PROSPECTUS SUPPLEMENT
(To prospectus dated December 8, 1997)
$200,000,000
New England Telephone and Telegraph Company
d/b/a Bell Atlantic -- New England
Ten Year 5.875% Notes due April 15, 2009
185 Franklin Street, Boston, Massachusetts 02110
Telephone Number (617) 743-9800
------------------
The Notes bear interest at the rate of 5.875% per year. Interest on the
Notes is payable on April 15 and October 15 of each year, beginning on October
15, 1999. The Notes will mature on April 15, 2009. We may redeem some or all of
the Notes at any time. We describe the redemption price under the heading
"Certain Terms of the Notes--Optional Redemption" on page S-3 of this
prospectus supplement.
The Notes are unsecured and rank equally with all our other senior
unsecured debt. There is currently no public market for the Notes. The
Underwriters will purchase all the Notes if any are purchased.
------------------
<TABLE>
<CAPTION>
Per
Note Total
------------ ---------------
<S> <C> <C>
Public Offering Price(1) .............................. 99.235% $198,470,000
Underwriting Discount ................................. .65% $ 1,300,000
Proceeds, before expenses, to New England Telephone and
Telegraph Company .................................... 98.585% $197,170,000
</TABLE>
(1) Plus accrued interest from April 19, 1999, if settlement occurs after
that date.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The Notes will be ready for delivery in book-entry form only through The
Depository Trust Company on or about April 19, 1999.
------------------
Merrill Lynch & Co.
The Williams Capital Group, L.P.
Utendahl Capital Partners, L.P.
------------------
The date of this prospectus supplement is April 13, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Supplement
About this Prospectus Supplement ..................... S-2
Where You Can Find More Information About Us ......... S-2
Use of Proceeds ...................................... S-3
Ratio of Earnings to Fixed Charges ................... S-3
Certain Terms of the Notes ........................... S-3
Underwriting ......................................... S-6
Experts .............................................. S-7
Prospectus
Available Information ................................ 2
Incorporation of Documents by Reference .............. 2
The Company .......................................... 3
Use of Proceeds ...................................... 3
Ratio of Earnings to Fixed Charges ................... 3
Description of Securities ............................ 3
Limitations on Issuance of Bearer Securities ......... 9
United States Taxation ............................... 10
Plan of Distribution ................................. 11
Experts .............................................. 12
Legal Matters ........................................ 12
</TABLE>
ABOUT THIS PROSPECTUS SUPPLEMENT
You should read this prospectus supplement along with the prospectus that
follows carefully before you invest. Both documents contain important
information you should consider when making your investment decision. This
prospectus supplement contains information about the Ten Year 5.875% Notes due
April 15, 2009, and the prospectus contains information about our debt
securities, including the Notes, generally. This prospectus supplement may add,
update or change information in the prospectus. You should rely only on the
information provided or incorporated by reference in this prospectus supplement
and the prospectus. The information in this prospectus supplement is accurate
as of April 13, 1999. We have not authorized anyone else to provide you with
different information.
WHERE YOU CAN FIND MORE
INFORMATION ABOUT US
We file annual, quarterly and current reports and other information with
the SEC. You may also read and copy any document we file at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are available to the public over the Internet
at the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference our Annual Report on Form 10-K for the year ended
December 31, 1998 and any future filings made with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, until we sell all of
the debt securities.
You may request a copy of these filings at no cost, by writing or
telephoning:
Director -- External Reporting
Bell Atlantic Corporation
47th Floor
1717 Arch Street
Philadelphia, PA 19103
Telephone: (215) 963-6360
S-2
<PAGE>
USE OF PROCEEDS
We will apply the proceeds from the sale of the Notes toward the
redemption of the $200,000,000 aggregate principal amount of our 7 3/8%
Debentures, due October 15, 2007, repayment of short-term indebtedness and/or
for general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our historical ratios of earnings to fixed
charges for the periods indicated:
<TABLE>
<CAPTION>
Years Ended December 31,
- ---------------------------------------------------
1998 1997 1996* 1995* 1994*
- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
6.23 5.87 6.87 5.58 4.98
</TABLE>
----------
* Restated as required by revision of Item 503(d) of Regulation S-K.
For the purpose of this ratio:
o earnings have been calculated by adding dividends received from an
equity affiliate, interest expense and the estimated interest portion of
rentals and amortization of capitalized interest to income before the
provision for income taxes, extraordinary item and cumulative effect of
change in accounting principle and by deducting therefrom the equity in
income of an affiliate; and
o fixed charges are comprised of interest expense, the estimated interest
portion of rentals and capitalized interest.
CERTAIN TERMS OF THE NOTES
The Notes will be limited to $200,000,000 aggregate principal amount. The
Notes will be issued only in registered form under the Indenture, dated as of
October 1, 1992, between us and State Street Bank and Trust Company, as
successor Trustee. The Indenture is more fully described in the prospectus
under the section "Description of Securities."
The Notes will mature on April 15, 2009. We will pay interest on the Notes
at the annual rate set forth on the cover of this prospectus supplement. We
will pay interest semiannually on each April 15 and October 15, beginning on
October 15, 1999, to the person in whose name the Notes are registered at the
close of business on the April 1 or October 1 prior to the payment date. We
will pay interest at our office or agency to be maintained in New York City,
which at the date of this prospectus supplement is State Street Bank and Trust
Company, 61 Broadway, New York, New York 10006. You may be required to
surrender the Notes to collect principal payments. We may, at our option, pay
interest by check mailed to the person entitled thereto at the address of such
person appearing on the register of the Notes.
Optional Redemption
The Notes will be redeemable, as a whole or in part, at our option, at any
time or from time to time on at least 30 days' but not more than 90 days' prior
notice mailed to the registered address of each holder of the Notes. The
redemption prices will be equal to the greater of (1) 100% of the principal
amount of the Notes to be redeemed or (2) the sum of the present values of the
Remaining Scheduled Payments (as defined below) discounted on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at a rate
equal to the sum of the Treasury Rate and 15 basis points. In the case of each
of clause (1) and (2), accrued interest will be payable to the redemption date.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming 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.
S-3
<PAGE>
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes 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 the Notes. "Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by us.
"Comparable Treasury Price" means, with respect to any redemption date,
(1) the average of the Reference Treasury Dealer Quotations for such redemption
date after excluding the highest and lowest of such Reference Treasury Dealer
Quotations or (2) if the Trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of all such quotations. "Reference
Treasury Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any redemption date, the average, as determined by the Trustee, 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 Trustee
by such Reference Treasury Dealer at 3:30 p.m., New York City time, on the
third business day preceding such redemption date.
