<PAGE>
As filed with the Securities and Exchange Commission on November 30, 1995
Registration No. 33-63647
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
___________________
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
PACIFIC TELESIS GROUP Nevada 94-2919931
PACIFIC TELESIS FINANCING I Delaware 94-6688509
PACIFIC TELESIS FINANCING II Delaware 94-6688510
PACIFIC TELESIS FINANCING III Delaware 94-6688511
(Exact name of Registrant as (State or other (I.R.S. Employer
specified in its Charter) Jurisdiction of Identification
Incorporation Number)
or Organization)
130 Kearny Street
San Francisco, California 94108
(415) 394-3000
(Address, including zip code, and telephone number,
including area code, of each registrant's principal
executive offices)
__________________
William E. Downing
Executive Vice President, Chief Financial Officer
& Treasurer
Pacific Telesis Group
130 Kearny Street
San Francisco, California 94108
(415) 394-3000
(Name, address, including zip code, and telephone number,
including area code, of agent for service for each registrant)
__________________
Please send copies of all communications to:
Duane G. Henry, Senior Counsel Blair W. White, Esq.
Jamie E. Chung, Esq. Pillsbury Madison & Sutro
Pacific Telesis Group P. O. Box 7880
130 Kearny Street San Francisco, California 94120
San Francisco, California 94108 (415) 983-1000
(415) 394-3535
________________________
Approximate Date of Commencement of Proposed Sale to Public:
From time to time after the effective date of the Registration
Statement, as determined by market conditions.
________________________
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
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CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Offering Aggregate Amount of
Title of Each Class Amount to Price Per Offering Registra-
of Securities to be be Regis- Unit Price tion Fee
Registered tered (1) (1)(2)(3) (1)(2)(3) (2)
___________________ _________ _________ _________ _________
Preferred Securities
of Pacific Telesis
Financing I. . . .
Preferred Securities
of Pacific Telesis
Financing II . . .
Preferred Securities
of Pacific Telesis
Financing III. . .
Subordinated Debt
Securities of Pacific
Telesis Group. . . .
Guarantees of Pre-
ferred Securities
of Pacific Telesis
Financing I,
Pacific Telesis
Financing II and
Pacific Telesis
Financing III by
Pacific Telesis
Group (4). . . .
Back-up undertakings
of Pacific Telesis
Group in connection
with Preferred Secur-
ities of Pacific
Telesis Financing
I, Pacific Telesis
Financing II and
Pacific Telesis
Financing III (4). . .
___________________________________________________________________________
Total $1,000,000,000 100% $1,000,000,000 $344,827.59
(1) Such indeterminate number of Preferred Securities of Pacific Telesis
Financing I, Pacific Telesis Financing II and Pacific Telesis Financing
III and such indeterminate principal amount of Subordinated Debt
Securities of Pacific Telesis Group as may from time to time be issued at
indeterminate prices. Subordinated Debt Securities may be issued and
sold to Pacific Telesis Financing I, Pacific Telesis Financing II and
Pacific Telesis Financing III, in which event such Subordinated Debt
Securities may later be distributed to the holders of Preferred
Securities upon a dissolution of Pacific Telesis Financing I, Pacific
Telesis Financing II or Pacific Telesis Financing III and the
distribution of the assets thereof.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457. The aggregate public offering price of the
Preferred Securities of Pacific Telesis Financing I, Pacific Telesis
Financing II and Pacific Telesis Financing III and the Subordinated Debt
Securities of Pacific Telesis Group registered hereby will not exceed
$1,000,000,000.
(3) Exclusive of accrued interest and distributions, if any.
(4) Includes the obligations of Pacific Telesis Group under the Declaration
for each Trust, the Guarantee issued with respect to Preferred Securities
issued by that Trust, the Subordinated Debt Securities purchased by that
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Trust and the Indenture, including Pacific Telesis' agreement (under
Section 4.3 of the Declaration and Section 5.1 of the Supplemental
Indenture) to pay all trust obligations other than those under the common
and preferred securities, all as described in the Registration Statement.
No separate consideration will be received for the Guarantees and these
obligations.
The Registrants hereby amend this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrants shall
file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
==============================================================================
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 30, 1995
PROSPECTUS SUPPLEMENT
(To Prospectus Dated _____, 1995)
_,000,000 Preferred Securities
Pacific Telesis Financing I
____% Trust Originated Preferred Securities(sm) ("TOPrS(sm)")
(Liquidation amount $25 per Preferred Security)
guaranteed to the extent set forth herein by
PACIFIC TELESIS GROUP
_______________
The ____% Trust Originated Preferred Securities (the "Preferred Securities")
offered hereby represent preferred undivided beneficial interests in the
assets of Pacific Telesis Financing I, a statutory business trust formed under
the laws of the State of Delaware ("Pacific Telesis Financing" or the
"Trust"). Pacific Telesis Group, a Nevada corporation ("Pacific Telesis" and,
together with its subsidiaries, the "Company"), will directly or indirectly
own all the common securities (the "Common Securities" and, together with the
Preferred Securities, the "Trust Securities") representing undivided
beneficial interests in the assets of Pacific Telesis Financing. Pacific
Telesis Financing exists for the sole purpose of issuing the Preferred
Securities and Common Securities and investing the proceeds thereof in an
equivalent amount of_____% Subordinated Deferrable Interest Debentures due
__________, 2025 ("Subordinated Debentures") of Pacific Telesis. Upon a
Declaration Event of Default (as defined herein), the holders of Preferred
Securities will have a preference over the holders of the Common Securities
with respect to payments in respect of distributions and payments upon
redemption, liquidation and otherwise.
______________________(continued on next page)
SEE "RISK FACTORS" ON PAGE __ FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND CIRCUMSTANCES
DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED SECURITIES
MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
OF SUCH DEFERRAL.
The Preferred Securities have been approved for listing on the New York Stock
Exchange, Inc. (the "New York Stock Exchange"). Trading of the Preferred
Securities on the New York Stock Exchange is expected to commence within a 30-
day period after the initial delivery of the Preferred Securities. See
"Underwriting."
____________________
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.
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Initial Proceeds to
Public Pacific
Offering Underwriting Telesis Financing
Price (1) Commission (2) (3)(4)
Per Preferred Security. . $25.00 (3) $25.00
Total . . . . . . . . . . $___,000,000 (3) $___,000,000
(1) Plus accrued distributions, if any, from ____________.
(2) Pacific Telesis Financing and Pacific Telesis have agreed to indemnify
the several Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in Subordinated Debentures, Pacific Telesis
has agreed to pay to the Underwriters as compensation ("Underwriters'
Compensation") for their arranging the investment therein of such
proceeds $_____ per Preferred Security (or $_________ in the aggregate);
provided that, such compensation for sales of 10,000 or more Preferred
Securities to a single purchaser will be $___ per Preferred Security.
Therefore, to the extent of such sales, the actual amount of
Underwriters' Compensation will be less than the aggregate amount
specified in the preceding sentence. See "Underwriting."
(4) Expenses of the offering which are payable by Pacific Telesis are
estimated to be $955,000.
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Preferred Securities will be made only in book-
entry form through the facilities of The Depository Trust Company, on or about
______, 1995.
_______________________
Merrill Lynch & Co.
_______________________
The date of this Prospectus Supplement is ______, 1995.
(sm) "Trust Originated Preferred Securities" and "TOPrS" are
service marks of Merrill Lynch & Co., Inc.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of ____% of the liquidation amount of $25 per
Preferred Security, accruing from the date of original issuance and payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of
each year, commencing ______, 1995 ("distributions"). The distribution rate
and the distribution and other payment dates for the Preferred Securities will
correspond to the interest rate and interest and other payment dates on the
Subordinated Debentures, which will be the sole assets of Pacific Telesis
Financing. As a result, if principal or interest is not paid on the
Subordinated Debentures, no amounts will be paid on the Preferred Securities.
The payment of distributions out of moneys held by Pacific Telesis Financing
and payments on liquidation of Pacific Telesis Financing or the redemption of
Preferred Securities, as set forth below, are fully and unconditionally
guaranteed by Pacific Telesis (the "Guarantee") if and to the extent the Trust
has funds available therefor. Pacific Telesis believes that its obligations
under the Guarantee, together with its other obligations described herein, are
equivalent to a full and unconditional guarantee by Pacific Telesis of
payments due on the Preferred Securities. See "Effect of Obligations Under
the Subordinated Debentures and the Guarantee" herein and "Description of
the Guarantees" in the accompanying prospectus (the "Prospectus ). If Pacific
Telesis does not make principal or interest payments on the Subordinated
Debentures, including as a result of Pacific Telesis' election to extend the
interest payment period on the Subordinated Debentures as described below,
Pacific Telesis Financing will not have sufficient funds to make distributions
on the Preferred Securities, in which event, the Guarantee will not apply to
such distributions until Pacific Telesis has made such principal or interest
payments. The obligations of Pacific Telesis under the Subordinated
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Debentures are unsecured and will be subordinate and junior in right of
payment, to the extent set forth herein, to all existing and future Senior
Indebtedness (as defined herein) of Pacific Telesis and will be effectively
subordinated to all existing and future liabilities and obligations of Pacific
Telesis' subsidiaries and partnerships. At September 30, 1995, the aggregate
amount of Senior Indebtedness and liabilities and obligations of Pacific
Telesis' subsidiaries and partnerships that would have effectively ranked
senior to the Subordinated Debentures was approximately $13,025 million.
Pacific Telesis has the right to defer payments of interest on the
Subordinated Debentures by extending the interest payment period on the
Subordinated Debentures at any time for up to 20 consecutive quarters (each an
"Extension Period") provided that no Extension Period may extend beyond the
Maturity Date (as defined herein). If interest payments are so deferred,
distributions on the Preferred Securities will also be deferred. During such
Extension Period, distributions will continue to accrue with interest thereon
(to the extent permitted by applicable law) at an annual rate of ____% per
annum compounded quarterly, and during any Extension Period, holders of
Preferred Securities will be required to include deferred interest income in
their gross income for United States federal income tax purposes in advance of
receipt of the cash distributions with respect to such deferred interest
payments. There could be multiple Extension Periods of varying lengths
throughout the term of the Subordinated Debentures. See "Risk Factors --
Option to Extend Interest Payment Period," "Risk Factors -- Tax Consequences
of Extension of Interest Payment Period," "Description of the Subordinated
Debentures -- Option to Extend Interest Payment Period," and "United States
Federal Income Taxation -- Original Issue Discount."
The Subordinated Debentures are redeemable by Pacific Telesis, in whole or in
part, from time to time, on or after ______, 2000, or at any time in certain
circumstances upon the occurrence of a Tax Event (as defined herein). If
Pacific Telesis redeems Subordinated Debentures, Pacific Telesis Financing
must redeem Trust Securities having an aggregate liquidation amount equal to
the aggregate principal amount of the Subordinated Debentures so redeemed at
$25 per Trust Security plus accrued and unpaid distributions thereon to the
date fixed for redemption (the "Redemption Price"). See "Description of the
Preferred Securities -- Mandatory Redemption." The outstanding Preferred
Securities will be redeemed upon maturity of the Subordinated Debentures. The
Subordinated Debentures mature on ______, 2025, but Pacific Telesis may extend
the maturity date once for up to an additional 19 years, provided certain
financial conditions are met. See "Description of the Subordinated Debentures
- -- Option to Extend Maturity Date." In addition, upon the occurrence of a
Special Event (as defined herein) arising from a change in law or a change in
legal interpretation, unless the Subordinated Debentures are redeemed in the
limited circumstances described herein, Pacific Telesis Financing shall be
dissolved, with the result that the Subordinated Debentures will be
distributed to the holders of the Preferred Securities and the Common
Securities, on a pro rata basis, in lieu of any cash distribution. In the
case of a Special Event that is a Tax Event, Pacific Telesis will have the
right in certain circumstances to redeem the Subordinated Debentures, which
would result in the redemption by Pacific Telesis Financing of the Trust
Securities in the same amount on a pro rata basis. If the Subordinated
Debentures are distributed to the holders of the Preferred Securities, Pacific
Telesis will use its best efforts to have the Subordinated Debentures listed
on the New York Stock Exchange or on such other exchange as the Preferred
Securities are then listed. See "Description of the Preferred Securities --
Special Event Redemption or Distribution."
In the event of the involuntary or voluntary dissolution, winding up or
termination of Pacific Telesis Financing, the holders of the Preferred
Securities will be entitled to receive for each Preferred Security a
liquidation amount of $25 plus accrued and unpaid distributions thereon
(including interest thereon) to the date of payment, unless, in connection
with such dissolution, the Subordinated Debentures are distributed to the
holders of the Preferred Securities. See "Description of the Preferred
Securities --Liquidation Distribution Upon Dissolution."
_____________________
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF
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COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
8
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<TABLE>
PACIFIC TELESIS GROUP - SUMMARY FINANCIAL DATA
The summary financial data below should be read in conjunction with the Company's Financial Statements and notes thereto
included in the 1994 Form 10-K and the 1995 Third Quarter Form 10-Q, which are incorporated by reference into this Prospectus.
See "Incorporation of Certain Documents by Reference" in the accompanying Prospectus. The summary financial data for the five
years ended December 31, 1994, are derived from financial statements that have been audited by Coopers & Lybrand L.L.P.,
independent certified public accountants. See "Independent Public Accountants" in the accompanying Prospectus. The summary
financial data for the nine months ended September 30, 1995 and 1994 are derived from financial statements that are unaudited,
but which, in the opinion of management, include all adjustments necessary for a fair presentation of the financial position
and results of operations for these periods.
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
---------------- -------------------------------------------------
FINANCIAL DATA 1995 1994 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Results of Operations:
(Dollars in millions, except per share amounts)
Operating revenues....................................... $ 6,760 $ 6,879 $ 9,235 $ 9,244 $ 9,108 $ 9,168 $ 9,052
Operating expenses....................................... 5,222 5,181 7,041 8,582 7,025 7,217 6,989
Operating income......................................... 1,538 1,698 2,194 662 2,083 1,951 2,063
Income from continuing operations........................ 817 874 1,136 191 1,173 931 981
Income (loss) from spun-off operations................... - 23 23 29 (31) 84 49
Cumulative effect of accounting changes.................. - - - (1,724) - - -
Extraordinary item, net of tax........................... (3,360) - - - - - -
Net income (loss)........................................ $(2,543) $ 897 $ 1,159 $(1,504) $ 1,142 $ 1,015 $ 1,030
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) Per Share:
Income from continuing operations........................ $ 1.92 $ 2.06 $ 2.68 $ 0.46 $ 2.91 $ 2.37 $ 2.47
Income (loss) from spun-off operations................... - 0.06 0.05 0.07 (0.08) 0.21 0.12
Cumulative effect of accounting changes.................. - - - (4.16) - - -
Extraordinary item....................................... (7.90) - - - - - -
Net income (loss)........................................ $ (5.98) $ 2.12 $ 2.73 $ (3.63) $ 2.83 $ 2.58 $ 2.59
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets*............................................ $15,601 $20,293 $20,139 $23,437 $21,849 $21,226 $21,051
Net assets of spun-off operations........................ - - - $ 2,874 $ 745 $ 663 $ 634
Shareowners' equity...................................... $ 2,173 $ 5,180 $ 5,233 $ 7,786 $ 8,251 $ 7,729 $ 7,401
(CONTINUED ON NEXT PAGE)
9
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PACIFIC TELESIS GROUP - SUMMARY FINANCIAL DATA
(Continued)
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
-------------------- ------------------------------------------------
FINANCIAL DATA (CONTINUED) 1995 1994 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Continuing Operations**:
Return on equity (%)..................................... (64.5) 22.7 22.0 -26.3 16.1 13.4 14.2
Return on capital (%).................................... (26.8) 14.5 14.3 -8.6 12.0 10.6 11.2
Debt maturing within one year............................ $ 881 $ 218 $ 246 $ 595 $ 1,158 $ 951 $ 810
Long-term obligations.................................... $ 5,232 $ 4,934 $ 4,897 $ 5,129 $ 5,207 $ 5,395 $ 5,496
Debt ratio (%)........................................... 73.8 49.9 49.6 53.8 45.9 47.3 48.2
Capital expenditures..................................... $ 2,019 $ 1,084 $ 1,684 $ 1,886 $ 1,852 $ 1,737 $ 1,760
Cash from operating activities........................... $ 1,982 $ 2,162 $ 2,947 $ 2,727 $ 2,807 $ 2,439 $ 2,542
OPERATING DATA
Employees................................................ 49,976 53,162 51,590 55,355 57,023 59,037 62,979
Toll messages (millions)***.............................. 3,639 3,355 4,485 4,272 4,158 4,092 4,174
Carrier access minutes-of-use (millions)................. 44,083 39,968 53,486 49,674 46,800 43,872 41,383
Customer switched access lines in service (thousands).... 15,640 15,223 15,298 14,873 14,551 14,262 13,868
Average shares outstanding(thousands).................... 425,184 423,937 423,969 414,171 402,977 400,023 403,569
Number of common shareowners............................. 733,983 773,447 764,749 804,024 881,607 919,796 1,005,548
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
1) Effective April 1, 1994, the Company spun off to its shareowners its domestic and international cellular, paging, and
other wireless operations in a one-for-one stock distribution of its 86 percent interest in these operations. As a
result, the Company's total assets and shareowners' equity were each reduced by $2.9 billion during 1994. The
Company's previous interests in the operating results and net assets of "spun-off operations" are classified
separately and excluded from the Company's revenues, expenses, and other amounts presented for "continuing
operations."
(CONTINUED ON NEXT PAGE)
10
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PACIFIC TELESIS GROUP - SUMMARY FINANCIAL DATA
(Continued)
Results for 1993, 1991, and 1990 reflect restructuring charges which reduced income from continuing operations by $861,
$122, and $65 million for each respective year, and related per share amounts by $2.08, $.30, and $.16 for each respective
year. Results for 1993 also reflect the cumulative after-tax effects of applying new accounting rules for postretirement
and postemployment benefits to prior years.
2) Effective third quarter 1995, management determined that it is no longer appropriate for Pacific Bell to continue to use
the special accounting rules of Statement of Financial Accounting Standards No. 71 (SFAS 71), "Accounting for the
Effects of Certain Types of Regulation" for entities subject to traditional regulation. Management's decision for
Pacific Bell to change to the more general accounting rules used by competitive enterprises was based upon assessing the
emerging competitive environment in California. As a result, the Company recorded during the third quarter a non-cash,
extraordinary charge of $3.4 billion, or $7.86 per share, which is net of a deferred income tax benefit of $2.4 billion.
The telephone plant write-down portion of the charge reflects a pre-tax increase in Pacific Bell's accumulated
depreciation reserve of approximately $4.8 billion. The extraordinary charge also includes a pre-tax write-off of
approximately $1 billion to eliminate Pacific Bell's regulatory assets and liabilities. As a result of the
extraordinary charge, the Company's shareowners' equity was reduced by $3.4 billion. The discontinuance of SFAS 71 is
not expected to have a material effect on future earnings.
* Includes net assets of spun-off operations for years prior to 1994.
** Excludes spun-off operations.
*** Toll messages include Message Telecommunications Services, Optional Calling Plans, WATS, and Terminating 800 messages.
Pacific Bell expanded its local calling areas effective June 1991, which reduced subsequent toll message volumes. As a
result, comparisons of 1992 and subsequent years' volumes with prior year volumes are not meaningful.
</FN>
</TABLE>
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The following information concerning the Company, Pacific Telesis Financing,
the Preferred Securities, the Guarantee and the Subordinated Debentures
supplements, and should be read in conjunction with, the information contained
in the accompanying Prospectus. Capitalized terms used in this Prospectus
Supplement have the same meanings as in the accompanying Prospectus.
PACIFIC TELESIS GROUP
The Company was incorporated in 1983 under the laws of the State of Nevada and
has its principal executive offices at 130 Kearny Street, San Francisco,
California 94108 (telephone number (415) 394-3000). The Company is one of
seven regional holding companies formed in connection with the 1984
divestiture by AT&T Corp. of its 22 wholly-owned operating telephone companies
("BOCs") pursuant to a consent decree settling antitrust litigation (the
"Consent Decree") approved by the United States District Court for the
District of Columbia, which has retained jurisdiction over the interpretation
and enforcement of the Consent Decree.
The Company includes a holding company, Pacific Telesis; two BOCs, Pacific
Bell and Nevada Bell; and certain diversified subsidiaries. The holding
company provides financial, strategic planning, legal and general
administrative functions on its own behalf and on behalf of its subsidiaries.
Pacific Bell and its wholly-owned subsidiaries, Pacific Bell Directory,
Pacific Bell Information Services and Pacific Bell Mobile Services, and Nevada
Bell provide a variety of communications and information services in
California and Nevada. These services include: (1) dialtone and usage
services including local service (both exchange and private line), message
toll services within a service area, Wide Area Toll Service (WATS) / 800
services within a service area, Centrex service (a central office-based
switching service) and various special and custom calling services; (2)
exchange access to interexchange carriers and information service providers
for the origination and termination of switched and non-switched (private
line) voice and data traffic; (3) billing services for interexchange carriers
and information service providers; (4) various operator services; (5)
installation and maintenance of customer premises wiring; (6) public
communications services; (7) directory publishing; and (8) selected
information services, such as voice mail and electronic mail. Pacific Bell
Mobile Services was formed in 1994 to offer personal communications services
and other mobile telecommunications services and has not yet commenced
service.
PACIFIC TELESIS FINANCING I
Pacific Telesis Financing is a statutory business trust formed under Delaware
law pursuant to (i) a declaration of trust executed by Pacific Telesis, as
sponsor (the "Sponsor"), and the trustees of Pacific Telesis Financing (the
"Pacific Telesis Trustees") and (ii) the filing of a certificate of trust with
the Secretary of State of the State of Delaware on October 17, 1995. The
declaration of trust will be amended and restated in its entirety (as so
amended and restated, the "Declaration") substantially in the form filed as an
exhibit to the Registration Statement of which this Prospectus Supplement
forms a part. The Declaration will be qualified as an indenture under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). Upon
issuance of the Preferred Securities, the purchasers thereof will own all of
the Preferred Securities. Pacific Telesis will directly or indirectly acquire
Common Securities in an aggregate liquidation amount equal to 3% of the total
capital of Pacific Telesis Financing and will own all of the issued and
outstanding Common Securities. Pacific Telesis Financing exists for the
exclusive purposes of (i) issuing the Trust Securities representing undivided
beneficial interests in the assets of the Trust, (ii) investing the gross
proceeds of the Trust Securities in the Subordinated Debentures and (iii)
engaging in only those other activities necessary or incidental thereto. The
Trust has a term of 55 years, but may be terminated earlier as provided in the
Declaration.
Pursuant to the Declaration, the number of Pacific Telesis Trustees will
initially be five. Three of the Pacific Telesis Trustees (the "Regular
Trustees") will be persons who are employees or officers of or who are
affiliated with Pacific Telesis. The fourth trustee will be a financial
institution unaffiliated with Pacific Telesis that will serve as property
trustee under the Declaration and as indenture trustee for the purposes of the
Trust Indenture Act (the "Property Trustee"). The fifth trustee will be a
12
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natural person who is a resident of the State of Delaware or a legal entity
which maintains a principal place of business in the State of Delaware (the
"Delaware Trustee"). The First National Bank of Chicago will act as the
Property Trustee and Michael J. Majchrzak, an employee of an affiliate of the
Property Trustee and a Delaware resident, will act as the Delaware Trustee, in
each case until removed or replaced by the holder of the Common Securities.
The First National Bank of Chicago will also act as indenture trustee under
the Guarantee (the "Guarantee Trustee"). See "Description of the Guarantees"
in the accompanying Prospectus.
The Property Trustee will hold title to the Subordinated Debentures for the
benefit of the Trust and the holders of the Trust Securities and, so long as
the Subordinated Debentures are held by Pacific Telesis Financing, the
Property Trustee will have the power to exercise all rights, powers, and
privileges of a holder of Subordinated Debentures under the Indenture (as
defined in "Description of Subordinated Debentures" herein). In addition, the
Property Trustee will maintain exclusive control of a segregated non-interest
bearing bank account (the "Property Account") to hold all payments made in
respect of the Subordinated Debentures for the benefit of the holders of the
Trust Securities. The Property Trustee will make payments of distributions
and payments on liquidation, redemption and otherwise to the holders of the
Trust Securities out of funds from the Property Account. The Guarantee
Trustee will hold the Guarantee for the benefit of the holders of the
Preferred Securities. Pacific Telesis, as the direct holder of all the Common
Securities, will have the right to appoint, remove or replace any Pacific
Telesis Trustee and to increase or decrease the number of Pacific Telesis
Trustees. Pacific Telesis will pay all fees, expenses, debts and obligations
(other than the Trust Securities) related to Pacific Telesis Financing and the
offering of the Trust Securities. See "Description of the Preferred
Securities -- Expenses and Taxes."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act, as amended (the "Trust Act") and
the Trust Indenture Act. See "Description of the Preferred Securities."
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained in other sections of this Prospectus Supplement and in
the accompanying Prospectus and should in particular consider the following
matters.
Ranking of Subordinate Obligations Under the Guarantee and Subordinated
Debentures
Pacific Telesis' obligations under the Guarantee are unsecured and subordinate
and junior in right of payment to all liabilities of Pacific Telesis and pari
passu with the most senior preferred or preference stock now or hereafter
issued, from time to time, if any, by Pacific Telesis, except those made
subordinate or pari passu by their terms, and with any guarantee now or
hereafter issued by Pacific Telesis in respect of any preferred stock or
preference stock of any affiliate of Pacific Telesis. The obligations of
Pacific Telesis under the Subordinated Debentures are subordinate and junior
in right of payment, to the extent set forth herein, to all present and future
Senior Indebtedness of Pacific Telesis and will be effectively subordinated to
all existing and future liabilities and obligations of Pacific Telesis'
subsidiaries and partnerships. At September 30, 1995, the aggregate amount of
Senior Indebtedness and liabilities and obligations of Pacific Telesis'
subsidiaries and partnerships that would have effectively ranked senior to the
Subordinated Debentures was approximately $13,025 million. There are no terms
in the Preferred Securities, the Subordinated Debentures or the Guarantee that
limit the Company's ability to incur additional indebtedness, including
indebtedness that ranks senior to the Subordinated Debentures and the
Guarantee. See "Description of the Guarantees -- Status of the Guarantees" in
the accompanying Prospectus, and "Description of the Subordinated Debentures -
- Subordination" herein.
Trust Distributions Dependent On Pacific Telesis' Payments On Subordinated
Debentures
The Trust's ability to make distributions and other payments on the Preferred
Securities is solely dependent upon Pacific Telesis making interest and other
payments on the Subordinated Debentures. If Pacific Telesis were not to make
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payments on the Subordinated Debentures for any reason, including as a result
of Pacific Telesis' election to defer the payment of interest on the
Subordinated Debentures by extending the interest period on the Subordinated
Debentures or as a result of Pacific Telesis' election to extend the maturity
of the Subordinated Debentures, the Trust will not make payments on the Trust
Securities. In such an event, holders of the Preferred Securities would not
be able to rely on the Guarantee since distributions and other payments on the
Preferred Securities are subject to such Guarantee only if and to the extent
that Pacific Telesis Financing has funds available therefor. Holders of the
Preferred Securities have the right to proceed first and directly against
Pacific Telesis to enforce Pacific Telesis' obligations to make payments under
the Guarantee. However, if the Trust's failure to make distributions on the
Preferred Securities is a consequence of Pacific Telesis' exercise of its
right to extend the interest payment period for the Subordinated Debentures,
the Guarantee does not provide that any payment shall be made on the Preferred
Securities. See "Description of the Guarantees -- Status of the Guarantees"
in the accompanying Prospectus.
Option to Extend Interest Payment Period or Maturity Date
Pacific Telesis has the right under the Indenture to (a) defer payments of
interest on the Subordinated Debentures by extending the interest payment
period at any time, and from time to time, on the Subordinated Debentures or
(b) to extend the Maturity Date of the Subordinated Debentures. As a
consequence of an extension of the interest payment period, quarterly
distributions on the Preferred Securities would be deferred (but despite such
deferral, to the extent permitted by law, would continue to accrue with
interest thereon compounded quarterly) by Pacific Telesis Financing during any
such Extension Period. Such right to extend the interest payment period for
the Subordinated Debentures is limited at any time to a period not exceeding
20 consecutive quarters, provided that no Extension Period may extend beyond
the Maturity Date of the Subordinated Debentures. In the event that Pacific
Telesis exercises this right to defer interest payments, then, prior to the
payment of all accrued interest on outstanding Subordinated Debentures, (a)
Pacific Telesis shall not declare or pay dividends on, or make a distribution
with respect to, or redeem, purchase or acquire, or make a liquidation payment
with respect to, any of its capital stock, (b) Pacific Telesis shall not make
any payment of interest, principal or premium, if any, on or repay, repurchase
or redeem any debt securities issued by Pacific Telesis that rank pari passu
with or junior to the Subordinated Debentures and (c) Pacific Telesis shall
not make guarantee payments with respect to the foregoing (other than pursuant
to the Guarantee); provided, however, that restriction (a) above does not
apply to any stock dividends paid by Pacific Telesis where the dividend stock
is the same stock as that on which the dividend is being paid. Prior to the
termination of any such Extension Period, Pacific Telesis may further extend
the interest payment period; provided that, such Extension Period, together
with all such previous and further extensions thereof, may not exceed 20
consecutive quarters or extend beyond the Maturity Date of the Subordinated
Debentures. Upon the termination of any Extension Period and the payment of
all amounts then due, Pacific Telesis may commence a new Extension Period,
subject to the above requirements. Consequently, there could be multiple
Extension Periods of varying lengths prior to the Maturity Date of the
Subordinated Debentures. See "Description of the Preferred Securities --
Distributions" and "Description of the Subordinated Debentures -- Option to
Extend Interest Payment Period.
Tax Consequences of Extension of Interest Payment Period
Should Pacific Telesis exercise its right to defer payments of interest by
extending the interest payment period, each holder of Preferred Securities
will continue to accrue income (as original issue discount ("OID")) in respect
of the deferred interest allocable to its Preferred Securities for United
States federal income tax purposes. Such income will be allocated but not
distributed to holders of record of Preferred Securities. As a result, each
such holder of Preferred Securities will recognize income for United States
federal income tax purposes in advance of the receipt of cash and will not
receive the cash from Pacific Telesis Financing related to such income if such
holder disposes of its Preferred Securities prior to the record date for the
date on which distributions of such amounts are made. Pacific Telesis has no
current intention of exercising its right to defer payments of interest by
extending the interest payment period on the Subordinated Debentures.
However, should Pacific Telesis determine to exercise such right in the
future, the market price of the Preferred Securities is likely to be adversely
affected. A holder that disposes of its Preferred Securities during an
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Extension Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Preferred Securities. In
addition, as a result of the existence of Pacific Telesis' right to defer
interest payments, the market price of the Preferred Securities (which
represent an undivided beneficial interest in the Subordinated Debentures) may
be more volatile than other securities on which OID accrues that do not have
such rights. See "United States Federal Income Taxation -- Original Issue
Discount."
Special Event Redemption or Distribution
Upon the occurrence of a Special Event, Pacific Telesis Financing shall be
dissolved, except in the limited circumstance described herein, with the
result that the Subordinated Debentures would be distributed to the holders of
the Trust Securities. In the case of a Special Event that is a Tax Event, in
certain circumstances, Pacific Telesis shall have the right to redeem the
Subordinated Debentures, in whole or in part, in which event Pacific Telesis
Financing will redeem the Trust Securities on a pro rata basis to the same
extent as the Subordinated Debentures are redeemed by Pacific Telesis. See
"Description of the Preferred Securities -- Special Event Redemption or
Distribution."
Under current United States federal income tax law, a distribution of
Subordinated Debentures upon the dissolution of Pacific Telesis Financing
would not be a taxable event to holders of the Preferred Securities. However,
a dissolution of Pacific Telesis Financing in which holders of the Preferred
Securities receive cash would be a taxable event to such holders. See "United
States Federal Income Taxation -- Receipt of Subordinated Debentures or Cash
Upon Liquidation of Pacific Telesis Financing."
There can be no assurance as to the market prices for the Preferred Securities
or the Subordinated Debentures that may be distributed in exchange for
Preferred Securities if a dissolution or liquidation of Pacific Telesis
Financing were to occur. Accordingly, the Preferred Securities that an
investor may purchase, whether pursuant to the offer made hereby or in the
secondary market, or the Subordinated Debentures that a holder of Preferred
Securities may receive on dissolution and liquidation of Pacific Telesis
Financing, may trade at a discount to the price that the investor paid to
purchase the Preferred Securities offered hereby. Because holders of
Preferred Securities may receive Subordinated Debentures upon the occurrence
of a Special Event, prospective purchasers of Preferred Securities are also
making an investment decision with regard to the Subordinated Debentures and
should carefully review all the information regarding the Subordinated
Debentures and Pacific Telesis contained herein and in the accompanying
Prospectus. See "Description of the Preferred Securities -- Special Event
Redemption or Distribution" and "Description of the Subordinated Debentures."
Prepayment Considerations; Option to Extend Scheduled Maturity Date.
At the option of Pacific Telesis, the Subordinated Debentures may be redeemed,
in whole or in part, at any time on or after _____________, 2000, at a
redemption price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest to the redemption date. See "Description of the
Subordinated Debentures - Optional Redemption." Investors in the Preferred
Securities should assume that Pacific Telesis will exercise its redemption
option if Pacific Telesis is able to refinance at a lower interest rate or it
is otherwise in the interest of Pacific Telesis to redeem the Subordinated
Debentures. If Subordinated Debentures are redeemed, Pacific Telesis
Financing must redeem Trust Securities having an aggregate liquidation amount
equal to the aggregate principal amount of Subordinated Debentures so
redeemed. See "Description of the Preferred Securities - Mandatory
Redemption."
Pacific Telesis also has the option to extend the maturity date of the
Subordinated Debentures once for up to an additional 19 years beyond the
Scheduled Maturity Date of _____________, 2025. See "Description of the
Subordinated Debentures - Option to Extend Scheduled Maturity Date."
Investors in the Preferred Securities should assume that Pacific Telesis will
exercise its option to extend the term if Pacific Telesis is unable to
refinance at a lower interest rate or it is otherwise in the interest of
Pacific Telesis to defer the maturity of the Subordinated Debentures. The
Preferred Securities will not be redeemed until the Subordinated Debentures
have been repaid or redeemed. See "Description of the Preferred Securities -
Mandatory Redemption."
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Limited Voting Rights
Holders of Preferred Securities will have only limited voting rights primarily
in connection with directing the activities of the Property Trustee as the
holder of the Subordinated Debentures. Such holders will not be entitled to
vote to appoint, remove or replace, or to increase or decrease the number of,
Pacific Telesis Trustees, which voting rights are vested exclusively in the
holder of the Common Securities. See ""Description of the Preferred
Securities -- Voting Rights."
Trading Price
The Preferred Securities may trade at a price that does not fully reflect the
value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. A holder who disposes of its Preferred Securities
between record dates for payments of distributions thereon will be required to
include as ordinary income OID on the Subordinated Debentures accrued through
the date of disposition, and to add such amount to its adjusted tax basis in
its pro rata share of the underlying Subordinated Debentures deemed disposed
of. To the extent the selling price is less than the holder's adjusted tax
basis (which will include, in the form of OID, all accrued but unpaid
interest), a holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes. See "United States Federal Income
Taxation -- Original Issue Discount" and "United States Federal Income
Taxation -- Sales of Preferred Securities."
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to combined fixed charges
from continuing operations of Pacific Telesis Group and its consolidated
subsidiaries for the periods indicated. For the purpose of calculating this
ratio, earnings consist of income before income taxes and fixed charges.
Fixed charges include interest on indebtedness (excluding discontinued
operations) and the portion of rentals representative of the interest factor.
Nine
Months
Ended
September 30 Year Ended December 31,
Ratio of ------------- -----------------------------------
Earnings 1995 1994 1994 1993 1992 1991 1990
to Fixed ---- ---- ---- ---- ---- ---- ----
Charges 4.23 4.85 4.60 1.37 4.21 3.42 3.27
==== ==== ==== ==== ==== ==== ====
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CAPITALIZATION OF PACIFIC TELESIS GROUP
The following table sets forth the unaudited consolidated capitalization of
Pacific Telesis at September 30, 1995, and as adjusted to reflect the sale of
the Preferred Securities and the application of the estimated net proceeds
therefrom (assuming the Underwriters' over-allotment option is not exercised).
See "Use of Proceeds." The table should be read in conjunction with Pacific
Telesis' consolidated financial statements and notes thereto included in the
documents incorporated by reference herein. See "Incorporation of Certain
Documents by Reference" in the accompanying Prospectus.
At
September 30, 1995
--------------------
As
(Dollars in millions) Actual Adjusted
(1) (1)
------ --------
Short-term borrowings................................ $ 881 $
======= =======
Long-term borrowings ................................ $5,232 $
------- -------
Company - obligated mandatorily Redeemable
Preferred Securities of Trust (2) ................... $ - (3) $
------- -------
Common shareholders' equity:
Common shares - $0.10 par value; 1,100,000,000
authorized; 428,399,646 outstanding (1)............. $ 43 $
Additional paid-in capital ......................... 3,494
Reinvested earnings ................................ (980) (4)
Treasury stock, at cost; 4,427,949 shares .......... (128)
Deferred compensation - LESOP TRUST ................ (256)
------- -------
Total common shareholders' equity ................... 2,173
------- -------
Total capitalization ................................ $7,405 $
======= =======
(1) Does not give effect to the shares of common stock of Pacific Telesis
("Common Stock"), that may be issued upon exercise of options to purchase
6,210,915 shares of Common Stock that were exercisable at September 30,
1995 under Pacific Telesis' stock option plans.
