPORATED
$___,000,000 __% Debentures, Series __, Due ____
and the other several Purchasers
referred to in the Purchase Agreement
dated ___________________, among such
Purchasers and GTE California Incorporated
Dear Sirs:
We have been designated by GTE California Incorporated (the "Company")
as counsel for the purchasers of $___,000,000 aggregate principal amount of its
___% Debentures, Series __, Due ____ (the "New Debentures"). Pursuant to such
designation and the terms of a Purchase Agreement dated ________, relating to
the New Debentures (the "Purchase 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 December 1, 1993, as amended and supplemented by
the First Supplemental Indenture dated as of April 15, 1996 (as amended and
supplemented, the "Indenture"), between the Company and U.S. Bank Trust
National Association (formerly known as First Trust of California, National
Association), as successor trustee to Bank of America National Trust and
Savings Association (the "Trustee").
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
Milbank, Tweed, Hadley & McCloy LLP, 1 Chase Manhattan Plaza, New York, New
York, 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.
<PAGE> 18
-2-
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 California.
2. The Purchase 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 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. 333-63651 (the "Registration Statements"), filed with the Commission
pursuant to the Securities Act of 1933, as amended (the "Act"), became
effective under the Act on September 28, 1998, and thereupon 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 or Blue Sky laws of certain States in
connection with the offer for sale or sale of the New Debentures in such
States. To the best of our knowledge, the Registration Statement remains in
effect at this date.
6. The Registration Statement, as of its effective date, and the
Prospectus, as of the date hereof, together with the documents incorporated by
reference therein (the "Incorporated Documents") (except any financial
statements or other financial data contained or incorporated by reference in
the Registration Statement, the Prospectus or such Incorporated Documents, as
to which no opinion is expressed) appear on their face to be appropriately
<PAGE> 19
-3-
responsive, in all material respects relevant to the offering of the New
Debentures, to the requirements of the Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as applicable, and the applicable rules
and regulations of the Commission thereunder.
The Registration Statement was filed on Form S-3 under the Act and,
accordingly, the Prospectus does 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 and Prospectus and we have reviewed
the Incorporated Documents. In connection with our participation in the
preparation of the Registration Statement 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 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 or
the Incorporated Documents, considered as a whole on the effective date of the
Registration Statement, 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 or that the
Prospectus and the Incorporated Documents, considered as a whole on the date
hereof, contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. We express no
opinion as to any document filed by the Company under the Exchange Act, whether
prior or subsequent to such effective date, except to the extent that such
documents are Incorporated Documents read together with the Registration
Statement 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
Prospectus or the Incorporated Documents.
We express no opinion as to matters governed by any laws other than
the laws of the State of New York, the Federal laws of the United States of
America and, to the extent the foregoing opinions involve laws other than the
laws of the State of New York or the Federal laws of the United States of
America, in reliance upon the opinion of even date herewith of William G.
Mundy, Esq., Vice President-General Counsel of the Company, such other laws.
<PAGE> 20
-4-
The opinions contained herein are rendered to you and are solely for
your benefit and the benefit of the Purchasers represented by you in connection
with the transaction contemplated by the Purchase Agreement. These opinions may
not be relied upon by you for any other purpose, or furnished to, quoted or
relied upon by any other person, firm or corporation for any purpose, without
our prior written consent.