"Reference Treasury Dealer" means each of Merrill Lynch, Pierce, Fenner &
Smith Incorporated and two other primary U.S. Government securities dealers
appointed by the Trustee (each, a "Primary Treasury Dealer"). If any of the
foregoing shall cease to be a Primary Treasury Dealer, we shall substitute
another nationally recognized investment banking firm that is a Primary
Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to each Note to be
redeemed, the remaining scheduled payments of principal of and interest on such
Note that would be due after the related redemption date but for such
redemption. If such redemption date is not an interest payment date with
respect to such Note, the amount of the next succeeding scheduled interest
payment on such Note will be reduced by the amount of interest accrued on such
Note to such redemption date.
On and after the redemption date, interest will cease to accrue on the
Notes or any portion of the Notes called for redemption (unless we default in
the payment of the redemption price and accrued interest). On or before the
redemption date, we will deposit with the paying agent (or the Trustee) money
sufficient to pay the redemption price of and accrued interest on the Notes to
be redeemed on such date. If less than all of the Notes of any series are to be
redeemed, the Notes to be redeemed shall be selected by the Trustee by such
method as the Trustee shall deem fair and appropriate.
Book-Entry System
The Notes will be represented by one or more global notes (the "Global
Notes") registered in the name of a nominee of The Depository Trust Company
("DTC"), as depository. As a result, ownership of interest in such Global Notes
will be shown on, and a transfer thereof will be effected only through, records
maintained by DTC or its nominee for the Notes and on the records of
participants. Except as otherwise described below, owners of beneficial
interests in the Global Notes will not be entitled to receive Notes in
definitive form and will not be considered the holder of the Notes.
DTC has advised us as follows: It is a limited-purpose trust company which
was created to hold securities for its participating organizations (the
"Participants") and to facilitate the clearance and settlement of securities
transactions between Participants in such securities through electronic
book-entry changes in accounts of its Participants. Participants include
securities brokers and dealers (including the Underwriters), banks and trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("indirect participants"). Persons
who are not Participants may beneficially own securities held by DTC only
through Participants or indirect participants.
Principal and interest payments on the Notes registered in the name of
DTC's nominee will be made by the Trustee to DTC's nominee as the registered
owner of the Global Notes. Under the terms of the Indenture, we and the Trustee
will treat the persons in whose names the Notes are registered as the owners of
the Notes for the purpose of receiving payment of principal and interest on the
Notes and for all other purposes whatsoever. Therefore, neither we nor the
Trustee or any Paying Agent have any direct responsibility or liability for the
payment of principal or interest on the Notes to owners of beneficial interests
in the Global Notes. DTC has advised us and the Trustee that its present
practice is, upon receipt of any payment of principal or interest, to
immediately credit the accounts
S-4
<PAGE>
of the Participants with such payment in amounts proportionate to their
respective holdings in principal amount of beneficial interests in the Global
Notes as shown on the records of DTC.
If DTC notifies us that it is unwilling or unable to continue as the
depository for the Global Notes or if at any time DTC ceases to be a clearing
agency registered under the Securities Exchange Act, and, in each case, we do
not appoint a successor clearing system within 90 days after receiving such
notice form DTC or on becoming aware that DTC is no longer so registered, we
will issue or cause to be issued individual certificates in registered form on
registration of transfer of, or in exchange for, book-entry interests in the
Notes represented by such Global Notes upon delivery of such Global Notes for
cancellation. In addition, if we determine not to have the Notes represented by
a Global Note, which we may do, we will issue or cause to be issued individual
certificates in registered form in exchange for book-entry interests in the
Notes represented by such Global Note upon delivery of such Global Note for
cancellation.
DTC has further advised us that DTC's management is aware that some
computer applications, systems and the like for processing data that are
dependent upon calendar dates, including dates before, on and after January 1,
2000, may encounter "Year 2000 problems." DTC has informed its Participants and
other members of the financial community that it has developed and is
implementing a program so that its systems, as the same relate to the timely
payment of distributions (including principal and interest payments) to
security holders, book-entry deliveries and settlement of trades within DTC,
continue to function appropriately. This program includes a technical
assessment and a remediation plan, each of which is complete. Additionally,
DTC's plan includes a testing phase, which is expected to be completed within
appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including issuers and their agents as well as third party
vendors from whom DTC licenses software and hardware and third party vendors on
whom DTC relies for information or the provision of services, including
telecommunication and electrical utility service providers, among others. DTC
has informed its Participants and other members of the financial community that
it is contacting, and will continue to contact, third party vendors from whom
DTC acquires services to: (1) impress upon them the importance of such services
being Year 2000 compliant; and (2) determine the extent of their efforts for
Year 2000 remediation and, as appropriate, testing of their services. In
addition, DTC is in the process of developing such contingency plans as it
deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to its Participants and other members of the financial community for
informational purposes only and is not intended to serve as a representation,
warranty or contract modification of any kind.
S-5
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") among us and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, The Williams Capital Group, L.P. and Utendahl Capital
Partners, L.P. (collectively, the "Underwriters"), we have agreed to sell to
the Underwriters, and the Underwriters have severally agreed to purchase, the
respective principal amounts of the Notes set forth opposite their names below.
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all the Notes if any are purchased.
<TABLE>
<CAPTION>
Underwriter Amount
- ------------------------------------------------ ---------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ................. $140,000,000
The Williams Capital Group, L.P. ......... 30,000,000
Utendahl Capital Partners, L.P. .......... 30,000,000
------------
Total ........................ $200,000,000
============
</TABLE>
We will also pay our issuing expenses estimated at $170,000. We are filing
the Underwriting Agreement with the Securities and Exchange Commission as an
exhibit to a Current Report on Form 8-K.
The Underwriters have advised us that they propose initially to offer the
Notes to the public at the public offering price set forth on the cover of this
prospectus supplement and to certain dealers at such price less a concession
not in excess of .40% of the principal amount of the Notes. The Underwriters
may allow, and such dealers may reallow, a discount not in excess of .25% of
the principal amount of the Notes of certain other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
This prospectus supplement and the prospectus should not be considered an
offer of the Notes in states where prohibited by law.
We do not intend to list the Notes on a national securities exchange.
Although the Underwriters intend to make a market in the Notes on the secondary
trading market, they are not required to do so and may stop their market making
activities at any time. Liquidity for the Notes cannot be assured.
To facilitate this offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of Notes. Specifically,
the Underwriters may over-allot in connection with the offering, creating a
short position in the Notes for their own account. In addition, to cover
over-allotments or to stabilize the price of the Notes, the Underwriters may
bid for and purchase Notes in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an Underwriter or a dealer
if the syndicate repurchases previously distributed Notes in transactions to
cover syndicate short positions, in stabilization transactions or otherwise.