(2) Accounting Treatment - The financial statements of the Trust will be
reflected in Pacific Telesis' consolidated financial statements. The
"Minority interest in financing trust" represents a guaranteed minority
interest in the Trust holding Subordinated Debentures of Pacific Telesis
Group. The footnotes to the consolidated financial statements will
describe the nature and terms of the Preferred Securities issued by the
Trust.
(3) One hundred percent of the assets of the trust consist of $ __________ in
principal amount of the Subordinated Debentures of Pacific Telesis with
an interest rate of _____ and maturity date of ____________.
(4) Reinvested earnings is affected by the recent discontinuance of SFAS 71.
Refer to Footnote (2) in the Summary Financial Data section on page ___.
USE OF PROCEEDS
All of the proceeds from the sale of the Preferred Securities will be invested
by Pacific Telesis Financing in Subordinated Debentures of Pacific Telesis
issued pursuant to the Indenture therefor described herein and ultimately will
be used by Pacific Telesis for general corporate purposes, which may include
capital expenditures, repurchases of outstanding long-term debt securities,
retirement of bank debt, investments in subsidiaries, working capital,
repayment of short-term commercial paper and other business opportunities.
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DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the
Trust Indenture Act. The Property Trustee, The First National Bank of
Chicago, will act as the indenture trustee for purposes of compliance with the
provisions of the Trust Indenture Act. The terms of the Preferred Securities
will include those stated in the Declaration, including those required to be
made part of the Declaration by the Trust Indenture Act. The following
summary of the principal terms and provisions of the Preferred Securities does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, the Declaration, a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus Supplement is a part, the
Trust Act and the Trust Indenture Act.
General
The Declaration authorizes the Regular Trustees to issue on behalf of Pacific
Telesis Financing the Trust Securities, which represent undivided beneficial
interests in the assets of Pacific Telesis Financing. All of the Common
Securities will be owned by Pacific Telesis. The Common Securities will have
equivalent terms to and will rank pari passu, and payments will be made
thereon on a pro rata basis, with the Preferred Securities, except that upon
the occurrence and during the continuance of a Declaration Event of Default,
the rights of the holders of the Common Securities to receive payment of
periodic distributions and payments upon liquidation, redemption and otherwise
will be subordinated to the rights of the holders of the Preferred Securities.
In addition, holders of the Common Securities have the exclusive right
(subject to the terms of the Declaration) to appoint, replace or remove
Trustees and to increase or decrease the number of Trustees. The Declaration
does not permit the issuance by Pacific Telesis Financing of any securities
other than the Trust Securities or the incurrence of any indebtedness by
Pacific Telesis Financing. Pursuant to the Declaration, the Property Trustee
will hold the Subordinated Debentures purchased by Pacific Telesis Financing
for the benefit of the holders of the Trust Securities. The payment of
distributions out of money held by Pacific Telesis Financing, and payments
upon redemption of the Preferred Securities or liquidation of Pacific Telesis
Financing, are guaranteed by Pacific Telesis to the extent described under
"Description of the Guarantees" in the accompanying Prospectus. The Guarantee
will be held by The First National Bank of Chicago, the Guarantee Trustee, for
the benefit of the holders of the Preferred Securities. The Guarantee only
covers payment of distributions when Pacific Telesis has made the
corresponding payment of interest or principal on the Subordinated Debentures
held by the Trust. In the absence of such payment of interest or principal,
the remedy of a holder of Preferred Securities is to direct the Property
Trustee to enforce the Property Trustee's rights as the holder of the
Subordinated Debentures. See "-- Voting Rights."
Distributions
Distributions on the Preferred Securities will be fixed at a rate per annum of
____% of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears for more than one quarter will bear interest thereon
from and including the last day of such quarter at the rate per annum of ____%
thereof compounded quarterly. The term "distributions" as used herein
includes any such interest payable unless otherwise stated. The amount of
distributions payable for any period will be computed on the basis of a 360-
day year of twelve 30-day months, and for any period shorter than a full
quarter, on the basis of the actual number of days elapsed in such 90-day
quarter.
Distributions on the Preferred Securities will be cumulative, will accrue from
______, 1995, and will be payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, commencing ____________, when, as
and if available for payment by the Property Trustee, except as otherwise
described below.
Pacific Telesis has the right under the Indenture to defer payments of
interest on the Subordinated Debentures by extending the interest payment
period from time to time on the Subordinated Debentures, which, if exercised,
would defer quarterly distributions on the Preferred Securities (though, to
the extent permitted by law, such distributions would continue to accrue with
interest since interest would continue to accrue on the Subordinated
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Debentures) during any such Extension Period. Such right to extend the
interest payment period for the Subordinated Debentures is limited to a period
not exceeding 20 consecutive quarters or extending beyond the Maturity Date of
the Subordinated Debentures. In the event that Pacific Telesis exercises this
right, then (a) Pacific Telesis shall not declare or pay dividends on, make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock, (b) Pacific
Telesis shall not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities issued by Pacific
Telesis that rank pari passu with or junior to the Subordinated Debentures and
(c) Pacific Telesis shall not make guarantee payments with respect to the
foregoing (other than pursuant to the Guarantee); provided, however, that, the
foregoing restriction (a) does not apply to any stock dividends paid by
Pacific Telesis where the dividend stock is the same stock as that on which
the dividend is being paid. Prior to the termination of any such Extension
Period, Pacific Telesis may further extend the interest payment period;
provided that, such Extension Period, together with all such previous and
further extensions thereof, may not exceed 20 consecutive quarters and may not
extend beyond the Maturity Date of the Subordinated Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due,
Pacific Telesis may select a new Extension Period, subject to the above
requirements. See "Description of the Subordinated Debentures -- Interest"
and "Description of the Subordinated Debentures -- Option to Extend Interest
Payment Period." If distributions are deferred, the deferred distributions
and accrued interest thereon shall be paid to holders of record of the
Preferred Securities as they appear on the books and records of Pacific
Telesis Financing on the record date for distributions due at the end of such
deferral period.
Distributions on the Preferred Securities must be paid on the dates payable to
the extent that Pacific Telesis Financing has funds available for the payment
of such distributions in the Property Account. Pacific Telesis Financing's
funds available for distribution to the holders of the Preferred Securities
will be limited to payments received from Pacific Telesis under the
Subordinated Debentures. See "Description of the Subordinated Debentures."
The payment of distributions out of moneys held by Pacific Telesis Financing
is guaranteed by Pacific Telesis to the extent set forth under "Description of
the Guarantees" in the accompanying Prospectus.
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of Pacific Telesis Financing
on the relevant record dates, which, as long as the Preferred Securities
remain in global form, will be one Business Day (as defined below) prior to
the relevant payment dates. Such distributions will be paid through the
Property Trustee who will hold amounts received in respect of the Subordinated
Debentures in the Property Account for the benefit of the holders of the Trust
Securities. Subject to any applicable laws and regulations and the provisions
of the Declaration, each such payment will be made as described under "Book-
Entry Only Issuance -- The Depository Trust Company" below. In the event that
the Preferred Securities do not continue to remain in global form, the Regular
Trustees shall have the right to select relevant record dates, which shall be
at least one Business Day but less than 60 Business Days prior to the relevant
payment dates. In the event that any date on which distributions are to be
made on the Preferred Securities is not a Business Day, then payment of the
distributions payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such record date. A "Business Day" shall mean any day other than Saturday,
Sunday or any other day on which banking institutions in New York, New York
and Chicago, Illinois are permitted or required by any applicable law or
regulation to close.
Mandatory Redemption
Upon the repayment of the Subordinated Debentures, whether at maturity or upon
redemption, the proceeds from such repayment or redemption shall
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Subordinated
Debentures so repaid or redeemed at the Redemption Price; provided that,
holders of Trust Securities shall be given not less than 30 nor more than 60
days notice of such redemption. The Subordinated Debentures will mature on
__________, 2025 unless the maturity date is extended at the option of Pacific
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Telesis (provided certain financial conditions are met), and may be redeemed,
in whole or in part, at any time on or after __________, 2000 or at any time
in certain circumstances upon the occurrence of a Tax Event. See "Description
of the Subordinated Debentures -- Optional Redemption." In the event that
fewer than all of the outstanding Preferred Securities are to be redeemed, the
Trust Securities will be redeemed pro rata to each holder according to the
aggregate liquidation amount of Trust Securities held by the relevant holder
in relation to the aggregate liquidation amount of all Trust Securities
outstanding. See "Book-Entry Issuance -- The Depository Trust Company" below
for a description of DTC's (as hereinafter defined) procedures in the event of
redemption.
Special Event Redemption or Distribution
"Tax Event" means that the Regular Trustees shall have received an opinion of
a nationally recognized independent tax counsel experienced in such matters (a
"Dissolution Tax Opinion") to the effect that, as a result of (a) any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or (b) any amendment to, or
change in, an interpretation or application of such laws or regulations by any
legislative body, court, governmental agency or regulatory authority, which
amendment, change, interpretation or pronouncement is enacted, promulgated,
issued or announced or which action is taken, in each case on or after the
date of this Prospectus Supplement, there is more than an insubstantial risk
that (i) Pacific Telesis Financing would be subject to United States federal
income tax with respect to interest accrued or received on the Subordinated
Debentures, (ii) Pacific Telesis Financing would be subject to more than a de
minimis amount of taxes, duties or other governmental charges, or (iii)
interest payable to Pacific Telesis Financing on the Subordinated Debentures
would not be deductible, in whole or in part, by Pacific Telesis for United
States federal income tax purposes.
"Investment Company Event" means that the Regular Trustees shall have received
an opinion of a nationally recognized independent counsel experienced in
practice under the Investment Company Act of 1940, as amended (the "1940
Act"), to the effect that, as a result of the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), there is more than an insubstantial
risk that Pacific Telesis Financing is or will be considered an "investment
company" which is required to be registered under the 1940 Act, which Change
in 1940 Act Law becomes effective on or after the date of this Prospectus
Supplement.
If, at any time, a Tax Event or an Investment Company Event (each, as defined
above, a "Special Event") shall occur and be continuing, Pacific Telesis
Financing shall, except in the circumstances described below, be dissolved
with the result that the Subordinated Debentures with an aggregate principal
amount equal to the aggregate stated liquidation amount of, with an interest
rate identical to the distribution rate of, and accrued and unpaid interest
equal to accrued and unpaid distributions on, the Trust Securities, would be
distributed to the holders of the Trust Securities in liquidation of such
holders' interests in Pacific Telesis Financing on a pro rata basis within 90
days following the occurrence of such Special Event; provided, however, that,
in the case of the occurrence of a Tax Event, as a condition of such
dissolution and distribution the Regular Trustees shall have received an
opinion of nationally recognized independent tax counsel experienced in such
matters (a "No Recognition Opinion"), which opinion may rely on published
revenue rulings of the Internal Revenue Service, to the effect that the
holders of the Trust Securities will not recognize any gain or loss for United
States federal income tax purposes as a result of such dissolution of Pacific
Telesis Financing and distribution of Subordinated Debentures, and provided
further, that, if at the time there is available to Pacific Telesis Financing
the opportunity to eliminate, within such 90 day period, the Special Event by
taking some ministerial action, such as filing a form or making an election or
pursuing some other reasonable measure that will have no adverse effect on
Pacific Telesis Financing, Pacific Telesis or the holders of the Trust
Securities, Pacific Telesis Financing will pursue such measure in lieu of
dissolution. Furthermore, if in the case of the occurrence of a Tax Event (i)
Pacific Telesis has received an opinion (a "Redemption Tax Opinion") of
nationally recognized independent tax counsel experienced in such matters
that, as a result of a Tax Event, there is more than an insubstantial risk
that Pacific Telesis would be precluded from deducting the interest on the
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Subordinated Debentures for United States federal income tax purposes, even
after the Subordinated Debentures were distributed to the holders of Trust
Securities in liquidation of such holders' interests in Pacific Telesis
Financing as described above, or (ii) the Regular Trustees shall have been
informed by such tax counsel that a No Recognition Opinion cannot be
delivered, Pacific Telesis shall have the right, upon not less than 30 nor
more than 60 days notice, to redeem the Subordinated Debentures, in whole or
in part, for cash within 90 days following the occurrence of such Tax Event,
and, following such redemption, Trust Securities with an aggregate liquidation
amount equal to the aggregate principal amount of the Subordinated Debentures
so redeemed shall be redeemed by Pacific Telesis Financing at the Redemption
Price on a pro rata basis; provided, however, that, if at the time there is
available to Pacific Telesis or Pacific Telesis Financing the opportunity to
eliminate, within such 90 day period, the Tax Event by taking some ministerial
action such as filing a form or making an election, or pursuing some other
similar reasonable measure which has no adverse effect on Pacific Telesis
Financing, Pacific Telesis or the holders of the Trust Securities, Pacific
Telesis or Pacific Telesis Financing will pursue such measure in lieu of
redemption.
If the Subordinated Debentures are distributed to the holders of the Preferred
Securities, Pacific Telesis will use its best efforts to cause the
Subordinated Debentures to be listed on the New York Stock Exchange or on such
other exchange as the Preferred Securities are then listed.
After the date for any distribution of Subordinated Debentures upon
dissolution of Pacific Telesis Financing, (i) the Preferred Securities will no
longer be deemed to be outstanding and (ii) the record holders of the
Preferred Securities will receive a registered global certificate or
certificates representing the Subordinated Debentures to be delivered upon
such distribution in exchange for the Preferred Securities held by such
holders.
There can be no assurance as to the market prices for either the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for the Preferred Securities if a dissolution and liquidation of Pacific
Telesis Financing were to occur. Accordingly, the Preferred Securities that an
investor may purchase, whether pursuant to the offer made hereby or in the
secondary market, or the Subordinated Debentures that an investor may receive
if a dissolution and liquidation of Pacific Telesis Financing were to occur,
may trade at a discount to the price that the investor paid to purchase the
Preferred Securities offered hereby.
Redemption Procedures
Pacific Telesis Financing may not redeem fewer than all of the outstanding
Preferred Securities unless all accrued and unpaid distributions have been
paid on all Preferred Securities for all quarterly distribution periods
terminating on or prior to the date of redemption.
If Pacific Telesis Financing gives a notice of redemption in respect of
Preferred Securities (which notice will be irrevocable), then, by 12:00 noon,
New York City time, on the redemption date, provided that Pacific Telesis has
paid to the Property Trustee a sufficient amount of cash in connection with
the related redemption or maturity of the Subordinated Debentures, Pacific
Telesis Financing will pay the Redemption Price to the holders of the
Preferred Securities. If notice of redemption shall have been given and funds
deposited as required, then immediately prior to the close of business on the
date of such deposit, distributions will cease to accrue and all rights of
holders of such Preferred Securities so called for redemption will cease,
except the right of the holders of such Preferred Securities to receive the
Redemption Price, but without interest on such Redemption Price. In the
event that any date fixed for redemption of Preferred Securities is not a
Business Day, then payment of the Redemption Price payable on such date will
be made on the next succeeding day that is a Business Day (without any
interest or other payment in respect of any such delay), except that, if such
Business Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day. In the event that Pacific Telesis fails
to repay the Subordinated Debentures on maturity or payment of the Redemption
Price in respect of Preferred Securities is improperly withheld or refused and
not paid either by Pacific Telesis Financing or by Pacific Telesis pursuant to
the Guarantee, distributions on such Preferred Securities will continue to
accrue at the then applicable rate from the original redemption date to the
actual date of payment, in which case the actual payment date will be
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considered the date fixed for redemption for purposes of calculating the
Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed as described below
under "Book-Entry Issuance--The Depository Trust Company."
If a partial redemption of the Preferred Securities would result in the
delisting of the Preferred Securities by a national securities exchange or
other organization on which the Preferred Securities are then listed, Pacific
Telesis pursuant to the Indenture will only redeem the Subordinated Debentures
in whole and, as a result, the Trust may only redeem the Preferred Securities
in whole.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), Pacific Telesis or its subsidiaries
may at any time, and from time to time, purchase outstanding Preferred
Securities by tender, in the open market or by private agreement.
Liquidation Distribution Upon Dissolution
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of Pacific Telesis Financing (each a "Liquidation"),
the then holders of the Preferred Securities and Common Securities will be
entitled to receive on a pro rata basis solely out of the assets of Pacific
Telesis Financing, after satisfaction of liabilities to creditors,
distributions in an amount equal to the aggregate of the stated liquidation
amount of $25 per Preferred Security plus accrued and unpaid distributions
thereon to the date of payment (the "Liquidation Distribution"), unless, in
connection with such Liquidation, Subordinated Debentures in an aggregate
stated principal amount equal to the aggregate stated liquidation amount of,
with an interest rate identical to the distribution rate of, and accrued and
unpaid interest equal to accrued and unpaid distributions on, the Preferred
Securities have been distributed on a pro rata basis to the holders of the
Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because Pacific Telesis Financing has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by Pacific Telesis Financing on the Preferred Securities and the
Common Securities shall be paid on a pro rata basis. The holders of the
Common Securities will be entitled to receive distributions upon any such
dissolution pro rata with the holders of the Preferred Securities, except that
if a Declaration Event of Default has occurred and is continuing, the
Preferred Securities shall have a preference over the Common Securities with
regard to such distributions.
Termination
Pursuant to the Declaration, Pacific Telesis Financing shall terminate upon
the earliest of (i) __________, 2050, (ii) the bankruptcy of Pacific Telesis,
(iii) the filing of a certificate of dissolution or its equivalent with
respect to Pacific Telesis, the filing of a certificate of cancellation with
respect to Pacific Telesis Financing, or the revocation of the charter of
Pacific Telesis and the expiration of 90 days after the date of revocation
without a reinstatement thereof, (iv) the distribution of Subordinated
Debentures upon the occurrence of a Special Event, (v) the entry of a decree
of a judicial dissolution of Pacific Telesis or Pacific Telesis Financing, or
(vi) the redemption of all the Trust Securities.
Declaration Events of Default
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the
Trust Securities (a "Declaration Event of Default"), provided that, pursuant
to the Declaration, the holder of the Common Securities will be deemed to have
waived any Declaration Event of Default with respect to the Common Securities
until all Declaration Events of Default with respect to the Preferred
Securities have been cured, waived or otherwise eliminated. Until such
Declaration Events of Default with respect to the Preferred Securities have
been so cured, waived, or otherwise eliminated, the Property Trustee will be
deemed to be acting solely on behalf of the holders of the Preferred
Securities and only the holders of the Preferred Securities will have the
right to direct the Property Trustee with respect to certain matters under the
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Declaration, and therefore the Indenture.
Upon the occurrence of a Declaration Event of Default, the Indenture Trustee
(as defined herein) or the Property Trustee as the holder of the Subordinated
Debentures will have the right under the Indenture to declare the principal of
and interest on the Subordinated Debentures to be immediately due and payable.
Pacific Telesis and Pacific Telesis Financing are each required to file
annually with the Property Trustee an officer's certificate as to its
compliance with all conditions and covenants under the Declaration.
Voting Rights
Except as described herein, under the Trust Act, the Trust Indenture Act and
under "Description of the Guarantees -- Modification of the Guarantees;
Assignment" in the accompanying Prospectus, and as otherwise required by law
and the Declaration, the holders of the Preferred Securities will have no
voting rights.
Subject to the requirement of the Property Trustee obtaining a tax opinion in
certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in aggregate liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Property Trustee, or to direct
the exercise of any trust or power conferred upon the Property Trustee under
the Declaration, including the right to direct the Property Trustee, as holder
of the Subordinated Debentures, to (i) exercise the remedies available under
the Indenture with respect to the Subordinated Debentures, (ii) waive any past
Indenture Event of Default that is waivable under the Base Indenture (as
defined herein), or (iii) exercise any right to rescind or annul a declaration
that the principal of all the Subordinated Debentures shall be due and
payable, consent to any amendment, modification or termination of the
Indenture or the Subordinated Debentures, where such consent should be
required; provided, however, that, where a consent or action under the
Indenture would require the consent or act of more than a majority of the
holders (a "Super-Majority") affected thereby, only the holders of at least
such Super-Majority of the Preferred Securities may direct the Property
Trustee to give such consent or take such action. If the Property Trustee
fails to enforce its rights under the Declaration (including, without
limitation, its rights, powers and privileges as a holder of the Subordinated
Debentures under the Indenture), a record holder of Preferred Securities may,
subject to certain provisions of the Declaration, institute a legal proceeding
directly against any person to enforce the Property Trustee's rights under the
Declaration without first instituting any legal proceeding against the
Property Trustee or any other person or entity. The Property Trustee shall
notify all holders of the Preferred Securities of any notice of default
received from the Indenture Trustee with respect to the Subordinated
Debentures. Except with respect to directing the time, method and place of
conducting a proceeding for a remedy, the Property Trustee shall not take any
of the actions described in clauses (i), (ii) or (iii) above unless the
Property Trustee has obtained an opinion of tax counsel to the effect that, as
a result of such action, Pacific Telesis Financing will not be classified as
other than a grantor trust for United States federal income tax purposes.
In the event the consent of the Property Trustee, as the holder of the
Subordinated Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Subordinated
Debentures, the Property Trustee shall request the direction of the holders of
the Trust Securities with respect to such amendment, modification or
termination and shall vote with respect to such amendment, modification or
termination as directed by a majority in liquidation amount of the Trust
Securities voting together as a single class; provided, however, that where a
consent under the Indenture would require the consent of a Super-Majority, the
Property Trustee may only give such consent at the direction of the holders of
at least the proportion in liquidation amount of the Trust Securities which
the relevant Super-Majority represents of the aggregate principal amount of
the Subordinated Debentures outstanding. The Property Trustee shall not take
any such action in accordance with the directions of the holders of the Trust
Securities unless the Property Trustee has obtained an opinion of tax counsel
to the effect that Pacific Telesis Financing will not be classified as other
than a grantor trust for United States federal income tax purposes on account
of such action.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
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Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be
taken, to be mailed to each holder of record of Preferred Securities. Each
such notice will include a statement setting forth the following information:
(i) the date of such meeting or the date by which such action is to be taken;
(ii) a description of any resolution proposed for adoption at such meeting on
which such holders are entitled to vote or of such matter upon which written
consent is sought; and (iii) instructions for the delivery of proxies or
consents. No vote or consent of the holders of Preferred Securities will be
required for Pacific Telesis Financing to redeem and cancel Preferred
Securities or distribute Subordinated Debentures in accordance with the
Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by Pacific Telesis or any entity
directly or indirectly controlling or controlled by, or under direct or
indirect common control with, Pacific Telesis, shall not be entitled to vote
or consent and shall, for purposes of such vote or consent, be treated as if
such Preferred Securities were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "-- Book-Entry Issuance -- The
Depository Trust Company" below.
Holders of the Preferred Securities will have no rights to appoint or remove
the Pacific Telesis Trustees, who may be appointed, removed or replaced solely
by Pacific Telesis as the indirect or direct holder of all of the Common
Securities.
Modification of the Declaration
The Declaration may be modified and amended if approved by a majority of the
Regular Trustees (and in certain circumstances the Property Trustee), provided
that, if any proposed amendment provides for, or the Regular Trustees
otherwise propose to effect, (i) any action that would adversely affect the
powers, preferences or special rights of the Trust Securities, whether by way
of amendment to the Declaration or otherwise, or (ii) the dissolution,
winding-up or termination of Pacific Telesis Financing other than pursuant to
the terms of the Declaration, then the holders of the Trust Securities voting
together as a single class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of at least 66 2/3% in liquidation amount of the Trust Securities
affected thereby; provided that, if any amendment or proposal referred to in
clause (i) above would adversely affect only the Preferred Securities or the
Common Securities, then only the affected class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of 66 2/3% in liquidation amount of such
class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to the
Declaration if such amendment or modification would (i) cause Pacific Telesis
Financing to be classified as other than a grantor trust for United States
federal income tax purposes, (ii) reduce or otherwise adversely affect the
powers of the Property Trustee or (iii) cause Pacific Telesis Financing to be
deemed an "investment company" which is required to be registered under the
1940 Act.
Mergers, Consolidations or Amalgamations
Pacific Telesis Financing may not consolidate, amalgamate, merge with or into
or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below. Pacific Telesis Financing may, with the consent of a
majority of the Regular Trustees and without the consent of the holders of the
Trust Securities, the Property Trustee or the Delaware Trustee, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State; provided that, (i) such successor entity either
(x) expressly assumes all of the obligations of Pacific Telesis Financing
under the Trust Securities or (y) substitutes for the Trust Securities other
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securities having substantially the same terms as the Trust Securities (the
"Successor Securities"), so long as the Successor Securities rank the same as
the Trust Securities rank with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) Pacific Telesis expressly
acknowledges a trustee of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the Subordinated Debentures,
(iii) the Preferred Securities or any Successor Securities with respect to the
Preferred Securities are listed, or any such Successor Securities will be
listed upon notification of issuance, on any national securities exchange or
with another organization on which the Preferred Securities are then listed or
quoted, (iv) such merger, consolidation, amalgamation or replacement does not
cause the Preferred Securities (including any Successor Securities with
respect to the Preferred Securities) to be downgraded by any nationally
recognized statistical rating organization, (v) such merger, consolidation,
amalgamation or replacement does not adversely affect the rights, preferences
and privileges of the holders of the Trust Securities (including any Successor
Securities) in any material respect (other than with respect to any dilution
of the holders' interest in the new entity), (vi) such successor entity has a
purpose identical to that of Pacific Telesis Financing, (vii) prior to such
merger, consolidation, amalgamation or replacement, Pacific Telesis has
received an opinion of a nationally recognized independent counsel to Pacific
Telesis Financing experienced in such matters to the effect that, (A) such
merger, consolidation, amalgamation or replacement does not adversely affect
the rights, preferences and privileges of the holders of the Trust Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in the new entity), and (B)
following such merger, consolidation, amalgamation or replacement, neither
Pacific Telesis Financing nor such successor entity will be required to
register as an investment company under the 1940 Act and (viii) Pacific
Telesis guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, Pacific Telesis Financing shall not, except
with the consent of holders of 100% in liquidation amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it, if such consolidation, amalgamation, merger or
replacement would cause Pacific Telesis Financing or the Successor Entity to
be classified as other than a grantor trust for United States federal income
tax purposes and each holder of the Trust Securities not to be treated as
owning an undivided beneficial interest in the Subordinated Debentures.
Expenses and Taxes
In the Declaration Pacific Telesis has agreed to pay for all debts and other
obligations (other than with respect to the Trust Securities) and all costs
and expenses of Pacific Telesis Financing (including costs and expenses
relating to the organization of Pacific Telesis Financing, the fees and
expenses of the Trustees and the costs and expenses relating to the operation
of Pacific Telesis Financing) and to pay any and all taxes and all costs and
expenses with respect thereto (other than United States withholding taxes) to
which Pacific Telesis Financing might become subject. The foregoing
obligations of Pacific Telesis under the Declaration are for the benefit of,
and shall be enforceable by, any person to whom any such debts, obligations,
costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor
has received notice thereof. Any such Creditor may enforce such obligations
of Pacific Telesis directly against Pacific Telesis, and Pacific Telesis has
irrevocably waived any right or remedy to require that any such Creditor take
any action against Pacific Telesis Financing or any other person before
proceeding against Pacific Telesis. Pacific Telesis has also agreed in the
Declaration to execute such additional agreements as may be necessary or
desirable to give full effect to the foregoing.
Book-Entry Issuance -- The Depository Trust Company
The Depository Trust Company ("DTC") will act as securities depository for the
Preferred Securities. The Preferred Securities initially will be issued only
as fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global Preferred Securities
certificates, representing the total aggregate number of Preferred Securities,
will be issued and will be delivered to DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global Preferred
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Securities as represented by a global certificate.
DTC has advised Pacific Telesis and Pacific Telesis Financing that DTC is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). DTC holds securities
that its participants ("Participants") deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations ("Direct Participants"). DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others, such as
securities brokers and dealers, banks and trust companies that clear
transactions through or maintain a direct or indirect custodial relationship
with a Direct Participant either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Securities and Exchange Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser
of each Preferred Security ("Beneficial Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchases, but Beneficial
Owners are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which the Beneficial Owners purchased
Preferred Securities. Transfers of ownership interests in the Preferred
Securities are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in the Preferred
Securities, except in the event that use of the book-entry system for the
Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Securities deposited by
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Preferred Securities with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Preferred Securities. DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Preferred Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants and by Direct Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements that may be in
effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce pro rata the amount
of the interest of each Direct Participant in such Preferred Securities to be
redeemed in accordance with its procedures.
Although voting with respect to the Preferred Securities is limited, in those
cases where a vote is required, neither DTC nor Cede & Co. will itself consent
or vote with respect to Preferred Securities. Under its usual procedures, DTC
would mail an Omnibus Proxy to Pacific Telesis Financing as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a listing attached
to the Omnibus Proxy). Pacific Telesis and Pacific Telesis Financing believe
that the arrangements among DTC, Direct and Indirect Participants, and
Beneficial Owners will enable the Beneficial Owners to exercise rights
equivalent in substance to the rights that can be directly exercised by a
holder of a beneficial interest in Pacific Telesis Financing.
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Distribution payments on the Preferred Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by Participants to Beneficial Owners will be governed
by standing instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or registered in
"street name," and such payments will be the responsibility of such
Participant and not of DTC, Pacific Telesis Financing or Pacific Telesis,
subject to any statutory or regulatory requirements that may be in effect from
time to time. Payment of distributions to DTC is the responsibility of
Pacific Telesis Financing, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments
to the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
Except as provided herein, a Beneficial Owner in a global Preferred Security
certificate will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depository with
respect to the Preferred Securities at any time by giving reasonable notice to
Pacific Telesis Financing. Under such circumstances, in the event that a
successor securities depository is not obtained, Preferred Securities
certificates are required to be printed and delivered. Additionally, the
Regular Trustees (with the consent of Pacific Telesis) may decide to
discontinue use of the system of book-entry transfers through DTC (or any
successor depository) with respect to the Preferred Securities. In that
event, certificates for the Preferred Securities will be printed and
delivered.
The information in this section concerning DTC and DTC's book-entry system has
been obtained from sources that Pacific Telesis and Pacific Telesis Financing
believe to be reliable, but neither Pacific Telesis nor Pacific Telesis
Financing takes responsibility for the accuracy thereof.
Information Concerning the Property Trustee
The Property Trustee, prior to the occurrence of a default with respect to the
Trust Securities, undertakes to perform only such duties as are specifically
set forth in the Declaration, in the terms of the Trust Securities or in the
Trust Indenture Act and, after default, shall exercise the same degree of care
as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Property Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at
the request of any holder of Preferred Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred thereby. The holders of Preferred Securities will not be
required to offer such indemnity in the event such holders, by exercising
their voting rights, direct the Property Trustee to take any action following
a Declaration Event of Default. The Property Trustee also serves as Guarantee
Trustee.
Paying Agent
In the event that the Preferred Securities do not remain in book-entry only
form, the following provisions would apply:
The Property Trustee will act as paying agent, and may designate an additional
or substitute paying agent at any time.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of Pacific Telesis Financing, but upon payment (with
the giving of such indemnity as Pacific Telesis Financing or Pacific Telesis
may require) in respect of any tax or other government charges that may be
imposed in relation to it.
Pacific Telesis Financing will not be required to register or cause to be
registered the transfer of Preferred Securities after such Preferred
Securities have been called for redemption.
Governing Law
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The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
Miscellaneous
The Regular Trustees are authorized and directed to operate Pacific Telesis
Financing in such a way so that Pacific Telesis Financing will not be required
to register as an "investment company" under the 1940 Act or be characterized
as other than a grantor trust for United States federal income tax purposes.
Pacific Telesis is authorized and directed to conduct its affairs so that the
Subordinated Debentures will be treated as indebtedness of Pacific Telesis for
United States federal income tax purposes. In this connection, Pacific
Telesis and the Regular Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of Pacific Telesis
Financing or the certificate of incorporation of Pacific Telesis, that each of
Pacific Telesis and the Regular Trustees determines in its discretion to be
necessary or desirable to achieve such end, as long as such action does not
adversely affect the interests of the holders of the Preferred Securities or
vary the terms thereof.
Holders of the Preferred Securities have no preemptive rights.
DESCRIPTION OF THE SUBORDINATED DEBENTURES
Set forth below is a description of the specific terms of the Subordinated
Debentures in which Pacific Telesis Financing will invest the proceeds from
the issuance and sale of the Trust Securities. This description supplements
the description of the general terms and provisions of the Subordinated
Debentures set forth in the accompanying Prospectus under the caption
"Description of the Subordinated Debt Securities." The following description
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the description in the accompanying Prospectus and
the Debt Securities Indenture, dated as of ______, 1995 (the "Base
Indenture"), between Pacific Telesis and The First National Bank of Chicago,
as Trustee (the "Indenture Trustee"), as supplemented by a First Supplemental
Indenture, dated as of ______, 1995 (the Base Indenture, as so supplemented,
is hereinafter referred to as the "Indenture"), the forms of which are filed
as Exhibits to the Registration Statement of which this Prospectus Supplement
and the accompanying Prospectus form a part and the Trust Indenture Act.
Certain capitalized terms used herein are defined in the Indenture.
Under certain circumstances involving the dissolution of Pacific Telesis
Financing following the occurrence of a Special Event, Subordinated Debentures
may be distributed to the holders of the Trust Securities in liquidation of
Pacific Telesis Financing. See "Description of the Preferred Securities --
Special Event Redemption or Distribution."
If the Subordinated Debentures are distributed to the holders of the Preferred
Securities, Pacific Telesis will use its best efforts to have the Subordinated
Debentures listed on the New York Stock Exchange or on such other exchange on
which the Preferred Securities are then listed.
General
The Subordinated Debentures will be issued as unsecured subordinated debt
securities under the Indenture. The Subordinated Debentures will be limited
in aggregate principal amount to approximately $___________, such amount being
the sum of the aggregate stated liquidation amount of the Preferred Securities
and the capital contributed by Pacific Telesis in exchange for the Common
Securities (the "Pacific Telesis Payment").
The Subordinated Debentures are not subject to a sinking fund provision. The
entire principal of the Subordinated Debentures will mature and become due and
payable, together with any accrued and unpaid interest thereon including
Compounded Interest (as hereinafter defined), if any, on __________, 2025,
subject to the election of Pacific Telesis to extend the scheduled maturity
date of the Subordinated Debentures to a date not later than __________, 2044,
which election is subject to Pacific Telesis' satisfying certain financial
conditions. See " -- Option to Extend Maturity Date."
If Subordinated Debentures are distributed to holders of Preferred Securities
in liquidation of such holders' interests in Pacific Telesis Financing, it is
presently anticipated that such Subordinated Debentures will initially be
issued in the form of one or more Global Security (as defined below). As
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described herein, under certain limited circumstances, Subordinated Debentures
may be issued in definitive certificated form in exchange for a Global
Security. See "--Book-Entry and Settlement" below. In the event that
Subordinated Debentures are issued in definitive certificated form, such
Subordinated Debentures will be in denominations of $25 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Payments on Subordinated Debentures issued as a Global Security will be made
to DTC or its nominee, a successor depository or its nominee. In the event
Subordinated Debentures are issued in definitive certificated form, principal
and interest will be payable, the transfer of the Subordinated Debentures will
be registrable and Subordinated Debentures will be exchangeable for
Subordinated Debentures of other denominations of a like aggregate principal
amount at the corporate trust offices of the Indenture Trustee in Chicago,
Illinois and New York, New York; provided that, payment of interest may be
made at the option of Pacific Telesis by check mailed to the address of the
persons entitled thereto.
Subordination
The Indenture provides that the Subordinated Debentures are subordinated and
junior in right of payment to the prior payment in full of all Senior
Indebtedness of Pacific Telesis whether now existing or hereafter incurred.
In the event and during the continuation of any default by Pacific Telesis in
the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness of Pacific Telesis, or in the event that the maturity of
any Senior Indebtedness of Pacific Telesis has been accelerated because of a
default, then in either case, no payment will be made by Pacific Telesis with
respect to the principal (including redemption payments) of or interest on the
Subordinated Debentures. Upon any distribution of assets of Pacific Telesis
to creditors upon any dissolution, winding-up, liquidation or reorganization,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership
or other proceedings, all principal, premium, if any, and interest due or to
become due on all Senior Indebtedness of Pacific Telesis must be paid in full
before the holders of Subordinated Debentures are entitled to receive or
retain any payment. In the event that the Subordinated Debentures are
declared due and payable before the Maturity Date, then all amounts due or to
become due on all Senior Indebtedness shall have been paid in full before
holders of the Subordinated Debentures are entitled to receive or retain any
payment. Upon satisfaction of all claims of all Senior Indebtedness then
outstanding, the rights of the holders of the Subordinated Debentures will be
subrogated to the rights of the holders of Senior Indebtedness of Pacific
Telesis to receive payments or distributions applicable to Senior Indebtedness
until all amounts owing on the Subordinated Debentures are paid in full.
The term "Senior Indebtedness" means, with respect to Pacific Telesis, all
indebtedness of such obligor, whether now existing or hereafter created, but
excluding trade accounts payable arising in the ordinary course of business.