Very truly yours,
MILBANK, TWEED, HADLEY & McCLOY LLP
<PAGE> 21
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 (March 2000 Edition) shall be to the
effect that:
At the closing, the Purchasers shall have received such number of
copies as are necessary to provide one for each Purchaser of a letter addressed
to the Company and satisfactory to the Purchasers or the Representative and
counsel to the Purchasers, dated as of the Closing Date and encompassing the
performance of certain procedures described in the letter as of a date not more
than five business days prior to the Closing Date (the "Cutoff Date"), from
Arthur Andersen LLP, confirming that they are independent public accountants
with respect to the Company within the meaning of the Securities Act of 1933,
as amended (the "Act") and the applicable published rules and regulations of
the Commission thereunder, specifically Rule 2-01 of Regulation S-X, and
stating in effect (1) that in their opinion, the financial statements and
schedules audited by them and incorporated by reference in the Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the Act, and the Securities Exchange Act of 1934, as amended
the ("Exchange Act") and the published rules and regulations thereunder, (2)
that although they have not audited any financial statements of the Company as
of any date or for any period subsequent to the prior-year audit, and although
they have conducted an audit for that period, the purpose (and therefore the
scope) of the audit was to enable them to express their opinion on the
financial statements as of that date and for the year then ended, but not on
the financial statements for any interim period within that year; therefore,
they are unable to and do not express any opinion on the unaudited condensed
consolidated balance sheet as of the latest available interim date, and the
unaudited condensed consolidated statements of income, reinvested earnings, and
cash flows for the latest available interim period subsequent to that
prior-year audit which are included in the Prospectus and for the comparable
period of the preceding year; they have performed the procedures specified by
the American Institute of Certified Public Accountants for a review of interim
financial information as described in SAS No. 71, Interim Financial
Information, on the latest available unaudited interim condensed consolidated
financial statements prepared by the Company, inquired of certain officials of
the Company responsible for financial and accounting matters, and read the
minutes of the Board of Directors and shareholders of the Company, all of which
procedures have been agreed to by the Purchasers, nothing has come to their
attention which caused them to believe that: (a) any unaudited interim
condensed consolidated financial statements incorporated by reference in the
Prospectus (i) 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 (ii) have
not been presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited financial
statements incorporated by reference in the Prospectus; or (b) (i) as of the
date of the latest available unaudited condensed consolidated interim financial
Statement prepared by the Company, there have been any changes in the capital
stock or any increase in the short-term indebtedness or long-term debt of the
Company or any decrease in net assets, in each case as compared with the
amounts shown on the latest balance sheet incorporated by reference in the
Prospectus, (ii) 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 the preceding clause (i), there were any
decreases in operating revenues, net operating income, net income or the
Company's ratio to earnings to fixed charges, in each case as compared with the
comparable period of the preceding year, or (iii) as of the Cutoff Date there
have been any material changes in the capital stock or any material increase in
the debt of the Company, or any material decreases in net assets, in each case
as compared with amounts shown in the latest balance sheet included or
<PAGE> 22
-2-
incorporated by reference in the Prospectus, and (iv) for the period from the
date of the latest available interim financial Statement referred to in clause
(b)(i) above to the Cutoff Date, there were any material decreases in operating
revenues, net operating income or net income, in each case as compared with the
comparable period of the preceding year, except in all instances for changes or
decreases which the Prospectus discloses have occurred or may occur or as
disclosed in such letter and except for changes occasioned by the declaration
and payment of dividends on the stock of the Company or occasioned by sinking
fund payments made on the debt securities of the Company, and (3) that they have
performed the following additional procedures with respect to the ratios of
earnings to fixed charges included or incorporated by reference in the
Prospectus: (i) compared the amounts used in the computation of such ratios with
the amounts included in the financial Statement incorporated by reference in the
Prospectus and noted agreement in all material respects, and (ii) recomputed the
ratios and noted agreement in all material respects.
<PAGE> 1
EXHIBIT 4.3
FORM OF NEW DEBENTURE
(FORM OF FACE OF DEBENTURE)
[If Debenture is a Global Debenture, insert the following:
EXCEPT AS OTHERWISE PROVIDED IN SECTION 2.11 OF THE INDENTURE, THIS GLOBAL
DEBENTURE MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE
OF THE DEPOSITORY OR TO A SUCCESSOR DEPOSITORY OR TO A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY.]
[If The Depository Trust Company is the Depository, insert the following:
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of DTC (and any payment is made to Cede & Co.
or to such other entity as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.]
No. _____________ $ _____________
GTE California Incorporated
____% Debentures, Series _, Due ____
GTE California Incorporated, a corporation duly organized and existing under
the laws of the State of California (herein referred to as the "Company"), for
value received, hereby promises to pay to _______________ or registered
assigns, the principal sum of __________________ Dollars on __________________
and to pay interest on said principal sum from __________________, or from the
most recent interest payment date to which interest has been paid or duly
provided for, semi-annually on _________ and ____________ in each year,
commencing ____________, at the rate of _____% per annum until the principal
hereof shall have become 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. The interest
installment so payable, and punctually paid or duly provided for, on any
interest payment date will, as provided in the Indenture hereinafter referred
to, be paid to the person in whose name this Debenture (or one or more
Predecessor Securities, 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 __________ or __________, as the case may be (whether or not
a business day), next preceding such interest payment date. Any such interest
installment not so punctually paid or duly provided for shall forthwith cease
to be payable to the registered holder on such regular record date, and may be
paid to the person in whose name this Debenture (or one or more Predecessor
Securities) 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
<PAGE> 2
-2-
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 the interest on this Debenture
shall be payable at the office or agency of the Company maintained for that
purpose in the City of Los Angeles, State of California 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 Security Register.
