Rule 424B2
Registration No. 333-45779
PROSPECTUS SUPPLEMENT
(To Prospectus Dated February 13, 1998)
$100,000,000
New York Telephone Company
d/b/a Bell Atlantic -- New York
THIRTY YEAR 6.50% DEBENTURES, DUE APRIL 15, 2028
---------------
Interest payable April 15 and October 15
---------------
Interest on the Debentures is payable on April 15 and October 15 of each year,
commencing on October 15, 1998. The Debentures will be represented by one or
more Global Debentures registered in the name of the nominee of The
Depository Trust Company ("DTC"). Beneficial interests in the
Global Debentures will be shown on, and transfers thereof
will be effected only through, records maintained by
DTC and its participants. Except as described herein,
Debentures in definitive form will not be issued.
The Debentures will be issued in denominations
of $1,000 and integral multiples thereof.
See "Certain Terms of the Debentures."
The Debentures will constitute unsecured indebtedness of the Company. The
Company's Refunding Mortgage Bonds, Series M through R, inclusive,
and V, in the aggregate principal amount of $785,000,000, are
secured by substantially all the property that the Company
now owns or hereafter acquires in the State of New York
and all securities (subject to certain exceptions)
that the Company now owns or hereafter acquires.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
---------------
PRICE 99.451% AND ACCRUED INTEREST
---------------
Underwriting
Price to Discounts and Proceeds to
Public (1) Commissions (2) Company (1) (3)
------------ --------------- ---------------
Per Debenture ......... 99.451% .363% 99.088%
Total ................. $99,451,000 $363,000 $99,088,000
- ------------
(1) Plus accrued interest from April 15, 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(3) Before deducting estimated expenses of $90,000 payable by the Company.
---------------
The Debentures are offered, subject to prior sale when, as and if accepted by
the Underwriters and subject to approval of certain legal matters by Simpson
Thacher & Bartlett, counsel for the Underwriters. It is expected that delivery
of the Debentures will be made on or about April 15, 1998 through the book-entry
facilities of DTC against payment therefor in immediately available funds.
---------------
MORGAN STANLEY DEAN WITTER
FIRST UNION CAPITAL MARKETS CORP.
April 7, 1998
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus Supplement or the Prospectus, and, if given or made, such information
or representations must not be relied upon as having been authorized. This
Prospectus Supplement and the Prospectus do not constitute an offer to sell or
the solicitation of an offer to buy any securities other than the securities
described in this Prospectus Supplement or an offer to sell or the solicitation
of an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful. Neither the delivery of this Prospectus Supplement or
the Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information contained here or therein is correct
as of any time subsequent to the date hereof.
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TABLE OF CONTENTS
Prospectus Supplement
Page
----
Use of Proceeds .......................................................... S-3
Ratio of Earnings to Fixed Charges ....................................... S-3
Recent Development ....................................................... S-3
Certain Terms of the Debentures .......................................... S-3
Underwriting ............................................................. S-4
Experts .................................................................. S-5
Prospectus
Available Information .................................................... 2
Incorporation of Documents by Reference .................................. 2
The Company .............................................................. 2
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 ..................................................... 12
Experts .................................................................. 13
Legal Matters ............................................................ 13
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE DEBENTURES.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, THE DEBENTURES IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
<PAGE>
USE OF PROCEEDS
The Company will apply the proceeds from the sale of the Debentures toward
the redemption of $150,000,000 aggregate principal amount of Refunding Mortgage
7-1/2% Bonds, Series R, due March 1, 2009, and $200,000,000 aggregate principal
amount of Forty Year 7-7/8% Debentures, due June 15, 2017.
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. The ratios of earnings to
fixed charges have been derived from audited financial statements for the years
ended December 31, 1995 through 1997 and unaudited financial statements for the
years ended December 31, 1993 and 1994.
Years Ended December 31,
-----------------------------------------------------------
1997 1996* 1995* 1994* 1993*
----------- --------- --------- --------- ---------
2.58 4.48 3.27 2.48 1.31
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.
*Revised to reflect certain reclassifications in presentation and certain
retroactive adjustments to conform the accounting methodologies of Bell Atlantic
and NYNEX as a result of their merger.
RECENT DEVELOPMENT
On April 6, 1998, the Company filed a "Pre-Filing Statement" with the New
York State Public Service Commission ("NYSPSC") setting out a series of
commitments made in anticipation of filing an application with the Federal
Communications Commission ("FCC") for authority to provide long distance
telecommunications services in New York State. The Pre-Filing Statement covers
commitments in the areas of account management for the Company's competitors;
the provision of packages of "unbundled network elements" under certain terms
and conditions; the provision of interconnection trunks and collocation
services; modifications to and third-party testing of operations support
systems; and measures to ensure that the quality of the Company's services to
competitors remains at an appropriate level following long distance entry. The
Chairman of the NYSPSC, the Assistant Attorney General of the Antitrust Division
of the U.S. Department of Justice and the Attorney General of the State of New
York have commented that if the Company fulfills these commitments, they believe
the Company should receive approval of its long distance application to be filed
with the FCC.