Without limiting the generality of the foregoing, "Senior Indebtedness" shall
include (i) the principal, premium, if any, and interest in respect of (A)
indebtedness of such obligor for money borrowed and (B) indebtedness evidenced
by securities, debentures, bonds or other similar instruments issued by such
obligor; (ii) all capital lease obligations of such obligor; (iii) all
obligations of such obligor issued or assumed as the deferred purchase price
of property, all conditional sale obligations of such obligor and all
obligations of such obligor under any title retention agreement (but excluding
trade accounts payable arising in the ordinary course of business); (iv) all
obligations of such obligor for the reimbursement on any letter of credit,
banker's acceptance, security purchase facility or similar credit transaction;
(v) all obligations of the type referred to in clauses (i) through (iv) above
of other persons for the payment of which such obligor is responsible or
liable as obligor, guarantor or otherwise, including, without limitation,
under all support agreements or guarantees by Pacific Telesis of debentures,
notes and other securities issued by its subsidiaries PacTel Capital Resources
and PacTel Capital Funding; and (vi) all obligations of the type referred to
in clauses (i) through (v) above of other persons secured by any lien on any
property or asset of such obligor (whether or not such obligation is assumed
by such obligor); except in each case for (1) any such indebtedness that is by
its terms subordinated to or pari passu with the Subordinated Debentures, and
(2) any indebtedness between or among such obligor and its affiliates,
including all other debt securities and guarantees in respect of those debt
securities issued to (a) any other Pacific Telesis Trust (as defined in the
Prospectus) or a trustee of such trust or (b) any other trust, or a trustee of
such trust, or any partnership or other entity affiliated with Pacific Telesis
that is a financing vehicle of Pacific Telesis (a "financing entity") in
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connection with the issuance by such financing entity of preferred securities
or other securities that rank pari passu with, or junior to, the Preferred
Securities. Such Senior Indebtedness shall continue to be Senior Indebtedness
and be entitled to the benefits of the subordination provisions irrespective
of any amendment, modification or waiver of any term of such Senior
Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness that
may be issued by Pacific Telesis. As of September 30, 1995, the aggregate
amount of Senior Indebtedness and liabilities and obligations of Pacific
Telesis' subsidiaries and partnerships that would have effectively ranked
senior to the Subordinated Debentures was approximately $13,025 million.
Optional Redemption
Pacific Telesis shall have the right to redeem the Subordinated Debentures, in
whole or in part, from time to time, on or after __________, 2000, or at any
time in certain circumstances upon the occurrence of a Tax Event as described
under "Description of the Preferred Securities -- Special Event Redemption or
Distribution," upon not less than 30 nor more than 60 days notice, at a
redemption price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest to the redemption date. If a partial redemption
of the Preferred Securities resulting from a partial redemption of the
Subordinated Debentures would result in the delisting of the Preferred
Securities, Pacific Telesis may only redeem the Subordinated Debentures in
whole. Pacific Telesis may not redeem fewer than all outstanding Subordinated
Debentures unless there was no accrued and unpaid interest on the Subordinated
Debentures as of the Interest Payment Date (as defined below) next preceding
the redemption date.
Interest
Each Subordinated Debenture shall bear interest at the rate of ____% per annum
from the original date of issuance, or from the most recent interest payment
date to which interest has been paid or provided for, payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year (each
an "Interest Payment Date"), commencing _____________, to the person in whose
name such Subordinated Debt Security is registered, subject to certain
exceptions, at the close of business on the Business Day next preceding such
Interest Payment Date. In the event the Subordinated Debentures shall not
continue to remain in book-entry only form, Pacific Telesis shall have the
right to select record dates, which shall be more than one Business Day prior
to the Interest Payment Date.
The amount of interest payable for any period will be computed on the basis of
a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is
computed, will be computed on the basis of the actual number of days elapsed
per 30-day month. In the event that any date on which interest is payable on
the Subordinated Debentures is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day that is
a Business Day (and without any interest or other payment in respect of any
such delay), except that, if such Business Day is in the next succeeding
calendar year, then such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date.
Option to Extend Scheduled Maturity Date
The "Scheduled Maturity Date" of the Subordinated Debentures is _______, 2025.
Pacific Telesis, however, may, before the Scheduled Maturity Date, extend such
maturity date no more than one time for up to an additional 19 years (_____,
2025 or the extended maturity date then in effect, as the case may be, is
hereinafter referred to as the "Maturity Date"). Pacific Telesis must
exercise its right to extend the term at least 90 days prior to the Scheduled
Maturity Date, may not extend the term more than once and must satisfy the
following conditions on the Scheduled Maturity Date: (a) Pacific Telesis is
not in bankruptcy or otherwise insolvent, (b) Pacific Telesis is not in
default on any Subordinated Debt Securities issued to a Pacific Telesis Trust
or to any trustee of such trust in connection with an issuance of trust
securities by such Pacific Telesis Trust, (c) Pacific Telesis has made timely
payments on the Subordinated Debentures for the immediately preceding six
quarters without deferrals, (d) Pacific Telesis Financing is not in arrears on
payments of distributions on the Trust Securities, (e) the Subordinated
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Debentures are rated investment grade by any one of Standard & Poor's
Corporation, Moody's Investors Service, Inc., Fitch Investor Services, Duff &
Phelps Credit Rating Company or any other nationally recognized statistical
rating organization, and (f) the final maturity of such Subordinated
Debentures is not later than the 49th anniversary of the issuance of the
Preferred Securities. Pursuant to the Declaration, the Regular Trustees are
required to give notice of Pacific Telesis' election to extend the maturity
date to the holders of the Preferred Securities.
Option to Extend Interest Payment Period
Pacific Telesis shall have the right at any time, and from time to time,
during the term of the Subordinated Debentures to defer payments of interest
by extending the interest payment period for a period not exceeding 20
consecutive quarters, at the end of which Extension Period, Pacific Telesis
shall pay all interest then accrued and unpaid, together with interest thereon
compounded quarterly at the rate specified for the Subordinated Debentures to
the extent permitted by applicable law ("Compounded Interest"); provided that
no Extension Period shall extend beyond the Maturity Date; and provided
further that, during any such Extension Period, (a) Pacific Telesis shall not
declare or pay any dividends on, make any distribution with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to any of
its capital stock, (b) Pacific Telesis shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by Pacific Telesis that rank pari passu with or junior to
the Subordinated Debentures and (c) Pacific Telesis shall not make guarantee
payments with respect to the foregoing (other than pursuant to the Guarantee);
provided, however, that, the foregoing restriction (a) does not apply to any
stock dividends paid by Pacific Telesis where the dividend stock is the same
as that on which the dividend is paid. Prior to the termination of any such
Extension Period, Pacific Telesis may further defer payments of interest by
extending the interest payment period; provided, however, that, such Extension
Period, including all such previous and further extensions, may not exceed 20
consecutive quarters or extend beyond the Maturity Date. Upon the termination
of any Extension Period and the payment of all amounts then due, Pacific
Telesis may commence a new Extension Period, subject to the terms set forth in
this section. No interest during an Extension Period, except at the end
thereof, shall be due and payable. Pacific Telesis has no present intention
of exercising its right to defer payments of interest by extending the
interest payment period on the Subordinated Debentures. If the Property
Trustee shall be the sole holder of the Subordinated Debentures, Pacific
Telesis shall give the Regular Trustees and the Property Trustee notice of its
selection of such Extension Period one Business Day prior to the earlier of
(i) the date distributions on the Preferred Securities are payable or (ii) the
date the Regular Trustees are required to give notice to the New York Stock
Exchange (or other applicable self-regulatory organization) or to holders of
the Preferred Securities of the record date or the date such distribution is
payable. The Regular Trustees shall give notice of Pacific Telesis' selection
of such Extension Period to the holders of the Preferred Securities. If the
Property Trustee shall not be the sole holder of the Subordinated Debentures,
Pacific Telesis shall give the holders of the Subordinated Debentures notice
of its selection of such Extension Period ten Business Days prior to the
earlier of (i) the Interest Payment Date or (ii) the date upon which Pacific
Telesis is required to give notice to the New York Stock Exchange (or other
applicable self-regulatory organization) or to holders of the Subordinated
Debentures of the record or payment date of such related interest payment.
Indenture Events of Default
If any Indenture Event of Default shall occur and be continuing, the Property
Trustee, as the holder of the Subordinated Debentures, will have the right to
declare the principal of and the interest on the Subordinated Debentures
(including any Compounded Interest and any other amounts payable under the
Indenture) to be forthwith due and payable and to enforce its other rights as
a creditor with respect to the Subordinated Debentures subject to the
subordination provisions in the Declaration. See "Description of the
Subordinated Debt Securities -- Events of Default" in the accompanying
Prospectus for a description of the Indenture Events of Default. An Indenture
Event of Default also constitutes a Declaration Event of Default. The holders
of Preferred Securities in certain circumstances have the right to direct the
Property Trustee to exercise its rights as the holder of the Subordinated
Debentures. See "Description of the Preferred Securities -- Declaration
Events of Default" and "Description of the Preferred Securities -- Voting
Rights."
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Book-Entry and Settlement
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of Pacific
Telesis Financing as a result of the occurrence of a Special Event, it is
presently anticipated that the Subordinated Debentures will be issued in the
form of one or more global certificates (each a "Global Security") registered
in the name of a securities depository or its nominee. Except under the
limited circumstances described below, Subordinated Debentures represented by
the Global Security will not be exchangeable for, and will not otherwise be
issuable as, Subordinated Debentures in definitive form. The Global
Securities described above may not be transferred except by the depository to
a nominee of the depository or by a nominee of the depository to the
depository or another nominee of the depository or to a successor depository
or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Subordinated
Debentures in definitive form and will not be considered the Holders (as
defined in the Indenture) thereof for any purpose under the Indenture, and no
Global Security representing Subordinated Debentures shall be exchangeable,
except for another Global Security of like denomination and tenor to be
registered in the name of the depository or its nominee or to a successor
depository or its nominee. Accordingly, each beneficial owner must rely on
the procedures of the depository or if such person is not a Participant, on
the procedures of the Participant through which such person owns its interest
to exercise any rights of a Holder under the Indenture.
The Depository
If Subordinated Debentures are distributed to holders of Preferred Securities
in liquidation of such holders' interests in Pacific Telesis Financing, DTC
will act as securities depository for the Subordinated Debentures. For a
description of DTC and the specific terms of the depository arrangements, see
"Description of the Preferred Securities -- Book-Entry Issuance -- The
Depository Trust Company." As of the date of this Prospectus Supplement, the
description therein of DTC's book-entry system and DTC's practices as they
relate to purchases, transfers, notices and payments with respect to the
Preferred Securities apply in all material respects to any debt obligations
represented by one or more Global Securities held by DTC. Pacific Telesis may
appoint a successor to DTC or any successor depository in the event DTC or
such successor depository is unable or unwilling to continue as a depository
for the Global Securities.
None of Pacific Telesis, Pacific Telesis Financing, the Indenture Trustee, any
paying agent and any other agent of Pacific Telesis or the Indenture Trustee
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in a
Global Security for such Subordinated Debentures or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
Discontinuance of the Depository's Services
A Global Security shall be exchangeable for Subordinated Debentures in
definitive certificated form registered in the names of persons other than the
depository or its nominee only if (i) the depository notifies Pacific Telesis
that it is unwilling or unable to continue as a depository for such Global
Security and no successor depository shall have been appointed, (ii) the
depository, at any time, ceases to be a clearing agency registered under the
Exchange Act at which time the depository is required to be so registered to
act as such depository and no successor depository shall have been appointed,
or (iii) Pacific Telesis, in its sole discretion, determines that such Global
Security shall be so exchangeable. Any Global Security that is exchangeable
pursuant to the preceding sentence shall be exchangeable for Subordinated
Debentures registered in such names as the depository shall direct. It is
expected that such instructions will be based upon directions received by the
depository from its Participants with respect to ownership of beneficial
interests in such Global Security.
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Miscellaneous
The Indenture will provide that Pacific Telesis will pay all fees and expenses
related to (i) the offering of the Trust Securities and the Subordinated
Debentures, (ii) the organization, maintenance and dissolution of Pacific
Telesis Financing, (iii) the retention of the Pacific Telesis Trustees and
(iv) the enforcement by the Property Trustee of the rights of the holders of
the Preferred Securities.
EFFECT OF OBLIGATIONS UNDER THE
SUBORDINATED DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of Pacific Telesis Financing
is to (i) issue the Trust Securities evidencing undivided beneficial interests
in the assets of Pacific Telesis Financing, (ii) invest the proceeds from such
issuance and sale in the Subordinated Debentures and (iii) engage in only
those other activities necessary or incidental thereto.
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because: (i) the
aggregate principal amount of Subordinated Debentures will be equal to the sum
of the aggregate stated liquidation amount of the Trust Securities; (ii) the
interest rate and the interest and other payment dates on the Subordinated
Debentures will match the distribution rate and distribution and other payment
dates for the Preferred Securities; (iii) Pacific Telesis shall pay all, and
Pacific Telesis Financing shall not be obligated to pay, directly or
indirectly, any, costs, expenses, debts and obligations of Pacific Telesis
Financing; and (iv) the Declaration further provides that the Pacific Telesis
Trustees shall not cause or permit Pacific Telesis Financing to, among other
things, engage in any activity that is not consistent with the purposes of
Pacific Telesis Financing.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor
are available) are guaranteed by Pacific Telesis as and to the extent set
forth under "Description of the Guarantees" in the accompanying Prospectus.
If Pacific Telesis does not make interest and/or principal payments on the
Subordinated Debentures purchased by Pacific Telesis Financing, it is expected
that Pacific Telesis Financing will not have sufficient funds to pay
distributions on the Preferred Securities. The Guarantee is a full and
unconditional guarantee from the time of its issuance, but will not apply to
the payment of distributions and other payments on the Preferred Securities
when Pacific Telesis Financing does not have sufficient funds to make such
distributions or other payments.
If Pacific Telesis fails to make interest and/or principal payments on the
Subordinated Debentures when due (taking account of any Extension Period) or
another Indenture Event of Default occurs and is continuing, the Declaration
provides a mechanism whereby the holders of the Preferred Securities, using
the procedures described in "Description of the Preferred Securities -- Voting
Rights," may direct the Property Trustee to enforce its rights under the
Subordinated Debentures. If the Property Trustee fails to enforce its rights
under the Subordinated Debentures, a holder of Preferred Securities may
institute a legal proceeding directly against Pacific Telesis to enforce the
Property Trustee's rights under the Subordinated Debentures without first
instituting any legal proceeding against the Property Trustee or any other
person or entity.
If Pacific Telesis fails to make payments to holders of Preferred Securities
under the Guarantee, any such holder of the Preferred Securities may institute
a legal proceeding directly against Pacific Telesis to enforce Pacific
Telesis' obligation to make such payments.
Pacific Telesis and Pacific Telesis Financing believe that the above
mechanisms and obligations, taken together, are substantially equivalent to a
full and unconditional guarantee by Pacific Telesis of payments due on the
Preferred Securities. See "Description of the Guarantees -- General" in the
accompanying Prospectus.
UNITED STATES FEDERAL INCOME TAXATION
General
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The following is a summary of certain of the material United States federal
income tax consequences of the purchase, ownership and disposition of
Preferred Securities. Unless otherwise stated, this summary deals only with
Preferred Securities held as capital assets by holders who purchase the
Preferred Securities upon original issuance ("Initial Holders"). It does not
deal with special classes of holders such as banks, thrifts, real estate
investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, or persons that
will hold the Preferred Securities as a position in a "straddle," as part of a
"synthetic security" or "hedge," as part of a "conversion transaction" or
other integrated investment, or as other than a capital asset. This summary
also does not address the tax consequences to persons that have a functional
currency other than the U.S. dollar or the tax consequences to shareholders,
partners or beneficiaries of a holder of Preferred Securities. Further, it
does not include any description of any alternative minimum tax consequences
or the tax laws of any state or local government or of any foreign government
that may be applicable to the Preferred Securities. This summary is based on
the Internal Revenue Code of 1986, as amended (the "Code"), U. S. Treasury
regulations thereunder and administrative and judicial interpretations
thereof, as of the date hereof, all of which are subject to change, possibly
on a retroactive basis.
Classification of the Subordinated Debentures and Pacific Telesis Financing
In connection with the issuance of the Subordinated Debentures, Phillip J.
Lauro, Executive Director of Taxes of Pacific Telesis and tax counsel for
Pacific Telesis and Pacific Telesis Financing, will render his opinion
generally to the effect that, under then current law and assuming full
compliance with the terms of the Indenture (and certain other documents), the
Subordinated Debentures will be classified for United States federal income
tax purposes as indebtedness of Pacific Telesis.
In connection with the issuance of the Preferred Securities, Mr. Lauro will
render his opinion generally to the effect that, under then current law and
assuming full compliance with the terms of the Declaration, Pacific Telesis
Financing will be classified for United States federal income tax purposes as
a grantor trust and not as an association taxable as a corporation.
Accordingly, for United States federal income tax purposes, each holder of
Preferred Securities generally will be considered the owner of an undivided
interest in the Subordinated Debentures. Each holder will be required to
include in its gross income its allocable share of income accrued on the
Subordinated Debentures.
Investors should be aware that these tax opinions do not address any other
issue and are not binding on the Internal Revenue Service or the courts.
Original Issue Discount
The Subordinated Debentures will be treated as issued with original issue
discount. Holders of debt instruments issued with OID must include the OID in
income on an economic accrual basis regardless of their method of tax
accounting and regardless of the timing of the receipt of cash attributable to
the OID. Generally, all of a holder's taxable interest income with respect to
the Subordinated Debentures will be accounted for as OID, and actual payments
and distributions of stated interest will not be separately reported as
taxable income. The amount of OID that accrues in any quarter will
approximately equal the amount of the interest that accrues on the
Subordinated Debentures in that quarter at the stated interest rate. In the
event that the interest payment period is extended, holders will continue to
accrue OID approximately equal to the amount of the interest payment due at
the end of the extended interest payment period on an economic accrual basis
over the length of the extended interest period.
Because income on the Preferred Securities will constitute OID, corporate
holders of Preferred Securities will not be entitled to a dividends - received
deduction with respect to any income recognized with respect to the Preferred
Securities.
Market Discount and Bond Premium
Holders of Preferred Securities other than Initial Holders may be considered
to have acquired their undivided interests in the Subordinated Debentures with
"market discount or "acquisition premium as such phrases are defined for
United States federal income tax purposes. Such holders are advised to
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consult their tax advisors as to the income tax consequences of the
acquisition, ownership and disposition of the Preferred Securities.
Receipt of Subordinated Debentures or Cash Upon Liquidation of Pacific Telesis
Financing
Under certain circumstances, as described under the caption "Description of
the Preferred Securities -- Special Event Redemption or Distribution,"
Subordinated Debentures may be distributed to holders in exchange for the
Preferred Securities and in liquidation of Pacific Telesis Financing. Under
current law, such a distribution, for United States federal income tax
purposes, would be treated as a non-taxable event to each holder, and each
holder would receive an aggregate tax basis in the Subordinated Debentures
equal to such holder's aggregate tax basis in its Preferred Securities. A
holder's holding period in the Subordinated Debentures so received in
liquidation of Pacific Telesis Financing would include the period during which
the Preferred Securities were held by such holder.
Under certain circumstances described herein (see "Description of the
Preferred Securities -- Special Event Redemption or Distribution"), the
Subordinated Debentures may be redeemed for cash and the proceeds of such
redemption distributed to holders in redemption of their Preferred Securities.
Under current law, such a redemption would, for United States federal income
tax purposes, constitute a taxable disposition of the redeemed Preferred
Securities, and a holder could recognize gain or loss as if it sold such
redeemed Preferred Securities for cash. See "-- Sales of Preferred
Securities."
Sales of Preferred Securities
A holder that sells Preferred Securities will recognize gain or loss equal to
the difference between its adjusted tax basis in the Preferred Securities and
the amount realized on the sale of such Preferred Securities. A holder's
adjusted tax basis in the Preferred Securities generally will be its initial
purchase price increased by OID previously includable in such holder's gross
income to the date of disposition and decreased by payments received on the
Preferred Securities. Subject to the market discount rules described above,
such gain or loss generally will be a capital gain or loss and generally will
be a long-term capital gain or loss if the Preferred Securities have been held
for more than one year.
The Preferred Securities may trade at a price that does not accurately reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. A holder who disposes of its Preferred Securities
between record dates for payments of distributions thereon will be required to
include in ordinary income OID on the Subordinated Debentures accrued through
the date of disposition, and to add such amount to its adjusted tax basis in
its Preferred Securities. To the extent the selling price is less than the
holder's adjusted tax basis (which will include, in the form of OID, all
accrued but unpaid interest) a holder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes.
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the
United States, a foreign corporation, a non-resident alien individual, a
foreign partnership, or a non-resident fiduciary of a foreign estate or trust.
Under present United States federal income tax law: (i) payments by Pacific
Telesis Financing or any of its paying agents to any holder of a Preferred
Security who or which is a United States Alien Holder will not be subject to
United States federal withholding tax; provided that, (a) the beneficial owner
of the Preferred Security does not actually or constructively own 10% or more
of the total combined voting power of all classes of stock of Pacific Telesis
entitled to vote, (b) the beneficial owner of the Preferred Security is not a
controlled foreign corporation that is related to Pacific Telesis through
stock ownership, and (c) either (A) the beneficial owner of the Preferred
Security certifies to Pacific Telesis Financing or its agent, under penalties
of perjury, that it is not a United States holder and provides its name and
address or (B) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "Financial Institution"), and holds the Preferred
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Security in such capacity, certifies to Pacific Telesis Financing or its
agent, under penalties of perjury, that such statement has been received from
the beneficial owner by it or by a Financial Institution between it and the
beneficial owner and furnishes Pacific Telesis Financing or its agent with a
copy thereof; and (ii) a United States Alien Holder of a Preferred Security
will not be subject to United States federal withholding tax on any gain
realized upon the sale or other disposition of a Preferred Security.
Information Reporting to Holders
Income on the Preferred Securities will be reported to holders on Forms 1099,
which forms should be mailed to holders of Preferred Securities by January 31
following each calendar year.
Backup Withholding
Payments made on, and proceeds from the sale of, the Preferred Securities may
be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld amounts will be
allowed as a credit against the holder's federal income tax, provided the
required information is provided to the Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES
IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), Pacific Telesis Financing has agreed to sell
to each of the Underwriters named below, and each of the Underwriters, for
whom ______________________________________ are acting as representatives (the
"Representatives"), has severally agreed to purchase the number of Preferred
Securities set forth opposite its name below. In the Underwriting Agreement,
the several Underwriters have agreed, subject to the terms and conditions set
forth therein, to purchase all the Preferred Securities offered hereby if any
of the Preferred Securities are purchased. In the event of default by an
Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of the nondefaulting Underwriters may
be increased or the Underwriting Agreement may be terminated.
Number of
Underwriters Preferred Securities
------------ --------------------
Merrill Lynch, Pierce Fenner & Smith
Incorporated ....................
Total........................................ _________
=========
The Underwriters propose to offer the Preferred Securities, in part, directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus Supplement, and, in part, to certain securities dealers at
such price less a concession of $___ per Preferred Security, provided that
such concession for sales of 10,000 or more Preferred Securities to a single
purchaser will be $__________ per Preferred Security. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $___ per
Preferred Security to certain brokers and dealers. After the Preferred
Securities are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Representatives.
In view of the fact that the proceeds of the sale of the Preferred Securities
will ultimately be used to purchase the Subordinated Debentures of Pacific
Telesis, the Underwriting Agreement provides that Pacific Telesis will pay as
Underwriters' Compensation to the Underwriters' arranging the investment
therein of such proceeds, an amount in New York Clearing House (next day)
funds of $____ per Preferred Security (or $_________ in the aggregate) for the
accounts of the several Underwriters; provided that, such compensation for
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<PAGE>
sales of 10,000 or more Preferred Securities to any single purchaser will be
$___ per Preferred Security. Therefore, to the extent of such sales, the
actual amount of Underwriters Compensation will be less than the aggregate
amount specified in the preceding sentence.
During a period of 30 days from the date of this Prospectus Supplement,
neither Pacific Telesis Financing nor Pacific Telesis will, without the prior
written consent of the Underwriters, directly or indirectly, sell, offer to
sell, grant any option for the sale of, or otherwise dispose of, any Preferred
Securities, any security convertible into or exchangeable into or exercisable
for Preferred Securities or Subordinated Debentures or any debt securities
substantially similar to the Subordinated Debentures or equity securities
substantially similar to the Preferred Securities (except for the Subordinated
Debentures and the Preferred Securities offered hereby).
The Preferred Securities have been approved for listing on the New York Stock
Exchange. Trading of the Preferred Securities on the New York Stock Exchange
is expected to commence within a 30 day period after the initial delivery of
the Preferred Securities. The Representatives have advised Pacific Telesis
Financing that they intend to make a market in the Preferred Securities prior
to the commencement of trading on the New York Stock Exchange. The
Representatives will have no obligation to make a market in the Preferred
Securities, however, and may cease market making activities, if commenced, at
any time.
Prior to this offering there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the
Preferred Securities on the New York Stock Exchange, the Underwriters will
undertake to sell lots of 100 or more Preferred Securities to a minimum of 400
beneficial holders.
Pacific Telesis Financing and Pacific Telesis have agreed to indemnify the
Underwriters against, or contribute to payments that the Underwriters may be
required to make in respect of, certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, Pacific Telesis and its subsidiaries in the
ordinary course of business.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of Pacific Telesis Financing by
Skadden, Arps, Slate, Meagher & Flom, special Delaware counsel to Pacific
Telesis Financing. The validity of the Subordinated Debentures and the
Guarantee and certain matters relating thereto will be passed upon for Pacific
Telesis by Richard W. Odgers - Executive Vice President, General Counsel and
Secretary of Pacific Telesis. Pillsbury Madison & Sutro, San Francisco,
California, are acting as counsel to the Underwriters in connection with
certain legal matters relating to the securities offered hereby. Pillsbury,
Madison & Sutro will rely on the opinion of Skadden, Arps, Slate, Meagher &
Flom as to certain matters of Delaware law relating to the validity of the
Preferred Securities. Certain United States Federal income taxation matters
will be passed upon for Pacific Telesis and Pacific Telesis Financing by
Phillip J. Lauro, Executive Director of Taxes of Pacific Telesis. As of
September 30, 1995, Mr. Odgers beneficially owned or had an interest in
approximately 2144 shares of Pacific Telesis common stock and had been granted
options under the Pacific Telesis Group 1994 Stock Incentive Plan or its
predecessor with respect to 70,000 shares of Pacific Telesis common stock. As
of September 30, 1995, Mr. Lauro beneficially owned or had an interest in
approximately 1462 shares of Pacific Telesis common stock and had been granted
options under the Pacific Telesis Group 1994 Stock Incentive Plan or its
predecessor with respect to 10,400 shares of Pacific Telesis common stock.
For many years, Pillsbury Madison & Sutro has acted and continues to act as
counsel in certain matters for Pacific Telesis and certain of its affiliates.
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SUBJECT TO COMPLETION, DATED NOVEMBER 30, 1995
PROSPECTUS
$1,000,000,000
PACIFIC TELESIS GROUP
Subordinated Debt Securities
____________________
Pacific Telesis Financing I
Pacific Telesis Financing II
Pacific Telesis Financing III
Preferred Securities guaranteed to the extent set forth herein by
Pacific Telesis Group
Pacific Telesis Group ("Pacific Telesis" and, together with its subsidiaries,
the "Company"), a Nevada corporation, may offer, from time to time, unsecured
subordinated debt securities consisting of debentures, notes or other
evidences of indebtedness (the "Subordinated Debt Securities"), or any
combination of the foregoing, in each case in one or more series and in
amounts, at prices and on terms to be determined at or prior to the time of
any such offering. The Subordinated Debt Securities when issued will be
unsecured obligations of Pacific Telesis. Pacific Telesis' obligations under
the Subordinated Debt Securities will be subordinate and junior in right of
payment to certain other indebtedness of Pacific Telesis as may be described
in an accompanying prospectus supplement (the "Prospectus Supplement").
Pacific Telesis Financing I, Pacific Telesis Financing II and Pacific Telesis
Financing III (each, a "Pacific Telesis Trust"), each a statutory business
trust formed under the laws of the State of Delaware, may offer, from time to
time, preferred securities, representing undivided beneficial interests in the
assets of the respective Pacific Telesis Trust ("Preferred Securities"). The
payment of periodic cash distributions ("distributions") with respect to
Preferred Securities of each of the Pacific Telesis Trusts out of moneys held
by each of the Pacific Telesis Trusts, and payments on liquidation, redemption
or otherwise with respect to such Preferred Securities, will be guaranteed by
Pacific Telesis to the extent described herein (each a "Guarantee"). See
"Description of the Guarantees" below. Pacific Telesis' obligations under the
Guarantees are subordinate and junior in right of payment to all other
liabilities of Pacific Telesis and rank pari passu with the most senior
preferred stock, if any, issued from time to time by Pacific Telesis.
Subordinated Debt Securities may be issued and sold from time to time in one
or more series by Pacific Telesis to a Pacific Telesis Trust, or a trustee of
such Pacific Telesis Trust, in connection with the investment of the proceeds
from the offering of Preferred Securities and Common Securities (as defined
herein) of such Pacific Telesis Trust. The Subordinated Debt Securities
purchased by a Pacific Telesis Trust may be subsequently distributed pro rata
to holders of Preferred Securities and Common Securities in connection with
the dissolution of such Pacific Telesis Trust upon the occurrence of certain
events as may be described in an accompanying Prospectus Supplement. The
Subordinated Debt Securities and the Preferred Securities and the related
Guarantees are sometimes collectively referred to hereafter as the "Offered
Securities".
Specific terms of the Subordinated Debt Securities of any series or the
Preferred Securities of any Pacific Telesis Trust in respect of which this
prospectus ("Prospectus ) is being delivered will be set forth in a Prospectus
Supplement with respect to such securities, which will describe, without
limitation and where applicable, the following: (i) in the case of
Subordinated Debt Securities, the specific designation, aggregate principal
amount, denomination, maturity, premium, if any, any exchange, conversion,
redemption or sinking fund provisions, if any, interest rate (which may be
fixed or variable), if any, the time and method of calculating interest
payments, if any, dates on which premium, if any, and interest, if any, will
be payable, the right of Pacific Telesis, if any, to defer payment of interest
on the Subordinated Debt Securities and the maximum length of such deferral
period, the initial public offering price, subordination terms, and any
listing on a securities exchange and other specific terms of the offering; and
(ii) in the case of Preferred Securities, the designation, number of
securities, liquidation preference per security, initial public offering
price, any listing on a securities exchange, distribution rate (or method of
calculation thereof), dates on which distributions shall be payable and dates
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<PAGE>
from which distributions shall accrue, any voting rights, terms for any
conversion or exchange into other securities, any redemption, exchange or
sinking fund provisions, any other rights, preferences, privileges,
limitations or restrictions relating to the Preferred Securities and the terms
upon which the proceeds of the sale of the Preferred Securities shall be used
to purchase a specific series of Subordinated Debt Securities of Pacific
Telesis.
The Offered Securities may be offered in amounts, at prices and on terms to be
determined at the time of offering; provided, however, that, the aggregate
initial public offering price of all Offered Securities shall not exceed
$1,000,000,000. The Prospectus Supplement relating to any series of Offered
Securities will contain information concerning certain United States federal
income tax considerations, if applicable to the Offered Securities.
Pacific Telesis and/or each of the Pacific Telesis Trusts may sell the Offered
Securities directly, through agents designated from time to time, or through
underwriters or dealers. See "Plan of Distribution" below. If any agents of
Pacific Telesis and/or any Pacific Telesis Trust or any underwriters or
dealers are involved in the sale of the Offered Securities, the names of such
agents, underwriters or dealers and any applicable commissions and discounts
will be set forth in any related Prospectus Supplement.
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. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF
SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
The date of this Prospectus is ___________, 1995.
No dealer, salesperson or any other individual has been authorized by Pacific
Telesis or any of the Pacific Telesis Trusts to give any information or to
make any representation other than those contained or incorporated by
reference in this Prospectus or any accompanying Prospectus Supplement and, if
given or made, such information or representation must not be relied upon as
having been authorized. This Prospectus does 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. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of Pacific Telesis or any of the
Pacific Telesis Trusts since the date hereof.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a combined Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed by Pacific Telesis and the Pacific Telesis Trusts with the
Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Offered
Securities. This Prospectus does not contain all of the information set forth
in such Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. Reference is made to
such Registration Statement and to the exhibits relating thereto for further
information with respect to the Company, the Pacific Telesis Trusts and the
Offered Securities. Any statements contained herein concerning the provisions
of any document filed as an exhibit to the Registration Statement or otherwise
filed with the SEC or incorporated by reference herein are not necessarily
complete, and, in each instance, reference is made to the copy of such
document so filed for a more complete description of the matter involved.
Each such statement is qualified in its entirety by such reference.
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Pacific Telesis is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the SEC.
Reports, proxy statements and other information concerning Pacific Telesis can
be inspected and copied at prescribed rates at the SEC's Public Reference
Room, Judiciary Plaza, 450 Fifth Street, Northwest, Washington, D.C. 20549,
as well as the following Regional Offices of the SEC: 7 World Trade Center,
New York, New York 10048; and Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661. Such reports, proxy statements and other
information may also be inspected at the offices of the following stock
exchanges on which Pacific Telesis stock is traded: the New York Stock
Exchange, 20 Broad Street, New York, New York 10005; the Chicago Stock
Exchange, One Financial Place, 440 La Salle Street, Chicago, Illinois 60605;
and the Pacific Stock Exchange, 301 Pine Street, San Francisco, California
94104.
No separate financial statements of any of the Pacific Telesis Trusts have
been included herein. Pacific Telesis does not consider that such financial
statements would be material to holders of the Preferred Securities because
(i) all of the voting securities of each of the Pacific Telesis Trusts will be
owned, directly or indirectly, by Pacific Telesis, a reporting company under
the Exchange Act, (ii) each of the Pacific Telesis Trusts has no independent
operations but exists for the sole purpose of issuing securities representing
undivided beneficial interests in the assets of such Pacific Telesis Trust and
investing the proceeds thereof in Subordinated Debt Securities issued by
Pacific Telesis, and (iii) Pacific Telesis' obligations described herein and
in any accompanying prospectus supplement are substantially equivalent to a
full and unconditional guarantee of payments due on the Trust Securities. See
"Description of the Subordinated Debt Securities" and "Description of the
Guarantees."
The Pacific Telesis Trusts are not currently subject to the information
reporting requirements of the Exchange Act. The Pacific Telesis Trusts will
become subject to such requirements upon the effectiveness of the Registration
Statement, although they intend to seek and expect to receive exemptions
therefrom.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Pacific Telesis (File No. 1-8609) with the
SEC pursuant to the Exchange Act are incorporated by reference herein and made
a part hereof:
1. Annual Report on Form 10-K for the year ended December 31, 1994.
2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995, June
30, 1995 and September 30, 1995.
3. Current Reports on Form 8-K dated April 19, 1995 and September 7, 1995.
All documents filed by Pacific Telesis pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering of the Offered Securities pursuant hereto shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein or in any Prospectus Supplement shall be
deemed to be modified or superseded for purposes of this Prospectus or any
Prospectus Supplement to the extent that a statement contained herein or
therein (or in any other subsequently filed document that also is or is deemed
to be incorporated by reference herein or therein) modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus
or any Prospectus Supplement.
Pacific Telesis undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon the written or oral request
of any such person, a copy of any or all of the foregoing documents
incorporated herein by reference, other than exhibits to such documents,
unless such exhibits are specifically incorporated by reference into such
documents. Such requests should be directed the Company's Investor Services
office, 130 Kearny Street, Suite 2926, San Francisco, California 94108
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(telephone number (415) 394-3078).
PACIFIC TELESIS GROUP
Pacific Telesis was incorporated in 1983 under the laws of the State of Nevada
and has its principal executive offices at 130 Kearny Street, San Francisco,
California 94108 (telephone number (415) 394-3000).
Pacific Telesis is one of seven regional holding companies formed in
connection with the 1984 divestiture by AT&T Corp. of its 22 wholly-owned
operating telephone companies ("BOCs") pursuant to a consent decree settling
antitrust litigation (the "Consent Decree") approved by the United States
District Court for the District of Columbia, which has retained jurisdiction
over the interpretation and enforcement of the Consent Decree.
The Company includes a holding company, Pacific Telesis; two BOCs, Pacific
Bell and Nevada Bell; and certain diversified subsidiaries. The holding
company provides financial, strategic planning, legal and general
administrative functions on its own behalf and on behalf of its subsidiaries.
Pacific Bell and its wholly-owned subsidiaries, including Pacific Bell
Directory, Pacific Bell Information Services and Pacific Bell Mobile Services,
and Nevada Bell provide a variety of communications and information services
in California and Nevada. These services include: (1) dialtone and usage
services including local service (both exchange and private line), message
toll services within a service area, Wide Area Toll Service (WATS) / 800
services within a service area, Centrex service (a central office-based
switching service) and various special and custom calling services; (2)
exchange access to interexchange carriers and information service providers
for the origination and termination of switched and non-switched (private
line) voice and data traffic; (3) billing services for interexchange carriers
and information service providers; (4) various operator services; (5)
installation and maintenance of customer premises wiring; (6) public
communications services; (7) directory publishing; and (8) selected
information services, such as voice mail and electronic mail. Pacific Bell
Mobile Services was formed in 1994 to offer personal communications services
and other mobile telecommunications services and has not yet commenced
service.