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, or 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.
The provisions of this Debenture are continued 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 CALIFORNIA INCORPORATED
By _______________________
President
Attest:
By __________________________
Secretary
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in
the within-mentioned Indenture.
U.S. Bank Trust National Association
as Trustee, Authenticating Agent and
Security Registrar
By __________________________
Authorized Signatory
<PAGE> 3
-3-
(FORM OF REVERSE OF DEBENTURE)
This Debenture is one of a duly authorized series of Securities of the Company
(herein sometimes referred to as the "Securities"), all issued or to be issued
in one or more series under and pursuant to an Indenture dated as of December
1, 1993, duly executed and delivered between the Company and Bank of America
National Trust and Savings Association, a national banking organization
organized and existing under the laws of the United States of America, and a
First Supplemental Indenture dated as of April 15, 1996, duly executed and
delivered between the Company and U.S. Bank Trust National Association
(formerly known as First Trust of California, National Association), a national
banking organization organized and existing under the laws of the United States
of America, as successor trustee to Bank of America National Trust and Savings
Association (hereinafter referred to as the "Trustee") (said Indenture, as
amended and supplemented by said First Supplemental Indenture, is hereinafter
referred to as the "Indenture"), to which Indenture reference is hereby made
for a description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders of the
Securities. By the terms of the Indenture, the Securities 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 Debenture is one of the
series designated on the face hereof (herein called the "Debentures") limited
in aggregate principal amount to $___,000,000.
[INSERT IF GLOBAL DEBENTURE - This Global Debenture shall be exchangeable for
Debentures in definitive form registered in the names of persons other than the
Depository or its nominee only if (i) the Depository notifies the Company that
it is unwilling or unable to continue as the Depository or if at any time such
Depository is no longer registered or in good standing under the Securities
Exchange Act of 1934 or other applicable statute and a successor depository is
not appointed by the Company within 90 days or (ii) the Company executes and
delivers to the Trustee an Officers' Certificate that the Global Debenture
shall be so exchangeable. To the extent that the Global Debenture is
exchangeable pursuant to the preceding sentence, it shall be exchangeable for
Debentures registered in such names as the Depository shall direct.
Notwithstanding any other provision herein, this Global Debenture may not be
transferred except as a whole by the Depository to a nominee of such Depository
or by a nominee of such Depository to such Depository or another nominee of
such Depository.]
In case an Event of Default, as defined in the Indenture, with respect to the
Debentures 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 permitting the Company and the Trustee, with
the consent of the holders of not less than a majority in aggregate principal
amount of the Securities of each series affected at the time outstanding, as
defined in the Indenture, to execute supplemental indentures for the purpose
<PAGE> 4
-4-
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 Securities; provided, however, that
no such supplemental indenture shall (i) extend the fixed maturity of any
Securities 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
Security so affected or (ii) reduce the aforesaid percentage of Securities, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of each Security then outstanding and
affected thereby. The Indenture also contains provisions permitting the holders
of a majority in aggregate principal amount of the Securities of any series at
the time outstanding, on behalf of the holders of Securities 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 Securities 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 interest on this
Debenture at the times and place and at the rate and in the money herein
prescribed.
The Debentures are issuable as registered Debentures without coupons in
denominations of $1,000 or any integral multiple thereof. Debentures may be
exchanged, upon presentation thereof for that purpose, at the office or agency
of the Company in the City of Los Angeles, State of California, for other
Debentures of authorized denominations, and for a like aggregate principal
amount and series, and upon payment of a sum sufficient to cover any tax or
other governmental charge in relation thereto.
[The Debentures will not be redeemable prior to maturity.]
OR
[The Debentures may not be redeemed prior to _________. The Debentures may be
redeemed on not less than 30 nor more than 60 days prior notice given as
provided in the Indenture, as a whole or from time to time in part, at the
option of the Company, on any date or dates on or after _________, and prior to
maturity, at the applicable percentage of the principal amount thereof to
<PAGE> 5
-5-
be redeemed as set forth below under the heading "Redemption Price" during the
respective twelve month periods beginning ____ of the years shown below:
Year Redemption Price
---- ----------------
%
together, in each case, with accrued interest to the date fixed for redemption
(but if the date fixed for redemption is an interest payment date, the interest
installment payable on such date shall be payable to the registered holder at
the close of business on the applicable record date).