Any of these activities may stabilize or maintain the market price of the Notes
above independent market levels. The Underwriters are not required to engage in
these activities and may end any of these activities at any time.
We have agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
The settlement date for the purchase of the Notes will be April 19, 1999,
as agreed upon by us and the Underwriters pursuant to Rule 15c6-1 under the
Securities Exchange Act.
Certain of the Underwriters and their affiliates have provided commercial
or investment banking services to us, our parent, Bell Atlantic Corporation,
and certain of its affiliates and may provide these services in the future.
They receive customary fees and commissions for these services.
S-6
<PAGE>
EXPERTS
The balance sheets as of December 31, 1998 and 1997 and the statements of
income, changes in shareowner's investment and cash flows for each of the three
years in the period ended December 31, 1998, included in our Annual Report on
Form 10-K, incorporated by reference in this prospectus supplement, have been
incorporated herein in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
S-7
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
P R O S P E C T U S
$500,000,000
New England Telephone and Telegraph Company
Debt Securities
New England Telephone and Telegraph Company ("Company") may offer from
time to time in one or more series up to $500,000,000 aggregate principal
amount of its debt securities ("Securities"), on terms to be determined at the
time Securities are offered for sale. Securities may be offered for sale
directly to purchasers and may also be offered through underwriters, dealers or
agents.
The terms of the Securities, including, where applicable, the specific
designation, aggregate principal amount, authorized denominations, maturity,
interest rate (or manner of calculation thereof) and time of payment of
interest, if any, any redemption terms, the initial public offering price, the
net proceeds to the Company from the sale of the Securities, the names of any
underwriters or agents, any compensation to such underwriters or agents and any
other specific terms in connection with the offering and sale of the Securities
in respect of which this Prospectus is being delivered are set forth in the
accompanying Prospectus Supplement ("Prospectus Supplement").
The Securities may be issued in registered form or bearer form. In
addition, all or a portion of the Securities of a series may be issued in
global form. Subject to certain exceptions, Securities in bearer form will not
be offered, sold or delivered to persons within the United States or to United
States persons. See "Limitations on Issuance of Bearer Securities."
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
---------------
December 8, 1997
<PAGE>
No person has been authorized to give any information or to make any
representation not contained or incorporated by reference in this Prospectus or
in the Prospectus Supplement in connection with the offer made by this
Prospectus or the Prospectus Supplement and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company or by any underwriter, dealer or agent. This Prospectus and the
Prospectus Supplement do not constitute an offer to sell or a solicitation of
an offer to buy any of the Securities offered hereby in any jurisdiction to any
person to whom it is unlawful to make such offer or solicitation in such
jurisdiction. This Prospectus and the Prospectus Supplement do not constitute
an offer to sell or a solicitation of an offer to buy any Securities other than
those to which they relate. The delivery of this Prospectus or the Prospectus
Supplement at any time does not imply that the information herein or therein is
correct as of any time subsequent to its date.
----------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and in accordance therewith
files reports and other information with the Securities and Exchange Commission
("SEC"). Such reports and other information filed by the Company can be
inspected and copied at the public reference facilities of the SEC, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, as well as at
the following SEC Regional Offices: Seven World Trade Center, Suite 1300, New
York, NY 10048; and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661. Copies can be obtained from the SEC by mail at prescribed
rates. Requests should be directed to the SEC's Public Reference Section, Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549. The SEC
also maintains a Web site (http: //www.sec.gov) that contains reports and other
information regarding the Company.
The Company has filed with the SEC Registration Statements on Form S-3
(together with all amendments and exhibits thereto, "Registration Statement")
under the Securities Act of 1933, as amended ("Securities Act"), covering the
Securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statements, certain parts of which
are omitted from the Prospectus in accordance with the rules and regulations of
the SEC. For further information, reference is made to the Registration
Statements.
----------------
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the SEC (File
No. 1-1150) and are hereby incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the year ended December
31, 1996;
(2) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 1997; and
(3) The Company's Current Reports on Form 8-K, date of reports August 14
and December 5, 1997.
All documents filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering shall be deemed to be incorporated by reference in
this Prospectus and to be part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Copies of the above documents (excluding exhibits to such documents,
unless such exhibits are specifically incorporated by reference therein) may be
obtained upon written or oral request without charge by each person to whom
this Prospectus is delivered from the Director--External Reporting, Bell
Atlantic Corporation, 31st Floor, 1717 Arch Street, Philadelphia, PA 19103
(telephone number 215-963-6360).
2
<PAGE>
THE COMPANY
The Company is engaged in the business of providing telecommunications
services in Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.
Since January 1, 1984, the Company has been a wholly-owned subsidiary of NYNEX
Corporation ("NYNEX"), one of the seven regional holding companies formed by
American Telephone and Telegraph Company ("AT&T") in connection with the
court-ordered divestiture (the "Divestiture") by AT&T of certain portions of
its 22 wholly-owned operating telephone companies. Prior to the Divestiture on
January 1, 1984, the Company was an associated company of the Bell System and a
wholly-owned subsidiary of AT&T.
As a result of the merger of NYNEX and Bell Atlantic Corporation ("Bell
Atlantic") on August 14, 1997, the Company became an indirect wholly owned
subsidiary of Bell Atlantic. Bell Atlantic, another of the original seven
holding companies formed by AT&T in connection with the Divestiture, is a
diversified telecommunications company operating in the region stretching from
Maine to Virginia. In addition to its operating telephone subsidiaries, Bell
Atlantic provides domestic wireless service in 25 states and has international
wireless and other telecommunications company investments.
The Company, incorporated in 1883 under the laws of the State of New York,
has its principal executive offices at 125 High Street, Boston, Massachusetts
02110 (telephone number 617 743-9800).
USE OF PROCEEDS
The Company intends to apply the proceeds from the sale of the Securities
to repay short-term and/or long-term debt, to refinance outstanding long-term
debt and/or for general corporate purposes. If market conditions are such that
the Company determines it is in its best interests to refinance long-term debt,
the Company would consider redeeming, repurchasing or refinancing, in whole or
in part, one or more outstanding issues identified in the Prospectus Supplement
relating to the particular series of Securities being offered hereby.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of the Company for the periods indicated:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------
Nine Months
Ended
September 30,
1997 1996 1995 1994 1993 1992
- -------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
6.05 6.86 5.59 4.97 1.64 4.31
</TABLE>
For the purpose of this ratio: (i) earnings have been calculated by adding
interest expense and the estimated interest portion of rentals to income before
the provision for income taxes, extraordinary item and cumulative effect of
change in accounting principle; and (ii) fixed charges are comprised of
interest expense, the estimated interest portion of rentals and interest
capitalized on construction.