THE PACIFIC TELESIS FINANCING TRUSTS
Each of Pacific Telesis Financing I, Pacific Telesis Financing II and Pacific
Telesis Financing III is a statutory business trust formed under Delaware law
pursuant to (i) a separate declaration of trust executed by Pacific Telesis,
as sponsor for such trust (the "Sponsor"), and the Pacific Telesis Trustees
(as defined herein) of such trust and (ii) the filing of a certificate of
trust with the Secretary of State of the State of Delaware on October 17,
1995. Each of the declarations of trust will be amended and restated in its
entirety (as so amended and restated, the "Declaration") substantially in the
form filed as an exhibit to the Registration Statement. Each Pacific Telesis
Trust exists for the exclusive purposes of (i) issuing the Preferred
Securities and common securities representing undivided beneficial interests
in the assets of the Trust (the "Common Securities" and, together with the
Preferred Securities, the "Trust Securities"), (ii) investing the gross
proceeds from the sale of the Trust Securities in the Subordinated Debt
Securities and (iii) engaging in only those other activities necessary or
incidental thereto. All of the Common Securities will be directly or
indirectly owned by Pacific Telesis. The Common Securities will rank pari
passu, and payments will be made thereon pro rata, with the Preferred
Securities, except that, upon an event of default under the Declaration, the
rights of the holders of the Common Securities to payment in respect of
distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights of the holders of the Preferred Securities.
Pacific Telesis will directly or indirectly acquire Common Securities in an
aggregate liquidation amount equal to 3% of the total capital of each Pacific
Telesis Trust. Each Pacific Telesis Trust has a term of approximately 55
years but may terminate earlier, as provided in each Declaration. Each
Pacific Telesis Trust's business and affairs will be conducted by the trustees
(the "Pacific Telesis Trustees") appointed by Pacific Telesis as the direct or
indirect holder of all the Common Securities. The holder of the Common
Securities will be entitled to appoint, remove or replace any of, or increase
or reduce the number of, the Pacific Telesis Trustees of a Pacific Telesis
Trust. The duties and obligations of the Pacific Telesis Trustees shall be
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governed by the Declaration of such Pacific Telesis Trust. A majority of the
Pacific Telesis Trustees of each Pacific Telesis Trust will be persons who are
employees or officers of or who are affiliated with Pacific Telesis (the
"Regular Trustees"). One Pacific Telesis Trustee (the "Property Trustee") of
each Pacific Telesis Trust will be a financial institution that is not
affiliated with Pacific Telesis and has a specified minimum amount of
aggregate capital, surplus, and undivided profits of not less than
$50,000,000, which shall act as property trustee and as indenture trustee for
the purposes of the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), pursuant to the terms set forth in a Prospectus Supplement.
In addition, unless the Property Trustee maintains a principal place of
business in the State of Delaware and otherwise meets the requirements of
applicable law, one Pacific Telesis Trustee (the "Delaware Trustee") of each
Pacific Telesis Trust will either be a natural person and a resident of
Delaware or a legal entity having its principal place of business in Delaware.
Pacific Telesis will pay all fees and expenses related to the Pacific Telesis
Trusts and the offering of the Trust Securities, the payment of which will be
guaranteed by Pacific Telesis. The Property Trustee for each Pacific Telesis
Trust is The First National Bank of Chicago, One First National Plaza,
Chicago, Illinois 60670. The Delaware Trustee for each Pacific Telesis Trust
is Michael J. Majchrzak, FCC National Bank, 300 King Street, Wilmington,
Delaware 19801. The address for each Pacific Telesis Trust is c/o Pacific
Telesis Group, the Sponsor of each Trust, at the Company's corporate
headquarters located at 130 Kearny Street, San Francisco, California 94108,
telephone (415) 394-3000.
USE OF PROCEEDS
Each Pacific Telesis Trust will use all proceeds received from the sale of its
Preferred Securities to purchase Subordinated Debt Securities from Pacific
Telesis. Pacific Telesis intends to add the net proceeds from the sale of the
Subordinated Debt Securities to Pacific Telesis' general funds, to be used for
general corporate purposes, including capital expenditures, repurchases of
outstanding long-term debt securities, investments in subsidiaries, working
capital, repayment of short-term commercial paper notes and other business
opportunities or as otherwise disclosed in any Prospectus Supplement.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to combined fixed charges
from continuing operations of Pacific Telesis Group and its consolidated
subsidiaries for the periods indicated. For the purpose of calculating this
ratio, earnings consist of income before income taxes and fixed charges.
Fixed charges include interest on indebtedness (excluding discontinued
operations) and the portion of rentals representative of the interest factor.
Nine
Months
Ended
September 30 Year Ended December 31,
Ratio of ------------- -----------------------------------
Earnings 1995 1994 1994 1993 1992 1991 1990
to Fixed ---- ---- ---- ---- ---- ---- ----
Charges 4.23 4.85 4.60 1.37 4.21 3.42 3.27
==== ==== ==== ==== ==== ==== ====
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DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES
Subordinated Debt Securities may be issued from time to time in one or more
series under an Indenture, dated as of _____________1995 (the "Subordinated
Debt Securities Indenture" or the "Indenture"), between the Company and The
First National Bank of Chicago as trustee (the "Subordinated Debt Securities
Trustee"). The terms of the Subordinated Debt Securities will include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act. The following summary does not purport to be
complete and is subject in all respects to the provisions of, and is qualified
in its entirety by reference to, the Indenture, which is filed as an exhibit
to the Registration Statement of which this Prospectus forms a part, and the
Trust Indenture Act. Whenever particular provisions or defined terms in the
Indenture are referred to herein, such provisions or defined terms and their
definitions are incorporated by reference herein.
The following description of the Subordinated Debt Securities sets forth the
general terms and provisions of the Subordinated Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Subordinated
Debt Securities offered by any Prospectus Supplement and the extent, if any,
to which such general provisions may apply will be described in the Prospectus
Supplement relating to such Subordinated Debt Securities.
General
The Subordinated Debt Securities will be unsecured, subordinated obligations
of Pacific Telesis. The Indenture does not limit the aggregate principal
amount of Subordinated Debt Securities which may be issued thereunder and
provides that the Subordinated Debt Securities may be issued from time to time
in one or more series pursuant to an indenture supplemental to the
Subordinated Debt Securities Indenture, or pursuant to a resolution of Pacific
Telesis' Board of Directors or pursuant to authority granted by such Board of
Directors (each a "Supplemental Indenture").
In the event Subordinated Debt Securities are issued to a Pacific Telesis
Trust (or a trustee of such trust) in connection with the issuance of Trust
Securities by any such Pacific Telesis Trust, such Subordinated Debt
Securities subsequently may be distributed pro rata to the holders of such
Trust Securities in connection with the dissolution of such Pacific Telesis
Trust upon the occurrence of certain events described in the Prospectus
Supplement relating to such Trust Securities. Only one series of Subordinated
Debt Securities will be issued to a Pacific Telesis Trust, or a trustee of
such trust, in connection with the issuance of Trust Securities by such
Pacific Telesis Trust.
Reference is made to the applicable Prospectus Supplement for any series of
Subordinated Debt Securities for the following terms: (1) the designation of
such series of Subordinated Debt Securities, (2) the aggregate principal
amount of such series of Subordinated Debt Securities, (3) the stated maturity
or maturities for payment of principal of such series of Subordinated Debt
Securities and any sinking fund or analogous provisions, (4) the rate or rates
at which such series of Subordinated Debt Securities shall bear interest and
the interest payment dates for such series of Subordinated Debt Securities,
(5) the rights, if any, to defer payments of interest on such series of
Subordinated Debt Securities by extending the interest payment period, (6)
the dates on which such interest will be payable, (7) the rights, if any to
extend the stated maturity or maturities for payment of principal of such
series of Subordinated Debt Securities, (8) the subordination terms of the
Subordinated Debt Securities of such series, (9) the currencies, currency unit
or index in or according to which principal of and interest and any premium on
such series of Subordinated Debt Securities shall be payable (if other than
United States Dollars), (10) the redemption date or dates, if any and the
redemption price or prices and other applicable redemption provisions for such
series of Subordinated Debt Securities, including the date, if any, after
which, and the price or prices at which, the Subordinated Debt Securities may
be redeemed at the option of Pacific Telesis or the Holder (as defined in the
Indenture) thereof, and other detailed terms and provisions of such optional
redemption, (11) whether the Subordinated Debt Securities will be issued as
bearer or registered securities, (12) the terms of any guaranty, if any,
issued with respect to such series of Subordinated Debt Securities, (13)
whether such series of Subordinated Debt Securities shall be issued as one or
more global debt securities ("Global Debt Securities"), and if so, the
identity of the depository (the "Debt Depository") for such Global Debt
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Security or Securities, (14) if not issued as one or more Global Debt
Securities, the denominations in which such series of Subordinated Debt
Securities shall be issuable (if other than denominations of $5,000 and any
integral multiple thereof), (15) the date from which interest on such series
of Subordinated Debt Securities shall accrue, (16) the basis upon which
interest on such series of Subordinated Debt Securities shall be computed (if
other than on the basis of a 360-day year of twelve 30-day months), (17) if
other than the principal amount thereof, the portion of the principal amount
of such series of Subordinated Debt Securities which shall be payable upon
declaration of acceleration of the maturity thereof pursuant to the Indenture,
(18) whether and under what circumstances Pacific Telesis will pay Additional
Amounts (as defined in the Indenture) to any Holder who is not a United States
person (including any modification to the definition of such term as contained
in the Indenture as originally executed) in respect of any tax, assessment or
governmental charge and, if so, whether Pacific Telesis will have an option to
redeem such Subordinated Debt Securities rather than pay such Additional
Amounts (and the terms of any such option), (19) any deletions from,
modifications of or additions to the Events of Default (as defined in the
Indenture) or covenants of Pacific Telesis with respect to such series of
Subordinated Debt Securities, whether or not such Events of Default or
covenants are consistent with the terms of such Subordinated Debt Securities
Indenture, (20) any restrictions on dividends or distributions by Pacific
Telesis under the Indenture, (21) the ability of Pacific Telesis to incur
additional indebtedness or issue additional securities, (22) whether such
series of Subordinated Debt Securities will be offered at an "original issue
discount," (23) if other than the Subordinated Debt Securities Trustee, the
person or persons who shall be registrar for such series of Subordinated Debt
Securities (24) the Record Date (as defined in the Indenture), (25) the
identity of the Subordinated Debt Securities Trustee, (26) the percentage of
such series of Subordinated Debt Securities necessary to require the
Subordinated Debt Securities Trustee to take action under the Indenture, (27)
the place or places, if any, other than the City of New York, where the
principal of (and premium, if any, on) and any interest on such series of
Subordinated Debt Securities shall be payable, where such Subordinated Debt
Securities may be surrendered for registration of transfer or exchange, and
where any notices or demands upon Pacific Telesis with respect to such series
of Subordinated Debt Securities may be served, (28) the designation of the
initial Exchange Rate Agent (as defined in the Indenture), if any, (29) the
provisions, if any , granting special rights to the holders of such series of
Subordinated Debt Securities upon the occurrence of such events as may be
specified, and (30) any other term or provision relating to such series of
Subordinated Debt Securities not inconsistent with the Indenture.
The Indenture does not contain any provisions that afford holders of
Subordinated Debt Securities protection in the event of a highly leveraged
transaction involving Pacific Telesis.
Denomination
Subordinated Debt Securities may be issuable as Registered Securities (as
defined in the Indenture) solely, as Bearer Securities (as defined in the
Indenture) solely, or as both. Registered Securities will be issuable in
denominations of $25 and integral multiples of $25 and Bearer Securities will
be issuable in the denomination of $5,000 and integral multiples of $5,000 or,
in each case, in such other denominations as may be specified in the terms of
the Subordinated Debt Securities. The Subordinated Debt Securities Indenture
also provides that Subordinated Debt Securities may be issued in global form.
Unless otherwise indicated in any Prospectus Supplement, Bearer Securities
will have interest coupons attached.
Registration and Transfer
Registered Securities will be exchangeable for other Registered Securities of
the same series and of a like aggregate principal amount and tenor of
different authorized denominations. If (but only if) provided for in any
Prospectus Supplement, Bearer Securities (with all unmatured coupons, except
as provided below, and all matured coupons in default) of any series may be
exchanged for Registered Securities of the same series of any authorized
denominations and of a like aggregate principal amount and tenor. In such
event, Bearer Securities surrendered in a permitted exchange for Registered
Securities between a Regular Record Date (as defined in the Indenture) or a
Special Record Date (as defined in the Indenture) 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 on such date
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for payment of interest 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. Unless
otherwise specified in any Prospectus Supplement, Bearer Securities will not
be issued in exchange for Registered Securities.
The Subordinated Debt Securities may be presented for exchange as described
above, and Registered Securities may be presented for registration of transfer
(duly endorsed or accompanied by a written instrument of transfer), at the
corporate trust offices of the Subordinated Debt Securities Trustee in
Chicago, Illinois or New York, New York. No service charge will be made for
any transfer or exchange of Subordinated Debt Securities, but Pacific Telesis
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
In the event of any redemption of Subordinated Debt Securities, Pacific
Telesis shall not be required to: (i) issue, register the transfer of or
exchange Subordinated Debt Securities of any series during a period beginning
at the opening of business 15 days before any selection of Subordinated Debt
Securities of that series to be redeemed and ending at the close of business
on (A) if Subordinated Debt Securities of the series are issuable only as
Registered Securities, the day of mailing of the relevant notice of redemption
and (B) if Subordinated Debt Securities of the series are issuable as Bearer
Securities, the day of the first publication of the relevant notice of
redemption or, if Subordinated Debt Securities of the series are also issuable
as Registered Securities and there is no publication, the day of mailing of
the relevant notice of redemption; (ii) register the transfer of or exchange
any Registered Security, or portion thereof, called for redemption, except the
unredeemed portion of any Registered Security being redeemed in part; (iii)
exchange any Bearer Security selected for redemption, except to exchange such
Bearer Security for a Registered Security of that series and like tenor that
is simultaneously surrendered for redemption; or (iv) issue, register the
transfer of or exchange any Subordinated Debt Securities that have been
surrendered for repayment at the option of the Holder, except the portion if
any, thereof not to be so repaid.
Global Securities
The Subordinated Debt Securities of a series may be issued in whole or in part
in the form of one or more Global Securities (as such term is defined below),
which will be deposited with, or on behalf of, a depository ("Depository") or
its nominee identified in the applicable Prospectus Supplement. In such case,
one or more Global Securities will be issued in a denomination or aggregate
denomination equal to the portion of the aggregate principal amount of
outstanding Subordinated Debt Securities of the series to be represented by
such Global Security or Global Securities. The term "Global Security," when
used with respect to any series of Subordinated Debt Securities, means a
Subordinated Debt Security that is executed by Pacific Telesis and
authenticated and delivered by the Subordinated Debt Securities Trustee to the
Depository or pursuant to the Depository's instruction, which shall be
registered in the name of the Depository or its nominee and which shall
represent, and shall be denominated in an amount equal to the aggregate
principal amount of, all of the outstanding Subordinated Debt Securities of
such series or any portion thereof, in either case having the same terms,
including, without limitation, the same original issue date, date or dates on
which principal is due, and interest rate or method of determining interest.
The specific terms of the Depository arrangement with respect to any portion
of a series of Subordinated Debt Securities to be represented by a Global
Security will be described in the applicable Prospectus Supplement. Pacific
Telesis expects that the following provisions will apply to Depository
arrangements.
Unless otherwise specified in the applicable Prospectus Supplement,
Subordinated Debt Securities that are to be represented by a Global Security
to be deposited with or on behalf of a Depository will be represented by a
Global Security registered in the name of such Depository or its nominee.
Upon the issuance of such Global Security, and the deposit of such Global
Security with or on behalf of the Depository for such Global Security, the
Depository will credit on its book-entry registration and transfer system the
respective principal amounts of the Subordinated Debt Securities represented
by such Global Security to the accounts of institutions that have accounts
with such Depository or its nominee ("participants"). The accounts to be
credited will be designated by the underwriters or agents with respect to such
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Subordinated Debt Securities or, if such Subordinated Debt Securities are
offered and sold directly by Pacific Telesis, by Pacific Telesis. Ownership
of beneficial interests in such Global Security will be limited to
participants or Persons (as defined in the Indenture) that may hold interests
through participants. Ownership of beneficial interests by participants in
such Global Security will be shown on, and the transfer of that ownership
interest will be effected only through, records maintained by the Depository
or its nominee for such Global Security. Ownership of beneficial interests in
such Global Security 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 certificated form. The foregoing limitations
and such laws may impair the ability to transfer beneficial interests in such
Global Securities.
So long as the Depository for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or Holder of the
Subordinated Debt Securities represented by such Global Security for all
purposes under the Indenture. Unless otherwise specified in the applicable
Prospectus Supplement, owners of beneficial interests in such Global Security
will not be entitled to have Subordinated Debt Securities of the series
represented by such Global Security registered in their names, will not
receive or be entitled to receive physical delivery of Subordinated Debt
Securities of such series in definitive certificated form and will not be
considered the Holders thereof for any purposes under the Indenture.
Accordingly, each Person owning a beneficial interest in such Global Security
must rely on the procedures of the Depository and, if such Person is not a
participant, on the procedures of the participant through which such Person
owns its interest, to exercise any rights of a Holder under the Indenture.
Pacific Telesis understands that under existing industry practices, if Pacific
Telesis requests any action of Holders or if an owner of a beneficial interest
in such Global Security desires to give any notice or take any action a Holder
is entitled to give or take under the Indenture, then the Depository would
authorize the participants to give such notice or take such action, and
participants would authorize beneficial owners owning through such
participants to give such notice or take such action or would otherwise act
upon the instructions of beneficial owners owning through them.
Principal of and any premium and interest on a Global Security will be payable
in the manner described in the applicable Prospectus Supplement.
Payment and Paying Agents
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
principal of and premium (if any) on any Subordinated Debt Securities will be
made only against surrender to the Paying Agent (as defined in the Indenture)
of such Subordinated Debt Securities. Unless otherwise indicated in an
applicable Prospectus Supplement, principal of and any premium and interest,
if any, on Subordinated Debt Securities will be payable, subject to any
applicable laws and regulations, at the office of such Paying Agent or Paying
Agents as Pacific Telesis may designate from time to time, except that at the
option of Pacific Telesis payment of any interest may be made by check mailed
to the address of the person entitled thereto as such address shall appear in
the Debenture Register with respect to such Subordinated Debt Securities.
Unless otherwise indicated in an applicable Prospectus Supplement, payment of
interest on a Subordinated Debt Security on any Interest Payment Date (as
defined in the Indenture) will be made to the person in whose name such
Subordinated Debt Security (or predecessor security) is registered at the
close of business on the Regular Record Date (as defined in the Indenture) for
such interest payment.
Pacific Telesis will act as Paying Agent with respect to the Subordinated Debt
Securities. Pacific Telesis may at any time designate additional Paying
Agents or rescind the designation of any Paying Agents or approve a change in
the office through which any Paying Agent acts, except that Pacific Telesis
will be required to maintain a Paying Agent in each Place of Payment (as
defined in the Indenture) for each series of the respective Subordinated Debt
Securities.
Subordination
The Subordinated Debt Securities will be subordinated and junior in right of
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payment to certain other indebtedness of Pacific Telesis to the extent set
forth in the Prospectus Supplement that will accompany this Prospectus.
Certain Covenants
If Subordinated Debt Securities are issued to a Pacific Telesis Trust or a
trustee of such trust in connection with the issuance of Trust Securities by
such Pacific Telesis Trust and there shall have occurred any event that would
constitute an Event of Default, then (a) Pacific Telesis shall not declare or
pay dividends on, or make a distribution with respect to or redeem, purchase
or acquire, or make a liquidation payment with respect to, any of its capital
stock, (b) Pacific Telesis shall not make any payment of interest, principal
or premium, if any, on or repay, repurchase or redeem any debt securities
issued by Pacific Telesis that rank pari passu with or junior to such
Subordinated Debt Securities and (c) Pacific Telesis shall not make guarantee
payments with respect to the foregoing (other than pursuant to the Guarantee);
provided, however, that, restriction (a) above does not apply to any stock
dividends paid by Pacific Telesis where the dividend stock is the same stock
as that on which the dividend is being paid.
In the event Subordinated Debt Securities are issued to a Pacific Telesis
Trust or a trustee of such trust in connection with the issuance of Trust
Securities of such Pacific Telesis Trust, for so long as such Trust Securities
remain outstanding, Pacific Telesis will covenant (i) to directly or
indirectly maintain 100% ownership of the Common Securities of such Pacific
Telesis Trust; provided, however, that any permitted successor of Pacific
Telesis under the Indenture may succeed to Pacific Telesis' ownership of such
Common Securities and (ii) to use its reasonable efforts to cause such Pacific
Telesis Trust (a) to remain a statutory business trust, except in connection
with the distribution of Subordinated Debt Securities to the holders of Trust
Securities in liquidation of such Pacific Telesis Trust, the redemption of all
of the Trust Securities of such Pacific Telesis Trust, or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration of such
Pacific Telesis Trust, and (b) to otherwise continue to be classified as a
grantor trust for United States federal income tax purposes.
Restrictions
The Subordinated Debt Securities Indenture provides that Pacific Telesis shall
not consolidate with or merge into any other corporation, or convey, transfer
or lease, or permit one or more of its Subsidiaries to convey, transfer or
lease, all or substantially all of the properties and assets of the Company on
a consolidated basis to any Person, unless either Pacific Telesis is the
continuing corporation or such corporation or Person is organized under the
laws of the United States or any state of the United States or the District of
Columbia, assumes by supplemental indenture all the obligations of Pacific
Telesis under the Indenture and the Subordinated Debt Securities and,
immediately after giving effect thereto, no Event of Default shall have
occurred and be continuing.
Events of Default
The Indenture provides, with respect to any series of Subordinated Debt
Securities outstanding thereunder, that any one or more of the following
events that has occurred and is continuing shall constitute an Event of
Default: (i) default in the payment of any interest upon or any Additional
Amounts payable in respect of any Subordinated Debt Security of that series,
or of any coupon appertaining thereto, when the same becomes due and payable
if such default continues for a period of 90 days, provided however that an
extension of one or more Interest Payment Dates in accordance with the terms
of any Supplemental Indenture shall not constitute a default in the payment of
interest; (ii) default in the payment of the principal of (or any premium, if
any) on any Subordinated Debt Security of that series when due at maturity
with respect to that series; provided, however, that, a valid extension of the
maturity of the Subordinated Debt Securities in accordance with the terms of
any Supplemental Indenture shall not constitute a default for this purpose;
(iii) default in the deposit of any sinking fund payment when and as due; (iv)
default in the performance or breach of any covenant or agreement of Pacific
Telesis in the Indenture with respect to any Subordinated Debt Security of
that series (other than a default or breach which would otherwise constitute
an Event of Default under the Indenture) and continuance of such default or
breach for a period of 90 days after written notice to Pacific Telesis from
the Trustee or to Pacific Telesis and the Subordinated Debt Securities Trustee
from the holders of at least 25% in principal amount of the outstanding
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Subordinated Debt Securities of that series; (v) certain events in bankruptcy,
insolvency or reorganization of Pacific Telesis; (vi) the voluntary or
involuntary dissolution, winding-up or termination of a Pacific Telesis Trust
to which (or to a trustee of such trust to which) Subordinated Debt Securities
were issued in connection with the issuance of Trust Securities by such
Pacific Telesis Trust, except in connection with the distribution of
Subordinated Debt Securities to the holders of Trust Securities in liquidation
of such Pacific Telesis Trust, the redemption of all of the Trust Securities
of such Pacific Telesis Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration of such Pacific Telesis
Trust; and (vii) any other Event of Default provided with respect to
Subordinated Debt Securities of that series. Pacific Telesis is required to
file annually with the Subordinated Debt Securities Trustee an officer's
certificate as to Pacific Telesis' compliance with all conditions and
covenants under the Indenture. The Indenture provides that the Trustee may
withhold notice to the Holders of Subordinated Debt Securities of any default,
except in the case of a default on the payment of the principal of (or
premium, if any) or interest on any Subordinated Debt Securities or the
payment of any sinking fund installment with respect to such Securities if it
considers it in the interest of the Holders of Subordinated Debt Securities to
do so.
If an Event of Default occurs and is continuing with respect to Subordinated
Debt Securities of a particular series, the Subordinated Debt Securities
Trustee or the Holders of not less than 25% in principal amount of Outstanding
(as defined in the Indenture) Subordinated Debt Securities of that series may
declare the Outstanding Subordinated Debt Securities of that series due and
payable immediately and upon any such declaration, such principal amount shall
become immediately due and payable.
Subject to the provisions relating to the duties of the Subordinated Debt
Securities Trustee, if an Event of Default with respect to Subordinated Debt
Securities of a particular series occurs and is continuing, the Subordinated
Debt Securities Trustee shall be under no obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
Holders of Subordinated Debt Securities of such series, unless such Holders
shall have offered to the Subordinated Debt Securities Trustee reasonable
indemnity and security against the costs, expenses and liabilities that might
be incurred by it in compliance with such request. Subject to such provisions
for the indemnification of the Subordinated Debt Securities Trustee, the
Holders of a majority in principal amount of the Outstanding Subordinated Debt
Securities of such series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the
Subordinated Debt Securities Trustee under the Indenture, or exercising any
trust or power conferred on the Subordinated Debt Securities Trustee with
respect to the Subordinated Debt Securities of that series. The Subordinated
Debt Securities Trustee may refuse to follow directions in conflict with law
or the Indenture that may involve the Subordinated Debt Securities Trustee in
personal liability or that may be unduly prejudicial to Holders not joining
therein.
The Holders of not less than a majority in principal amount of the Outstanding
Subordinated Debt Securities of any series may, on behalf of the Holders of
all the Subordinated Debt Securities of such series and any related coupons,
waive any past Event of Default under the Indenture with respect to such
series and its consequences and annul any declaration that any Subordinated
Debt Securities are due and payable immediately, except a default (i) in the
payment of the principal of (or premium, if any) or interest on any
Subordinated Debt Security of such series or (ii) in respect of a covenant or
provision that cannot be modified or amended without the consent of the Holder
of each Outstanding Subordinated Debt Security of such series affected
thereby.
Modification or Waiver
With the consent of the Holders of not less than a majority in principal
amount of all Outstanding Subordinated Debt Securities of any series, the
Company and the Trustee may enter into supplemental indentures for the purpose
of adding any provisions to or changing in any manner or eliminating in any
manner any of the provisions of the Indenture which affect such series of
Subordinated Debt Securities or of modifying in any manner the rights of the
Holders of such series; provided that, no such supplemental indenture may,
without the consent of the Holder of each Outstanding Subordinated Debt
Security of such series, among other things, (i) change the Stated Maturity
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(as defined in the Indenture) of the principal of or any installment of
principal of or interest on any Subordinated Debt Security of such series,
(ii) reduce the principal amount or the rate of interest on or any premium
payable upon redemption of any Subordinated Debt Security of such series,
(iii) change any obligation of Pacific Telesis to pay Additional Amounts in
respect of any Subordinated Debt Security of such series, (iv) reduce the
amount of principal of a Subordinated Debt Security of such series that is an
Original Issue Discount Security (as defined in the Indenture) and would be
due and payable upon a declaration of acceleration of the Maturity (as defined
in the Indenture) thereof or the amount thereof provable in bankruptcy, (v)
adversely affect any right of repayment at the option of the Holder of any
Subordinated Debt Security of such series, (vi) change the place or currency
of payment of principal of, or any premium or interest on, any Subordinated
Debt Security of such series, (vii) impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof or any
Redemption Date (as defined in the Indenture) or Repayment Date (as defined in
the Indenture) therefor, (viii) reduce the above-stated percentage of Holders
of Outstanding Subordinated Debt Securities of such series necessary to modify
or amend the Indenture or to consent to any waiver thereunder or reduce the
requirements for voting or quorum described below, (ix) change the time of
payment or reduce the amount of any minimum sinking fund payment or (x) modify
the foregoing requirements or reduce the percentage of Outstanding
Subordinated Debt Securities of such series necessary to waive any past
default.
Modification and amendment of the Indenture or any supplemental indenture may
be made by Pacific Telesis and the applicable Trustee without the consent of
any Holder, for any of the following purposes: (i) to evidence the succession
of another Person to Pacific Telesis as obligor under the Indenture or
Supplemental Indenture; (ii) to add to the covenants of Pacific Telesis for
the benefit of the Holders of all or any series of Subordinated Debt
Securities or to surrender any right or power conferred upon Pacific Telesis;
(iii) to add Events of Default for the benefit of the Holders of all or any
series of Subordinated Debt Securities; (iv) to add or change any provisions
of the Indenture to facilitate the issuance of Bearer Securities; (v) to
change or eliminate any provisions of the Indenture, provided that any such
change or elimination shall become effective only when there are no
Outstanding Subordinated Debt Securities of any series created prior thereto
that are entitled to the benefit of such provision; (vi) to establish the form
or terms of Subordinated Debt Securities of any series; (vii) to provide for
the acceptance of appointment by a successor Trustee or facilitate the
administration of the trusts under the Indenture by more than one Subordinated
Debt Securities Trustee; and (viii) to close the Indenture with respect to the
authentication and delivery of additional series of Subordinated Debt
Securities, to cure any ambiguity or inconsistency in the Indenture or
Supplemental Indenture, provided such action does not adversely affect the
interest of Holders of Subordinated Debt Securities of any series in any
material respect.
The Indenture contains provisions for convening meetings of the Holders of
Subordinated Debt Securities of a series if Subordinated Debt Securities of
that series are issuable as Bearer Securities. A meeting may be called at any
time by the Subordinated Debt Securities Trustee and also by such Subordinated
Debt Securities Trustee pursuant to a request made to such Subordinated Debt
Securities Trustee by Pacific Telesis or the Holders of at least 10% in
principal amount of the Subordinated Debt Securities of such series
Outstanding, but in any case, notice shall be given as provided in the
Indenture. Except for any consent that must be given by the Holder of each
Subordinated Debt Security affected thereby, as described above, any
resolution presented at a meeting or adjourned meeting duly reconvened at
which a quorum is present may be adopted by the affirmative vote of the
Holders of a majority in principal amount of the Subordinated Debt Securities
of that series Outstanding; provided, however, that, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the Holders of a
specified percentage that is less than a majority in principal amount of
Subordinated Debt Securities of a series Outstanding may be adopted at a
meeting or adjourned meeting, duly reconvened and at which a quorum is
present, by the affirmative vote of the Holders of such specified percentage
in principal amount of the Subordinated Debt Securities of that series
Outstanding. Any resolution passed or decision taken at any meeting of
Holders of Subordinated Debt Securities of any series duly held in accordance
with the Indenture will be binding on all Holders of Subordinated Debt
Securities of that series and the related coupons. The quorum at any meeting
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called to adopt a resolution, and at any reconvened meeting, will consist of
persons entitled to vote a majority in principal amount of the Subordinated
Debt Securities of a series Outstanding; provided, however, that, if any
action is to be taken at such meeting with respect to a consent or waiver that
may be given by the Holders of not less than a specified percentage in
principal amount of the Subordinated Debt Securities of a series Outstanding,
the Persons entitled to vote such specified percentage in principal amount of
the Subordinated Debt Securities of such series Outstanding will constitute a
quorum. Notwithstanding the foregoing provisions, if any action is to be
taken at a meeting of Holders of Subordinated Debt Securities of any series
with respect to any request, demand, authorization, direction, notice,
consent, waiver or other action that the Indenture expressly provides may be
made, given or taken by the Holders of a specified percentage in principal
amount of all Outstanding Subordinated Debt Securities affected thereby, or of
the Holders of such series and one or more additional series, then (i) there
shall be no minimum quorum requirement for such meeting, and (ii) the
principal amount of the Outstanding Subordinated Debt Securities of such
series that vote in favor of such request, demand, authorization, direction,
notice, consent, waiver or other action shall be taken into account in
determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
Indenture.
Governing Law
The Subordinated Debt Securities Indenture and the Subordinated Debt
Securities will be governed by, and construed in accordance with, the internal
laws of the State of California.
Information Concerning the Subordinated Debt Securities Trustee
The Subordinated Debt Securities Trustee, prior to default, undertakes to
perform only such duties as are specifically set forth in the Indenture and,
after default, shall exercise the same degree of care as a prudent individual
would exercise in the conduct of his or her own affairs. Subject to such
provision, the Subordinated Debt Securities Trustee is under no obligation to
exercise any of the powers vested in it by the Indenture at the request of any
Holder of Subordinated Debt Securities, unless offered reasonable indemnity by
such Holder against the costs, expenses and liabilities that might be incurred
thereby. The Subordinated Debt Securities Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Subordinated Debt Securities Trustee
reasonably believes that repayment or adequate indemnity is not reasonably
assured to it.
Defeasance and Discharge
All liability of Pacific Telesis in respect to any Outstanding Subordinated
Debt Securities shall cease, terminate and be completely discharged if Pacific
Telesis shall (a) irrevocably deposit with the Subordinated Debt Securities
Trustee, in trust, at or before maturity, lawful money or direct obligations
of the United States (or in the case of Subordinated Debt Securities
denominated in a currency other than U.S. dollars, of the government that
issued such currency), or obligations the principal of and interest on which
are guaranteed by the United States (or in the case of Subordinated Debt
Securities denominated in a currency other than U.S. Dollars, guaranteed by
the government that issued such currency), in such amounts and maturing at
such times that the proceeds of such obligations to be received upon the
respective maturities and interest payment dates will provide funds sufficient
to pay the principal of and interest and any premium to Maturity or the
Redemption Date, as the case may be, with respect to such Subordinated Debt
Securities and (b) deliver to the Subordinated Debt Securities Trustee an
opinion of counsel to the effect that the Holders of such Subordinated Debt
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such discharge. All obligations of Pacific Telesis to
comply with certain covenants applicable to any Outstanding Subordinated Debt
Securities shall cease if Pacific Telesis shall deposit with the Subordinated
Debt Securities Trustee in trust, at or before maturity, lawful money or
direct obligations of the United States (or in the case of Subordinated Debt
Securities denominated in a currency other than U.S. Dollars, of the
government that issued such currency), or obligations the principal of and
interest on which are guaranteed by the United States (or in the case of
Subordinated Debt Securities denominated in a currency other than U.S.
Dollars, by the government that issued such currency), in such amounts and
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maturing at such times that the proceeds of such obligations to be received
upon the respective maturities and interest payment dates will provide funds
sufficient to pay the principal of and interest and any premium to Maturity or
to the Redemption Date, as the case may be, with respect to such Subordinated
Debt Securities.
Miscellaneous
Pacific Telesis will have the right at all times to assign any of its
respective rights or obligations under the Subordinated Debt Securities
Indenture to a direct or indirect wholly-owned subsidiary of Pacific Telesis;
provided, that, in the event of any such assignment, Pacific Telesis will
remain liable for all of their respective obligations. Subject to the
foregoing, the Subordinated Debt Securities Indenture will be binding upon and
inure to the benefit of the parties thereto and their respective successors
and assigns. The Subordinated Debt Securities Indenture provides that it may
not otherwise be assigned by the parties thereto.
DESCRIPTION OF THE PACIFIC TELESIS TRUSTS' PREFERRED SECURITIES
Each Pacific Telesis Trust may issue, from time to time, only one series of
Preferred Securities having terms described in the Prospectus Supplement
relating thereto. The Declaration of each Pacific Telesis Trust authorizes
the Regular Trustees of such Pacific Telesis Trust to issue on behalf of such
Pacific Telesis Trust one series of Preferred Securities. The Declaration
will be qualified as an indenture under the Trust Indenture Act. The
Preferred Securities will have such terms, including distributions,
redemption, voting, liquidation rights and such other preferred, deferral or
other special rights or such restrictions as shall be set forth in the
Declaration or made part of the Declaration by the Trust Indenture Act.
Reference is made to any Prospectus Supplement relating to the Preferred
Securities of a Pacific Telesis Trust for specific terms, including (i) the
distinctive designation of such Preferred Securities, (ii) the number of
Preferred Securities issued by such Pacific Telesis Trust, (iii) the annual
distribution rate (or method of determining such rate) for Preferred
Securities issued by such Pacific Telesis Trust and the date or dates upon
which such distributions shall be payable (provided, however, that,
distributions on such Preferred Securities shall be payable on a quarterly
basis to holders of such Preferred Securities as of a record date in each
quarter during which such Preferred Securities are outstanding) (iv) whether
distributions on Preferred Securities issued by such Pacific Telesis Trust
shall be cumulative, and, in the case of Preferred Securities having such
cumulative distribution rights, the date or dates or method of determining the
date or dates from which distributions on Preferred Securities issued by such
Pacific Telesis Trust shall be cumulative, (v) the amount or amounts which
shall be paid out of the assets of such Pacific Telesis Trust to the holders
of Preferred Securities of such Pacific Telesis Trust upon voluntary or
involuntary dissolution, winding-up or termination of such Pacific Telesis
Trust, (vi) the obligation, if any, of such Pacific Telesis Trust to purchase
or redeem Preferred Securities issued by such Pacific Telesis Trust and the
price or prices at which, the period or periods within which and the terms and
conditions upon which Preferred Securities issued by such Pacific Telesis
Trust shall be purchased or redeemed, in whole or in part, pursuant to such
obligation, (vii) the voting rights, if any, of Preferred Securities issued by
such Pacific Telesis Trust in addition to those required by law, including the
number of votes per Preferred Security and any requirement for the approval by
the holders of Preferred Securities, or of Preferred Securities issued by one
or more Pacific Telesis Trusts, or of both, as a condition to specified action
or amendments to the Declaration of such Pacific Telesis Trust, (viii) the
rights, if any, to defer distributions on the Preferred Securities by
extending the interest payment period, (ix) the terms of any guarantee, if
any, issued with respect the Preferred Securities, (x) whether such Preferred
Securities shall be issued as one or more Global Securities (as defined in the
Declaration), and if so, the identity of the depository for such Global
Security or Securities, (xi) if not issued as one or more Global Securities,
the denominations in which the Preferred Securities shall be issuable (xii)
the events of default under the Declaration and any deletions from,
modifications of or additions to the events of default or covenants of such
Pacific Telesis Trust with respect to the Preferred Securities, whether or not
such events of default or covenants are consistent with the terms of the
Preferred Securities, (xiii) any restrictions on any distributions by such
Pacific Telesis Trust under the Declaration, (xiv) the ability of such Pacific
Telesis Trust to incur additional indebtedness or issue additional securities,
(xv) if other than the Property Trustee, the person or persons who shall be
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<PAGE>
registrar for the Preferred Securities (xvi) the identity of the Property
Trustee, (xii) any covenants of such Pacific Telesis Trust with respect the
Preferred Securities, and (xiii) any other relevant rights, preferences,
privileges, limitations or restrictions of Preferred Securities issued by such
Pacific Telesis Trust consistent with the Declaration of such Pacific Telesis
Trust or with applicable law. All Preferred Securities offered hereby will be
guaranteed by Pacific Telesis to the extent set forth below under "Description
of the Guarantees." Certain United States federal income tax considerations
applicable to any offering of Preferred Securities will be described in the
Prospectus Supplement relating thereto.