In the event of redemption of this Debenture in part only, a new Debenture of
like tenor for the unredeemed portion hereof and otherwise having the same terms
as this Debenture shall be issued in the name of the holder hereof upon the
presentation and surrender hereof.]
OR
[The Debentures may be redeemed on not less than 30 nor more than 60 days'
prior notice given as provided in the indenture, as a whole or from time to
time in part, at the option of the Company, at a redemption price equal to the
greater of (i) 100% of the principal amount thereof and (ii) the sum of the
present values of the remaining scheduled payments of principal and interest
thereon discounted to the date of redemption on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate plus ___
basis points, plus, in either case, accrued and unpaid interest on the
principal amount being redeemed to such redemption date.
"Treasury Rate" means, with respect to any redemption date, (i) the yield,
under the heading which represents the average for the immediately preceding
week, appearing in the most recently published statistical release published by
the Board of Governors of the Federal Reserve System designated as "Statistical
Release H.15(519)" or any successor publication which is published weekly by
the Board of Governors of the Federal Reserve System and which establishes
yields on actively traded United States Treasury securities adjusted to
constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Comparable Treasury Issue (if no maturity within
three months before or after the Remaining Life, yields for the two published
maturities most closely corresponding to the Comparable Treasury Issue shall be
determined and the Treasury Rate shall be interpolated or extrapolated from
such yield on a straight-line basis, rounding to the nearest month) or (ii) if
such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date. The Treasury Rate shall be calculated
on the third Business Day preceding the redemption date.
<PAGE> 6
-6-
"Business Day" means any calendar day that is not a Saturday, Sunday or legal
holiday in New York, New York and on which commercial banks are open for
business in New York, New York.
"Comparable Treasury Issue" means the United States Treasury security selected
by an Independent Investment Banker as having a maturity comparable to the
remaining term ("Remaining Life") of the Debentures to be redeemed that would
be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of such Debentures.
"Independent Investment Banker" means _______________________ or, if such firm
is unwilling or unable to select the Comparable Treasury Issue, an independent
investment banking institution of national standing appointed by the Trustee.
"Comparable Treasury Price" means (i) the average of three Reference Treasury
Dealer Quotations for such redemption date, or (ii) if the Independent
Investment Banker is unable to obtain three such Reference Treasury Dealer
Quotations, the average of all such quotations obtained.
"Reference Treasury Dealer" means (i) ______________________,
______________________ and ______________________, and their respective
successors, provided, however, that if any of the foregoing shall cease to be a
primary U.S. Government securities dealer in The City of New York (a "Primary
Treasury Dealer"), the Company shall substitute therefor another Primary
Treasury Dealer and (ii) any other Primary Treasury Dealer selected by the
Independent Investment Banker and approved in writing by the Company.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Independent Investment Banker, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Independent Investment Banker at 3:30 p.m., New York
City time, on the third Business Day preceding such redemption date.
In the event of redemption of this Debenture in part only, a new Debenture of
like tenor for the unredeemed portion hereof and otherwise having the same
terms as this Debenture shall be issued in the name of the holder hereof upon
the presentation and surrender hereof.]
As provided in the Indenture and subject to certain limitations therein set
forth, this Debenture is transferable by the registered holder hereof on the
Security Register of the Company, upon surrender of this Debenture for
registration of transfer at the office or agency of the Company in the City of
Los Angeles, State of California accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company or the Security
Registrar 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.
<PAGE> 7
-7-
Prior to due presentment for registration of transfer of this Debenture the
Company, the Trustee, any paying agent and any Security 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 Security Registrar) for the
purpose of receiving payment of or on account of the principal hereof and
(subject to Section 2.03 of the Indenture) interest due hereon and for all
other purposes, and neither the Company nor the Trustee nor any paying agent
nor any Security 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.
[INSERT IF GLOBAL DEBENTURE - The Depository by acceptance of this Global
Debenture agrees that it will not sell, assign, transfer or otherwise convey
any beneficial interest in this Global Debenture unless such beneficial
interest is in an amount equal to an authorized denomination for Debentures of
this series.]
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Indenture.