DESCRIPTION OF SECURITIES
The following describes certain general terms and provisions of the
Securities to which any Prospectus Supplement may relate. The particular terms
and provisions of the series of Securities offered by a Prospectus Supplement,
and the extent to which such general terms and provisions described below may
apply thereto, will be described in the Prospectus Supplement relating to such
series of Securities.
The Securities are to be issued under an Indenture dated as of October 1,
1992 ("Indenture"), from the Company to State Street Bank and Trust Company,
successor Trustee ("Trustee"). The following summaries of certain provisions of
the Securities and the Indenture do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all provisions of the
Indenture, including the definition therein of certain terms. Wherever
particular sections or defined terms of the Indenture are referred to, it is
intended that such sections or defined terms shall be incorporated herein by
reference.
3
<PAGE>
General
The Indenture does not limit the amount of Securities which can be issued
thereunder, and additional debt securities may be issued thereunder up to the
aggregate principal amount which may be authorized from time to time by, or
pursuant to a resolution of, the Company's Board of Directors or by a
supplemental indenture. Reference is made to the Prospectus Supplement for the
following terms of the particular series of Securities being offered hereby:
(i) the title of the Securities of the series; (ii) any limit upon the
aggregate principal amount of the Securities of the series; (iii) the date or
dates (or manner of determining the same) on which the principal of the
Securities of the series will mature; (iv) the rate or rates (or manner of
calculation thereof), if any, at which the Securities of the series will bear
interest, the date or dates from which any such interest will accrue and on
which such interest will be payable (or manner of determining the same), and,
with respect to Securities of the series in registered form, the record date
for the interest payable on any interest payment date; (v) the place or places
where the principal of and interest, if any, on the Securities of the series
will be payable; (vi) any redemption or sinking fund provisions; (vii) if other
than the principal amount thereof, the portion of the principal amount of
Securities of the series which will be payable upon declaration of acceleration
of the maturity thereof; (viii) whether the Securities of the series will be
issuable in registered form ("registered Securities") or bearer form ("bearer
Securities") or both, and whether and the terms upon which bearer Securities
will be exchangeable for registered Securities and vice versa; (ix) any
provisions for payment of additional amounts for taxes and any provision for
redemption, in the event the Company must comply with reporting requirements in
respect of a Security or must pay such additional amounts in respect of any
Security; (x) whether the Securities of the series will be issued in whole or
in part in the form of a temporary or permanent global Security or Securities
and, in such case, the depositary therefor; (xi) any other terms of the
Securities (which terms shall not be inconsistent with the provisions of the
Indenture), including any terms which may be required by or advisable under
United States laws or regulations or advisable in connection with the marketing
of Securities of such series. (Sections 2.01. and 2.02.) To the extent not
described herein, principal, premium, if any, and interest, if any, will be
payable, and the Securities of a particular series will be transferable, in the
manner described in the Prospectus Supplement relating to such series.
Each series of Securities will constitute unsecured indebtedness of the
Company and will rank on a parity with the Company's other unsecured
indebtedness.
Securities may be sold at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time
of issuance is below market rates. Federal income tax consequences applicable
to any such Securities will be described in the Prospectus Supplement relating
thereto.
Denominations, Registration of Transfer and Exchange
Unless otherwise indicated in the Prospectus Supplement, the Securities
will be issuable in denominations of $1,000 and integral multiples thereof.
Securities of a series may be issuable in whole or in part in the form of one
or more global Securities, as described below under "Global Securities". One or
more global Securities will be issued in a denomination or aggregate
denominations equal to the aggregate principal amount of Securities of the
series to be represented by such global Security or Securities. If so provided
with respect to a series of Securities, Securities of such series will be
issuable solely as bearer Securities with coupons attached or as both
registered Securities and bearer Securities.
In connection with the sale during the "restricted period" as defined in
Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury Regulations
(generally, the first 40 days after the closing date and, with respect to
unsold allotments, until sold), no bearer Security shall be mailed or otherwise
delivered to any location in the United States (as defined under "Limitations
on Issuance of Bearer Securities"). A bearer Security in definitive form
(including interests in a permanent global Security) may be delivered only if
the person entitled to receive such bearer Security furnishes written
certification, in the form required by the Indenture, to the effect that such
bearer Security is not owned by or on behalf of a United States person (as
defined under "Limitations on Issuance of Bearer Securities"), or, if a
beneficial interest in such bearer Security is owned by or on behalf of a
United States person, that such United States person (i) acquired and holds the
bearer Security through a foreign branch of a United States financial
institution, (ii) is a foreign branch of a United States financial institution
purchasing for its own account or resale (and in either case, (i) or (ii), such
financial institution agrees to comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended
("Code"), and the regulations thereunder) or (iii) is a financial institution
purchasing for resale during the restricted period which certifies that it has
not
4
<PAGE>
acquired such bearer Security for purposes of resale to a United States person
or to a person within the United States. (Section 2.03.(d)) See "Global
Securities--Bearer Debt Securities" and "Limitations on Issuance of Bearer
Securities". Bearer Securities and the coupons related thereto will be
transferable by delivery. (Section 2.12.(e))
Registered Securities of any series (other than a global Security) may be
exchanged for other registered Securities of that series, of any authorized
denominations and in a like aggregate principal amount having identical terms.
In addition, if Securities of any series are issuable as both registered
Securities and as bearer Securities, at the option of the holder, and subject
to the terms of the Indenture, bearer Securities (with all unmatured coupons,
except as provided below, and all matured coupons in default) of such series
may be exchanged for registered Securities of that series of any authorized
denominations and of a like aggregate principal amount having identical terms.
Unless otherwise indicated in an applicable Prospectus Supplement, any bearer
Security surrendered in exchange for a registered Security between a regular
record date or a special record date and the relevant date for payment of
interest shall be surrendered without the coupon relating to such date for
payment of interest, and interest will not be payable in respect of the
registered Security issued in exchange for such bearer Security but will be
payable only to the holder of such coupon when due in accordance with the terms
of the Indenture. (Section 2.12.(b)) Except as provided in an applicable
Prospectus Supplement, bearer Securities will not be issued in exchange for
registered Securities.
Securities may be presented for exchange as provided above, and registered
Securities (other than a global Security) may be presented for registration of
transfer (with the form of transfer endorsed thereon duly executed), at the
office of the registrar or at the office of any co-registrar appointed by the
Company for such purpose with respect to any series of Securities and referred
to in an applicable Prospectus Supplement, without service charge and upon
payment of any taxes and other governmental charges as described in the
Indenture. (Sections 2.04. and 2.12.(c)) Such transfer or exchange will be
effected upon the registrar or co-registrar, as the case may be, being
satisfied with the documents of title and identity of the person making the
request. The Company has initially appointed the Trustee as registrar under the
Indenture. If a Prospectus Supplement refers to any co-registrars (in addition
to the registrar) initially appointed by the Company with respect to any series
of Securities, the Company may at any time terminate the appointment of any
such co-registrar, except that, if Securities of a series are issuable only as
registered Securities, the Company will be required to maintain a registrar for
such series. The Company may at any time designate additional co-registrars
with respect to any series of Securities. (Section 2.04.)