In connection with the issuance of Preferred Securities, each Pacific Telesis
Trust will issue one series of Common Securities. The Declaration of each
Pacific Telesis Trust authorizes the Regular Trustees of such trust to issue
on behalf of such Pacific Telesis Trust one series of Common Securities having
such terms including distributions, redemption, voting, liquidation rights or
such restrictions as shall be set forth therein. The terms of the Common
Securities issued by a Pacific Telesis Trust will be substantially identical
to the terms of the Preferred Securities issued by such Pacific Telesis Trust
and the Common Securities will rank pari passu with, and payments will be made
thereon pro rata with, the Preferred Securities except that, upon an event of
default under the Declaration, the rights of the holders of the Common
Securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of
the holders of the Preferred Securities. Except in certain limited
circumstances, the Common Securities will also carry the right to vote and to
appoint, remove or replace any of the Pacific Telesis Trustees of a Pacific
Telesis Trust. All of the Common Securities of a Pacific Telesis Trust will
be directly or indirectly owned by Pacific Telesis.
DESCRIPTION OF THE GUARANTEES
Set forth below is a summary of information concerning the Guarantees that
will be executed and delivered by Pacific Telesis for the benefit of the
holders, from time to time, of Preferred Securities. Each Guarantee will be
qualified as an indenture under the Trust Indenture Act. The First National
Bank of Chicago will act as indenture trustee under each Guarantee (the
"Guarantee Trustee"). The terms of each Guarantee will be those set forth in
such Guarantee and those made part of such Guarantee by the Trust Indenture
Act. The summary does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference
to, the form of Guarantee, which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and the Trust Indenture Act.
Each Guarantee will be held by the Guarantee Trustee for the benefit of the
holders of the Preferred Securities of the applicable Pacific Telesis Trust.
General
Pursuant to each Guarantee, Pacific Telesis will irrevocably and
unconditionally agree, to the extent set forth herein, to pay in full to the
holders of the Preferred Securities issued by a Pacific Telesis Trust, the
Guarantee Payments (as defined herein) (except to the extent paid by such
Pacific Telesis Trust), as and when due, regardless of any defense, right of
set-off or counterclaim which such Pacific Telesis Trust may have or assert.
The following payments with respect to Preferred Securities issued by a
Pacific Telesis Trust (the "Guarantee Payments"), to the extent not paid by
such Pacific Telesis Trust, will be subject to the Guarantee (without
duplication): (i) any accrued and unpaid distributions that are required to
be paid on such Preferred Securities, but only if and to the extent that such
Trust has funds available therefor (ii) the redemption price, including all
accrued and unpaid distributions (the "Redemption Price") with respect to any
Preferred Securities called for redemption by the Pacific Telesis Trust, but
only if and to the extent that such Trust has funds available therefor and
(iii) upon a voluntary or involuntary dissolution, winding-up or termination
of such Pacific Telesis Trust (other than in connection with the distribution
of Subordinated Debt Securities to the holders of Preferred Securities or the
redemption of all of the Preferred Securities upon maturity or redemption of
the Subordinated Debt Securities held by such Pacific Telesis Trust) the
lesser of (a) the aggregate of the liquidation amount and all accrued and
unpaid distributions on such Preferred Securities to the date of payment to
the extent such Pacific Telesis Trust has funds available therefor or (b) the
amount of assets of such Pacific Telesis Trust remaining available for
distribution to holders of such Preferred Securities in liquidation of such
Pacific Telesis Trust. Pacific Telesis' obligation to make a Guarantee
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<PAGE>
Payment may be satisfied by direct payment of the required amounts by Pacific
Telesis to the holders of Preferred Securities or by causing the applicable
Pacific Telesis Trust to pay such amounts to such holders.
Each Guarantee will be a full and unconditional guarantee, to the extent
described herein, with respect to the Preferred Securities issued by the
applicable Pacific Telesis Trust from the time of issuance of such Preferred
Securities but will only apply to any payment of distributions on the
Preferred Securities if and to the extent that such Trust shall have funds
available therefor. If Pacific Telesis does not make interest payments on the
Subordinated Debt Securities purchased by a Pacific Telesis Trust, such
Pacific Telesis Trust will not pay distributions on the Preferred Securities
issued by such Pacific Telesis Trust and will not have funds available
therefor. See "Description of the Subordinated Debt Securities."
Pacific Telesis has also agreed to irrevocably and unconditionally guarantee
the obligations of the Pacific Telesis Trusts with respect to the Common
Securities (the "Common Securities Guarantees") to the same extent as the
Guarantees, except that, upon an event of default under the Indenture, holders
of Preferred Securities under the Guarantees shall have priority over holders
of Common Securities under the Common Securities Guarantees with respect to
distributions and payments on liquidation, redemption or otherwise.
Certain Covenants of Pacific Telesis
In each Guarantee, Pacific Telesis will covenant that, so long as any
Preferred Securities issued by the applicable Pacific Telesis Trust remain
outstanding, if there shall have occurred any event that would constitute an
event of default under such Guarantee or the Declaration of such Pacific
Telesis Trust or if Pacific Telesis shall have given notice of its election to
extend the interest payment period on the Subordinated Debt Securities as
provided in the Indenture, then (a) Pacific Telesis shall not declare or pay
any dividend on, or make any distribution with respect to, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock and (b) Pacific Telesis shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by Pacific Telesis which rank pari passu with or junior to
such Guarantee. However, each Guarantee will except from the foregoing any
stock dividends paid by Pacific Telesis where the dividend stock is the same
stock as that on which the dividend is being paid.
Modification of the Guarantees; Assignment
Except with respect to any changes that do not adversely affect the rights of
holders of Preferred Securities (in which case no vote will be required), each
Guarantee may be amended only with the prior approval of the holders of not
less than 66 2/3% in liquidation amount of the outstanding Preferred
Securities issued by the applicable Pacific Telesis Trust. The manner of
obtaining any such approval of holders of such Preferred Securities will be
set forth in an accompanying Prospectus Supplement. All guarantees and
agreements contained in a Guarantee shall bind the successors, assignees,
receivers, trustees and representatives of Pacific Telesis and shall inure to
the benefit of the holders of the Preferred Securities of the applicable
Pacific Telesis Trust then outstanding.
Events of Default
An event of default under the Guarantee will occur upon the failure of Pacific
Telesis to make or perform any of its payments or other obligations
thereunder. The holders of a majority in liquidation amount of the Preferred
Securities to which a Guarantee relates have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Guarantee, to waive certain defaults
thereunder or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee.
If the Guarantee Trustee fails to enforce such Guarantee, any holder of
Preferred Securities relating to such Guarantee may institute a legal
proceeding directly against Pacific Telesis to enforce the Guarantee Trustee's
rights under such Guarantee without first instituting a legal proceeding
against the relevant Pacific Telesis Trust, the Guarantee Trustee or any other
person or entity. Notwithstanding the foregoing, any holder of Preferred
Securities shall have the right, which is absolute and unconditional, to
receive the Guarantee Payments and to institute suit for the enforcement of
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<PAGE>
such payments and such rights shall not be impaired without the consent of
such holder.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, prior to the occurrence of a default, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to a Guarantee, shall exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by a Guarantee Agreement
at the request of any holder of Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
Termination of the Guarantees
Each Guarantee will terminate as to the Preferred Securities issued by the
applicable Pacific Telesis Trust upon the earlier of (a) full payment of the
Redemption Price of all Preferred Securities of such Pacific Telesis Trust,
(b) distribution of the Subordinated Debt Securities held by such Pacific
Telesis Trust to the holders of the Preferred Securities of such Pacific
Telesis Trust or (c) upon full payment of the amounts payable in accordance
with the Declaration of such Pacific Telesis Trust upon liquidation of such
Pacific Telesis Trust. Each Guarantee will continue to be effective or will
be reinstated, as the case may be, if at any time any holder of Preferred
Securities issued by the applicable Pacific Telesis Trust must restore payment
of any sums paid under such Preferred Securities or such Guarantee.
Status of the Guarantees
Each Guarantee will constitute an unsecured obligation of Pacific Telesis and
will rank (i) subordinate and junior in right of payment to all other
liabilities of Pacific Telesis including the Subordinated Debt Securities,
(ii) pari passu with the most senior preferred or preference stock now or
hereafter issued by Pacific Telesis and with any guarantee now or hereafter
entered into by Pacific Telesis in respect of any preferred or preference
stock of any affiliate of Pacific Telesis and (iii) senior to Pacific Telesis'
common stock. The terms of the Preferred Securities provide that each holder
of Preferred Securities issued by such Pacific Telesis Trust by acceptance
thereof agrees to the subordination provisions and other terms of the
applicable Guarantee.
Each Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly
against the guarantor to enforce its rights under a Guarantee without
instituting a legal proceeding against any other person or entity).
Each Guarantee will be deposited with the Guarantee Trustee and held for the
benefit of the holders of the Preferred Securities. Except as otherwise noted
herein, the Guarantee Trustee has the right to enforce the Guarantees on
behalf of the holders of the Preferred Securities. The Guarantees will not be
discharged except by payment of the Guarantee Payments in full (without
duplication of any amounts theretofore paid by the Trusts).
The Company's obligations under the Declaration for each Trust, the Guarantee
issued with respect to Preferred Securities issued by that Trust, the
Subordinated Debt Securities purchased by that Trust and the related Indenture
in the aggregate will provide a full and unconditional guarantee on a
subordinated basis by the Company of payments due on the Preferred Securities
issued by that Trust.
Governing Law
The Guarantees will be governed by and construed in accordance with the
internal laws of the State of California.
PLAN OF DISTRIBUTION
Pacific Telesis may sell any series of the Subordinated Debt Securities and
the Pacific Telesis Trusts may sell the Preferred Securities in one or more of
the following ways from time to time: (i) to or through underwriters or
dealers, (ii) directly to purchasers or (iii) through agents. The Prospectus
Supplement with respect to any Offered Securities will set forth (i) the terms
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<PAGE>
of the offering of the Offered Securities, including the name or names of any
underwriters, dealers or agents, (ii) the purchase price of the Offered
Securities and the proceeds to Pacific Telesis or the applicable Pacific
Telesis Trust as the case may be from such sale, (iii) any underwriting
discounts and commissions or agency fees and other items constituting
underwriters' or agents' compensation, (iv) any initial public offering
prices, (v) any discounts or concessions allowed or reallowed or paid to
dealers, and (vi) any securities exchange on which such Offered Securities may
be listed. Any initial public offering price, discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale, the Offered Securities will be acquired
by the underwriters for their own account and may be resold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale.
The Offered Securities may be offered to the public either through
underwriting syndicates represented by one or more managing underwriters or
directly by one or more firms acting as underwriters. The underwriter or
underwriters with respect to a particular underwritten offering of Offered
Securities will be named in the Prospectus Supplement relating to such
offering and, if an underwriting syndicate is used, the managing underwriter
or underwriters will be set forth on the cover of such Prospectus Supplement.
Unless otherwise set forth in the Prospectus Supplement relating thereto, the
obligations of the underwriters to purchase the Offered Securities will be
subject to certain conditions precedent, and the underwriters will be
obligated to purchase all the Offered Securities if any are purchased. If
dealers are utilized in the sale of Offered Securities, Pacific Telesis and/or
the applicable Pacific Telesis Trust will sell such Offered Securities to the
dealers as principals. The dealers may then resell such Offered Securities to
the public at varying prices to be determined by such dealers at the time of
resale. The names of the dealers and the terms of the transaction will be set
forth in the Prospectus Supplement relating thereto.
Any series of Subordinated Debt Securities may be sold from time to time
either directly by Pacific Telesis or through agents designated by Pacific
Telesis. Any series of Preferred Securities may be sold from time to time
either directly by the applicable Pacific Telesis Trust or by agents
designated by such trust. Any agent involved in the offer or sale of the
Offered Securities in respect to which this Prospectus is delivered will be
named, and any commissions payable by Pacific Telesis and/or the applicable
Pacific Telesis Trust to such agent will be set forth, in the Prospectus
Supplement relating thereto. Unless otherwise indicated in the Prospectus
Supplement, any such agent will be acting on a best efforts basis for the
period of its appointment.
The Subordinated Debt Securities may be sold directly by Pacific Telesis and
the Preferred Securities may be sold directly by the applicable Pacific
Telesis Trust to institutional investors or others who may be deemed to be
underwriters within the meaning of the Securities Act with respect to any
resale thereof. The terms of any such sales will be described in the
Prospectus Supplement relating thereto.
Agents, dealers and underwriters may be entitled under agreements with Pacific
Telesis and/or the applicable Pacific Telesis Trust to indemnification by
Pacific Telesis and/or such Pacific Telesis Trust against certain civil
liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that such agents, dealers or
underwriters may be required to make in respect thereof. Agents, dealers and
underwriters may be customers of, engage in transactions with, or perform
services for Pacific Telesis and/or the applicable Pacific Telesis Trust in
the ordinary course of business.
Each series of Offered Securities will be a new issue of securities and will
have no established trading market. Any underwriters to whom Offered
Securities are sold for public offering and sale may make a market in such
Offered Securities, but such underwriters will not be obligated to do so and
may discontinue any market making at any time without notice. The Offered
Securities may or may not be listed on a national securities exchange. No
assurance can be given that there will be a market for the Offered Securities.
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VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the Pacific Telesis Trusts by
Skadden, Arps, Slate, Meagher & Flom, special Delaware counsel to the Pacific
Telesis Trusts. The validity of the Subordinated Debt Securities and the
Guarantee and certain matters relating thereto will be passed upon for Pacific
Telesis by Richard W. Odgers - Executive Vice President, General Counsel and
Secretary of Pacific Telesis. Certain United States federal income taxation
matters will be passed upon for Pacific Telesis and the Pacific Telesis Trusts
by Phillip J. Lauro, Executive Director of Taxes of Pacific Telesis. As of
September 30, 1995, Mr. Odgers beneficially owned or had an interest in
approximately 2,144 shares of Pacific Telesis common stock and had been
granted options under the Pacific Telesis Group 1994 Stock Incentive Plan or
its predecessor with respect to 70,000 shares of Pacific Telesis common stock.
As of September 30, 1995, Mr. Lauro beneficially owned or had an interest in
approximately 1462 shares of Pacific Telesis common stock and had been granted
options under the Pacific Telesis Group 1994 Stock Incentive Plan or its
predecessor with respect to 10,400 shares of Pacific Telesis common stock.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheets as of December 31, 1994 and 1993, and the
consolidated statements of income, retained earnings, and cash flows for each
of the three years in the period ended December 31, 1994, and the financial
statement schedule included in Pacific Telesis Group's Annual Report on Form
10-K for the year ended December 31, 1994, incorporated by reference in this
Prospectus, have been included herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in auditing and accounting. With respect to the unaudited interim
financial information for the periods ended March 31, 1995 and 1994, and June
30, 1995, and 1994, incorporated by reference in this prospectus, the
independent certified public accountants have reported that they have applied
limited procedures in accordance with professional standards for a review of
such information. However, their separate reports included in the Company's
quarterly reports on Form 10-Q for the quarters ended March 31, 1995, and June
30, 1995, incorporated by reference herein, state that they did not audit and
they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information
should be restricted in light of the limited nature of the review procedures
applied. The accountants are not subject to the liability provisions of
Section 11 of the Securities Act of 1933 for their reports on the unaudited
interim financial information because those reports are not a "report" or a
"part" of the Registration Statement prepared or certified by the accountants
within the meaning of Sections 7 and 11 of the Act.
------------------------------------ ------------------------------------
No dealer, salesperson or other
individual has been authorized
to give any information or to
make any representations other
than those contained or incor-
porated by reference in this ----------
Prospectus Supplement or the Preferred Securities
Prospectus in connection with
the offer made by this Prospectus Pacific Telesis Financing I
Supplement and the Prospectus
and, if given or made, such _____% Trust Originated
information or representation Preferred Securities ("TOPrS")
must not be relied upon as guaranteed to the extent set
having been authorized by forth herein by
Pacific Telesis Group, Pacific Pacific Telesis Group
Telesis Financing I, or the
Underwriters. Neither the
delivery of this Prospectus
Supplement and the Prospectus
nor any sale made hereunder and
thereunder shall under any cir-
cumstance create an implication
that there has been no change
in the affairs of Pacific Telesis ---------------------
Group or Pacific Telesis Financing PROSPECTUS SUPPLEMENT
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<PAGE>
I, since the date hereof. This ---------------------
Prospectus Supplement and the
Prospectus do not constitute an
offer or solicitation by anyone
in any state in which such offer
or solicitation is not authorized
or in which the person making such
offer or solicitation is not quali-
fied to do so or to anyone to whom
it is unlawful to make such offer Merrill Lynch & Co.
or solicitation.
TABLE OF CONTENTS
Prospectus Supplement
Page
____
Pacific Telesis Group Summary
Financial Data
Pacific Telesis Group
Pacific Telesis Financing I
Risk Factors ______, 1995
Ratio of Earnings to Fixed
Charges
Capitalization of Pacific
Telesis Group
Use of Proceeds
Description of the Pre-
ferred Securities
Description of the Subordi-
nated Debentures
Effect of Obligations Under
the Subordinated Debentures
and the Guarantee
United States Federal Income
Taxation
Underwriting
Legal Matters
Prospectus
Available Information
Incorporation of Certain Docu-
ments by Reference
Pacific Telesis Group
The Pacific Telesis Financing Trusts
Use of Proceeds
Ratio of Earnings to Fixed
Charges
Description of the Subordinated
Debt Securities
Description of the Pacific
Telesis Trusts' Preferred
Securities
Description of the Guarantees
Plan of Distribution
Validity of Securities
Independent Public Accountants
____________________________________ ____________________________________
57
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Securities and Exchange Commission Filing Fee . . $ 344,827.59
New York Stock Exchange Listing Fee . . . . . . . 170,300*
Rating Agency Fees. . . . . . . . . . . . . . . . 200,000*
Blue Sky Fees and Expenses. . . . . . . . . . . . 20,000*
Trustee's Expenses. . . . . . . . . . . . . . . . 15,000*
Printing Fees and Expenses. . . . . . . . . . . . 70,000*
Accounting Fees and Expenses. . . . . . . . . . . 25,000*
Legal Fees and Expenses . . . . . . . . . . . . . 90,000*
Miscellaneous . . . . . . . . . . . . . . . . . . 20,000*
----------------
Total. . . . . . . . . . . . . . . . . . . . $ 955,127.59*
================
_________________________________
* Estimated
Item 15. Indemnification of Directors and Officers.
Section 78.037 of the Nevada Revised Statutes ("N.R.S.") provides that a
Nevada corporation's articles may contain a provision eliminating or limiting
the personal liability of a director or officer to the corporation or its
stockholders for damages for breach of fiduciary duty but may not eliminate or
limit liability for acts or omissions involving intentional misconduct, fraud,
a knowing violation of the law or illegal payment of dividends. Pacific
Telesis' Articles of Incorporation ("Articles") contain such a provision and
therefore any lawsuits involving monetary damages would be subject to this
limitation. There is no such limitation in actions for equitable relief.
With respect to lawsuits not thus limited by Pacific Telesis' Articles, N.R.S.
Section 78.751 specifies the circumstances under which a Nevada corporation
may indemnify a director, officer, employee or agent. Generally, such person
must have acted in good faith and in a manner reasonably believed to be in, or
not opposed to, the best interests of the corporation, and with respect to any
criminal action or proceeding, such person must also have had no reasonable
cause to believe his or her conduct was unlawful. In any proceeding by or in
the right of the corporation where there is a judgment against such person,
indemnification may be made if such person acted in good faith, in a manner
which he or she reasonably believed to be in or not opposed to the best
interests of the corporation and was not found liable for negligence or
misconduct in the performance of his or her duties to the corporation.
However, indemnification may be had even where the person has been adjudged to
be liable for negligence or misconduct in the performance of his or her duties
if the court in which the action or suit was brought determines upon
application that despite the adjudication of liability but in view of all of
the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses as the court deems proper. Where the director,
officer, employee or agent successfully defends any such civil or criminal
proceeding, indemnification is required.
Pacific Telesis' Articles provide that it shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was a director or officer of Pacific Telesis, or is or was serving at the
request of Pacific Telesis as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, or
as a fiduciary of an employee benefit plan of Pacific Telesis or of a wholly
owned subsidiary corporation, against expenses incurred in connection with
such actions, suit or proceeding, including attorneys' fees, judgments, fines
and amounts paid in settlement, to the extent not prohibited by law, state or
federal. Expenses incurred in defending any such proceeding may be advanced
by Pacific Telesis prior to the final disposition of such action, suit or
proceeding upon receipt of an undertaking to repay such amount unless it shall
be determined ultimately that the person is entitled to be indemnified
thereunder. The Articles further provide that these provisions may not be
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<PAGE>
repealed or amended without the affirmative vote of at least 66-2/3% of the
voting power of the shares entitled to vote thereon.
Pacific Telesis' Articles also contain a provision authorizing the Corporation
to enter into indemnity agreements (the "Indemnity Agreements") with each of
Pacific Telesis' directors and officers. The Article states that such
agreements shall provide that Pacific Telesis shall indemnify (and advance
expenses to) the indemnitee to the fullest extent permitted by applicable law,
no later than 30 days after a written request has been made therefor, against
all expenses, judgments, fines, penalties, excise taxes and amounts paid in
settlement for claims with respect to events relating to such person's service
with or for Pacific Telesis, and that in any proceeding to enforce the
obligation to indemnify such person, Pacific Telesis shall have the burden to
establish that such indemnification is prohibited; provided, however, that
such agreements shall exclude indemnification if a judgment or other final
adjudication adverse to the indemnitee established (a) that his or her acts
were committed in bad faith or were the result of deliberate dishonesty, or
(b) that he or she in fact gained a financial advantage to which he or she was
not legally entitled, in which event the amount of the indemnification shall
be reduced by the amount of such financial advantage gained. Pacific Telesis
has entered into Indemnity Agreements with each of its directors and executive
officers as provided in this Article.
The directors and officers of Pacific Telesis are covered by insurance
policies indemnifying against certain liabilities, including certain
liabilities arising under the Securities Act of 1933, as amended, which might
be incurred by them in such capacities and against which they cannot be
indemnified by Pacific Telesis. Subject to certain exceptions, the Indemnity
Agreements obligate Pacific Telesis to use its best efforts to purchase and
maintain in effect such insurance with coverage no less favorable than that
presently provided.
The Indemnity Agreements also provide that if Pacific Telesis shall
discontinue any of its existing policies of directors' and officers' liability
insurance or limit the scope or the amount of the coverages thereunder, or if
such policies or coverages shall become unavailable in whole or in part for
any reason, then Pacific Telesis will hold harmless and indemnify the
indemnitee to the full extent of the coverage which would have been provided
if such insurance had been maintained.
The Declaration of each Pacific Telesis Trust provides that no Pacific Telesis
Trustee, affiliate of any Pacific Telesis Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives or agents of any
Pacific Telesis Trustee, or any employee or agent of such Pacific Telesis
Trust or its affiliates (each an "Indemnified Person") shall be liable,
responsible or accountable in damages or otherwise to such Pacific Telesis
Trust or any employee or agent of the Trust or its affiliates for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Indemnified Person in good faith on behalf of such Pacific Telesis
Trust and in a manner such Indemnified Person reasonably believed to be within
the scope of the authority conferred on such Indemnified Person by such
Declaration or by law, except that an Indemnified Person shall be liable for
any such loss, damage or claim incurred by reason of such Indemnified Person's
negligence or willful misconduct with respect to such acts or omissions. The
Declaration of each Pacific Telesis Trust also provides that to the fullest
extent permitted by applicable law, Pacific Telesis shall indemnify and hold
harmless each Indemnified Person from and against any loss, damage or claim
incurred by such Indemnified Person by reason of any act or omission performed
or omitted by such Indemnified Person in good faith on behalf of such Pacific
Telesis Trust and in a manner such Indemnified Person reasonably believed to
be within the scope of authority conferred on such Indemnified Person by such
Declaration, except that no Indemnified Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such
Indemnified Person by reason of the negligence of such Indemnified Person or
willful misconduct with respect to such acts or omissions. The Declaration of
each Pacific Telesis Trust further provides that, to the fullest extent
permitted by applicable law, expenses (including legal fees) incurred by an
Indemnified Person in defending any claim, demand, action, suit or proceeding
shall, from time to time, be advanced by Pacific Telesis prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
or an undertaking by or on behalf of the Indemnified Person to repay such
amount if it shall be determined that the Indemnified Person is not entitled
to be indemnified for the underlying cause of action as authorized by such
Declaration.
59
<PAGE>
The directors and officers of Pacific Telesis and the Regular Trustees are
covered by insurance policies indemnifying against certain liabilities,
including certain liabilities arising under the Securities Act of 1933, as
amended, which might be incurred by them in such capacities and against which
they cannot be indemnified by Pacific Telesis or the Pacific Telesis Trusts.
Any agents, dealers or underwriters who execute any of the agreements filed as
Exhibit 1 to this registration statement will agree to indemnify Pacific
Telesis' directors and their officers and the Pacific Telesis Trustees who
signed the registration statement against certain liabilities that may arise
under the Securities Act of 1993, as amended, with respect to information
furnished to Pacific Telesis or any of the Pacific Telesis Trusts by or on
behalf of any such indemnifying party.
Item 16. Exhibits.
Exhibits identified in parentheses below are on file with the SEC and are
incorporated herein by reference to such previous filings. All other exhibits
are provided as part of this electronic transmission.
1 - Form of Underwriting Agreement for offering of Preferred Securities.
*4-A - Certificate of Trust of Pacific Telesis Financing I.
*4-B - Certificate of Trust of Pacific Telesis Financing II.
*4-C - Certificate of Trust of Pacific Telesis Financing III.
*4-D-1- Declaration of Trust of Pacific Telesis Financing I.
4-D-2- Form of Amended and Restated Declaration of Trust of Pacific Telesis
Financing I.
*4-E-1- Declaration of Trust of Pacific Telesis Financing II.
4-E-2- Form of Amended and Restated Declaration of Trust of Pacific Telesis
Financing II - identical to Exhibit 4-D-2
*4-F-1- Declaration of Trust of Pacific Telesis Financing III.
4-F-2- Form of Amended and Restated Declaration of Trust of Pacific Telesis
Financing III - identical to Exhibit 4-D-2
4-G - Form of Debt Securities Indenture among Pacific Telesis Group and
The First National Bank of Chicago, as Trustee.
4-H - Form of Supplemental Indenture to Indenture to be used in connection
with the issuance of Subordinated Debt Securities and Preferred
Securities.
4-I - Form of Preferred Security (included in 4-D-2 above).
4-J - Form of Subordinated Debt Security (included in 4-H above).
4-K - Form of Guarantee with respect to Preferred Securities.
*5-A - Opinion of Richard W. Odgers, Esq.
*5-B - Opinions of Skadden, Arps, Slate, Meagher & Flom
*8 - Opinion of Phillip J. Lauro, Esq. as to certain federal income
taxation matters.
12 - Computation of Ratio of Earnings to Fixed Charges of Pacific Telesis
Group. (In addition, Exhibit 12 to Pacific Telesis' Form 10-K for
1994 (File No. 1-8609) is incorporated by reference herein).
15 - Letter re unaudited interim financial information.
23-A - Consent of Independent Accountants, Coopers & Lybrand L.L.P.
*23-B - Consent of Richard W. Odgers, Esq., is contained in the opinion of
counsel filed as Exhibit 5-A.
*23-C - Consents of Skadden, Arps, Slate, Meagher & Flom are contained in its
opinions of counsel filed as Exhibit 5-B.
*23-D - Consent of Phillip J. Lauro, Esq., is contained in the opinion of
counsel filed as Exhibit 8.
*24 - Powers of Attorney (the powers of attorney for the Pacific Telesis
Trustees of Pacific Telesis Financing I, Pacific Telesis Financing II
and Pacific Telesis Financing III are included in Exhibits 4-D-1, 4-E-
1 and 4-F-1, respectively).
*25-A - Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee under the
Debt Securities Indenture.
*25-B - Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee under the
Declaration of Trust of Pacific Telesis Financing I.
60
<PAGE>
*25-C - Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of The First National Bank of Chicago, as Trustee
under the Declaration of Trust of Pacific Telesis Financing II.
*25-D - Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of The First National Bank of Chicago, as Trustee
under the Declaration of Trust of Pacific Telesis Financing III.
*25-E-1 - Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of The First National Bank of Chicago, as Trustee of
the Preferred Securities Guarantees of Pacific Telesis for the
benefit of the holders of Preferred Securities of Pacific Telesis
Financing I.
*25-E-2- Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of The First National Bank of Chicago, as Trustee of
the Preferred Securities Guarantees of Pacific Telesis for the
benefit of the holders of Preferred Securities of Pacific Telesis
Financing II.
*25-E-3- Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of The First National Bank of Chicago, as Trustee of
the Preferred Securities Guarantees of Pacific Telesis for the
benefit of the holders of Preferred Securities of Pacific Telesis
Financing III.
________________________________
* Previously filed.
Item 17. Undertaking.
The Registrants hereby undertake that, for purposes of determining any
liability under the Securities Act, each filing of Pacific Telesis' Annual
Report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (and where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d)
of the Exchange Act) that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the provisions referred to in Item 15 (other than the
insurance policies referred to therein), or otherwise, the Registrants have
been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of
expenses incurred or paid by a director, officer or controlling person of the
Registrants in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrants will, unless in the opinion
of their counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
61
<PAGE>
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the Plan of
Distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that the undertakings set forth in paragraphs (i) and (ii)
above do not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic reports filed
by Pacific Telesis pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
The Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
62
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1
to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of San Francisco, State of California,
on November 30, 1995.
PACIFIC TELESIS GROUP
By
/s/ William E. Downing
----------------------
(William E. Downing)
Executive Vice President,
Chief Financial Officer
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment No.
1 to Registration Statement has been signed by the following persons in the
capacities indicated on November 30, 1995.
Signature/Name Title
/s/ Philip J. Quigley*
------------------------ Chairman of the Board,
(Philip J. Quigley) President & Chief
Executive Officer
and Director
/s/ William E. Downing Executive Vice
------------------------ President, Chief
(William E. Downing) Financial Officer
and Treasurer
(principal financial
officer and principal
accounting officer)
/s/ Gilbert F. Amelio*
------------------------ Director
(Gilbert F. Amelio)
/s/ William P. Clark*
------------------------ Director
(William P. Clark)
/s/ Herman E. Gallegos*
------------------------ Director
(Herman E. Gallegos)
/s/ Frank C. Herringer*
------------------------ Director
(Frank C. Herringer)
/s/ Ivan J. Houston*
------------------------ Director
(Ivan J. Houston)
/s/ Mary S. Metz*
------------------------ Director
(Mary S. Metz)
63
<PAGE>
/s/ Toni Rembe*
------------------------ Director
(Toni Rembe)
/s/ S. Donley Ritchey*
------------------------ Director
(S. Donley Ritchey)
/s/ Richard M. Rosenberg*
------------------------ Director
(Richard M. Rosenberg)
*By /s/ William E. Downing
------------------------
Attorney-in-fact
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of Pacific
Telesis Financing I, Pacific Telesis Financing II and Pacific Telesis
Financing III certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form S-3 and has duly caused this
Amendment No. 1 to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Francisco, State of
California, on the 30th day of November, 1995.
PACIFIC TELESIS FINANCING I
By
/s/ Roomy F. Balaporia*
---------------
Roomy F. Balaporia, Trustee
By
/s/ Miles H. Mochizuki*
---------------
Miles H. Mochizuki, Trustee
By
/s/ Marie B. Washington*
---------------
Marie B. Washington, Trustee
PACIFIC TELESIS FINANCING II
By
/s/ Roomy F. Balaporia*
---------------
Roomy F. Balaporia, Trustee
By
/s/ Miles H. Mochizuki*
---------------
Miles H. Mochizuki, Trustee
By
/s/ Marie B. Washington*
---------------
Marie B. Washington, Trustee
64
<PAGE>
PACIFIC TELESIS FINANCING III
By
/s/ Roomy F. Balaporia*
---------------
Roomy F. Balaporia, Trustee
By
/s/ Miles H. Mochizuki*
---------------
Miles H. Mochizuki, Trustee
By
/s/ Marie B. Washington*
---------------
Marie B. Washington, Trustee
*By
/s/ William E. Downing
------------------------
Attorney-in-fact
EXHIBIT INDEX
Exhibits identified in parentheses below are on file with the SEC and are
incorporated herein by reference to such previous filings. All other exhibits
are provided as part of this electronic transmission.
1 - Form of Underwriting Agreement for offering of Preferred
Securities.
*4-A - Certificate of Trust of Pacific Telesis Financing I.
*4-B - Certificate of Trust of Pacific Telesis Financing II.
*4-C - Certificate of Trust of Pacific Telesis Financing III.
*4-D-1- Declaration of Trust of Pacific Telesis Financing I.
4-D-2- Form of Amended and Restated Declaration of Trust of Pacific
Telesis Financing I.
*4-E-1- Declaration of Trust of Pacific Telesis Financing II.
4-E-2- Form of Amended and Restated Declaration of Trust of Pacific
Telesis Financing II - identical to Exhibit 4-D-2
*4-F-1- Declaration of Trust of Pacific Telesis Financing III.
4-F-2- Form of Amended and Restated Declaration of Trust of Pacific
Telesis Financing III - identical to Exhibit 4-D-2
4-G - Form of Debt Securities Indenture among Pacific Telesis Group and
The First National Bank of Chicago, as Trustee.
4-H - Form of Supplemental Indenture to Indenture to be used in
connection with the issuance of Subordinated Debt Securities and
Preferred Securities.
4-I - Form of Preferred Security (included in 4-D-2 above).
4-J - Form of Subordinated Debt Security (included in 4-H above).
4-K - Form of Guarantee with respect to Preferred Securities.
*5-A - Opinion of Richard W. Odgers, Esq.
*5-B - Opinions of Skadden, Arps, Slate, Meagher & Flom
*8 - Opinion of Phillip J. Lauro, Esq. as to certain federal income
taxation matters.
12 - Computation of Ratio of Earnings to Fixed Charges of Pacific
Telesis Group. (In addition, Exhibit 12 to Pacific Telesis' Form
10-K for 1994 (File No. 1-8609) is incorporated by reference
herein).
15 - Letter re unaudited interim financial information.
23-A - Consent of Independent Accountants, Coopers & Lybrand L.L.P.
*23-B - Consent of Richard W. Odgers, Esq., is contained in the opinion of
counsel filed as Exhibit 5-A.
*23-C - Consents of Skadden, Arps, Slate, Meagher & Flom are contained in
its opinions of counsel filed as Exhibit 5-B.
*23-D - Consent of Phillip J. Lauro, Esq., is contained in the opinion of
counsel filed as Exhibit 8.
*24 - Powers of Attorney (the powers of attorney for the Pacific Telesis
Trustees of Pacific Telesis Financing I, Pacific Telesis Financing
65
<PAGE>
II and Pacific Telesis Financing III are included in Exhibits 4-D-
1, 4-E-1 and 4-F-1, respectively).
*25-A - Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee under
the Debt Securities Indenture.
*25-B - Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee under
the Declaration of Trust of Pacific Telesis Financing I.
*25-C - Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee under
the Declaration of Trust of Pacific Telesis Financing II.
*25-D - Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee under
the Declaration of Trust of Pacific Telesis Financing III.
*25-E-1 - Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee of the
Preferred Securities Guarantees of Pacific Telesis for the benefit
of the holders of Preferred Securities of Pacific Telesis Financing
I.
*25-E-2- Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee of the
Preferred Securities Guarantees of Pacific Telesis for the benefit
of the holders of Preferred Securities of Pacific Telesis Financing
II.
*25-E-3- Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Trustee of the
Preferred Securities Guarantees of Pacific Telesis for the benefit
of the holders of Preferred Securities of Pacific Telesis Financing
III.
________________________________
* Previously filed.