<PAGE> 1
EXHIBIT 12
GTE CALIFORNIA INCORPORATED AND SUBSIDIARY
Statements of the Consolidated Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- --------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
Net earnings available for fixed charges:
Income before extraordinary charges $ 813.4 $ 681.5 $ 642.8 $ 515.8 $ 342.9
Add - Income tax expense 555.6 454.6 390.5 329.3 235.5
- Fixed charges 149.3 139.8 124.3 119.7 133.6
--------- --------- --------- --------- ---------
Adjusted earnings $ 1,518.3 $ 1,275.9 $ 1,157.6 $ 964.8 $ 712.0
========= ========= ========= ========= =========
Fixed charges:
Interest expense $ 141.2 $ 128.9 $ 110.0 $ 106.1 $ 120.0
Portion of rent expense representing interest 8.1 10.9 14.3 13.6 13.6
--------- --------- --------- --------- ---------
Adjusted fixed charges $ 149.3 $ 139.8 $ 124.3 $ 119.7 $ 133.6
========= ========= ========= ========= =========
RATIO OF EARNINGS TO FIXED CHARGES 10.17 9.13 9.31 8.06 5.33
</TABLE>
<PAGE> 1
EXHIBIT 26.1
GTE CALIFORNIA INCORPORATED
Invitation For Bids For the Purchase of
$____,000,000 ____% Debentures, Series _, Due____
GTE CALIFORNIA INCORPORATED (the "Company") is inviting bids from
certain investment banks ("Invited Bidders"), each of whom may bid either
individually (a "Sole Bidder") or as part of a group of bidders for which the
Invited Bidder serves as the representative of such group (the
"Representative"), subject to the terms and conditions stated herein, for the
purchase from it of $____,000,000 aggregate principal amount of its ____%
Debentures, Series _, Due ____ (the "Debentures").
1. Information Respecting the Company and the Debentures.
Invited Bidders may examine, at the office of the Assistant Secretary
of the Company, 1255 Corporate Drive, Irving, Texas 75038, (972) 507-5328, on
any business day between 10:00 a.m. and 4:00 p.m., Central time, the following:
(a) the Registration Statement on Form S-3 (including the
Prospectus, documents incorporated by reference and exhibits), with
respect to the Debentures;
(b) the Restated Articles of Incorporation of the
Company, as amended;
(c) a copy of the Indenture dated as of December 1, 1993
and the First Supplemental Indenture dated as of April 15, 1996 (the
Indenture as so supplemented is herein called the "Indenture") under
which the Debentures are to be issued, together with the Form of New
Debenture;
(d) the form of Purchase Agreement (including the
Standard Purchase Agreement Provisions (March 2000 Edition)) to be used
in submitting bids for the purchase of the Debentures;
(e) the form of questionnaire to be provided by each of
the bidders; and
(f) memoranda prepared by counsel to the Purchasers with
respect to the status of the Debentures under securities or blue sky
laws of certain jurisdictions.
Copies of said documents in reasonable quantities (except the Restated
Articles of Incorporation of the Company, the Indenture, and other exhibits to
the Registration Statement) will be supplied upon request, so long as
available, to Invited Bidders.
The Company reserves the right to amend the Registration Statement
(including exhibits thereto) and Prospectus and to supplement the Prospectus in
such manner as shall not be unsatisfactory to Messrs. Milbank, Tweed,
<PAGE> 2
Hadley & McCloy LLP. The Company will make copies of any such amendments or
supplements available for examination at the above office in Irving, Texas.
2. Information Regarding the Bidders to be Furnished to the Company.
In the case of a bid by a group of bidders, the Representative shall
be designated and authorized as the representative of the several bidders in
such group in the questionnaires filed by the members of the group.
In the case of a bid by a group of bidders, the Representative shall
provide to the Company in writing a list of the names of any potential bidder
in its group no later than 10:00 a.m., Central time, on the business day
immediately preceding the date scheduled for the submission of bids. No bid by
a group of bidders will be accepted by the Company if such group contains a
member to which the Company has objected prior to 5:00 p.m., Central time, on
the business day immediately preceding the date scheduled for the submission of
bids. Additional members may be added to a group of bidders after 10:00 a.m.,
Central time, on the business day immediately preceding the date scheduled for
the submission of bids only with the consent of the Company.