Neither the Company nor the registrar shall be required (i) to issue,
register the transfer of or exchange Securities of any series for the period of
15 days immediately preceding the selection of any such Securities to be
redeemed or (ii) to register the transfer of or exchange Securities of any
series selected, called or being called for redemption as a whole or the
portion being redeemed of any such Securities selected, called or being called
for redemption in part. (Section 2.12.(d))
Payment and Paying Agents
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of (i) principal of (and premium, if any, on) registered Securities will be
paid only against presentation and surrender thereof at the office of the
paying agent (as defined below) in New York, New York, or, at the option of the
holder, at the corporate trust office of the Trustee unless the Company shall
have otherwise instructed the Trustee and (ii) interest, if any, on registered
Securities (other than a global Security) may be paid on the interest payment
date for such Securities to the holder thereof at the close of business on the
relevant record date specified in the Securities by check mailed to such
holder's address as it appears on the register for such Securities. (Section
2.05.(b))
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of (i) principal of (and premium, if any, on) bearer Securities will be paid
only against presentation and surrender thereof, (ii) interest, if any, on
bearer Securities will be paid only against presentation and surrender of the
coupons for such interest installments as are evidenced thereby as they mature
and (iii) original issue discount (as defined in the Code), if any, on bearer
Securities will be paid only against presentation and surrender of such
Securities (and in either case, (ii) or (iii), at the office of the paying
agent located outside of the United States, unless the Company shall have
otherwise instructed the Trustee in writing). If at the time that payment of
principal of (and premium, if any, on), interest, if any, or original issue
discount, if any, on a bearer Security or coupon shall become due, the payment
so payable at the office or offices of all paying agents outside the United
States is illegal or effectively precluded because of the imposition of
exchange controls or other similar restrictions on the payment of such amount
in United States
5
<PAGE>
currency, then the Company may instruct the Trustee to make such payments at
the office of the paying agent located in the United States. (Section 2.05.(c))
No payment of interest on a bearer Security will be made unless on the earlier
of the date of the first such payment by the Company or the delivery by the
Company of the bearer Security in definitive form (including interests in a
permanent global Security) (the "Certification Date"), a written certificate in
the form and to the effect described under "Denominations, Registration of
Transfer and Exchange" is provided to the Trustee. (Section 2.08.)
The Company shall maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities which are issuable solely as
registered Securities may be presented for payment ("paying agent"). With
respect to any series of Securities issued in whole or in part as bearer
Securities, the Company shall maintain one or more paying agents located
outside the United States and shall maintain such paying agents for a period of
two years after the principal of such bearer Securities has become due and
payable. During any period thereafter for which it is necessary in order to
conform to United States tax laws or regulations, the Company will maintain a
paying agent outside the United States to which the bearer Securities (or
coupons appertaining thereto) may be presented for payment. The Company may
appoint one or more additional paying agents and may terminate the appointment
of any paying agent at any time upon written notice. The Company initially
appoints the Trustee as paying agent. (Section 2.04.)
Global Securities
The Securities of a series may be issued in whole or in part in the form
of one or more global Securities that will be deposited with or on behalf of a
depositary identified in the Prospectus Supplement relating to such series.
Global Securities may be issued in either registered or bearer form and in
either temporary or permanent form. (Section 2.01.)
The specific terms of the depositary arrangement with respect to any
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will
apply to all depositary arrangements.
Unless otherwise specified in an applicable Prospectus Supplement,
Securities which are to be represented by a global Security in registered form
to be deposited with or on behalf of a depositary will be registered in the
name of such depositary or its nominee. Upon the issuance of a global Security
in registered form, the depositary for such global Security will credit the
respective principal amounts of the Securities represented by such global
Security to the accounts of institutions that have accounts with such
depositary or its nominee ("participants"). The accounts to be credited shall
be designated by the underwriters or agents of such Securities or by the
Company, if such Securities are offered and sold directly by the Company.
Ownership of beneficial interests in such global Securities will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests by participants in such global Securities will be shown
on, and the transfer of that ownership interest will be effected only through,
records maintained by the depositary or its nominee for such global Security.
Ownership of beneficial interests in global Securities by persons that hold
through participants will be shown on, and the transfer of that ownership
interest within such participant will be effected only through, records
maintained by such participant. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a global Security.
So long as the depositary for a global Security in registered form, or its
nominee, is the registered owner of such global Security, such depositary or
such nominee, as the case may be, will be considered the sole owner or holder
of the Securities represented by such global Security for all purposes under
the Indenture. Except as set forth below, owners of beneficial interests in
such global Securities will not be entitled to have Securities of the series
represented by such global Security registered in their names, will not receive
or be entitled to receive physical delivery of Securities of such series in
definitive form and will not be considered the owners or holders thereof under
the Indenture.
Payment of principal of, premium, if any, and any interest on Securities
registered in the name of or held by a depositary or its nominee will be made
to the depositary or its nominee, as the case may be, as the registered owner
or the holder of the global Security. None of the Company, the Trustee, any
paying agent or the registrar for such Securities shall owe any duty or
obligation to any beneficial owner of any Security or have any responsibility
or liability for any
6
<PAGE>
aspect of the records or notices relating to or payments made on account of
beneficial ownership interests in a global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests. (Section 2.07.(c))
The Company expects that the depositary for a permanent global Security in
registered form, upon receipt of any payment of principal, premium or interest
in respect of a permanent global Security, will credit immediately
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such global Security
as shown on the records of such depositary. The Company also expects that
payments by participants to owners of beneficial interests in such global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with Securities held
for the accounts of customers in bearer form or registered in "street name",
and will be the responsibility of such participants.
A global Security in registered form may not be transferred except as a
whole by the depositary for such global Security to a nominee of such
depositary or by a nominee of such depositary to such depositary or another
nominee of such depositary or by such depositary or any such nominee to a
successor of such depositary or a nominee of such successor. If a depositary
for a permanent global Security in registered form is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days, the Company will issue Securities in definitive
registered form in exchange for the global Security or Securities representing
such Securities. In addition, the Company may at any time and in its sole
discretion determine not to have any Securities in registered form represented
by one or more global Securities and, in such event, will issue Securities in
definitive form in exchange for all of the global Securities representing such
Securities. Further, if the Company so specifies with respect to the Securities
of a series, an owner of a beneficial interest in a global Security
representing Securities of such series may, on terms acceptable to the Company
and the depositary for such global Security, receive Securities of such series
in definitive form. In any such instance, an owner of a beneficial interest in
a global Security will be entitled to physical delivery in definitive form of
Securities of the series represented by such global Security equal in principal
amount to such beneficial interest and to have such Securities registered in
its name (if the Securities of such series are issuable as registered
Securities). Securities of such series so issued in definitive form will be
issued as either registered or bearer Securities if the Securities of such
series are issuable in either form. (Section 2.12.) See, however, "Limitation
on Issuance of Bearer Securities" below for a description of certain
restrictions on the issuance of a bearer Security in definitive form in
exchange for an interest in a global Security.