CERTAIN TERMS OF THE DEBENTURES
The following description of particular terms of the Debentures offered
hereby (referred to in the Prospectus as "Securities") supplements, and to the
extent inconsistent therewith, replaces, the description of the general terms
and provisions of Securities set forth in the Prospectus, to which description
reference is hereby made.
General
The Debentures will be limited to $100,000,000 aggregate principal amount
and will be issuable only in registered form under an indenture, dated as of
February 1, 1998 (the "Indenture"), from the Company to The Chase Manhattan
Bank, Trustee, which is more fully described in the accompanying Prospectus
under "Description of Securities."
The Debentures will mature on April 15, 2028. Interest on the Debentures
will be paid from April 15, 1998 and will be payable semiannually on each April
15 and October 15, commencing October 15, 1998, to the persons in whose names
the Debentures are registered at the close of business on the April 1 or October
1 prior to the payment date at the annual rate set forth on the cover page of
this Prospectus Supplement. Principal of and interest on the Debentures will be
payable at the office or agency of the Company to be maintained in New York
City, which at the date of this Prospectus Supplement is the principal corporate
trust office of the Trustee. Debentureholders may be required to surrender the
Debentures to collect principal payments. At the option of the Company, interest
on the Debentures may be paid by check mailed to the person entitled thereto at
the address of such person appearing on the register of the Debentures.
S-3
<PAGE>
The Debentures will not be redeemable prior to maturity.
The Indenture does not contain any covenants or other provisions that are
specifically intended to afford holders of the Debentures special protection in
the event of a highly leveraged reorganization, restructuring or similar
transaction involving the Company that may adversely affect holders of the
Debentures. However, any such transaction would likely require regulatory
approval.
Book-Entry System
The Notes will be issued in the form of one or more fully registered Global
Debentures (the "Global Debenture") which will be deposited with, or on behalf
of, The Depository Trust Company, New York, New York ("DTC"), and registered in
the name of DTC's nominee.
DTC has advised 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 Debentures 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 Debenture. Under the terms of the Indenture, the Company and
the Trustee will treat the persons in whose names the Notes are registered as
the owners of the Debentures for the purpose of receiving payment of principal
and interest on the Debentures and for all other purposes whatsoever. Therefore,
neither the Company, the Trustee nor any Paying Agent has any direct
responsibility or liability for the payment of principal or interest on the
Debentures to owners of beneficial interests in the Global Debenture. DTC has
advised the Company and the Trustee that its present practice is, upon receipt
of any payment of principal or interest, to immediately credit the accounts of
the Participants with such payment in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the Global Debenture as
shown on the records of DTC.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below, and each of the Underwriters has severally agreed to purchase, the
principal amount of the Debentures set forth opposite its name below.
Principal
Amount
Name of Debentures
---- -------------
Morgan Stanley & Co. Incorporated .............. $ 50,000,000
First Union Capital Markets Corp., a Division
of Wheat First Securities .................... 50,000,000
------------
Total ........................................ $100,000,000
============
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Debentures are subject to the
approval of certain legal matters by their counsel and to certain other
conditions. Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Debentures, if any are
taken.
The Underwriters propose to offer the Debentures in part directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of .30% of the principal amount of the Debentures. The
Underwriters may allow, and such dealers may reallow, a concession not to exceed
.15% of the principal amount of the Debentures to certain brokers and dealers.
After the Debentures are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the Underwriters.
S-4
<PAGE>
The Company does not intend to apply for listing of the Debentures on a
national securities exchange, but has been advised by the Underwriters that they
intend to make a market in the Debentures but they are not obligated to do so
and may discontinue market making at any time without notice. No assurance can
be given as to the liquidity of the trading market for the Debentures.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, or contribute to payments which the Underwriters may be required to
make in respect thereof.
In order to facilitate the offering of the Debentures, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Debentures. Specifically, the Underwriters may overallot in connection with
the offering, creating a short position in the Debentures for their own account.
In addition, to cover allotments or to stabilize the price of the Debentures,
the Underwriters may bid for, and purchase, the Debentures in the open market.
Finally, the underwriting syndicate may reclaim selling concessions allowed to
an underwriter or dealer for distributing the Debentures in the offering, if the
syndicate repurchases previously distributed Debentures 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 Debentures
above independent market levels. The Underwriters are not required to engage in
these activities, and may end any of these activities at any time.