66
EXHIBIT 1
---------
FORM OF UNDERWRITING AGREEMENT
------------------------------
____________, 199_
Pacific Telesis Financing ____
c/o Pacific Telesis Group
130 Kearny Street
San Francisco, CA 94108
Pacific Telesis Group
130 Kearny Street
San Francisco, CA 94108
Ladies and Gentlemen:
We (the "Manager") are acting on behalf of the underwriters (including
ourselves) named in Schedule I hereto (such underwriter or underwriters being
herein called the "Underwriters") and we understand that Pacific Telesis
Financing ____ (the "Trust"), a statutory business trust organized under the
Business Trust Act (the "Delaware Act") of the State of Delaware (Chapter 38,
Title 12, of the Delaware Code, 12 Del. C. Section 3801 et seq.) proposes to
issue and sell ________ shares of its ____% Trust Originated Preferred
Securities (the "Preferred Securities").
It is understood that substantially contemporaneously with the offering and
sale of the Preferred Securities to the Underwriters contemplated hereby, (i)
the Trust, its trustees (the "Trustees") and Pacific Telesis Group, a Nevada
corporation, the sponsor of the Trust (the "Company") shall take all necessary
action to adopt an Amended and Restated Declaration of Trust in substantially
the form of the Form of Amended and Restated Declaration of Trust attached as
Exhibit 4-D-2 to the Registration Statement (as defined herein), (as so
amended and restated, the "Declaration") pursuant to which the Trust shall (x)
issue and sell the Preferred Securities to the Underwriters pursuant hereto
and (y) issue _____ shares of its ____% _____ Common Securities (the "Common
Securities" and, together with the Preferred Securities, the "Trust
Securities") to the Company, in each case with such rights and obligations as
shall be set forth in such Declaration, (ii) the Company and The First
National Bank of Chicago, as Trustee, acting pursuant to an indenture dated as
of _____________, 1995 shall enter into a supplemental indenture in
substantially the form of the Form of Supplemental Indenture attached as
Exhibit 4-H to the Registration Statement (the "Supplemental Indenture", and
the Indenture, as so supplemented, the "Indenture") providing for the issuance
of $________ in aggregate principal amount of the Company's Subordinated
Deferrable Interest Debentures, due 2025 (the "Debentures"), (iii) the Company
shall sell such Debentures to the Trust in conjunction with the consummation
of the sale of the Preferred Securities to the Underwriters contemplated
hereby and (iv) the Company and The First National Bank of Chicago, as
Guarantee Trustee, shall enter into a guarantee agreement in substantially the
form of the Form of the Preferred Securities Guarantee attached as Exhibit 4-K
to the Registration Statement (the "Guarantee") for the benefit of holders
from time to time of the Preferred Securities.
Subject to the terms and conditions set forth or incorporated by reference
herein, the Trust hereby agrees to sell and the Underwriters listed on
Schedule I hereto agree to purchase, severally and not jointly, the respective
number of Preferred Securities set forth opposite their names at a purchase
price per share of $______.
The Preferred Securities will be offered, in part, directly to the public
at a price equal to the initial public offering price of $_______ per
Preferred Security, and in part to certain securities dealers at such price
less a concession of $______ per Preferred Security, provided that such
concession for sales of 10,000 or more Preferred Securities to a single
purchaser will be $_____ per Preferred Security. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $_____ per
Preferred Security to certain brokers and dealers.
The Company will pay as compensation to the Underwriters arranging the
1
investment of the proceeds of the offering of the Preferred Securities in the
Debentures, an amount in San Francisco Clearing House (next day) funds of $___
per Preferred Security (or $______ in the aggregate) for the accounts of the
several Underwriters; provided that, such compensation for sales of 10,000 or
more Preferred Securities to any single purchaser will be $____ per Preferred
Security.
The Underwriters will pay for the Preferred Securities upon delivery
thereof at the office of ___________ at _____ a.m. (New York time) on
_________, 199_, or at such other time, not later than 5:00 p.m. (New York
time) on ____________, 199_, as shall be designated by the Manager. The time
and date of such payment and delivery are hereinafter referred to as the
"Closing Date".
The Preferred Securities shall have the terms set forth in the Prospectus
dated ____________, 199_, and the Prospectus Supplement dated ____________,
199_, including the following:
Terms of Preferred Securities
Aggregate Number of
Preferred Securities:
Purchase Price:
Closing Date:
Form:
Distribution, Liquidation Refer to Exhibit 4-D-2
and Redemption Provisions: of the Registration
Statement
Guarantee Provisions: Refer to Exhibit 4-K of the
Registration Statement
Lock-Up Securities:
Lock-Up Period:
All provisions contained in the document entitled "Pacific Telesis
Financing I, Pacific Telesis Financing II, Pacific Telesis Financing III and
Pacific Telesis Group, Trust Originated Preferred Securities ("TOPrS"), Form
of Underwriting Agreement Standard Provisions" filed on __________, 1995 as
Exhibit 1 to the Registration Statement on Form S-3 (No. 33-63647) of the
Trust and the Company (the "Registration Statement"), a copy of which is
attached hereto, are herein incorporated by reference in their entirety and
shall be deemed to be a part of this agreement to the same extent as if such
provisions had been set forth in full herein, except that (i) if any term
defined in such document is otherwise defined herein, the definition set forth
herein shall control and (ii) all references in such document to, and all
provisions in such document relating to, a type of agreement that has not been
entered into in connection with the transactions contemplated hereby shall not
be deemed to be a part of this agreement.
Please confirm your agreement by having an authorized officer sign a copy
of this agreement in the space set forth below and return the signed copy to
the undersigned.
This agreement may be signed in any number of counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
Very truly yours,
__________________________________
__________________________________
__________________________________
Acting severally on behalf of
themselves and the several
Underwriters named herein
By:
_____________________________
2
By:
______________________________
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted:
PACIFIC TELESIS FINANCING ___
By: PACIFIC TELESIS GROUP,
Sponsor
By:
_________________________________
Name:
Title:
PACIFIC TELESIS GROUP
By
_______________________________
Name:
Title:
3
<PAGE>
SCHEDULE I
----------
Number of Shares
________________
Underwriter of Firm Securities
___________ __________________
[insert Syndicate List]
Total ________________
4
<PAGE>
PACIFIC TELESIS FINANCING I
PACIFIC TELESIS FINANCING II
PACIFIC TELESIS FINANCING III
AND
PACIFIC TELESIS GROUP
TRUST ORIGINATED PREFERRED SECURITIES ("TOPrS")*
FORM OF UNDERWRITING AGREEMENT STANDARD PROVISIONS
From time to time, each of Pacific Telesis Financing I, Pacific Telesis
Financing II and Pacific Telesis Financing III, each a statutory business
trust organized under the Business Trust Act (the "Delaware Act") of the
State of Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C.
Section 3801, et seq.) (the "Trusts" and each individually a "Trust"), and
Pacific Telesis Group, a Nevada corporation (the "Company"), may enter into
one or more underwriting agreements that provide for the sale of certain
Trust Originated Preferred Securities ("TOPrS") of the Trust (the "Preferred
Securities"), to the purchaser or purchasers named therein (the
"Underwriters"). The Preferred Securities will be guaranteed by the Company
(the "Preferred Securities Guarantee") pursuant to the Preferred Securities
Guarantee Agreement (the "Preferred Securities Guarantee Agreement"), to the
extent described in the Prospectus (as defined in Paragraph 2(a)), with
respect to distributions and payments upon liquidation, redemption and
otherwise. The Preferred Securities and the related Preferred Securities
Guarantee are referred to herein as the "Securities". The standard
provisions set forth herein may be incorporated by reference in any such
underwriting agreement (the "Underwriting Agreement"). The Underwriting
Agreement, including the provisions incorporated therein by reference, is
herein referred to as "this Agreement." Unless otherwise defined herein,
terms defined in the Underwriting Agreement are used herein as therein
defined.
The terms governing the issuance of Securities shall be as provided in the
applicable Underwriting Agreement (with respect to each Underwriting
Agreement, the "Underwritten Securities").
1. ISSUANCE OF UNDERWRITTEN SECURITIES. Sales of the Underwritten
Securities may be made from time to time by the Company and the Trust to the
Underwriters of the Underwritten Securities. The firm or firms designated
as the representative or representatives, as the case may be, of the
Underwriters of the Underwritten Securities in the Underwriting Agreement
relating thereto will act as the representative or representatives (the
"Representative"). The obligation of the Company and the Trust to issue and
sell any of the Underwritten Securities and the obligation of any
Underwriters to purchase any of the Underwritten Securities shall be
evidenced by the Underwriting Agreement with respect to the Underwritten
Securities specified therein. Each Underwriting Agreement shall specify the
aggregate principal amount of the Underwritten Securities, the public
offering price of the Underwritten Securities, the purchase price to the
Underwriters of the Underwritten Securities, the names of the Underwriters
of the Underwritten Securities, the name of the Representative of such
Underwriters and the principal amount of the Underwritten Securities to be
purchased by each Underwriter, and shall set forth the date, time and manner
of delivery of the Underwritten Securities and payment therefor. The
Underwriting Agreement shall also specify (to the extent not set forth in
the Registration Statement (as defined in Paragraph 2(a)) or the Prospectus
the general terms of the Underwritten Securities. The Underwriting
Agreement may also specify other matters and provisions regarding the
Underwritten Securities and the sale thereof. An Underwriting Agreement
shall be in writing (which may be in counterparts), and may be evidenced by
an exchange of telegraphic communications, facsimile, or any other rapid
transmission device designed to produce a written record of communications
transmitted. The obligations of the Underwriters under each Underwriting
Agreement shall be several and not joint.
The Company and the Trust shall not be obligated to deliver any
Underwritten Securities except upon payment for all Underwritten Securities
to be purchased pursuant to this Agreement as hereinafter provided.
____________________
* "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
5
The entire proceeds from the sale of the Securities will be combined with
the entire proceeds from the sale by the Trust to the Company of its common
securities ( the "Common Securities"), as guaranteed by the Company, to the
extent set forth in the Prospectus, with respect to distributions and
payments upon liquidation and redemption (the "Common Securities Guarantee"
and together with the Preferred Securities Guarantee, the "Guarantees")
pursuant to the Common Securities Guarantee Agreement (the "Common
Securities Guarantee Agreement," and together with the Preferred Securities
Guarantee Agreement, the "Guarantee Agreements") and will be used by the
Trust to purchase the Company's Subordinated Deferrable Interest Debentures
due 2025 (the "Debentures") as set forth in the Prospectus.
The Preferred Securities and the Common Securities will be issued
pursuant to the Trust's Amended and Restated Declaration of Trust (the
"Declaration"). The Debentures will be issued pursuant to an indenture (the
"Base Indenture") between the Company and the Indenture Trustee (as defined
below) and a supplement to the Base Indenture (the "Supplemental Indenture"
and together with the Base Indenture and any amendments or supplements
thereto, the "Indenture").
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE TRUST. Each of the
Company and the Trust jointly and severally represents and warrants to, and
agrees with, the several Underwriters that:
(a) A registration statement on Form S-3 including a basic
prospectus with respect to the Preferred Securities, the Preferred
Securities Guarantee and the Debentures has been prepared by the Company
and the Trust in conformity with the requirements of the Securities Act
of 1933, as amended (the "Act"), and the rules and regulations of the
Securities and Exchange Commission (the "Commission") thereunder (the
"Rules and Regulations") and has become effective. The Commission has
not issued any order preventing or suspending the use of the Prospectus
in connection with the offering or sale of the Underwritten Securities.
As used in this Agreement, (i) "Registration Statement" means that
registration statement described above, as amended to the date hereof;
and (ii) "Prospectus" means the basic prospectus (including all documents
incorporated therein by reference) included in the Registration
Statement, together with any prospectus amendment or supplement
(including in each case all documents incorporated therein by reference)
specifically relating to the Underwritten Securities, as filed with, or
mailed for filing to, the Commission pursuant to Rule 424 or Rule 430A of
the Rules and Regulations and all documents that constitute a final
prospectus under Rule 434 of the Rules and Regulations.
(b) The Registration Statement and the Prospectus contain, and
(in the case of any amendment or supplement to any such document, or any
material incorporated by reference in any such document, filed with the
Commission after the date as of which this representation is being made)
will contain at all times during the period specified in Paragraph 5(c)
hereof, all statements which are required by the Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the
rules and regulations of the Commission under such Acts; the Declaration,
the Indenture, and the Preferred Securities Guarantee, including any
amendments and supplements thereto, pursuant to which the Underwritten
Securities will be issued, conformed, on the date on which the
Registration Statement originally became effective, with the requirements
of the Trust Indenture Act and the rules and regulations of the
Commission thereunder, and the Registration Statement and the Prospectus
do not, and (in the case of any amendment or supplement to any such
document, or any material incorporated by reference in any such document,
filed with the Commission after the date as of which this representation
is being made) will not, at any time during the period specified in
Paragraph 5(c) hereof, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; provided that
neither the Company nor the Trust make any representation or warranty as
to information contained in or omitted from the Registration Statement or
the Prospectus in reliance and based upon and in conformity with
information furnished in writing to the Company or the Trust through the
Representative by or on behalf of any Underwriter specifically for
inclusion therein, or as to any statements in or omissions from that part
of the Registration Statement that constitutes the Statements of
Eligibility and Qualification on Form T-1 (the "Forms T-1") under the
Trust Indenture Act of The First National Bank of Chicago as trustee (the
"Indenture Trustee") under the Indenture, as property trustee (the
6
"Property Trustee") under the Declaration and as trustee ("Guarantee
Trustee") under the Guarantees.
(c) The Company is not in violation of its corporate charter or
bylaws or in default under any agreement, indenture or instrument, the
effect of which violation or default would be material to the Company;
the Trust is not in violation of its declaration of trust or in default
under any agreement, indenture or instrument, the effect of which
violation would be material to the Trust; the execution and delivery by
the Company and the Trust and performance by the Company and the Trust of
their obligations under this Agreement and compliance by the Company with
the provisions of the Underwritten Securities, the Declaration, the
Indenture and the Guarantees and the issuance and delivery by the Trust
of the Preferred Securities will not conflict with, result in the
creation or imposition of any lien, charge or encumbrance upon any of the
assets of the Company or the Trust pursuant to the terms of, or
constitute a default under, any agreement, indenture or instrument, or
result in a violation of the corporate charter or bylaws of the Company
or the declaration of trust of the Trust or any order, rule or regulation
of any court or governmental agency having jurisdiction over the Company
or the Trust the effect of which conflict, lien, charge, encumbrance,
default or violation would be material to the Company or the Trust and,
except as required by the Act, the Trust Indenture Act, the Exchange Act
and applicable state or foreign securities laws, no consent,
authorization or order of, or filing or registration with, any court or
governmental agency is required for the execution, delivery and
performance of this Agreement, the Declaration, the Indenture and the
Guarantees by the Company and the Trust.
(d) Except as described in or contemplated by the Prospectus, as
of the date hereof, there has not been any material adverse change in, or
any adverse development which materially affects, the business,
properties, financial condition, results of operations or prospects of
the Company, and its subsidiaries taken as a whole, since the dates as of
which information is given in the Prospectus.
(e) The Company has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the
Declaration, the Indenture and the Guarantees; and this Agreement has
been duly authorized, executed and delivered by the Company. The Trust
has the business trust power and authority to execute, deliver and
perform its obligations under this Agreement; and this Agreement has been
duly authorized, executed and delivered by the Trust.
(f) The Preferred Securities to be issued will be duly
authorized by the Declaration and, when issued, will be validly issued
and (subject to the terms of the Declaration) fully paid and
nonassessable undivided beneficial interests in the assets of the Trust,
not subject to any preemptive or similar rights, and will conform to all
statements relating thereto contained in the Prospectus. Holders of
Preferred Securities will be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit
organized under the Delaware General Corporation Law.
(g) The Common Securities have been duly authorized by the Declaration
and, when issued and delivered by the Trust to the Company against
payment therefor as described in the Registration Statement and
Prospectus, will be validly issued and (subject to the terms of the
Declaration) fully paid and non-assessable undivided beneficial interests
in the assets of the Trust and will conform to the description thereof
contained in the Prospectus; the issuance of the Common Securities is not
subject to preemptive or other similar rights; and at the Delivery Date
all of the issued and outstanding Common Securities of the Trust will be
directly owned by the Company free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity.
(h) The Declaration and the Guarantees have been duly authorized
by the Company and, as of the Delivery Date, will have been duly executed
and delivered by the Company. Assuming due authorization, execution and
delivery of the Declaration by the Trustees, the Declaration will, as of
the Delivery Date, be a valid and binding obligation of the Company and
the Trustees, enforceable against the Company and the Trustees in
accordance with its terms, subject to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights and remedies generally and
to general principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity) and at the Delivery Date, the
7
Declaration will have been duly qualified under the Trust Indenture Act.
As of the Delivery Date, the Guarantees will be valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms, subject to the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws affecting
the rights and remedies of creditors generally and of general principles
of equity and at the Delivery Date, the Preferred Securities Guarantee
Agreement will have been duly qualified under the Trust Indenture Act.
(i) The Indenture will be duly qualified under the Trust
Indenture Act and, assuming due authorization, execution and delivery of
the Indenture by the Indenture Trustee and upon execution and delivery by
the Company, will be enforceable against the Company in accordance with
its terms, subject to the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws affecting
the rights and remedies of creditors generally and of general principles
of equity.
(j) The Debentures to be deposited in the Trust as trust assets
have been duly and validly authorized, and assuming due authorization,
execution and delivery of the Indenture by the Indenture Trustee, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to the Trust against payment therefore as
described in the Prospectus will be entitled to the benefits of the
Indenture and will be valid and binding obligations of the Company
enforceable against the Company in accordance with its terms, subject to
the effect of bankruptcy, insolvency, reorganization, receivership,
moratorium and other similar laws affecting the rights and remedies of
creditors generally and of general principles of equity.
(k) The Company has been duly incorporated, is validly existing
and in good standing under the laws of the State of Nevada and is duly
qualified to do business and in good standing as a foreign corporation in
each jurisdiction in which its ownership of property or the conduct of
its business requires such qualification (except where the failure so to
qualify would not have a material adverse effect upon the Company), and
has all power and authority necessary to own or hold its properties and
to conduct the business in which it is engaged.
(l) The Trust has been duly created and is validly existing in
good standing as a business trust under the Delaware Act with the
business trust power and authority to conduct its business as presently
conducted and as described in the Prospectus and to enter into and
perform its obligations under this Agreement, the Preferred Securities,
the Common Securities and the Declaration and the Trust is duly qualified
to transact business as a foreign company and is in good standing in any
other jurisdiction in which such qualification is necessary, except to
the extent that the failure to so qualify or be in good standing would
not have a material adverse effect on the Trust; the Trust is and will be
treated as a "grantor trust" for Federal income tax purposes under
existing law; and the Trust will be treated as a consolidated subsidiary
of the Company pursuant to generally accepted accounting principles.
(m) Except as described in or contemplated by statements in the
Prospectus, there is no litigation or governmental proceeding pending or
to the knowledge of the Company, threatened against the Company or the
Trust which is likely to result in any material adverse change in the
financial condition, results of operations, business or prospects of the
Company or the Trust or which is required to be disclosed in the
Registration Statement.
(n) The financial statements filed as part of the Registration
Statement or included in the Prospectus present, or (in the case of any
amendment or supplement to any such document, or any material
incorporated by reference in any such document, filed with the Commission
after the date as of which this representation is being made) will
present fairly, at all times during the period specified in paragraph
5(c) hereof, the financial condition and results of operations of the
Company on a consolidated basis, at the dates and for the periods
indicated, and have been, and (in the case of any amendment or supplement
to any such document, or any material incorporated by reference in any
such document, filed with the Commission after the date as of which this
representation is being made) will be at all times during the period
specified in Paragraph 5(c) hereof, prepared in conformity with generally
accepted accounting principles.
8
(o) The documents incorporated by reference into the Prospectus
have been, and (in the case of any amendment or supplement to any such
document, or any material incorporated by reference in any such document
filed with the Commission after the date as of which this representation
is being made) will be at all times during the period specified in
Paragraph 5(c) hereof, prepared by the Company in conformity with the
applicable requirements of the Act and the Rules and Regulations and the
Exchange Act and the rules and regulations of the Commission thereunder
and such documents have been, or (in the case of any amendment or
supplement to any such document, or any material incorporated by
reference in any such document, filed with the Commission after the date
as of which this representation is being made) will be at all times
during the period specified in Paragraph 5(c) hereof, timely filed as
required thereby.
(p) Neither the Company nor the Trust is, or will be, and
neither the Company nor the Trust is directly or indirectly controlled
by, or acting on behalf of any person which is, an investment company
within the meaning of the Investment Company Act of 1940, as amended.
(q) Each of the Company and the Trust has complied with all
provisions of Section 517.075 Florida Statutes (Chapter 92-198, Laws of
Florida), an act relating to disclosure of doing business with Cuba.
3. DEFAULT BY UNDERWRITERS. If any Underwriter defaults in the performance
of its obligations under this Agreement, the remaining nondefaulting
Underwriters shall be obligated to purchase the Underwritten Securities
which the defaulting Underwriter agreed but failed to purchase in the
respective proportions which the principal amount of Underwritten Securities
set forth in the Underwriting Agreement to be purchased by each remaining
nondefaulting Underwriter set forth therein bears to the aggregate principal
amount of Underwritten Securities set forth therein to be purchased by all
the remaining nondefaulting Underwriters; provided that the remaining
nondefaulting Underwriters shall not be obligated hereby to purchase any
Underwritten Securities if the aggregate principal amount of Underwritten
Securities which the defaulting Underwriter or Underwriters agreed but
failed to purchase exceeds 9.09% of the total principal amount of
Underwritten Securities, and any remaining nondefaulting Underwriter shall
not be obligated to purchase more than 110% of the principal amount of
Underwritten Securities set forth in the Underwriting Agreement to be
purchased by it. If the foregoing maximums are exceeded, the remaining
nondefaulting Underwriters, or those other underwriters satisfactory to the
Representative who so agree, shall have the right, but shall not be
obligated, to purchase, in such proportion as may be agreed upon among them,
all the Underwritten Securities. If the foregoing maximums are exceeded and
the remaining Underwriters or other underwriters satisfactory to the
Representative do not elect to purchase the Underwritten Securities which
the defaulting Underwriter or Underwriters agreed but failed to purchase,
this Agreement shall terminate without liability on the part of any
nondefaulting Underwriter or the Company.
Nothing contained in this Paragraph 3 shall relieve a defaulting Underwriter
of any liability it may have to the Company for damages caused by its
default. If the remaining Underwriters or other underwriters satisfactory
to the Representative are obligated or agree to purchase the Underwritten
Securities of a defaulting or withdrawing Underwriter, either the
Representative or the Company may postpone the Delivery Date for up to seven
full business days in order to effect any changes that in the opinion of the
Company or the Representative may be necessary in the Registration
Statement, the Prospectus or in any other document or arrangement.
4. DELIVERY OF UNDERWRITTEN SECURITIES. Delivery of and payment for the
Underwritten Securities shall be made at such address, date and time as may
be specified in the Underwriting Agreement. This date and time are
sometimes referred to as the "Delivery Date." On the Delivery Date, the
Trust shall deliver the Underwritten Securities to The Depository Trust
Company ("DTC") for the account of each Underwriter against payment to or
upon the order of the Trust of the purchase price by certified or official
bank check or checks payable in next-day funds settled through the San
Francisco Clearing House or such other Clearing House as is named in the
Underwriting Agreement. The Underwritten Securities will be issued as
fully-registered securities registered in the name of Cede & Co., the
nominee of DTC. One or more fully-registered global Preferred Securities
certificates representing the aggregate number of Preferred Securities, will
be issued and delivered to DTC. Time shall be of the essence: except as
otherwise provided herein, delivery of the Underwritten Securities at the
9
time and place specified pursuant to this Agreement is a further condition
of the obligation of each Underwriter hereunder, and, except as otherwise
provided herein, delivery of payment at the time and place specified
pursuant to this Agreement is a further condition of the obligation of the
Company hereunder. For the purpose of expediting the checking and packaging
of the Underwritten Securities, the Company shall make the Underwritten
Securities available for inspection by the Representative in New York, New
York or at another location acceptable to the Representative, in either case
not later than 2:00 P.M., local time, on the business day prior to the
Delivery Date. As used herein, "business day" means any day on which the
New York Stock Exchange, Inc. is open for trading.
5. COVENANTS OF THE TRUST AND THE COMPANY. Each of the Trust and the
Company jointly and severally agrees with the several Underwriters:
(a) To furnish promptly to the Representative and to counsel for
the Underwriters one signed copy of the Registration Statement as
originally filed and each amendment thereto filed prior to the date
hereof and relating to or covering the Underwritten Securities, and a
copy of the Prospectus, including all documents incorporated therein by
reference and all consents and exhibits filed therewith.
(b) To deliver promptly to the Representative such reasonable
number of the following documents as the Representative may request:
(i) conformed copies of the Registration Statement (including exhibits)
and of this Agreement, (ii) the Prospectus, and (iii) any documents
incorporated by reference in the Prospectus.
(c) To file with the Commission, during such period following
the date hereof as the Prospectus is required by law to be delivered, any
amendment or supplement to the Registration Statement or the Prospectus
that may, in the judgment of the Company, be required by the Act or
requested by the Commission.
(d) Prior to filing with the Commission during the period
referred to in (c) above, (i) any amendment to the Registration
Statement, (ii) the Prospectus or any amendment or supplement thereto, or
(iii) any document incorporated by reference in any of the foregoing or
any amendment or supplement to such incorporated document, to furnish a
copy thereof to the Representative and to counsel for the Underwriters a
reasonable amount of time prior to such proposed filing and not file any
such amendment or supplement to which the Representative or counsel for
the Underwriters shall reasonably object unless the Company shall
conclude that such amendment or supplement must be filed in accordance
with applicable law; and to file the Prospectus as so supplemented
pursuant to Rule 424(b) under the Act not later than the Commission's
close of business on the second business day following the execution and
delivery of this Agreement, or, if applicable, such earlier time as may
be required by Rule 430A(a)(3) under the Act.
(e) To advise the Representative promptly (i) when any
post-effective amendment to the Registration Statement relating to or
covering the Underwritten Securities becomes effective, (ii) during the
period referred to in (c) above, of the mailing or the delivery or EDGAR
transmission to the Commission for filing of any supplement to the
Prospectus or any document to be filed pursuant to the Exchange Act,
(iii) of the receipt of any comments from the Commission, (iv) of any
request or proposed request by the Commission for an amendment or
supplement to the Registration Statement (insofar as the amendment or
supplement relates to or covers the Underwritten Securities), to the
Prospectus, to any document incorporated by reference in any of the
foregoing or for any additional information, (v) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or any reference to or the initiation or threat of
any stop order proceeding or of any challenge by the Commission to the
accuracy or adequacy of any document incorporated by reference in the
Prospectus, (vi) of receipt by the Company of any notification with
respect to the suspension of the qualification of the Underwritten
Securities for sale in any jurisdiction or the initiation or threat of
any proceeding for that purpose, and (vii) of the happening of any event
which makes untrue any statement of a material fact made in the
Registration Statement (insofar as the Registration Statement relates to
or covers the Underwritten Securities) or the Prospectus or which
requires the making of a change in the Registration Statement or the
Prospectus in order to make any material statement therein not
misleading.
10
(f) If, during the period referred to in (c) above, the
Commission shall issue a stop order suspending the effectiveness of the
Registration Statement, to make every reasonable effort to obtain the
lifting of that order at the earliest possible time.
(g) If any event shall occur as a result of which it is
necessary to amend or supplement the Prospectus in order to make the
Prospectus not misleading in the light of the circumstances existing at
the time it is delivered to a purchaser, to forthwith amend or supplement
the Prospectus in accordance with paragraph (d) above so that, as so
amended or supplemented, the Prospectus will not include an untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading, and furnish to the Underwriters a reasonable number of copies
of such amendment or supplement.
(h) As soon as practicable, to make generally available to its
security holders and to deliver to the Representative an earnings
statement of the Company, conforming with the requirements of
Section 11(a) of the Act, covering a period of at least twelve months
beginning after the effective date of the Registration Statement, as
defined in Rule 158(c) under the Act.
(i) During a period of five years after the date hereof, to
furnish to the Representative copies of all reports and financial
statements furnished by the Company to each securities exchange on which
securities issued by the Company may be listed pursuant to requirements
of or agreements with such exchange or to the Commission pursuant to the
Exchange Act or any rule or regulation of the Commission thereunder.
(j) To endeavor to qualify the Underwritten Securities for offer
and sale and to determine their eligibility for investment under the
securities laws of such jurisdictions as the Representative may
reasonably request and to continue such qualifications in effect so long
as reasonably required for distribution; provided, however, that neither
the Company nor the Trust shall be required to qualify to do business in
any jurisdiction where it is not now qualified nor to take any other
action which would subject it to general or unlimited service of process
in any jurisdiction where it is not now so subject.
(k) To pay the costs incident to the authorization, issuance,
and delivery of the Underwritten Securities; the costs incident to the
preparation and filing under the Act of the Registration Statement and
any amendments and exhibits thereto and the Prospectus and any amendments
or supplements thereto; the costs incident to the preparation and filing
of any document and any amendments and exhibits thereto required to be
filed by the Company under the Exchange Act; the costs of printing or
reproducing and distributing the Registration Statement as originally
filed and each amendment and post-effective amendment thereof (including
exhibits), the Prospectus and any documents incorporated by reference in
any of the foregoing documents; the costs of reproducing this Agreement;
fees paid to rating agencies in connection with the rating of the
Securities, including the Underwritten Securities; the fees and expenses
of qualifying the Securities, including the Underwritten Securities,
under the securities laws of the several jurisdictions as provided in
this Paragraph and of preparing and printing a Blue Sky Memorandum and a
memorandum concerning the legality of the Securities, including the
Underwritten Securities, as an investment (including reasonable fees of
counsel to the Underwriters in connection therewith) and all other
reasonable costs and expenses incident to the performance of the
Company's and the Trust's obligations under this Agreement; provided
that, except as provided in this Paragraph 5(k) and in Paragraph 10
hereof, the Underwriters shall pay their own costs and expenses,
including the fees and expenses of their counsel, any transfer taxes on
the Underwritten Securities which they may sell and the expenses of
advertising any offering of the Underwritten Securities made by the
Underwriters.
(l) To use its best efforts to obtain the listing of the
Underwritten Securities on the securities exchange(s), if any, set forth
in the Underwriting Agreement (the "Stock Exchange") and to cause such
listing to be continued so long as such listing remains commercially
practicable in the reasonable judgment of the Company and to furnish from
time to time any and all documents, instruments, information and
undertakings that may be necessary in order to effect such listing; if
11
the Securities are exchanged for the Debentures, the Company will use its
reasonable efforts to effect the listing of the Debentures on the
exchange on which the Securities were then listed.
(m) Until the termination of the offering of the Underwritten
Securities, to timely file all documents, and any amendments to
previously filed documents, required to be filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act.
(n) During the period beginning on the date hereof and
continuing to the Delivery Date, not to offer, sell, contract to sell or
otherwise dispose of any Preferred Securities, any security convertible
into or exchangeable into or exercisable for securities or any equity
securities substantially similar to the Preferred Securities other than
the Underwritten Securities to the Underwriters.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company and the Trust shall jointly and severally
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act from and against any loss, claim, damage
or liability and expense whatsoever, as incurred, joint or several, and
any action in respect thereof, to which that Underwriter or controlling
person may become subject, under the Act or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectus, or arises out
of, or is based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse each Underwriter
and such controlling person for any reasonable out-of-pocket legal and
other expenses, as incurred, reasonably incurred by that Underwriter or
controlling person in investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action, as such
expenses are incurred; provided, however, that neither the Company nor
the Trust shall be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement or the Prospectus in reliance
and based upon information furnished in writing to the Company or the
Trust through the Representative by or on behalf of any Underwriter
expressly for use in the Registration Statement; and provided further
that as to the Prospectus, this indemnity agreement shall not inure to
the benefit of any Underwriter or any person controlling that Underwriter
on account of any loss, claim, damage, liability or action arising from
the sale of Underwritten Securities to any person by that Underwriter if
that Underwriter failed to send or give a copy of the Prospectus to that
person within the time required by the Act and the untrue statement or
alleged untrue statement of a material fact or omission or alleged
omission to state a material fact was corrected in the Prospectus, unless
such failure resulted from noncompliance by the Company or the Trust with
Paragraph 5(b) hereof. For purposes of the second proviso to the
immediately preceding sentence, the term "Prospectus" shall not be deemed
to include the documents incorporated therein by reference, and no
Underwriter shall be obligated to send or give any supplement or
amendment to any document incorporated by reference in the Prospectus to
any person other than a person to whom such Underwriter has delivered
such incorporated documents in response to a written request therefor.
The foregoing indemnity agreement is in addition to any liability which
the Company or the Trust may otherwise have to any Underwriter or
controlling person.
(b) Each Underwriter shall indemnify and hold harmless the
Company and the Trust, each of their trustees, each of their directors,
each of their officers who signed the Registration Statement and any
person who controls the Company or the Trust within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act from and against
any loss, claim, damage or liability and expense whatsoever, as incurred,
joint or several, and any action in respect thereof, to which the Company
or the Trust or any such trustee, director, officer or controlling person
may become subject, under the Act or otherwise, insofar as such loss,
claim, damage, liability or action, arises out of, or is based upon, any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or the Prospectus, or arises out of, or is
based upon the omission or alleged omission to state therein a material
12
fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that the
untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance and based upon information furnished in
writing to the Company or the Trust through the Representative by or on
behalf of that Underwriter expressly for use in the Registration
Statement, and shall reimburse the Company or the Trust for any
reasonable out-of-pocket legal and other expenses, as incurred,
reasonably incurred by the Company or any such trustee, director, officer
or controlling person in investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action, as such
expenses are incurred. The foregoing indemnity agreement is in addition
to any liability which any Underwriter may otherwise have to the Company
or the Trust or any of their trustees, directors, officers or controlling
persons.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity is applicable pursuant to either of the two preceding
subparagraphs, such person (the "indemnified party") shall promptly
notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party, upon request
of the indemnified party, shall retain counsel reasonably satisfactory to
the indemnified party to represent the indemnified party, and any others
the indemnifying party may designate in such proceeding, and shall pay
the reasonable fees and disbursements of such counsel related to such
proceeding, but the omission so to notify such indemnifying party of any
such action shall not relieve such indemnifying party from any liability
which it may have to the indemnified party otherwise than on account of
the indemnity agreement provided for in the two preceding subparagraphs.
In any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the
retention of such counsel, or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actually or
potentially differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm in addition
to any local counsel for all such indemnified parties and that all such
fees and expenses shall be reimbursed as they are incurred. Such one
firm shall be designated in writing by the Representative in the case of
parties indemnified pursuant to Paragraph 6(a) and by the Company and the
Trust in the case of parties indemnified pursuant to Paragraph 6(b). The
indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for under Paragraphs 6(a) or
6(b) shall for any reason be unavailable to an indemnified party in
respect of any loss, claim, damage or liability, or any action in respect
thereof, referred to therein, then each indemnifying party shall, in lieu
of indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage
or liability, or action in respect thereof, in such proportion as is
appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other from the offering of the
Underwritten Securities. If, however, this allocation is not permitted
by applicable law, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of such
loss, claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect the relative benefits
received by the Company or the Trust on the one hand and the Underwriters
on the other from the offering of the Underwritten Securities and the
relative fault of the Company or the Trust on the one hand and the
Underwriters on the other with respect to the statements or omissions
which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations.
The relative benefits received by the Company or the Trust on the one
hand and the Underwriters on the other with respect to such offering
shall be deemed to be in the same proportion as the total net proceeds
13
from the offering of the Underwritten Securities (after deducting
expenses) received by the Company or the Trust bear to the total
underwriting discounts and commissions received by the Underwriters with
respect to such offering. The relative fault shall be determined by
reference to whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company or the Trust or the Underwriters, the
intent of the parties, and their relative knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by an indemnified party as a result
of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Paragraph 6(d) shall be deemed to include, for
purposes of this Paragraph 6(d), any reasonable out-of-pocket legal or
other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Paragraph 6(d), no Underwriter
shall be required to contribute any amount in excess of the amount by
which the total price at which the Underwritten Securities underwritten
by it and distributed to the public were offered to the public exceeds
the amount of any damages which such Underwriter has otherwise paid or
become liable to pay by reason of any untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall
be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to
contribute as provided in this Paragraph 6(d) are several in proportion
to their respective underwriting obligations and not joint.
(e) The agreements contained in this Paragraph 6 and the
representations, warranties and agreements of the Company and the Trust
in Paragraph 2 and Paragraph 5 hereof shall survive the delivery of the
Underwritten Securities and shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any indemnified party.
Notwithstanding the preceding sentence, in the event of any termination
or cancellation of this Agreement or any failure to consummate the sale
of the Underwritten Securities within the scope of Paragraph 3 hereof,
such Paragraph shall control the Company's and the Trust's obligations
and liabilities instead of Paragraph 5(k).
7. TERMINATION BY THE REPRESENTATIVE. This Agreement may be terminated by
the Representative, in the absolute discretion of the Representative, by
written notice given to and received by the Company prior to the delivery of
and any payment for the Underwritten Securities if, during the period
beginning on the date hereof to and including the Delivery Date, (i) trading
in the Preferred Securities shall have been suspended by the Commission or a
national securities exchange or trading in securities generally on the New
York Stock Exchange shall have been suspended or materially limited, and, in
the reasonable judgment of a majority in interest of the Underwriters,
including the Representative, such suspension or limitation in trading in
the Preferred Securities or in securities generally is material and would
make it impracticable to market the Underwritten Securities, (ii) a general
moratorium on commercial banking activities shall have been declared by
either Federal, New York, or California authorities, (iii) there shall have
occurred any material outbreak or escalation of hostilities or other
calamity or crisis the effect of which on the financial markets of the
United States, or, if the Underwritten Securities are to be offered or sold
in any financial market outside of the United States, such foreign financial
market, is such as to make it, in the reasonable judgment of the
Representative, impracticable to market the Underwritten Securities, or
(iv) there shall have occurred any material adverse change, or any
development involving a prospective material adverse change, in or affecting
particularly the business or properties of the Company which materially
impairs the investment quality of the Underwritten Securities.
8. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The respective
obligations of the Underwriters under the Agreement with respect to the
Underwritten Securities are subject to the accuracy, on the date hereof and
on the Delivery Date, of the representations and warranties of the Company
and the Trust contained herein, to the performance by the Company and the
Trust of its obligations hereunder, and to each of the following additional
terms and conditions applicable to the Underwritten Securities:
(a) At or before the Delivery Date, no stop order suspending the
effectiveness of the Registration Statement nor any order directed to any
document incorporated by reference in the Prospectus shall have been
14
issued and prior to that time no stop order proceeding shall have been
initiated or threatened by the Commission and no challenge shall have
been made by the Commission to the accuracy or adequacy of any document
incorporated by reference in the Prospectus; any request of the
Commission for inclusion of additional information in the Registration
Statement or the Prospectus or otherwise shall have been complied with;
and after the date hereof, neither the Company nor the Trust shall have
filed with the Commission any amendment or supplement to the Registration
Statement or the Prospectus (or any document incorporated by reference
therein) in violation of Paragraph 5(d) hereof.
(b) No Underwriter shall have discovered and disclosed to the
Company or the Trust on or prior to the Delivery Date that the
Registration Statement or the Prospectus contains an untrue statement of
a fact which is material or omits to state a fact which is material and
is required to be stated therein or is necessary to make the statements
therein not misleading.
(c) The General Counsel of the Company shall have furnished to
the Representative his opinion addressed to the Underwriters and dated
the Delivery Date to the effect that:
(i) The Company has been duly incorporated and is validly existing
and in good standing under the laws of the State of Nevada.
(ii) The Company is duly qualified to do business and is in good
standing as a foreign corporation in all jurisdictions in which its
ownership of property or its conduct of business requires such
qualification (except where the failure so to qualify would not have
a material adverse effect upon the Company), and has all power and
authority necessary to own its properties and conduct the business in
which it is engaged as described in the Prospectus.
(iii) The Trust is duly qualified and in good standing as a foreign
company in any jurisdiction in which such qualification is necessary,
except to the extent that the failure to so qualify or be in good
standing would not have a material adverse effect on the Trust.
(iv) All of the issued and outstanding Common Securities of the
Trust are owned of record by the Company free and clear, to the best
of said counsel's knowledge, of any security interest, mortgage,
pledge, lien, encumbrance, claim or equitable right.
(v) The Declaration has been duly qualified under the Trust
Indenture Act.
(vi) The Indenture has been duly qualified under the Trust Indenture
Act and, assuming due authorization, execution and delivery of the
Indenture by the Company and the Indenture Trustee, the Indenture
will be enforceable against the Company in accordance with its terms.
(vii) Assuming due authorization, execution and delivery of the
Debentures by the Company and due authorization, execution and
delivery of the Indenture by the Company and the Indenture Trustee,
the Debentures when executed and authenticated in accordance with the
provisions of the Indenture and delivered against payment therefor,
as described in the Prospectus, will be entitled to the benefits of
the Indenture and will be valid and binding obligations of the
Company enforceable against the Company in accordance with its terms.
(viii) Each of the Guarantee Agreements has been duly authorized,
executed and delivered by the Company; the Preferred Securities
Guarantee Agreement, assuming it is duly authorized, executed and
delivered by the Guarantee Trustee and assuming the Preferred
Securities are issued, delivered and paid for in accordance with the
Underwriting Agreement and the Prospectus, constitutes a valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms; and the Preferred Securities Guarantee
Agreement has been duly qualified under the Trust Indenture Act.
(ix) The statements made in the Prospectus under the captions "Risk
Factors," "Description of the Pacific Telesis Trusts' Preferred
Securities," "Description of the Pacific Telesis Subordinated Debt
Securities," and "Description of the Guarantees," and "Effect of
Obligations Under the Subordinated Debentures and the Guarantee"
insofar as such statements constitute summaries of the legal matters
15
or documents referred to therein are accurate in all material
respects; and the Declaration, the Indenture and the Preferred
Securities Guarantee Agreement filed with the Commission as part of
the Registration Statement complied as to form in all material
respects with the requirements of the Trust Indenture Act and the
rules and regulations of the Commission thereunder.
(x) Neither the Company nor the Trust is, or will be, and neither
the Company nor the Trust is directly or indirectly controlled by, or
acting on behalf of any person which is, an investment company within
the meaning of the Investment Company Act of 1940, as amended.
(xi) The Underwritten Securities have been duly authorized,
executed, authenticated, issued and delivered and are valid and
binding obligations of the Trust entitled to the benefits of the
Declaration and are enforceable in accordance with their terms.
(xii) This Agreement has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution
and delivery by the other parties hereto, is a valid and binding
obligation of the Company.
(xiii) The Underwritten Securities, the Common Securities, the
Debentures, the Declaration, the Indenture and each of the Guarantee
Agreements conform as to legal matters to the statements concerning
them in the Registration Statement and the Prospectus under the
following (or comparable) captions: "Description of Securities" and
"Plan of Distribution."
(xiv) The Registration Statement is effective under the Act, no stop
order suspending its effectiveness has been issued and, to the best
of such counsel's knowledge, no proceeding for that purpose is
pending or threatened by the Commission.
(xv) No order directed to any document incorporated by reference in
the Prospectus has been issued by the Commission and, to the best of
such counsel's knowledge, no challenge has been made by the
Commission to the accuracy or adequacy of any such document.
(xvi) Such counsel does not know of any litigation or any
governmental proceeding pending or threatened against the Company or
the Trust which is likely to materially adversely affect the subject
matter of this Agreement or is required to be disclosed in the
Prospectus which is not disclosed and correctly summarized therein.
(xvii) The execution, delivery and performance of this Agreement and
compliance by the Company and the Trust with the provisions of the
Underwritten Securities and the Declaration, the Indenture or the
Guarantees will not result in a material conflict with, or result in
the creation or imposition of any lien, charge or encumbrance of a
material amount upon the assets of the Company or the Trust pursuant
to the terms of, or constitute a material default under, any material
agreement, indenture or instrument known to such counsel, or result
in a violation of the corporate charter or bylaws of the Company, or
result in a material violation of any order, rule or regulation of
any court or governmental agency having jurisdiction over the Company
or its property.
(xviii) The issue and sale of the Debentures and the execution and
delivery of the Guarantees by the Company in accordance with the
terms of this Agreement, the Company's purchase of the Common
Securities from the Trust and the Company's participation in the
transactions otherwise contemplated by this Agreement have been duly
and validly authorized by the necessary corporate action of the
Company; and no authorization, approval, consent, certificate or
order of any other state commission or regulatory authority (other
than under any applicable state securities or blue sky laws, as to
which said counsel need express no opinion) or of any federal
commission or regulatory authority is required in respect of such
issue and sale, such purchase or such participation, except (A) such
as may be required under the Act or the Rules and Regulations and
(B) the qualification of the Declaration, the Preferred Securities
Guarantee Agreement and the Indenture under the Trust Indenture Act
and rules and regulations of the Commission thereunder.
(xix) The Declaration has been duly authorized, executed and
16
delivered by the Company, as sponsor, and has been duly executed and
delivered by the Trustees.
In giving such opinion, such counsel may rely, as to the authorization,
execution and delivery of the Indenture and authentication of the
Underwritten Securities by the Indenture Trustee, upon a certificate of
the Indenture Trustee setting forth the facts as to such authorization,
execution, delivery and authentications and such counsel may assume the
due authorization execution and delivery of this Agreement by or on
behalf of the Underwriters. Such counsel need not express an opinion
with respect to any state or foreign securities or blue sky laws. Such
counsel may limit the scope of his opinion to the law of the State of
California, the general corporation law of the State of Nevada and the
federal law of the United States of America.
In connection with the opinions expressed by such counsel in response to
subparagraphs (vi), (vii), (viii), (xi) and (xii) above, such counsel's
opinion as to enforceability may be qualified to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, liquidation, conservatorship, readjustment of debt,
moratorium or other similar laws generally affecting the enforcement of
the rights of creditors, and insofar as indemnification provisions may be
limited by applicable law, and that such opinion is subject to
limitations imposed by applicable law or equitable principles upon the
specific enforceability of any of the remedies, covenants or other
provisions of the documents referred to in such subparagraphs whether
considered in a proceeding in equity or at law and upon the availability
of injunctive relief or other equitable remedies. Such counsel's opinion
in response to subparagraph (viii) above is further subject, as to
enforceability, to the effect of applicable court decisions, invoking
statutes or principles of equity, which have held that certain covenants
and provisions of agreements are unenforceable where the breach of such
covenants or provisions imposes restrictions or burdens upon a borrower,
and it cannot be demonstrated that the enforcement of such restrictions
or burdens is necessary for the protection of the creditor, or which have
held that the creditor's enforcement of such covenants or provisions
under the circumstances would violate the creditor's covenants of good
faith and fair dealing implied under California law; the effect of
California statutes and rules of law that cannot be waived prospectively
by a borrower; and the effect of California statutes and cases to the
effect that a surety may be exonerated if the creditor alters the
original obligation of the principal without the surety's consent, elects
remedies for default that may impair the surety's subrogation rights
against the principal, proceeds against the surety without first
exhausting its remedies against the principal or otherwise takes action
which prejudices the surety, without notification of and consent of the
surety, unless such rights of the surety are validly waived.
Such opinion shall also state that the Registration Statement and the
Prospectus, as of their respective effective or issue dates, complied as
to form in all material respects with the requirements of the Act and the
Trust Indenture Act and the rules and regulations of the Commission under
said Acts (except that no opinion need be expressed as to the financial
statements and other financial and statistical data contained therein)
and each document incorporated by reference in the Prospectus as filed
under the Exchange Act complied, when so filed, as to form in all
material respects with the applicable requirements of the Exchange Act
and the rules and regulations of the Commission thereunder (except that
no opinion need be expressed as to the financial statements and other
financial and statistical data contained therein)
Such opinion shall also contain a statement that such counsel has no
reason to believe that (except for financial statements and other
financial and statistical data contained therein as to which no opinion
need be expressed) (i) the Registration Statement, when it became
effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein not misleading, or (ii) either the
Registration Statement or the Prospectus contains an untrue statement of
a material fact or omits to state a material fact necessary in order to
make the statements therein (and in the case of the Prospectus, in light
of the circumstances under which they were made) not misleading on the
date of this Agreement or on the Delivery Date.
(d) Skadden, Arps, Slate, Meagher & Flom, special Delaware
counsel for the Company, shall have furnished to the Representative their
17
opinion addressed to the Underwriters and dated as of the Delivery Date,
to the effect that:
(i) The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Act; all filings
required under the laws of the State of Deleware with respect to the
creation and valid existence of the Trust as a business trust have
been made; under the Delaware Act and the Declaration, the Trust has
all necessary power and authority to own property and to conduct its
business as described in the Prospectus.
(ii) The Declaration is a valid and binding obligation of the
Company and the Regular Trustees enforceable against the Company and
the Regular Trustees in accordance with its terms, except to the
extent that enforcement thereof may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
(iii) The Preferred Securities have been duly authorized for
issuance and, subject to the qualification set forth below, when
issued, delivered and paid for in accordance with the Underwriting
Agreement, will be validly issued, fully paid and non-assessable
undivided beneficial interests in the assets of the Trust; the
holders of the Preferred Securities will be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law
of the State of Delaware and the issuance of the Preferred Securities
is not subject to preemptive or other similar rights under the
Delaware Act or the Declaration. We bring to your attention that the
holders of Preferred Securities may be obligated, pursuant to the
Declaration, to (a) provide indemnity and/or security in connection
with and pay taxes or governmental charges arising from transfers of
Preferred Securities and the issuance of replacement Preferred
Securities, and (b) provide security and indemnity in connection with
requests of or directions to the Property Trustee to exercise its
rights and powers under the Declaration.
(iv) The execution, delivery and performance by the Trust of the
Underwriting Agreement have been duly authorized by all necessary
actions of the Trust.
(e) The Company shall have furnished to the Representative on
the Delivery Date (i) certificates, dated the Delivery Date, of its
Chairman of the Board, Vice Chairman, President, an Executive Vice
President or a Vice President and its respective Treasurer or an
Assistant Treasurer and (ii) a certificate, dated the Delivery Date, of a
Trustee of the Trust, in each case in which such officers shall state
that, to the best of their knowledge after reasonable investigation, the
representations and warranties of the Company and the Trust, as the case
may be, in Paragraph 2 hereof are true and correct as of the Delivery
Date with the same effect as if made on the Delivery Date, the Company
and the Trust, as the case may be, have complied with all agreements and
satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to the Delivery Date, that no stop order suspending
the effectiveness of the Registration Statement is in effect and no
proceedings for that purpose are pending or are threatened by the
Commission and that, subsequent to the date of the most recent financial
statements in the Prospectus, there has been no material adverse change
in the financial position or results of operations of the Company and any
of its subsidiaries, taken as a whole, except as set forth in or
contemplated by the Prospectus.
(f) At the Delivery Date, counsel for the Underwriters shall
have been furnished with such documents and opinions as they may
reasonably require for the purpose of enabling them to pass upon the
issuance and sale of the Preferred Securities as herein contemplated and
related proceedings, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company
and the Trust, in connection with the issuance and sale of the Preferred
Securities as herein contemplated shall be reasonably satisfactory in
form and substance to the Representative and counsel for the
Underwriters.
18
(g) The Company shall have furnished to the Representative a
letter of Coopers & Lybrand, L.L.P., addressed to the Board of Directors
of the Company and the Underwriters and dated the Delivery Date, to the
effect that:
(i) they are independent public accountants with respect to the
Company and its consolidated subsidiaries within the meaning of the
Act and the Rules and Regulations; and the Trust is and will be
treated as a consolidated subsidiary of the Company pursuant to
generally accepted accounting principles;
(ii) in their opinion, the consolidated financial statements and any
supplementary financial information and schedules audited (and, if
applicable, prospective financial statements and/or pro forma
financial information examined) by them and included or incorporated
by reference in the Registration Statement or the Prospectus comply
as to form in all material respects with the applicable accounting
requirements of the Act or the Exchange Act and the related published
rules and regulations thereunder; and if applicable, they have made a
review in accordance with standards established by the American
Institute of Certified Public Accountants of the condensed
consolidated interim financial statements of the Company for the
periods specified in such letter, as indicated in their reports
thereon, copies of which have been furnished to the Representative;
(iii) based upon limited procedures set forth in detail in such
letter, nothing has come to their attention which causes them to
believe that:
(A) the unaudited consolidated financial statements and
supporting schedules of the Company included in the Registration
Statement do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and
Regulations or are not presented in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in
the Registration Statement;
(B) the unaudited amounts of revenues, net income and net income
per share set forth under "Pacific Telesis Group Summary Financial
Information" in the Prospectus were not determined on a basis
substantially consistent with that used in determining the
corresponding amounts in the audited financial statements included in
the Registration Statement; or
(C) at a specified date not more than five days prior to
Delivery Date, there has been any change in the capital stock of the
Company or any increase in the consolidated long-term debt of the
Company or any decrease in consolidated net current assets or net
assets as compared with the amounts shown on the date of the most
recent consolidated balance sheet included in or incorporated by
reference in the Registration Statement and the Prospectus during the
period from the date of the most recent consolidated balance sheet
included in or incorporated by reference in the Registration
Statement and the Prospectus to a specified date not more than five
days prior to the Delivery Date, there were any decreases, as
compared with the corresponding period in the preceding year, in
consolidated revenues, net income or net income per share of the
Company and its subsidiaries except in all instances for changes,
increases or decreases which the Registration Statement and the
Prospectus disclose have occurred or may occur; and
(iv) in addition to the examination referred to in their opinions
and the limited procedures referred to in clause (iii) above, they
have carried out certain specified procedures, not constituting an
audit, with respect to certain amounts, percentages and financial
information which are included in the Registration Statement and
Prospectus, or incorporated therein by reference, and which are
specified by the Representative, and have found such amounts,
percentages and financial information to be in agreement with the
relevant accounting, financial and other records of the Company and
its subsidiaries identified in such letter.
(h) Pillsbury Madison & Sutro, as counsel for the Underwriters,
shall have furnished to the Representative on the Delivery Date such
opinions with respect to the validity of the Underwritten Securities and
19
with respect to the Registration Statement, the Prospectus, and other,
related matters as the Representative may reasonably require. In giving
such opinion such counsel may rely, as to all materials governed by the
laws of jurisdictions other than the law of the State of California, the
Federal law of the United States and Delaware General Corporation Law
upon the opinions of counsel reasonably satisfactory to the Underwriters.
(i) Pepper, Hamilton & Scheetz, as counsel for The First National Bank
of Chicago, as Property Trustee under the Declaration, Guarantee Trustee
under the Preferred Securities Guarantee Agreement, shall have furnished
to the Representative their opinion addressed to the Underwriters and
dated the Delivery Date, to the effect that:
(i) The First National Bank of Chicago is a national banking
association duly organized and validly existing in good standing
under the laws of the United States of America.
(ii) the Property Trustee has full power, authority and legal right
to execute, deliver and perform its obligations under the terms of
the Declaration and the Preferred Securities Guarantee Agreement;
(iii) the execution, delivery and performance by the Property
Trustee of the Declaration and the execution, delivery and
performance by the Guarantee Trustee of the Preferred Securities
Guarantee Agreement have been duly authorized by all necessary
corporate action on the part of the Property Trustee and the
Guarantee Trustee, respectively. The Declaration and the Preferred
Securities Guarantee Agreement have been duly executed and delivered
by the Property Trustee and the Guarantee Trustee, respectively, and
constitute the legal, valid and binding obligations of the Property
Trustee and the Guarantee Trustee, respectively, enforceable against
the Property Trustee and the Guarantee Trustee, respectively, in
accordance with their terms, subject to the effect of bankruptcy,
insolvency, reorganization, receivership, fraudulent conveyance,
moratorium and other similar laws affecting the rights of creditors
generally as from time to time in effect, general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law), and considerations of public policy
or the effect of applicable law relating to fiduciary duties;
(iv) the execution, delivery and performance of the Declaration and
the Preferred Securities Guarantee Agreement by the Property Trustee
and the Guarantee Trustee, respectively, does not conflict with or
constitute a breach of the charter or by-laws of the Property Trustee
and the Guarantee Trustee, respectively; and
(v) no consent, approval or authorization of, or registration with
or notice to, any governmental authority or agency of the State of
Illinois or the United States of America governing the banking or
trust powers of The First National Bank of Chicago is required for
the execution, delivery or performance by the Property Trustee and
the Guarantee Trustee of the Declaration and the Preferred Securities
Guarantee Agreement.
(j) The Underwritten Securities shall have been accepted for
listing on the Stock Exchange, if the Prospectus states that the
Underwritten Securities will be so listed, subject to official notice of
issuance.
(k) If the Prospectus contains a discussion of federal taxation
issues with respect to the Underwritten Securities, the Company shall
have furnished to the Representative a letter of United States tax
counsel addressed to the Underwriters and dated the Delivery Date to the
effect that (i) the Underwriters may rely on the opinion of such counsel
filed as an exhibit to the Registration Statement to the same extent as
though it were dated the date of such letter authorizing reliance;
(ii) such counsel has reviewed the other statements in the Prospectus
under the caption "United States Federal Income Tax Matters" and, insofar
as they are, or refer to, statements of United States law or legal
conclusions, such statements are accurate in all material respects; (iii)
for federal income tax purposes (A) the Debentures will constitute
indebtedness of the Company and (B) the Debentures will be treated as
issued with "original issue discount" ("OID") and such OID on the
Debentures will be deductible by the Company on an economic accrual basis
in accordance with section 163(e)(1) of the Internal Revenue Code of
1986, as amended, and Treasury Regulation section 1.163-4(a)(1); and (iv)
20
under current law, the Trust will be classified for United States federal
income tax purposes as a grantor trust and not as an association taxable
as a corporation; accordingly, for United States federal income tax
purposes, each holder of Preferred Securities generally will be
considered the owner of an undivided interest in the Debentures, and each
holder will be required to include in its gross income any original issue
discount accrued with respect to its allocable share of the Debentures.
(l) (i) Between the date hereof and the Delivery Date, there shall have
been no decrease in the prevailing ratings of any of the outstanding debt
securities issued or guaranteed by the Company or of the Preferred
Securities by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 436(g) under the Act) and (ii) such
organization shall have not publicly announced between the date hereof
and the Delivery Date that it has under surveillance or review, with
possible negative implications that constitute a worsening of the status
prevailing at the date hereof, its rating of any of the debt securities
issued or guaranteed by the Company or of the Preferred Securities, where
such public announcement is such as to make it, in the reasonable
judgment of the Representative, impracticable to market the Underwritten
Securities.
In case any of the conditions specified above in this Paragraph 8 shall not
have been fulfilled on the Delivery Date, this Agreement may be terminated
by the Representative by delivering written notice of termination to the
Company. Any such termination shall be without liability of any party to
any other party except to the extent provided in Paragraphs 5, 6 and 10
hereof.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably
satisfactory to the Representative.
9. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE TRUST. The
obligations of the Company and the Trust to sell and deliver the
Underwritten Securities are subject to the following conditions precedent:
at or before the Delivery Date, no stop order suspending the effectiveness
of the Registration Statement nor any order directed to any document
incorporated by reference in the Prospectus shall have been issued, and
prior to that time no stop order proceeding shall have been initiated or
threatened by the Commission and no challenge shall have been made by the
Commission to the accuracy or adequacy of any document incorporated by
reference in the Prospectus; any request of the Commission for inclusion of
additional information in the Registration Statement or the Prospectus or
otherwise shall have been complied with.
In case any of the conditions specified above in this Paragraph 9 shall not
have been fulfilled on the Delivery Date, this Agreement may be terminated
by the Company by delivering written notice of termination to the
Representative. Any such termination shall be without liability of any
party to any other party except to the extent provided in Paragraphs 5, 6
and 10 hereof.
10. THE COMPANY'S OR THE TRUST'S FAILURE TO CONSUMMATE SALE. If the sale
of the Underwritten Securities provided for in this Agreement is not
consummated by reason of any failure, refusal or inability on the part of
the Company or the Trust to perform any agreement on its part to be
performed (except for any failure so to perform on the part of the Company
or the Trust engendered by a failure, refusal or inability on the part of
any Underwriter to perform any agreement on their part to be performed) or
the failure of any condition set forth in Paragraph 8 (except for any such
failure engendered by any Underwriter), the Company will reimburse the
Underwriters (a) such reasonable out-of-pocket disbursements not exceeding
$45,000 (or such other amount as may be specified in the Underwriting
Agreement) as shall have been reasonably incurred by the Underwriters in
connection with their investigation, marketing and preparing to market the
Underwritten Securities, and (b) for the reasonable fees and expenses of
their counsel, and, upon such reimbursement, the Company shall have no
further liability to the Underwriters except as provided in Paragraph 6.
11. NOTICES. The Company and the Trust shall be entitled to act and rely
upon any request, consent, notice or agreement by, or on behalf of, the
Representative. Any notice by the Company and the Trust to the Underwriters
shall be sufficient if given in writing or by telegraph addressed to the
Representative at its address set forth in the Underwriting Agreement and
21
any notice by the Underwriters to the Company and the Trust shall be
sufficient if given in writing or by telegraph addressed to the Company or
the Trust at 130 Kearny Street, San Francisco, California 94108, Attention:
Executive Vice President and CFO, Pacific Telesis Group.
12. SUCCESSORS. This Agreement shall be binding upon the Underwriters,
the Company, the Trust and their respective successors. This Agreement and
the terms and provisions hereof are for the sole benefit of only those
persons, except that (a) the representations, warranties, indemnities and
agreements of the Company and the Trust contained in this Agreement shall
also be deemed to be for the benefit of the person or persons, if any, who
control any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, and (b) the indemnity agreement of the
Underwriters contained in Paragraph 6 hereof shall be deemed to be for the
benefit of trustees, directors and officers of the Company and the Trust,
who have signed the Registration Statement and any person controlling the
Company or the Trust. Nothing in this Agreement is intended or shall be
construed to give any person, other than the persons referred to in this
Paragraph 12, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein. The term
"successors" shall not include any purchaser of the Underwritten Securities
merely because of such purchase.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
22
<PAGE> EXHIBIT 4-D-2
-------------
=========================================
AMENDED AND RESTATED DECLARATION OF TRUST
PACIFIC TELESIS FINANCING I
Dated as of __________, 1995
=========================================
1
<PAGE>
TABLES OF CONTENTS
ARTICLE I
INTERPRETATION AND DEFINITIONS
Page
----
SECTION 1.1 Definitions...........................................
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application......................
SECTION 2.2 Lists of Holders of Securities........................
SECTION 2.3 Reports by the Property Trustee.......................
SECTION 2.4 Periodic Reports to Property Trustee..................
SECTION 2.5 Evidence of Compliance with Conditions Precedent......
SECTION 2.6 Events of Default; Waiver.............................
SECTION 2.7 Events of Default; Notice.............................
ARTICLE III
ORGANIZATION
SECTION 3.1 Name..................................................
SECTION 3.2 Office................................................
SECTION 3.3 Purpose...............................................
SECTION 3.4 Authority.............................................
SECTION 3.5 Title to Property of the Trust........................
SECTION 3.6 Powers and Duties of the Regular Trustees.............
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees..
SECTION 3.8 Powers and Duties of the Property Trustee.............
SECTION 3.9 Certain Duties and Responsibilities of the
Property Trustee......................................
SECTION 3.10 Certain Rights of the Property Trustee................
SECTION 3.11 Delaware Trustee......................................
SECTION 3.12 Execution of Documents................................
SECTION 3.13 Not Responsible for Recitals or Issuance
of Securities.........................................
SECTION 3.14 Duration of Trust.....................................
SECTION 3.15 Mergers...............................................
SECTION 3.16 Preferential Collection of Claims Against Trust.......
SECTION 3.17 Property Trustee May File Proofs of Claim.............
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities...............
SECTION 4.2 Responsibilities of the Sponsor.......................
SECTION 4.3 Expenses..............................................
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees....................................
SECTION 5.2 Delaware Trustee......................................
SECTION 5.3 Property Trustee; Eligibility.........................
SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee
Generally.............................................
SECTION 5.5 Initial Trustees......................................
SECTION 5.6 Appointment, Removal and Resignation of Trustees......
SECTION 5.7 Vacancies among Trustees..............................
SECTION 5.8 Effect of Vacancies...................................
SECTION 5.9 Meetings..............................................
SECTION 5.10 Delegation of Power...................................
2
<PAGE>
TABLES OF CONTENTS (Cont'd)
ARTICLE VI
DISTRIBUTIONS
Page
----
SECTION 6.1 Distributions.........................................
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities...............
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust..................................
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities................................
SECTION 9.2 Registration, Transfer and Exchange of Securities.....
SECTION 9.3 Deemed Security Holders...............................
SECTION 9.4 Global Preferred Securities and Common Securities.....
SECTION 9.5 Notices to Depository.................................
SECTION 9.6 Mutilated, Destroyed, Lost or Stolen Securities.......
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.............................................
SECTION 10.2 Exculpation...........................................
SECTION 10.3 Fiduciary Duty........................................
SECTION 10.4 Indemnification.......................................
SECTION 10.5 Outside Businesses....................................
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year...........................................
SECTION 11.2 Certain Accounting Matters............................
SECTION 11.3 Banking...............................................
SECTION 11.4 Withholding...........................................
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments............................................
SECTION 12.2 Meetings of the Holders of Securities;
Action by Written Consent.............................
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee....
SECTION 13.2 Representations and Warranties of Delaware Trustee....
3
<PAGE>
TABLES OF CONTENTS (Cont'd)
ARTICLE XIV
MISCELLANEOUS
Page
----
SECTION 14.1 Notices...............................................
SECTION 14.2 Governing Law.........................................
SECTION 14.3 Intention of the Parties..............................
SECTION 14.4 Headings..............................................
SECTION 14.5 Successors and Assigns................................
SECTION 14.6 Partial Enforceability................................
SECTION 14.7 Counterparts..........................................
EXHIBIT A TERMS OF SECURITIES...................................
ANNEX I FORM OF PREFERRED SECURITY CERTIFICATE................
ANNEX II FORM OF COMMON SECURITY CERTIFICATE...................
EXHIBIT B SPECIMEN OF DEBENTURE.................................
EXHIBIT C UNDERWRITING AGREEMENT................................
4
<PAGE>
CROSS-REFERENCE TABLE*
Section of Trust
Indenture Act of 1939, Section of
as amended Declaration
---------------------- -----------
310(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3(a)
310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3(a)
310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.16(a);3.16(c)
311(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.16(b);3.16(c)
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a);2.2(b)
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
312(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(d)
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
313(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(b),3.10(a)
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7(a)
315(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
315(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(b)
315(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6(d)
316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6
316(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6(e)
316(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6(e)
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.17
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6(s)
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(c)
____________________
* This Cross-Reference Table does not constitute part of the Declaration
and shall not have any bearing upon the interpretation of any of its
terms or provisions.
5
<PAGE>
AMENDED AND RESTATED DECLARATION OF TRUST
OF
PACIFIC TELESIS FINANCING I
_______________, 1995
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of ____________, 1995, by the undersigned trustees (together
with all other Persons (as hereinafter defined) from time to time duly
appointed and serving as trustees in accordance with the provisions of this
Declaration, collectively the "Trustees" (as hereinafter more fully
defined)), Pacific Telesis Group, a Nevada corporation, as trust sponsor
(the "Sponsor" (as hereinafter more fully defined)), and by the holders,
from time to time, of undivided beneficial interests (as hereinafter more
fully defined) in the trust to be issued pursuant to this Declaration;
WHEREAS, the Trustees and the Sponsor have established a trust (the "Trust")
under the Business Trust Act (as hereinafter defined) pursuant to a
Declaration of Trust dated as of October 16, 1995, (the "Original
Declaration")and a Certificate of Trust filed with the Secretary of State of
Delaware on October 17, 1995, for the sole purpose of issuing and selling
certain securities representing undivided beneficial interests in the assets
of the Trust and investing the proceeds from the sale thereof in certain
subordinated debentures.
WHEREAS, as of the date hereof, no interests in the Trust have been issued;
WHEREAS, all of the Trustees and the Sponsor by this Declaration, amend and
restate each and every term and provision of the Original Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto to continue the
Trust as a business trust under the Business Trust Act and that the Original
Declaration be amended and restated in its entirety as provided herein and
that this Declaration constitute the governing instrument of such Trust, the
Trustees declare that all assets contributed to the Trust will be held for
the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust
issued hereunder, subject to the provisions of this Declaration.
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in
this Section 1.1;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to
this Declaration as modified, supplemented or amended from time to
time;
(d) all references in this Declaration to Articles and Sections and
Exhibits are to Articles and Sections of and Exhibits to this
Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act (as hereinafter defined) or any successor rule thereunder.
"Authorized Officer" of a Person means any Person that is authorized to bind
such Person.
6
"Bankruptcy" means, with respect to an entity, (a) the entry of a decree or
order by a court having jurisdiction in the premises adjudging such entity a
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of
such entity under the Federal Bankruptcy Code or any other applicable
federal or state law, or appointing a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of such entity or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order unstayed and
in effect for a period of 60 consecutive days or (b) the institution by such
entity of proceedings to be adjudicated a bankrupt or insolvent, or the
consent by it to the institution of bankruptcy or insolvency proceedings
against it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under the Federal Bankruptcy Code or any other
applicable federal or state law, or the consent by it to the filing of any
such petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the company or of any
substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the admission by it in writing of its inability
to pay its debts generally as they become due.
"Business Day" means any day other than a day on which banking institutions
in New York, New York are authorized or required by law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12
Del. Code Section 3801 et seq., as it may be amended from time to time, or
any successor legislation.
"Closing Date" means ______________, [1995].
"Code" means the Internal Revenue Code of 1986 as amended and as it may be
amended from time to time after the date hereof, or any successor
legislation.
"Commission" means the Securities and Exchange Commission.
"Common Securities Guarantee" means the guarantee agreement dated as of
_______________, [1995], of the Sponsor in respect of the Common Securities
(as hereinafter defined).
"Common Security" has the meaning specified in Section 7.1.
"Covered Person" means: (a) any officer, director, shareholder, partner,
member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder (as hereinafter defined) of
Securities (as hereinafter defined).
"Delaware Trustee" has the meaning set forth in Section 5.2.
"Depository" means DTC or its successor hereunder.
"Direction" by a Person means a written direction signed:
(a) if the Person is a natural person, by that Person; or
(b) in any other case, in the name of such Person by one or more
Authorized Officers of that Person.
"Distribution" means a distribution payable to Holders of Securities in
accordance with Section 6.1.
"DTC" means The Depository Trust Company, the initial Depository.
"Event of Default" in respect of the Securities means an Event of Default
(as defined in the Indenture) has occurred and is continuing in respect of
the Subordinated Debentures (as hereinafter defined).
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.
"Global Security" means a certificate representing all or a portion of the
Common Securities or the Preferred Securities issued hereunder, as the case
may be, and delivered to the Depository in accordance with Section 9.4 and
bearing the legend set forth in Section 9.4.
"Holder" means a Person in whose name a Security is registered, such Person
7
being a beneficial owner within the meaning of the Business Trust Act.
"Indemnified Person" means (a) any Trustee; (b) any Affiliate of any
Trustee; (c) any officers, directors, shareholders, members, partners,
employees, representatives or agents of any Trustee; or (d) any employee or
agent of the Trust or its Affiliates.
"Indenture" means the Indenture dated as of __________, 1995, as
supplemented by the First Supplemental Indenture dated as of __________,
1995, each being between the Subordinated Debenture Issuer (as hereinafter
defined) and the Subordinated Debenture Trustee (as hereinafter defined) as
such Indenture may be further amended, supplemented or modified in
accordance with the terms thereof.
"Investment Company" means an investment company as defined in the
Investment Company Act (as hereinafter defined).
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in Exhibit A as such
exhibit may be amended or modified in accordance with the provisions of this
Declaration.
"Legal Action" has the meaning set forth in Section 3.6(g).
"Majority in liquidation amount of the Securities" means Holder(s) of
outstanding Securities voting together as a single class or, as the context
may require, Holders of outstanding Preferred Securities or Holders of
outstanding Common Securities voting separately as a class, who are the
record owners of more than 50% of the aggregate liquidation amount
(including the stated amount that would be paid on redemption, liquidation
or otherwise, plus accrued and unpaid Distributions to the date upon which
the voting percentages are determined) of all outstanding Securities of the
relevant class. In determining whether the Holders of the requisite amount
of Preferred Securities have voted, Preferred Securities which are owned by
the Sponsor, the Trusts or any other obligor on the Preferred Securities or
by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Sponsor, the Trustee or any other
obligor on the Preferred Securities shall be disregarded for the purpose of
any such determination.
"Ministerial Action" has the meaning set forth in the terms of the
Securities as set forth in Exhibit A as such exhibit may be amended or
modified in accordance with the provisions of this Declaration.
"Officer's Certificate" means, with respect to any Person, a certificate
signed by an Authorized Officer of such Person. Any Officer's Certificate
delivered with respect to compliance with a condition or covenant provided
for in this Declaration shall include:
(a) a statement that the officer signing the Certificate has read the
covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the
Certificate;
(c) a statement that such officer has made such examination or
investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether
or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of such officer, such
condition or covenant has been complied with.
"100% in liquidation amount of the Securities" means Holders of outstanding
Securities voting together as a single class or, as the context may require,
Holders of outstanding Preferred Securities or Holders of outstanding Common
Securities, voting separately as a class, representing at least 100% of the
aggregate liquidation amount (including the stated amount that would be
paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined)
of all outstanding Securities of the relevant class. In determining whether
the Holders of the requisite amount of Preferred Securities have voted,
Preferred Securities which are owned by the Sponsor, the Trusts or any other
8
obligor on the Preferred Securities or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Sponsor, the Trustee or any other obligor on the Preferred Securities
shall be disregarded for the purpose of any such determination.
"Paying Agent" has the meaning specified in Section 3.8(h).
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company,
limited liability company, trust, unincorporated association, or government
or any agency, authority, or political subdivision thereof.
"Preferred Securities Guarantee" means the guarantee agreement dated as of
_____________, [1995], of the Sponsor in respect of the Preferred
Securities.
"Preferred Security" has the meaning specified in Section 7.1.
"Pricing Agreement" means the pricing agreement between the Trust, the
Subordinated Debenture Issuer, and the underwriters designated by the
Regular Trustees (as hereinafter defined) with respect to the offer and sale
of the Preferred Securities.
"Property Trustee" means the Trustee meeting the eligibility requirements
set forth in Section 5.3.
"Property Trustee Account" has the meaning set forth in Section 3.8(c).
"Quorum" means a majority of the Regular Trustees or, if there are only two
Regular Trustees, both of them.
"Register" means the books for the registration and transfer of Securities
which books are kept by the Trustee in accordance with Section 9.2.
"Regular Trustee" means any Trustee other than the Property Trustee and the
Delaware Trustee.