Bearer Debt Securities. If so specified in an applicable Prospectus
Supplement, pending the availability of a permanent global Security, all or any
portion of the Securities of a series which may be issuable as bearer
Securities will initially be represented by one or more temporary global
Securities, without interest coupons, to be delivered to a depositary
designated in the applicable Prospectus Supplement, for the benefit of Morgan
Guaranty Trust Company of New York, Brussels office, as operator of the
Euro-clear System ("Euro-clear") and Centrale de Livraison de Valeurs
Mobilieres, S.A. ("CEDEL, S.A.") and for credit to the designated accounts.
The interests of the beneficial owner or owners in a temporary global
Security in bearer form will be exchangeable for definitive Securities
(including interests in a permanent global Security in bearer form),
representing Securities having the same interest rate and stated maturity, but
only upon written certification in the form and to the effect described under
"Denominations, Registration of Transfer and Exchange" unless such
certification has been provided on an earlier interest payment date. The
beneficial owner of a Security represented by a temporary global Security in
bearer form or a permanent global Security in bearer form may, on or after the
applicable exchange date and upon 30 days' written notice to the Trustee or the
global exchange agent given through Euro-clear or CEDEL, S.A., exchange its
interest for definitive bearer Securities or, if specified in an applicable
Prospectus Supplement, definitive registered Securities of any authorized
denomination. No bearer Security delivered in exchange for a portion of a
temporary global Security or a permanent global Security shall be mailed or
otherwise delivered to any location in the United States. (Section 2.08.)
Unless otherwise specified in an applicable Prospectus Supplement,
interest in respect of any portion of a temporary global Security in bearer
form payable in respect of an interest payment date occurring prior to the
applicable exchange date will be paid to each of Euro-clear and CEDEL, S.A.
with respect to the portion of the temporary global Security in bearer form
held for its account, but only upon receipt by the Trustee or the global
exchange agent in each case of written certification, in the form and to the
effect described under "Denominations, Registration of Transfer and Exchange".
Each of Euro- clear and CEDEL, S.A. will undertake in such circumstances
7
<PAGE>
to credit such interest received by it in respect of a temporary global
Security in bearer form to the respective accounts for which it holds such
temporary global Security in bearer form as of the relevant interest payment
date.
Negative Pledge Covenants
If at any time the Company mortgages, pledges or otherwise subjects to any
lien the whole or any part of any property or assets now owned or hereafter
acquired by it, except as hereinafter provided, the Company will secure the
outstanding Securities, and any other obligations of the Company which may then
be outstanding and entitled to the benefit of a covenant similar in effect to
this covenant, equally and ratably with the indebtedness or obligations secured
by such mortgage, pledge or lien, for as long as any such indebtedness or
obligation is so secured. The foregoing covenant does not apply to the
creation, extension, renewal or refunding of purchase-money mortgages or liens,
or to the making of any deposit or pledge to secure public or statutory
obligations or with any governmental agency at any time required by law in
order to qualify the Company to conduct its business or any part thereof or in
order to entitle it to maintain self-insurance or to obtain the benefits of any
law relating to workmen's compensation, unemployment insurance, old age
pensions or other social security, or with any court, board, commission or
governmental agency as security incident to the proper conduct of any
proceeding before it. Nothing contained in the Indenture prevents a person
directly or indirectly controlling or controlled by, or under direct or
indirect common control with, the Company from mortgaging, pledging or
subjecting to any lien any property or assets, whether or not acquired from the
Company. (Section 4.02.)
Amendment and Waiver
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented by the Company and the Trustee with the consent of the
holders of a majority in principal amount of the outstanding Securities of each
series affected by the amendment or supplement (with each series voting as a
class), or compliance with any provision may be waived with the consent of the
holders of a majority in principal amount of the outstanding Securities of each
series affected by such waiver (with each series voting as a class). However,
without the consent of each Securityholder affected, an amendment or waiver may
not (i) reduce the amount of Securities whose holders must consent to an
amendment or waiver; (ii) change the rate of or change the time of payment of
interest on any Security; (iii) change the principal of or change the fixed
maturity of any Security; (iv) waive a default in the payment of the principal
of or interest on any Security; (v) make any Security payable in money other
than that stated in the Security; or (vi) impair the right to institute suit
for the enforcement of any payment on or with respect to any Security. (Section
9.02.) The Indenture may be amended or supplemented without the consent of any
Securityholder (i) to cure any ambiguity, defect or inconsistency in the
Indenture or in the Securities of any series; (ii) to provide for the
assumption of all the obligations of the Company under the Securities and any
coupons related thereto and the Indenture by any corporation in connection with
a merger, consolidation, transfer or lease of the Company's property and assets
substantially as an entirety, as provided for in the Indenture; (iii) to
provide for uncertificated Securities in addition to or in place of
certificated Securities; (iv) to make any change that does not adversely affect
the rights of any Securityholder; (v) to provide for the issuance of and
establish the form and terms and conditions of a series of Securities or to
establish the form of any certifications required to be furnished pursuant to
the terms of the Indenture or any series of Securities; or (vi) to add to
rights of Securityholders. (Section 9.01.)
Successor Entity
The Company may not consolidate with or merge into, or transfer or lease
its property and assets substantially as an entirety to, another entity unless
the successor entity is a corporation and assumes all the obligations of the
Company under the Securities and any coupons related thereto and the Indenture.
Thereafter all such obligations of the Company terminate. (Section 5.01.)
Events of Default
The following events are defined in the Indenture as "Events of Default"
with respect to a series of Securities: (i) default in the payment of interest
on any Security of such series for 90 days; (ii) default in the payment of the
principal of any Security of such series; (iii) failure by the Company for 90
days after notice to it to comply with any of its other agreements in the
Securities of such series, in the Indenture or in any supplemental indenture;
and (iv) certain events of bankruptcy or insolvency. (Section 6.01.) If an
Event of Default occurs with respect to the
8
<PAGE>
Securities of any series and is continuing, the Trustee or the holders of at
least 25% in principal amount of all of the outstanding Securities of that
series may declare the principal (or, if the Securities of that series are
original issue discount Securities, such portion of the principal amount as may
be specified in the terms of that series) of all the Securities of that series
to be due and payable. Upon such declaration, such principal (or, in the case
of original issue discount Securities, such specified amount) shall be due and
payable immediately. (Section 6.02.)