Each of the Underwriters and their respective affiliates may engage in
various transactions with and perform various services for the Company in the
ordinary course of business.
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1996 and the
consolidated statements of income and reinvested earnings (accumulated deficit)
and cash flows for each of the three years in the period ended December 31, 1997
and the related consolidated 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.
S-5
<PAGE>
PROSPECTUS
$750,000,000
New York Telephone Company
d/b/a Bell Atlantic -- New York
Debt Securities
New York Telephone Company ("Company") may offer from time to time in one
or more series up to $750,000,000 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.
----------------
February 13, 1998
<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 representation 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, 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, the "Registration
Statements") 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. 1-3435) 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 Report 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, 1997, January 12, 1998 and January 20, 1998.
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).
THE COMPANY
The Company is engaged in the business of providing telecommunications
services in New York State and in a small portion of Connecticut (Greenwich and
Byram only). Since January 1, 1984, the Company has been a
2
<PAGE>
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 by AT&T of certain
portions of its 22 wholly owned operating telephone companies. Prior to its
divestiture by AT&T 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 1896 under the laws of the State of New York,
has its principal executive offices at 1095 Avenue of the Americas, New York,
NY 10036 (telephone number 212 395-2121).
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 and to refinance outstanding
long-term debt. 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:
Nine Months Years Ended December 31,
Ended ----------------------------------------------
September 30,
1997 1996* 1995* 1994* 1993* 1992*
-------------- ------- ------- ------- ------- ------
2.44 4.48 3.27 2.48 1.31 3.97
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.
*Revised to reflect certain reclassifications in presentation and certain
retroactive adjustments to conform the accounting methodologies of Bell
Atlantic and NYNEX as a result of their merger.
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 February 1,
1998 ("Indenture"), from the Company to The Chase Manhattan Bank, 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 definitions 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.
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
3
<PAGE>
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 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))
4
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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, 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), 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 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
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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 issued 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. Neither the Company, the Trustee, any
paying agent nor 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 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
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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 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 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.
Certain Covenants
The Company currently has outstanding under its Refunding Mortgage dated
October 1, 1921 ("Mortgage") between the Company and Bankers Trust Company, as
Trustee (as supplemented by 24 supplemental indentures
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confirming the lien thereof), its Refunding Mortgage Bonds, Series M through R,
inclusive, and T and V, in the aggregate principal amount of $985,000,000.
Substantially all the property that the Company now owns or hereafter acquires
in the State of New York and all securities (except as specified therein) that
the Company now owns or hereafter acquires, including securities representing
the Company's investment in Empire City Subway Company (Limited), a wholly
owned subsidiary of the Company, and in Telesector Resources Group, Inc., which
is owned by the Company and New England Telephone and Telegraph Company, are
subject to the lien of the Mortgage. As long as any Securities remain
outstanding, the Company will not issue any additional bonds under the Mortgage
except bonds issued, as provided in the Mortgage, in respect either of bonds
surrendered for transfer or exchange or for substitution for mutilated,
destroyed, lost or stolen bonds. Nothing in the Indenture prevents the Company
from subjecting any property or assets to the lien of the Mortgage, or from
taking any action that it deems necessary to comply with the Mortgage. (Section
4.02.)
As long as any Securities remain outstanding, the Company will not issue
additional funded debt securities ranking equally with or prior to the
Securities unless, on the date of the proposed issuance of the new funded debt
securities, the earnings of the Company available for payment of interest
charges during the period of any 12 consecutive calendar months out of the
preceding 15 such months were at least 1.75 times the annualized interest for
that 12-month period on the total of the funded debt securities outstanding
during such period plus the funded debt securities proposed to be issued.
"Earnings of the Company available for payment of interest charges" means
income before extraordinary items plus all (i) taxes in respect of income, (ii)
interest charges on funded debt securities and (iii) interest charges on other
indebtedness retired or to be retired by or in anticipation of funded debt
securities issued during the period or in respect of which the computation is
made. Interest charged to construction is to be includable in income. There
will not be included in annualized interest charges the interest on bonds
issued under the Mortgage or on any other funded debt securities held in any
sinking fund or on any funded debt securities retired or to be retired by or in
anticipation of funded debt securities issued during the period or in respect
of which the computation is made. "Funded debt securities" means securities
evidencing indebtedness of the Company for borrowed money maturing by its terms
more than one year after the date of the issuance of the new funded debt
securities. Any computation pursuant to this provision may, at the Company's
option, be based on consolidated figures of the Company and its consolidated
subsidiaries. (Section 4.03.)
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 heretofore and 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 by such
person from the Company. (Section 4.04.)
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 for 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
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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 holder of a Security; (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 the
rights of holders of any series of Securities. (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 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.)