No bid will be considered unless the Sole Bidder, or in the case of a
group of bidders, each member of the group through the Representative, shall
have furnished to the Company, and the Company shall have received, a signed
copy of the form of questionnaire referred to above, properly filled out by the
Sole Bidder or by each member of the group of bidders (the Company reserving,
however, the right to waive the form of the questionnaire or any irregularity
which it deems to be immaterial in any such questionnaire and to extend either
generally or in specific instances the time for furnishing questionnaires, and
specifically reserving the right to obtain all required bidder information by
telecopy or other means of communication). Such copy shall be furnished to the
Company by telecopy at (972) 507-5343 or by hand delivery or by mail to 1255
Corporate Drive, Mail Code: SVC04C08, Irving, Texas 75038, Attention: David S.
Kauffman, Esq., to be received no later than 5:00 p.m., Central time, on the
business day immediately preceding the date scheduled for the submission of
bids (or on such later date as may be determined pursuant to Section 5 hereof).
Notwithstanding the furnishing of such questionnaires to the Company, any Sole
Bidder, or the Representative on behalf of a group of bidders, thereafter may
determine, without liability to the Company, not to bid, or any of the several
members of a group (other than the Representative) may withdraw therefrom at or
before the time of submission of the bid of such group.
3. Obligations of a Representative to a Group of Bidders.
In the case of a group of bidders, the Representative shall (i) make
available to the members of the group any due diligence materials received by
it from the Company and (ii) upon the request of any member of such group,
request from the Company and deliver to such member of the group copies of the
documents listed in Section 1 hereof.
4. Form and Contents of Bids.
Each bid shall be for the purchase of all of the Debentures.
In case the bid of a group of bidders is accepted, the obligations of
the members of the group to purchase the respective principal amounts of
2
<PAGE> 3
Debentures indicated in the bid shall be several and not joint. Such bidders
shall act through the Representative, who shall be empowered to bind the
bidders in the group. No bidder may submit or participate in more than one bid.
5. Submission of Bids and Delivery of Confirmation of Bids.
All bids must be submitted by telephone and confirmed in writing in
the manner set forth in Exhibit A, Confirmation of Bid, attached, signed by the
Sole Bidder or the Representative on behalf of the members of a group of
bidders. Each bid must specify: (a) the interest rate, which shall be a
multiple of 1/8 of 1% or 1/100 of 1%; and (b) the price to be paid to the
Company for the Debentures, which shall be expressed as a percentage of the
principal amount of the Debentures and shall not be less than 98% thereof nor
more than 100% thereof. The Confirmation of Bid shall specify the same interest
rate and price specified in the telephonic bid.
The Company reserves the right in its discretion from time to time to
postpone the time and the date for submission of bids for an aggregate period
of not exceeding thirty days, and will give notice of any such postponement to
each Invited Bidder, specifying in such notice the changes in the times and
dates set forth in the Purchase Agreement occasioned by such postponement. In
the event that any such postponement should be for a period of more than three
full business days after the date of sending or delivering such notice, the
time for filing of questionnaires by prospective bidders under Section 2 hereof
shall by such notice be postponed to 5:00 p.m., Central time, at the place of
delivery specified in Section 2 hereof, on the business day immediately
preceding the newly scheduled date for the submission of bids.
6. Acceptance or Rejection of Bids.
The Company may reject all bids, but if any bid for the Debentures is
accepted the Company will accept that bid which shall result in the lowest
"annual cost of money" to the Company for the Debentures, and any bid not so
accepted by the Company shall, unless such bid shall be involved in rebidding
as hereinafter provided, be deemed to have been rejected. The lowest annual
cost of money to the Company for the Debentures shall be determined by the
Company and such determination shall be final. In case the lowest annual cost
of money to the Company is provided by two or more such bids, the Company
(unless it shall reject all bids) will give the makers of such identical bids
an opportunity (the duration of which the Company may in its sole discretion
determine) to improve their bids. The Company will accept, unless it shall
reject all bids, the improved bid providing the Company with the lowest annual
cost of money for the Debentures. If upon such rebidding the lowest annual cost
of money to the Company is again provided by two or more improved bids, the
Company may without liability to the maker of any other bid accept any one of
such improved bids in its sole discretion, or may reject all bids. If no
improved bid is made within the time fixed by the Company, the Company may
without liability to the maker of any other bid accept any one of the initially
submitted bids providing the lowest annual cost of money to the Company, or may
reject all bids.
The Company further reserves the right to reject the bid of any Sole
Bidder or group of bidders if the Company, in the opinion of its counsel, may
not lawfully sell the Debentures to such bidder or to any member of such group,
unless, in the case of a group of bidders, prior to 1:00 p.m., Central
3
<PAGE> 4
time, on the date on which the bids are submitted, the member or members to
which, in the opinion of the Company's counsel, the Debentures may not be
lawfully sold have withdrawn from the group and the remaining members have
agreed to purchase the Debentures which such withdrawing member or members had
offered to purchase.