Securityholders may not enforce the Indenture or the Securities, except as
provided in the Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Securities. (Section 6.06.) Subject to
certain limitations, holders of a majority in principal amount of the
Securities of each series affected (with each series voting as a class) may
direct the Trustee in its exercise of any trust power. (Section 6.05.) The
Trustee may withhold from Securityholders notice of any continuing default
(except a default in payment of principal or interest) if it determines that
withholding notice is in their interests. (Section 7.05.)
Concerning The Trustee
The Company maintains banking relationships in the ordinary course of
business with the Trustee and certain of its affiliates. The Trustee also
serves as trustee for the Company's 6 1/4% Notes, due December 15, 1997, Five
Year 5.05% Notes, due October 1, 1998, Thirty-Eight Year 4 5/8% Debentures, due
April 1, 1999, Forty Year 4 1/2% Debentures, due July 1, 2002, Ten Year 6 1/4%
Notes, due March 15, 2003, Forty Year 4 5/8% Debentures, due July 1, 2005, and
Thirty Year 6 7/8% Debentures, due October 1, 2023.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In compliance with United States federal tax laws and regulations, bearer
Securities may not be offered or sold during the restricted period (as defined
under "Description of Securities--Denominations, Registration of Transfer and
Exchange"), or delivered in definitive form in connection with a sale during
the restricted period, in the United States or to a United States person (each
as defined below), except to the extent permitted under Section
1.163-5(c)(2)(i)(D) of the United States Treasury Regulations (the "D Rules").
Any underwriters, agents and dealers participating in the offering of
Securities must agree not to offer or sell bearer Securities in the United
States or to United States persons, except to the extent permitted under the D
Rules, nor deliver bearer Securities within the United States.
Bearer Securities and their interest coupons will bear a legend
substantially to the following effect: "Any United States person who holds this
obligation will be subject to limitations under the United States income tax
laws, including the limitations provided in Sections 165(j) and 1287(a) of the
Internal Revenue Code". The sections referred to in such legend provide that a
United States person, with certain exceptions, will not be entitled to deduct
any loss on bearer Securities and must treat as ordinary income any gain
realized on a sale or other disposition of bearer Securities.
Purchasers of bearer Securities may be affected by certain limitations
under United States tax laws. See "United States Taxation--Backup Withholding".
As used herein, "United States person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States and an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source, and "United States" means the United States of America (including the
States and the District of Columbia) and its possessions including Puerto Rico,
the United States Virgin Islands, Guam, American Samoa, Wake Island and the
Northern Mariana Islands.
9
<PAGE>
UNITED STATES TAXATION
THE DISCUSSION SET FORTH BELOW IS INTENDED ONLY AS A SUMMARY OF CERTAIN OF
THE UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSEQUENCES APPLICABLE TO THE
OWNERSHIP OF SECURITIES BY UNITED STATES ALIENS AND DOES NOT PURPORT TO BE A
COMPLETE ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A
DECISION TO PURCHASE SECURITIES. SUCH DISCUSSION DOES NOT ADDRESS ANY TAX
CONSEQUENCES THAT MAY BE RELEVANT TO INVESTORS THAT ARE NOT UNITED STATES
ALIENS OR ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCALITY OR
NON-UNITED STATES JURISDICTION. PROSPECTIVE INVESTORS SHOULD CONSULT THE
APPROPRIATE PROSPECTUS SUPPLEMENT FOR THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES THAT MAY BE RELEVANT TO A PARTICULAR OFFERING OF SECURITIES.
FURTHERMORE, THE DISCUSSION SET FORTH BELOW IS BASED ON THE CODE, REGULATIONS,
RULINGS AND JUDICIAL DECISIONS AS OF THE DATE HEREOF, AND SUCH AUTHORITIES MAY
BE REPEALED, REVOKED OR MODIFIED SO AS TO MAKE THE FOLLOWING ANALYSIS
INAPPLICABLE. IT IS RECOMMENDED THAT ALL PROSPECTIVE INVESTORS CONSULT THEIR
OWN TAX ADVISORS CONCERNING THE TAX CONSIDERATIONS OF THIS OFFERING.
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be required
with respect to the payment by the Company or any paying agent of
principal, premium, if any, or interest (which for purposes of this
discussion includes original issue discount) on a Security owned by a
United States Alien (as defined below), provided that, in the case of
interest (i) the beneficial owner does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of
the Company entitled to vote within the meaning of Section 871(h)(3) of the
Code and the regulations thereunder, (ii) the beneficial owner is not a
controlled foreign corporation that is related to the Company through stock
ownership and (iii) in the case of a registered Security, the beneficial
owner satisfies the statement requirement (described generally below) set
forth in Section 871(h) and Section 881(c) of the Code and the regulations
thereunder;
(b) no withholding of United States federal income tax will be required
with respect to any gain or income realized by a United States Alien upon
the sale, exchange or retirement of a Security; and
(c) a Security beneficially owned by an individual who at the time of
death is a United States Alien will not be subject to United States federal
estate tax as a result of such individual's death, provided that such
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to
vote within the meaning of Section 871(h)(3) of the Code and provided that
the interest payments with respect to such Security would not have been, if
received at the time of such individual's death, effectively connected with
the conduct of a United States trade or business by such individual.
To qualify for the exemption from withholding tax in (a)(iii) above, the
beneficial owner of a registered Security, or a financial institution holding
the Security on behalf of such owner, must provide, in accordance with
specified procedures, a paying agent of the Company with a statement to the
effect that the beneficial owner is not a United States person, citizen or
resident. Pursuant to current temporary Treasury regulations, these
requirements will be met if (1) the beneficial owner provides his name and
address and certifies, under penalties of perjury, that he is not a United
States person, citizen or resident (which certification may be made on an
Internal Revenue Service Form W-8 or a successor form) or (2) a financial
institution holding the Security on behalf of the beneficial owner certifies,
under penalties of perjury, that such statement has been received by it and
furnishes a paying agent with a copy thereof.
Payments to United States Aliens not meeting the requirements of paragraph
(a) above and thus subject to withholding of United States federal income tax
may nevertheless be exempt from such withholding if the beneficial owner of the
Security provides the Company with a properly executed (1) Internal Revenue
Service Form 1001 (or a successor form) claiming an exemption from withholding
under the benefit of a tax treaty or (2) Internal
10
<PAGE>
Revenue Service Form 4224 (or a successor form) stating that interest paid on
the Security is not subject to withholding because it is effectively connected
with the owner's conduct of a trade or business in the United States.