Holders of Securities 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 holders of Securities 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. The Trustee also serves as trustee for the Company's
Five Year 51/4% Notes due September 1, 1998, Ten Year 57/8% Notes due September
1, 2003, Ten Year 55/8% Notes due November 1, 2003, Ten Year 61/4% Notes due
February 15, 2004, Twelve Year 6.125% Debentures, due January 15, 2010, Thirty
Year 6.70% Debentures due November 1, 2023, Thirty Year 71/4% Debentures due
February 15, 2024, Thirty-Two Year 7% Debentures due August 15, 2025, and Forty
Year 7% Debentures due December 1, 2033, all issued under an Indenture dated as
of June 1, 1993 from the Company to the Trustee. Walter V. Shipley, the
Chairman of the Board and Chief Executive Officer of the Trustee and The Chase
Manhattan Corporation, the parent of the Trustee, is a director of the Company
and Bell Atlantic. John R. Stafford, a director of the Trustee and The Chase
Manhattan Corporation, is a director of the Company and Bell Atlantic.
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
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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 Section 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 the income of which is
subject to United States federal income taxation regardless of its source, or
trust which is subject to the supervision of a court within the United States
and the control of a United States person as described in Section 7701(a)(30)
of the Code. "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.
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. OTHER SIGNIFICANT UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES THAT MAY BE RELEVANT TO A PARTICULAR OFFERING OF SECURITIES
WILL BE SET FORTH IN THE APPROPRIATE PROSPECTUS SUPPLEMENT. 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 ("OID")) 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, (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, and (iv) the beneficial owner is not a bank whose receipt of
interest on a Security is described in Section 881(c)(3)(A) of the Code;
(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
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(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
a United States trade or business of 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. Currently, 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. Under Treasury regulations
finalized in 1997 (the "Final Regulations"), the statement requirement referred
to in (a)(iii) above may also be satisfied with other documentary evidence for
interest paid after December 31, 1998 with respect to an offshore account or
through certain foreign intermediaries.
Payments to United States Aliens not meeting the requirements of paragraph
(a) above and thus subject to 30% 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 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. Under the Final Regulations, United
States Aliens will generally be required to provide Internal Revenue Service
Form W-8 in lieu of Internal Revenue Service Form 1001 and Internal Revenue
Service Form 4224, although alternative documentation may be applicable in
certain situations.
If a United States Alien is engaged in a trade or business in the United
States and premium, if any, or interest (including OID) on a Security is
effectively connected with the conduct of such trade or business, the United
States Alien, although exempt from the withholding tax discussed above, will be
subject to United States federal income tax on such interest and OID on a net
income basis in the same manner as if it were a United States person. In
addition, if such holder is a foreign corporation, it may be subject to a
branch profits tax equal to 30% of its effectively connected earnings and
profits for the taxable year, subject to adjustments. For this purpose, such
premium, if any, and interest (including OID) on a Security will be included in
such foreign corporation's earnings and profits.
Any gain or income realized upon the sale, exchange, retirement or other
disposition of a Security generally will not be subject to United States
federal income tax unless (i) such gain or income is effectively connected with
a trade or business in the United States of the United States Alien, or (ii) in
the case of a United States Alien who is an individual, such individual is
present in the United States for 183 days or more in the taxable year of such
sale, exchange, retirement or other disposition, and certain other conditions
are met.
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
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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, or, after December 31, 1998, if such
nominee, custodian, agent or broker is a foreign partnership, in which one or
more United States persons, in the aggregate, own more than 50% of the income
or capital interests in the partnership or if the partnership is engaged in a
trade or business in the United States, 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.
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 the statement
referred to 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 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.
Securities may also be offered and sold, if so indicated in the Prospectus
Supplement, in connection with a remarketing upon their purchase, in accordance
with a redemption or repayment pursuant to their terms, or otherwise, by one or
more firms ("remarketing firms"), acting as principals for their own accounts
or as agents for the Company. Any remarketing firm will be identified and the
terms of its agreement, if any, with the Company
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and its compensation will be described in the Prospectus Supplement.
Remarketing firms may be deemed to be underwriters, as that term is defined in
the Securities Act, in connection with the Securities remarketed thereby.
Underwriters, dealers, agents and remarketing firms may be customers of,
engage in transactions with, or perform services for, the Company in the
ordinary course of business. Also, underwriters, dealers, agents, remarketing
firms 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, agent and remarketing firm 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 consolidated balance sheets as of December 31, 1996 and 1995 and the
consolidated statements of income and reinvested earnings (accumulated deficit)
and cash flows for each of the three years in the period ended December 31,
1996 and the related consolidated 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 was passed upon for the
Company by Sandra DiIorio Thorn, 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 the Company and certain of its affiliates.
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