7. Purchase Agreement and Completion of Registration Statement.
The Company will signify its acceptance of a bid by signing the
Purchase Agreement. The Company shall, upon request, execute the acceptance on
additional number of copies of the Purchase Agreement as shall be reasonably
requested by the Representative of the successful bidders. Upon the acceptance
of a bid, the successful Sole Bidder, or, in the case of a bid by a group of
bidders, the Representative on behalf of the successful bidders, shall furnish
to the Company, in writing, all information regarding the bidder or bidders and
the public offering, if any, of the Debentures required in connection with the
prospectus supplement to the Registration Statement, any further information
regarding the bidders and the public offering, if any, to be made by them,
which may be required to complete the applications filed by the Company with
public authorities having jurisdiction over the Company, and other information
required by law in respect of the purchase or sale of the Debentures as herein
contemplated.
8. Delivery of the Debentures.
The Debentures will be delivered in temporary or definitive form, at
the election of the Company, to the purchasers of the Debentures at the place,
at the time and in the manner indicated in the Purchase Agreement, against
payment of the purchase price therefor as provided in the Purchase Agreement.
9. Opinion of Counsel for the Purchasers.
Messrs. Milbank, Tweed, Hadley & McCloy LLP, 1 Chase Manhattan Plaza,
New York, N.Y. 10005, have been requested by the Company to act as counsel for
the successful bidder or bidders of the Debentures and to give to the
purchasers an opinion as outlined in the Purchase Agreement. Such counsel has
reviewed or will review, from the standpoint of possible purchasers of the
Debentures, the form of the Registration Statement and the Prospectus and
competitive bidding papers, including the Purchase Agreement, and has reviewed
or will review the corporate proceedings with respect to the issue and sale of
the Debentures. Invited Bidders may confer with Messrs. Milbank, Tweed, Hadley
& McCloy LLP with respect to any of the foregoing matters at the offices of
said firm, 1 Chase Manhattan Plaza, New York, N.Y. 10005, Attn.: Robert W.
Mullen, Jr., Esq. The successful bidders are to pay the compensation and
disbursements of such counsel, except as otherwise provided in the Purchase
Agreement. Such counsel will, on request, advise any Sole Bidder who has, or
the Representative of any group of bidders who have, furnished questionnaires
as provided in Section 2 hereof, of the amount of such compensation and of the
estimated amount of such disbursements.
GTE CALIFORNIA INCORPORATED
- -----------, -----
4
<PAGE> 5
EXHIBIT A
GTE CALIFORNIA INCORPORATED
(the "Company")
CONFIRMATION OF BID FOR
$___,000,000 ____% Debentures, Series _, Due ____
(the "Debentures")
TERMS
Maturity: _______, ____.
Interest Payable: Semi-annually on _______ and _______, commencing _______.
Redemption Provisions:
[The Debentures will not be redeemable prior to maturity.]
OR
[The Debentures will not be redeemable prior to ________. The "initial
regular redemption price" of the Debentures will be the initial public
offering price as defined below plus the rate of interest on the
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 beginning ______, 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 Debentures, the
initial public offering price of the Debentures shall be the price,
expressed in percentage of principal amount (exclusive of accrued
interest), at which the Debentures are to be initially offered for sale to
the public; if there is not a public offering of the Debentures, the
initial public offering price of the 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 purchasers.]
OR
[The Debentures may be redeemed on not less than 30 nor more than 60 days'
notice given as provided in the Indenture, as a whole or from time to time
in part, at the option of the Company, at a redemption price equal to the
greater of (i) 100% of the principal amount thereof and (ii) the sum of the
present values of the remaining scheduled payments of principal and
5
<PAGE> 6
interest thereon discounted to the date of redemption on a semi-annual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Treasury Rate plus __ basis points, plus, in either case, accrued and
unpaid interest on the principal amount being redeemed to such redemption
date.