As used herein, "United States Alien" means any corporation, partnership,
individual or fiduciary that is, as to the United States, a foreign
corporation, a nonresident alien individual, a nonresident fiduciary of a
foreign estate or trust, or a foreign partnership one or more of the members of
which is, as to the United States, a foreign corporation, a nonresident alien
individual or a nonresident fiduciary of a foreign estate or trust.
Backup Withholding
Under certain circumstances, the Company or its paying agent will have to
report to the United States Internal Revenue Service payments of principal,
interest, original issue discount, if any, and any premium. In addition, the
Company or its paying agent may have to withhold 31% of such payments and
deposit such amounts with the Internal Revenue Service ("backup withholding").
Generally, no information reporting or backup withholding will be required
with respect to payments by the Company or a paying agent to United States
Aliens (1) if those payments are made outside of the United States on bearer
Securities or (2) on registered Securities with respect to which a statement
described in (a)(iii) above has been received and the payor does not have
actual knowledge that the beneficial owner is a United States person.
In addition, backup withholding and information reporting will not apply
if the principal of, premium, if any, or interest on a Security is paid or
collected by a foreign office of a custodian, nominee or other foreign agent on
behalf of the beneficial owner of such Security, or if a foreign office of a
broker (as defined in applicable Treasury regulations) pays the proceeds of the
sale of a Security to the owner thereof. If, however, such nominee, custodian,
agent or broker is, for United States federal income tax purposes, a United
States person, a controlled foreign corporation or a foreign person that
derives 50% or more of its gross income for certain periods from the conduct of
a United States trade or business, such payments will not be subject to backup
withholding but will be subject to information reporting, unless (1) such
custodian, nominee, agent or broker has documentary evidence in its records
that the beneficial owner is not a United States person and certain other
conditions are met or (2) the beneficial owner otherwise establishes an
exemption. Temporary Treasury regulations provide that the Treasury is
considering whether backup withholding will apply with respect to such payments
of principal, premium, interest or the proceeds of a sale that are not subject
to backup withholding under the current regulations. Under proposed Treasury
regulations not currently in effect, backup withholding will not apply to such
payments absent actual knowledge that the payee is a United States person.
Principal of, premium, if any, and interest on, a Security paid to the
beneficial owner of such Security by a United States office of a custodian,
nominee or agent, or the payment by the United States office of a broker of the
proceeds of sale of such Security, will be subject to both backup withholding
and information reporting unless the beneficial owner provides a statement
described in (a)(iii) above, and the payor does not have actual knowledge that
the beneficial owner is a United States person, or otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such United States Alien's United States federal
income tax liability provided the required information is furnished to the
Internal Revenue Service.
PLAN OF DISTRIBUTION
General
The Company may sell the Securities being offered hereby: (i) directly to
purchasers, (ii) through agents, (iii) through underwriters, (iv) through
dealers or (v) through a combination of any such methods of sale.
The distribution of the Securities may be effected from time to time in
one or more transactions either: (i) at a fixed price or prices, which may be
changed, (ii) at market prices prevailing at the time of sale, (iii) at prices
related to such prevailing market prices or (iv) at negotiated prices.
Offers to purchase Securities may be solicited directly by the Company or
by agents designated by the Company from time to time. Any such agent, which
may be deemed to be an underwriter as that term is defined in the Securities
Act, involved in the offer or sale of the Securities in respect of which this
Prospectus is delivered
11
<PAGE>
will be named, and any commissions payable by the Company to such agent will be
set forth, in the Prospectus Supplement. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis
for the period of its appointment (ordinarily five business days or less).
Agents may be customers of, engage in transactions with, or perform services
for, the Company in the ordinary course of business.
If an underwriter or underwriters are utilized in the sale, the Company
will execute an underwriting agreement with such underwriters at the time of
sale to them, and the names of the underwriters and the terms of the
transactions will be set forth in the Prospectus Supplement, which will be used
by the underwriters to make resales of the Securities in respect of which this
Prospectus is delivered to the public.
If a dealer is utilized in the sale of the Securities in respect of which
this Prospectus is delivered, the Company will sell such Securities to the
dealer, as principal. The dealer may then resell such Securities to the public
at varying prices to be determined by such dealer at the time of resale.
Underwriters, dealers and agents may be customers of, engage in
transactions with, or perform services for, the Company in the ordinary course
of business. Also, underwriters, dealers, agents and other persons may be
entitled, under agreements which may be entered into with the Company, to
indemnification against, or contribution with respect to, certain civil
liabilities, including liabilities under the Securities Act.
Each underwriter, dealer and agent participating in the distribution of
any Securities that are issuable as bearer Securities will agree that it will
not offer, sell or deliver, directly or indirectly, bearer Securities in the
United States or to United States persons (other than qualifying financial
institutions) in connection with the original issuance of such Securities.
Delayed Delivery Arrangements
If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters to solicit offers by certain institutions to purchase
Securities from the Company at the public offering price set forth in the
Prospectus Supplement pursuant to Delayed Delivery Contracts (the "Contracts")
providing for payment and delivery on the date stated in the Prospectus
Supplement. Each Contract will be for an amount not less than, and unless the
Company otherwise agrees, the aggregate principal amount of Securities sold
pursuant to Contracts shall be not less nor more than, the respective amounts
stated in the Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and other institutions, but shall in all cases be subject to the
approval of the Company. Contracts will not be subject to any conditions except
that the purchase by an institution of the Securities covered by its Contract
shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject. A
commission indicated in the Prospectus Supplement will be paid to underwriters
and agents soliciting purchases of Securities pursuant to Contracts accepted by
the Company.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered are set forth in the accompanying Prospectus
Supplement.
EXPERTS
The balance sheets as of December 31, 1996 and 1995 and the statements of
income and reinvested earnings and cash flows for each of the three years in
the period ended December 31, 1996 and the related financial statement
schedule, all incorporated by reference in this prospectus, have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
LEGAL MATTERS
The legality of the Securities offered hereby will be passed upon for the
Company by Mr. Morrison DeS. Webb, Vice President and General Counsel of the
Company, and for the agents or underwriters, if any, by Simpson Thacher &
Bartlett (a partnership which includes professional corporations), 425
Lexington Avenue, New York, New York 10017. Simpson Thacher & Bartlett from
time to time has acted as counsel in certain matters for NYNEX and certain of
its subsidiaries, including the Company.
12
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$200,000,000
New England Telephone and Telegraph Company
d/b/a Bell Atlantic -- New England
Ten Year 5.875% Notes due April 15, 2009
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
Merrill Lynch & Co.
The Williams Capital Group, L.P.
Utendahl Capital Partners, L.P.
April 13, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