"Treasury Rate" means, with respect to any redemption date, (i) the yield,
under the heading which represents the average for the immediately
preceding week, appearing in the most recently published statistical
release published by the Board of Governors of the Federal Reserve System
designated as "Statistical Release H.15(519)" or any successor publication
which is published weekly by the Board of Governors of the Federal Reserve
System and which establishes yields on actively traded United States
Treasury securities adjusted to constant maturity under the caption
"Treasury Constant Maturities," for the maturity corresponding to the
Comparable Treasury Issue (if no maturity is within three months before or
after the Remaining Life, yields for the two published maturities most
closely corresponding to the Comparable Treasury Issue shall be determined
and the Treasury Rate shall be interpolated or extrapolated from such
yields on a straight-line basis, rounding to the nearest month) or (ii) if
such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate
per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, calculated using a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to
the Comparable Treasury Price for such redemption date. The Treasury Rate
shall be calculated on the third Business Day preceding the redemption
date.
"Business Day" means any calendar day that is not a Saturday, Sunday or
legal holiday in New York, New York and on which commercial banks are open
for business in New York, New York.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity
comparable to the remaining term ("Remaining Life") of the Debentures to be
redeemed that would be utilized, at the time of selection and in accordance
with customary financial practice, in pricing new issues of corporate debt
securities of comparable maturity to the remaining term of such New
Debentures.
"Independent Investment Banker" means ____________________ or, if such firm
is unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing appointed
by the Trustee.
"Comparable Treasury Price" means (i) the average of three Reference
Treasury Dealer Quotations for such redemption date, or (ii) if the
Independent Investment Banker is unable to obtain three such Reference
Treasury Dealer Quotations, the average of all such quotations obtained.
"Reference Treasury Dealer" means (i)___________________,
_____________________ and ________________, and their respective
successors, provided, however, that if any of the foregoing shall cease to
be a primary U.S. Government securities dealer in The City of New York (a
"Primary Treasury Dealer"), the Company shall substitute therefor another
Primary Treasure Dealer and (ii) any other Primary Treasury Dealer selected
by the Independent Investment Banker and approved in writing by the
Company.
6
<PAGE> 7
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as
determined by the Independent Investment Banker, or the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the Independent
Investment Banker at 3:30 p.m., New York City time, on the third Business
Day preceding such redemption date.
In the event of redemption of this Debenture in part only, a new Debenture
of like tenor for the unredeemed portion hereof and otherwise having the
same terms as this Debenture shall be issued in the name of the holder
hereof upon the presentation and surrender hereof.]
NAME OF BIDDER: _________________________________________________________
TELEPHONE NUMBER TO BE USED TO CALL IN BID: ____________________________
TIME AND DATE BID RECEIVED: _____________________________________________
(to be completed by the Company)
7
<PAGE> 8
By submitting this bid, the bidder named above agrees to the following terms
and conditions:
o Each bid shall be for the purchase of all of the Debentures.
o Each bid may be made by a single bidder or by a group of bidders.
o The bidder acknowledges that it (and all members of the bidding group it
represents) has received a copy of the Prospectus dated ________________.
o If the bid is made by a group of bidders, the undersigned represents and
warrants that it is fully authorized by all bidders in the group to act on
their behalf and to bind them to the terms of the Purchase Agreement
relating to the Debentures.
o Each bid shall specify:
o the annual interest rate on the Debentures, which rate shall be a
multiple of 1/8 of 1% or 1/100 of 1%;
o the price (exclusive of accrued interest) to be paid to the Company
for the Debentures, which price shall not be less than 98% and not
more than 100% of the principal amount of the Debentures, and that
accrued interest on the Debentures from _______, to the date of
payment of the Debentures and the delivery thereof will be paid to
the Company by the purchaser or purchasers; and
o in the case of a bid by a group of bidders, the name of, and amount
to be purchased by each bidder.
o Bids must be received by 8:30 a.m., Central time, on _______, or such
later time and/or date as the Company may specify (the "Bid Time").
o Bids shall be irrevocable for one (1) hour after the Bid Time.
o The winning bid shall be selected on the basis of the lowest "annual cost
of money" to the Company.
o Whether or not this bid is accepted by the Company, an executed copy of
this Confirmation of Bid must be sent promptly by telecopy to the Company
at (972) 507-5343, Attn: David S. Kauffman.
o If this bid is accepted, upon acceptance the undersigned agrees to
promptly furnish to the Company a signed copy of the Purchase Agreement
relating to the Debentures and a copy of all information required to be
included in the Prospectus relating to the Debentures.
o Closing Date: _______ at 10:00 a.m., New York City time.
8
<PAGE> 9
BID:
Interest Rate ________________ %
Price to be paid to the Company ________________ %
------------------------------
(Name of Bidder)
------------------------------
(Authorized Signature)
9