"Related Party" means, with respect to the Sponsor, any direct or indirect
wholly owned subsidiary of the Sponsor or any other Person that owns,
directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"Responsible Officer" means, with respect to the Property Trustee, the
chairman of the board, the president, any vice-president, any assistant
vice-president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer, any trust officer or assistant trust officer or any
other officer in the corporate trust department of the Property Trustee
customarily performing functions similar to those performed by any of the
above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity with the particular
subject.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act.
"Securities" means the Common Securities and the Preferred Securities.
"Securities Act" means the Securities Act of 1933, as amended and as it may
be amended from time to time hereafter, or any successor legislation.
"66-2/3% in liquidation amount of the Securities" means Holders of
outstanding Securities voting together as a single class or, as the context
may require, Holders of outstanding Preferred Securities or Holder(s) of
outstanding Common Securities voting separately as a class, representing at
least 66-2/3% of the aggregate liquidation amount (including the stated
amount that would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions, to the date upon which the voting
percentages are determined) of all outstanding Securities of the relevant
class. In determining whether the Holders of the requisite amount of
Preferred Securities have voted, Preferred Securities which are owned by the
Sponsor, the Trusts or any other obligor on the Preferred Securities or by
any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Sponsor, the Trustee or any other
obligor on the Preferred Securities shall be disregarded for the purpose of
any such determination.
9
"Special Event" has the meaning set forth in Exhibit A as such exhibit may
be amended or modified in accordance with the provisions of this
Declaration.
"Sponsor" means Pacific Telesis Group, a Nevada corporation in its capacity
as sponsor of the Trust or any successor entity.
"Subordinated Debenture Issuer" means the Sponsor in its capacity as issuer
of the Debentures.
"Subordinated Debenture Trustee" means The First National Bank of Chicago,
as trustee under the Indenture until a successor is appointed thereunder,
and thereafter means such successor trustee.
"Subordinated Debentures" means the series of Subordinated Debentures and/or
notes to be issued by the Subordinated Debenture Issuer under the Indenture
to be held by the Property Trustee pursuant to Section 3.6(c).
"Successor Property Trustee" means a successor Trustee possessing the
qualifications to act as Property Trustee under Section 5.3.
"Super Majority" has the meaning set forth in Section 2.6(a)(ii). In
determining whether the Holders of the requisite amount of Preferred
Securities have voted, Preferred Securities which are owned by the Sponsor,
the Trusts or any other obligor on the Preferred Securities or by any Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with the Sponsor, the Trustee or any other obligor
on the Preferred Securities shall be disregarded for the purpose of any such
determination.
"Tax Event" has the meaning set forth in Exhibit A as such exhibit may be
amended or modified in accordance with the provisions of this Declaration.
"10% in liquidation amount of the Securities" means Holders of outstanding
Securities voting together as a single class or, as the context may require,
Holders of outstanding Preferred Securities or Holders of outstanding Common
Securities, voting separately as a class, representing at least 10% of the
aggregate liquidation amount (including the stated amount that would be
paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined)
of all outstanding Securities of the relevant class. In determining whether
the Holders of the requisite amount of Preferred Securities have voted,
Preferred Securities which are owned by the Sponsor, the Trusts or any other
obligor on the Preferred Securities or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Sponsor, the Trustee or any other obligor on the Preferred Securities
shall be disregarded for the purpose of any such determination.
"Treasury Regulations" means the income tax regulations, including temporary
and proposed regulations, promulgated under the Code by the United States
Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Trustee" or "Trustees" means each Person who has signed this Declaration as
a trustee, so long as such Person shall continue in office in accordance
with the terms hereof, and all other Persons who may from time to time be
duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees
hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended as
of the date of this Declaration.
"25% in liquidation amount of the Securities" means Holders of outstanding
Securities voting together as a single class or, as the context may require,
Holders of outstanding Preferred Securities or Holders of outstanding Common
Securities, voting separately as a class, representing at least 25% of the
aggregate liquidation amount (including the stated amount that would be
paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined)
of all outstanding Securities of the relevant class. In determining whether
the Holders of the requisite amount of Preferred Securities have voted,
Preferred Securities which are owned by the Sponsor, the Trusts or any other
obligor on the Preferred Securities or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
10
the Sponsor, the Trustee or any other obligor on the Preferred Securities
shall be disregarded for the purpose of any such determination.
"Underwriting Agreement" means the Underwriting Agreement for the offering
and sale of Preferred Securities in the form of Exhibit 1 to Registration
Statement No. 33-63647, as amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) So long as the Preferred Securities are outstanding, this
Declaration shall be subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration and
shall, to the extent applicable, be governed by such provisions.
At such time as the Preferred Securities are no longer
outstanding, the Trust Indenture Act shall not govern this
Declaration and all provisions requiring compliance with specified
provisions of the Trust Indenture Act shall be of no further force
and effect.
(b) The Property Trustee shall be the only Trustee which is a Trustee
for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this Declaration
limits, qualifies or conflicts with the duties imposed by Sections
310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control.
(d) The application of the Trust Indenture Act to this Declaration
shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the
Trust.
SECTION 2.2 Lists of Holders of Securities.
(a) The Sponsor and the Regular Trustees on behalf of the Trust will
furnish or cause to be furnished to the Property Trustee, not less
than 45 days nor more than 60 days after each date (month and day)
that is a Distribution payment date, but in no event less
frequently than semiannually, and at such other times as the
Property Trustee may request in writing, within 30 days after
receipt by the Sponsor and the Regular Trustees of any such
request, a list in such form as the Property Trustee may
reasonably require containing all the information in the
possession or control of the Sponsor, the Trustees, or any Paying
Agents other than the Property Trustee, as to the names and
addressees of the Holders of Securities, obtained since the date
as of which the next previous list, if any, was furnished,
excluding from any such list the names and addresses received by
the Property Trustee in its capacity as registrar (if so acting).
Any such list may be dated as of a date not more than 15 days
prior to the time such information is furnished and need not
include information received after such date.
(b) The Property Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of
Securities (i) contained in the most recent list furnished to it
as provided in this Section 2.2, (ii) received by the Property
Trustee in the capacity of Paying Agent or registrar (if so
acting), and (iii) filed with the Property Trustee within the two
preceding years as provided for in Section 2.2(a). The Property
Trustee may destroy any list furnished to it as provided in this
Section 2.2 upon receipt of a new list so furnished.
(c) If three or more Holders of Securities (hereinafter referred to as
"applicants") apply in writing to the Property Trustee, and
furnish to the Property Trustee reasonable proof that each such
applicant has owned a Security for a period of at least six months
preceding the date of such application, and such application
states that the applicants desire to communicate with other
Holders of Securities with respect to their rights under this
Declaration or under such Securities, and is accompanied by a copy
of the form of proxy or other communication which such applicants
11
propose to transmit, then the Property Trustee shall, within five
Business Days after the receipt of such application, at its
election, either:
(i) afford such applicants access to the information preserved at
the time by the Property Trustee in accordance with the
provisions of this Section 2.2 or
(ii) inform such applicants as to the approximate number of
Holders of Securities whose names and addresses appear in the
information preserved at the time by the Property Trustee in
accordance with the provisions of Section 2.2(b), and as to
the approximate cost of mailing to such Holders the form of
proxy or other communications, if any, specified in such
application.
If the Property Trustee shall elect not to afford such applicants
access to such information, the Property Trustee shall, upon the
written request of such applicants, mail to each of the Holders of
Securities whose name and address appear in the information
preserved at the time by the Property Trustee in accordance with
the provisions of Section 2.2(b), a copy of the form of proxy or
other communication which is specified in such request, with
reasonable promptness after a tender to the Property Trustee of
the material to be mailed and of payment, or provision for the
payment, of the reasonable expenses of mailing, unless within five
days after such tender, the Property Trustee shall mail to such
applicants and file with the Commission, together with a copy of
the material to be mailed, a written statement to the effect that,
in the opinion of the Property Trustee, such mailing would be
contrary to the best interests of the Holders of Securities or
would be in violation of applicable law. Such written statement
shall specify the basis of such opinion. If the Commission, after
opportunity for a hearing upon the objections specified in the
written statement so filed, shall enter an order refusing to
sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, the Commission shall
find, after notice and opportunity for hearing, that all the
objections so sustained have been met and shall enter an order so
declaring, the Property Trustee shall mail copies of such material
to all such Holders of Securities with reasonable promptness after
the entry of such order and the renewal of such tender; otherwise
the Property Trustee shall be relieved of any obligation or duty
to such applicants respecting their application.
(d) Each and every Holder of the Securities, by receiving and holding
the same, agrees with the Sponsor, the Regular Trustees and the
Property Trustee that none of them nor any Paying Agent nor any
registrar shall be held accountable by reason of the disclosure of
any such information as to the names and addresses of the Holders
of Securities in accordance with the provisions of Section 2.2(c),
regardless of the source from which such information was derived,
and that the Property Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under
Section 2.2(c).
(e) The Property Trustee shall comply with its obligations under
Sections 311(a) and 311(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Property Trustee.
Within 60 days after May 15 of each year, the Property Trustee shall provide
to the Holders of the Preferred Securities such reports as are required by
Section 313 of the Trust Indenture Act, if any, in the form and in the
manner provided by Section 313 of the Trust Indenture Act. The Property
Trustee shall also comply with the requirements of Section 313(d) of the
Trust Indenture Act.
SECTION 2.4 Periodic Reports to Property Trustee.
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Property Trustee such documents, reports and information as
required by Section 314 (if any) and the compliance certificate required by
Section 314 of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act.
12
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Declaration that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture
Act. Any certificate or opinion required to be given by an officer pursuant
to Section 314(c)(1) may be given in the form of an Officer's Certificate.
SECTION 2.6 Events of Default; Waiver.
The occurrence and continuance of an Event of Default under the Indenture
with respect to the Subordinated Debentures shall constitute an Event of
Default hereunder.
(a) The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the
Preferred Securities, waive any past Event of Default in respect
of the Preferred Securities and its consequences, provided that,
if the underlying Event of Default under the Indenture:
(i) is not waivable under the Indenture, the Event of Default
under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of the holders of greater than a
majority in principal amount of the Subordinated Debentures
(a "Super Majority") to be waived under the Indenture, the
Event of Default under the Declaration may only be waived by
the vote of all of the Holders of the Preferred Securities or
such proportion thereof in liquidation amount as represents
the relevant Super Majority of the aggregate principal amount
of the Subordinated Debentures outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu
of Section 316(a)(1)(B) of the Trust Indenture Act and such
Section 316(a)(1)(B) of the Trust Indenture Act is hereby
expressly excluded from this Declaration and the Securities, as
permitted by the Trust Indenture Act.
Upon such waiver, any such default shall cease to exist, and any
Event of Default with respect to the Preferred Securities arising
therefrom shall be deemed to have been cured, for every purpose of
this Declaration, but no such waiver shall extend to any
subsequent or other default or Event of Default with respect to
the Preferred Securities or impair any right consequent thereon.
Any waiver by the Holders of the Preferred Securities of an Event
of Default with respect to the Preferred Securities shall also be
deemed to constitute a waiver by the Holders of the Common
Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any
further act, vote, or consent of the Holders of the Common
Securities.
(b) The Holders of a Majority in liquidation amount of the Common
Securities may, by vote, on behalf of the Holders of all of the
Common Securities, waive any past Event of Default with respect to
the Common Securities and its consequences, provided that, if the
underlying Event of Default under the Indenture:
(i) is not waivable under the Indenture, except where the Holders
of the Common Securities are deemed to have waived such Event
of Default under the Declaration as provided below in this
Section 2.6(b), the Event of Default under the Declaration
shall also not be waivable; or
(ii) requires the consent or vote of a Super Majority to be
waived, except where the Holders of the Common Securities are
deemed to have waived such Event of Default under the
Declaration as provided below in this Section 2.6(b) the
Event of Default under the Declaration may only be waived by
the vote of the Holders of at least the proportion in
liquidation amount of the Common Securities as represents the
relevant Super Majority of the aggregate principal amount of
the Subordinated Debentures outstanding;
provided that, each Holder of Common Securities will be deemed to
13
have waived any such Event of Default and all Events of Default
with respect to the Common Securities and its consequences until
all Events of Default with respect to the Preferred Securities
have been cured, waived or otherwise eliminated, and until such
Events of Default have been so cured, waived or otherwise
eliminated, the Property Trustee will be deemed to be acting
solely on behalf of the Holders of the Preferred Securities and
only the Holders of the Preferred Securities will have the right
to direct the Property Trustee in accordance with the terms of
the Securities. The foregoing provisions of this Section 2.6(b)
shall be in lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of the
Trust Indenture Act and such Sections 316(a)(1)(A) and
316(a)(1)(B) of the Trust Indenture Act are hereby expressly
excluded from this Declaration and the Securities, as permitted by
the Trust Indenture Act. Subject to the foregoing provisions of
this Section 2.6(b), upon such waiver, any such default shall
cease to exist and any Event of Default with respect to the Common
Securities arising therefrom shall be deemed to have been cured
for every purpose of this Declaration, but no such waiver shall
extend to any subsequent or other default or Event of Default with
respect to the Common Securities or impair any right consequent
thereon.
(c) A waiver of an Event of Default under the Indenture by the
Property Trustee at the direction of the Holders of the Preferred
Securities constitutes a waiver of the corresponding Event of
Default under this Declaration. The foregoing provisions of this
Section 2.6(c) shall be in lieu of Section 316(a)(1)(B) of the
Trust Indenture Act and such Section 316(a)(1)(B) of the Trust
Indenture Act is hereby expressly excluded from this Declaration
and the Securities, as permitted by the Trust Indenture Act.
(d) The provisions of Section 315(e) of the Trust Indenture Act shall
be excluded from this Declaration.
(e) No Holder of any Preferred Security or of any Common Security
shall have any right by virtue or by availing of any provision of
this Declaration to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Declaration
or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless such Holder previously shall have given
to the Property Trustee written notice of a continuing Event of
Default, as hereinbefore provided, and unless also the Holders of
not less than 25% in liquidation amount of the Preferred
Securities or of the Common Securities, as the case may be, then
outstanding shall have made written request upon the Property
Trustee to institute such action, suit or proceeding in its own
name as Property Trustee hereunder and shall have offered to the
Property Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein
or thereby (including the reasonable fees of counsel for the
Property Trustee), and the Property Trustee, for 60 days after its
receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or
proceeding and no direction inconsistent with such written request
shall have been given to the Property Trustee pursuant to this
Section 2.2(e); it being understood and intended, and being
expressly covenanted by the taker and Holder of every Security
with every other taker and Holder and the Property Trustee, that
no one or more Holders of Securities shall have any right in any
manner whatever by virtue or by availing of any provision of this
Declaration to affect, disturb or prejudice the rights of the
Holders of any other of such Securities, or to obtain or seek to
obtain priority over or preference to any other such Holder, or to
enforce any right under this Declaration, except in the manner
herein provided and for the equal, ratable and common benefit of
all Holders of Securities. For the protection and enforcement of
the provisions of this Section 2.2(e), each and every Holder and
the Property Trustee shall be entitled to such relief as can be
given either at law or in equity.
Notwithstanding any other provisions in this Indenture, the right
of any Holder of any Security to receive payment of the
Distributions on such Security on or after the respective due
dates expressed in such Security (or, in the case of redemption,
14
on or after the date fixed for redemption), or to institute suit
for the enforcement of any such payment on or after such
respective dates shall not be impaired or affected without the
consent of such Holder.
SECTION 2.7 Event of Default; Notice.
(a) The Property Trustee shall, within 90 days after the occurrence of
an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Securities, notices of such Event
of Default known to the Property Trustee, unless such Event of
Default has been cured, remedied or waived before the giving of
such notice (the term "Event of Default" for the purposes of this
Section 2.7(a) being hereby defined to be an Event of Default
irrespective of any periods of grace provided for in the Indenture
and irrespective of the giving of any notice provided therein);
provided that, except for an Event of Default in the payment of
principal of (or premium, if any) or interest on any of the
Subordinated Debentures or in the payment of any sinking fund
installment established for the Subordinated Debentures, the
Property Trustee shall be protected in withholding such notice if
and so long as the board of directors, the executive committee, or
a trust committee of directors and/or Responsible Officers of the
Property Trustee in good faith determines that the withholding of
such notice is in the interests of the Holders of the Securities.
(b) The Property Trustee shall not be deemed to have knowledge of any
default except:
(i) a default under Sections 501(1) and 501(2) of the Indenture;
or
(ii) any default as to which the Property Trustee shall have
received written notice or a Responsible Officer charged with
the administration of the Declaration shall have obtained
written notice of.
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named "Pacific Telesis Financing I", as such name may be
modified from time to time by the Regular Trustees following written notice
to the Holders of Securities. The Trust's activities may be conducted under
the name of the Trust or any other name deemed advisable by the Regular
Trustees.
SECTION 3.2 Office.
The address of the principal office of the Trust is c/o Pacific Telesis
Group, 130 Kearny Street, San Francisco, California 94108. On ten Business
Days written notice to the Holders of Securities, the Regular Trustees may
designate another principal office.
SECTION 3.3 Purpose.
The exclusive purposes and functions of the Trust are (a) to issue and sell
Securities and use the proceeds from such sale to acquire the Subordinated
Debentures, and (b) except as otherwise limited herein, to engage in only
those other activities necessary, or incidental thereto. The Trust shall
not borrow money, issue debt or reinvest proceeds derived from investments,
pledge any of its assets, or otherwise undertake (or permit to be
undertaken) any activity that would cause (i) the Trust to be classified as
other than a grantor trust for United States federal income tax purposes or
(ii) each Holder of Securities not to be treated as owning an undivided
beneficial interest in the Subordinated Debentures at any time the
Securities are outstanding.
SECTION 3.4 Authority.
Subject to the limitations provided in this Declaration and to the specific
duties of the Property Trustee, the Regular Trustees shall have exclusive
and complete authority to carry out the purposes of the Trust. An action
taken by the Regular Trustees in accordance with their powers shall
15
constitute the act of and serve to bind the Trust and an action taken by the
Property Trustee in accordance with its powers shall constitute the act of
and serve to bind the Trust. In dealing with the Trustees acting on behalf
of the Trust, no person shall be required to inquire into the authority of
the Trustees to bind the Trust. Persons dealing with the Trust are entitled
to rely conclusively on the power and authority of the Trustees as set forth
in this Declaration.
SECTION 3.5 Title to Property of the Trust.
Except as provided in Section 3.8 with respect to the Subordinated
Debentures and the Property Trustee Account (as hereinafter defined) or as
otherwise provided in this Declaration, legal title to all assets of the
Trust shall be vested in the Trust. The Holders shall not have legal title
to any part of the assets of the Trust, but shall have an undivided
beneficial interest in the assets of the Trust.
SECTION 3.6 Powers and Duties of the Regular Trustees.
The Regular Trustees shall have the exclusive power, duty and authority to
cause the Trust to engage in the following activities:
(a) to issue and sell the Preferred Securities and the Common
Securities in accordance with this Declaration; provided,
however, that the Trust may issue no more than one series of
Preferred Securities and no more than one series of Common
Securities, and, provided further, that there shall be no
interests in the Trust other than the Securities, and the issuance
of Securities shall be limited to a simultaneous issuance of both
Preferred Securities and Common Securities on each Closing Date;
(b) in connection with the issue and sale of the Preferred Securities,
at the direction of the Sponsor, to:
(i) execute and file with the Commission the registration
statement on Form S-3 prepared by the Sponsor, including
any amendments thereto, pertaining to the Preferred
Securities, the Subordinated Debentures and the Preferred
Securities Guarantee;
(ii) execute and file any documents prepared by the Sponsor, or
take any acts as determined by the Sponsor to be necessary
in order to qualify or register all or part of the
Preferred Securities in any state in which the Sponsor has
determined to qualify or register such Preferred
Securities for sale;
(iii) execute and file an application, prepared by the Sponsor,
to the New York Stock Exchange or any other national stock
exchange or the Nasdaq National Market for listing upon
notice of issuance of any Preferred Securities;
(iv) execute and file with the Commission a registration
statement on Form 8-A, including any amendments thereto,
prepared by the Sponsor relating to the registration of
the Preferred Securities under Section 12(b) of the
Exchange Act; and
(v) execute and enter into the Underwriting Agreement and
Pricing Agreement providing for the sale of the Preferred
Securities;
(c) to acquire the Subordinated Debentures with the proceeds of the
sale of the Preferred Securities and the Common Securities;
provided, however, that the Regular Trustees shall cause legal
title to the Subordinated Debentures to be held of record in the
name of the Property Trustee for the benefit of the Trust and the
Holders of the Preferred Securities and the Holders of the Common
Securities;
(d) to give the Sponsor and the Property Trustee prompt written notice
of the occurrence of a Special Event; provided that the Regular
Trustees shall consult with the Sponsor and the Property Trustee
before taking or refraining from taking any Ministerial Action in
relation to a Special Event;
16
(e) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including for
the purposes of Section 316(c) of the Trust Indenture Act, and
with respect to Distributions, voting rights, redemptions and
exchanges, and to issue relevant notices to the Holders of
Preferred Securities and Holders of Common Securities as to such
actions and applicable record dates;
(f) to take all actions and perform such duties as may be required of
the Regular Trustees pursuant to the terms of the Securities;
(g) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against
the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the
Property Trustee has the exclusive power to bring such Legal
Action;
(h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors,
advisors, and consultants and pay reasonable compensation for such
services;
(i) to cause the Trust to comply with the Trust's obligations under
the Trust Indenture Act;
(j) to give the certificate required by Section 314(a)(4) of the Trust
Indenture Act to the Property Trustee, which certificate may be
executed by any Regular Trustee;
(k) to incur expenses that are necessary or incidental to carry out
any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar and
transfer agent for the Securities;
(m) to give prompt written notice to the Holders of the Securities of
any notice received from the Subordinated Debenture Issuer of its
election (i) to defer payments of interest on the Subordinated
Debentures by extending the interest payment period under the
Indenture or, (ii) to extend the scheduled maturity date on the
Subordinated Debentures;
(n) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all
matters necessary or incidental to the foregoing;
(o) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence,
rights, franchises and privileges as a statutory business trust
under the laws of the State of Delaware and of each other
jurisdiction in which such existence is necessary to protect the
limited liability of the Holders of the Securities or to enable
the Trust to effect the purposes for which the Trust was created;
(p) to take any action, not inconsistent with this Declaration or with
applicable law, that the Regular Trustees determine in their
discretion to be necessary or desirable in carrying out the
activities of the Trust as set out in this Section 3.6, including,
but not limited to:
(i) causing the Trust not to be deemed to be an Investment
Company required to be registered under the Investment
Company Act;
(ii) causing the Trust not to be classified as other than a
grantor trust for United States federal income tax
purposes; and
(iii) cooperating with the Subordinated Debenture Issuer to
ensure
that the Subordinated Debentures will be treated as
indebtedness of the Subordinated Debenture Issuer for
United States federal income tax purposes, provided that
such action does not adversely affect the interests of
Holders;
17
(q) to take all action necessary to cause all applicable tax returns
and tax information reports that are required to be filed with
respect to the Trust to be duly prepared and filed by the Regular
Trustees, on behalf of the Trust;
(r) subject to the requirements of Rule 3a-5 and Section 317(b) of the
Trust Indenture Act, to appoint one or more Paying Agents in
addition to the Property Trustee; and
(s) as soon as is practicable, furnish the Property Trustee with
notice of any event which is an Event of Default or which with the
giving of notice or the passage of time or both would constitute
an Event of Default which has occurred and is continuing on the
date of such notice, which notice shall set forth the nature of
such event and the action which the Regular Trustees propose to
take with respect thereto.
The Regular Trustees must exercise the powers set forth in this Section 3.6
in a manner that is consistent with the purposes and functions of the Trust
set out in Section 3.3, and the Regular Trustees shall not take any action
that is inconsistent with the purposes and functions of the Trust set forth
in Section 3.3.
Subject to this Section 3.6, the Regular Trustees shall have none of the
powers or the authority of the Property Trustee set forth in Section 3.8.
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.
(a) The Trust shall not, and the Trustees (including the Property
Trustee) shall cause the Trust not to, engage in any activity
other than as required or authorized by this Declaration. In
particular, the Trust shall not and the Trustees (including the
Property Trustee) shall cause the Trust not to:
(i) invest any proceeds received by the Trust from holding the
Subordinated Debentures, but shall distribute all such
proceeds to Holders of Securities pursuant to the terms of
this Declaration and of the Securities;
(ii) acquire any assets other than as expressly provided
herein;
(iii) possess Trust property for other than a Trust purpose;
(iv) make any loans or incur any indebtedness other than loans
represented by the Subordinated Debentures;
(v) possess any power or otherwise act in such a way as to
vary the Trust assets or the terms of the Securities in
any way whatsoever;
(vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other
than the Securities; or
(vii) other than as provided in this Declaration and in Exhibit
A
both as may be amended or modified in accordance with the
provisions of this Declaration, (A) direct the time,
method and place of exercising any trust or power
conferred upon the Subordinated Debenture Trustee with
respect to the Subordinated Debentures, (B) waive any past
default that is waivable under Section 513 of the
Indenture, (C) exercise any right to rescind or annul any
declaration that the principal of all the Subordinated
Debentures shall be due and payable, or (D) consent to any
amendment, modification or termination of the Indenture or
the Subordinated Debentures where such consent shall be
required unless the Trust shall have received an opinion
of counsel to the effect that such modification will not
cause more than an insubstantial risk that the Trust will
be classified as other than a grantor trust for United
States federal income tax purposes.
SECTION 3.8 Powers and Duties of the Property Trustee.
18
(a) The legal title to the Subordinated Debentures shall be
owned by and held of record in the name of the Property
Trustee for the benefit of the Trust and the Holders of
the Securities. The right, title and interest of the
Property Trustee to the Subordinated Debentures shall vest
automatically in each Person who may hereafter be
appointed as Property Trustee in accordance with Section
5.6. Such vesting and cessation of title shall be
effective whether or not conveyancing documents with
regard to the Subordinated Debentures have been executed
and delivered.
(b) The Property Trustee shall not transfer its right, title
and interest in the Subordinated Debentures to the Regular
Trustees or to the Delaware Trustee (if the Property
Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated trust account
(the "Property Trustee Account") in the name of and
under the exclusive control of the Property Trustee
on behalf of the Holders of the Securities and,
upon the receipt of payments of funds made in
respect of the Subordinated Debentures held by the
Property Trustee, deposit such funds into the
Property Trustee Account and make payments to the
Holders of the Preferred Securities and Holders of
the Common Securities from the Property Trustee
Account in accordance with Section 6.1. Funds in
the Property Trustee Account shall be held
uninvested until disbursed in accordance with this
Declaration. The Property Trustee Account shall be
an account that is maintained with a banking
institution either (A) whose long term unsecured
indebtedness is rated "A" or better by a
"nationally recognized statistical rating
organization", as that term is defined for purposes
of Rule 436(g)(2) under the Securities Act or (B)
which has a capital surplus of at least
$50,000,000;
(ii) engage in such ministerial activities as shall be
necessary or appropriate to effect the redemption
of the Preferred Securities and the Common
Securities to the extent the Subordinated
Debentures are redeemed or mature; and
(iii) upon notice of distribution issued by the Regular
Trustees in accordance with the terms of the
Securities, engage in such ministerial activities
as shall be necessary or appropriate to effect the
distribution of the Subordinated Debentures to
Holders of Securities upon the occurrence of
certain Special Events (as may be defined in the
terms of the Securities) arising from a change in
law or a change in legal interpretation or other
specified circumstances pursuant to the terms of
the Securities.
(d) The Property Trustee shall take all actions and perform
such duties as may be specifically required of the
Property Trustee pursuant to the terms of the Securities.
(e) The Property Trustee shall take any Legal Action which
arises out of or in connection with an Event of Default or
the Property Trustee's duties and obligations under this
Declaration or the Trust Indenture Act.
(f) The Property Trustee shall continue to serve as Trustee
until either:
(i) the Trust has been completely liquidated and the
proceeds of the liquidation distributed to the
Holders of Securities pursuant to the terms of the
Securities; or
19
(ii) a Successor Property Trustee has been appointed and
has accepted that appointment in accordance with
Section 5.6.
(g) The Property Trustee shall have the legal power to
exercise all of the rights, powers and privileges of a
holder of Subordinated Debentures under the Indenture and,
if an Event of Default occurs and is continuing, the
Property Trustee shall, for the benefit of Holders of the
Securities, enforce its rights as holder of the
Subordinated Debentures subject to the rights of the
Holders pursuant to the terms of such Securities.
(h) The Property Trustee may authorize one or more Persons
(each, a "Paying Agent") to pay Distributions, redemption
payments or liquidation payments on behalf of the Trust
with respect to all Securities and any such Paying Agent
shall comply with Section 317(b) of the Trust Indenture
Act. Any Paying Agent may be removed by the Property
Trustee at any time and a successor Paying Agent or
additional Paying Agents may be appointed at any time by
the Property Trustee.
(i) Subject to this Section 3.8, the Property Trustee shall
have none of the duties, liabilities, powers or the
authority of the Regular Trustees set forth in Section
3.6.
The Property Trustee must exercise the powers set forth in this Section
3.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3, and the Property Trustee shall not
take any action that is inconsistent with the purposes and functions of
the Trust set out in Section 3.3.
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee.
(a) The Property Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may
have occurred, shall undertake to perform only such duties as are
specifically set forth in this Declaration, in the terms of the
Securities and in the Trust Indenture Act and no implied covenants
shall be read into this Declaration against the Property Trustee.
In case an Event of Default has occurred (that has not been cured
or waived pursuant to Section 2.6), the Property Trustee shall
exercise such of the rights and powers vested in it by this
Declaration, and use the same degree of care and skill in its
exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) No provision of this Declaration shall be construed to relieve the
Property Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct,
except that:
(i) prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default that
may have occurred:
(A) the duties and obligations of the Property Trustee
shall be determined solely by the express
provisions of this Declaration, in the terms of the
Securities and in the Trust Indenture Act and the
Property Trustee shall not be liable except for the
performance of such duties and obligations as are
specifically set forth in this Declaration, and no
implied covenants or obligations shall be read into
this Declaration against the Property Trustee; and
(B) in the absence of bad faith on the part of the
Property Trustee, the Property Trustee may
conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed therein, upon any certificates or
opinions furnished to the Property Trustee and
conforming to the requirements of this Declaration;
but in the case of any such certificates or
20
opinions that by any provision hereof are
specifically required to be furnished to the
Property Trustee, the Property Trustee shall be
under a duty to examine the same to determine
whether or not they conform to the requirements of
this Declaration;
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of
the Property Trustee, unless it shall be proved that the
Property Trustee was negligent in ascertaining the
pertinent facts;
(iii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of
not less than a Majority in liquidation amount of the
Securities at the time outstanding relating to the time,
method and place of conducting any proceeding for any
remedy available to the Property Trustee, or exercising
any trust or power conferred upon the Property Trustee
under this Declaration;
(iv) no provision of this Declaration shall require the
Property Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any
of its rights or powers, if it shall have reasonable
grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms
of this Declaration or adequate indemnity against such
risk or liability is not reasonably assured to it;
(v) the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the
Subordinated Debentures and the Property Trustee Account
shall be to deal with such property in a similar manner as
the Property Trustee deals with similar property for its
own account, subject to the protections and limitations on
liability afforded to the Property Trustee under this
Declaration and the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or liability for
or with respect to the value, genuineness, existence or
sufficiency of the Subordinated Debentures or the payment
of any taxes or assessments levied thereon or in
connection therewith;
(vii) the Property Trustee shall not be liable for any interest
on any money received by it except as it may otherwise
agree with the Sponsor. Money held by the Property Trustee
need not be segregated from other funds held by it except
in relation to the Property Trustee Account maintained by
the Property Trustee pursuant to Section 3.8(c)(i) and
except to the extent otherwise required by law; and
(viii) the Property Trustee shall not be responsible for
monitoring
the compliance by the Regular Trustees or the Sponsor with
their respective duties under this Declaration, nor shall
the Property Trustee be liable for the default or
misconduct of the Regular Trustees or the Sponsor.
SECTION 3.10 Certain Rights of the Property Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may rely and shall be fully protected
in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have
been signed, sent or presented by the proper party or
parties;
21
(ii) any direction or act of the Sponsor or the Regular
Trustees contemplated by this Declaration shall be
sufficiently evidenced by a Direction or an Officer's
Certificate;
(iii) whenever in the administration of this Declaration, the
Property Trustee shall deem it desirable that a matter be
proved or established before taking, suffering or omitting
any action hereunder, the Property Trustee (unless other
evidence is herein specifically prescribed) may, in the
absence of bad faith on its part request and rely upon an
Officer's Certificate which, upon receipt of such request,
shall be promptly delivered by the Sponsor or the Regular
Trustees;
(iv) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument
(including any financing or continuation statement or any
filing under tax or securities laws) (or any rerecording,
refiling or registration thereof);
(v) the Property Trustee may consult with counsel or other
experts and the advice or opinion of such counsel and
experts with respect to legal matters or advice within the
scope of such experts' area of expertise shall be full and
complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good
faith and in accordance with such advice or opinion. Such
counsel may be counsel to the Sponsor or any of its
Affiliates, and may include any of its employees. The
Property Trustee shall have the right at any time to seek
instructions concerning the administration of this
Declaration from any court of competent jurisdiction;
(vi) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Declaration at the request or direction of any Holder,
unless such Holder shall have provided to the Property
Trustee adequate security and indemnity, which would
satisfy a reasonable person in the position of the
Property Trustee, against the costs, expenses (including
attorneys' fees and expenses) and liabilities that might
be incurred by it in complying with such request or
direction, including such reasonable advances as may be
requested by the Property Trustee provided, that, nothing
contained in this Section 3.10(a)(vi) shall be taken to
relieve the Property Trustee, upon the occurrence of an
Event of Default, of its obligation to exercise the rights
and powers vested in it by this Declaration;
(vii) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document, but the Property Trustee, in its
discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit;
(viii) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys, and the
Property Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder;
(ix) any action taken by the Property Trustee or its agents
hereunder shall bind the Trust and the Holders of the
Securities, and the signature of the Property Trustee or
its agents alone shall be sufficient and effective to
perform any such action and no third party shall be
required to inquire as to the authority of the Property
Trustee to so act or as to its compliance with any of the
terms and provisions of this Declaration, both of which
shall be conclusively evidenced by the Property Trustee's
or its agent's taking such action;
22
(x) whenever in the administration of this Declaration the
Property Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right
or taking any other action hereunder, the Property Trustee
(i) may request instructions from the Holders of the
Securities which instructions may only be given by the
Holders of the same proportion in liquidation amount of
the Securities as would be entitled to direct the Property
Trustee under the terms of the Securities in respect of
such remedy, right or action, (ii) may refrain from
enforcing such remedy or right or taking such other action
until such instructions are received, and (iii) shall be
protected in acting in accordance with such instructions;
and
(xi) except as otherwise expressly provided by this
Declaration, the Property Trustee shall not be under any
obligation to take any action that is discretionary under
the provisions of this Declaration.
(b) No provision of this Declaration shall be deemed to impose any
duty or obligation on the Property Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or
imposed on it, in any jurisdiction in which it shall be illegal,
or in which the Property Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform any such
act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the
Property Trustee shall be construed to be a duty.
SECTION 3.11 Delaware Trustee.
Notwithstanding any other provision of this Declaration other than Section
5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor
shall the Delaware Trustee have any of the duties and responsibilities of
the Regular Trustees or the Property Trustee described in this Declaration.
Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee
for the sole and limited purpose of fulfilling the requirements of Section
3807 of the Business Trust Act.
SECTION 3.12 Execution of Documents.
Unless otherwise determined by the Regular Trustees, and except as otherwise
required by the Business Trust Act, a majority of or, if there are only two,
both of the Regular Trustees or, if there is only one, such Regular Trustee
is authorized to execute on behalf of the Trust any documents that the
Regular Trustees have the power and authority to execute pursuant to Section
3.6; provided that, any listing application prepared by the Sponsor referred
to in Section 3.6(b)(iii) may be executed by one Regular Trustee.
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities.
The recitals contained in this Declaration and the Securities shall be taken
as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations
as to the value or condition of the property of the Trust or any part
thereof. The Trustees make no representations as to the validity or
sufficiency of this Declaration or the Securities.
SECTION 3.14 Duration of Trust.
The Trust, unless terminated pursuant to the provisions of Article VIII
hereof, shall have existence for 55 years from the Closing Date.
SECTION 3.15 Mergers.
(a) The Trust may not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any corporation or other
body, except as described in Section 3.15(b) and (c).
(b) The Trust may, with the consent of the Regular Trustees or, if
there are more than two, a majority of the Regular Trustees and
without the consent of the Holders of the Securities, the Delaware
Trustee or the Property Trustee, consolidate, amalgamate, merge
with or into, or be replaced by a trust organized as such under
23
the laws of any State; provided that:
(i) such successor entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations of the
Trust under the Securities; or
(B) substitutes for the Securities other securities
having substantially the same terms as the
Preferred Securities (the "Successor Securities")
so long as the Successor Securities rank the same
as the Preferred Securities rank with respect to
Distributions and payments upon liquidation,
redemption and maturity;
(ii) the Subordinated Debenture Issuer expressly acknowledges a
trustee of the Successor Entity that possesses the same
powers and duties as the Property Trustee as the holder of
the Subordinated Debentures;
(iii) the Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities
exchange or other organization on which the Preferred
Securities are then listed or quoted;
(iv) such merger, consolidation, amalgamation or replacement
does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally
recognized statistical rating organization;
(v) such merger, consolidation, amalgamation or replacement
does not adversely affect the rights, preferences and
privileges of the Holders of the Securities (including any
Successor Securities) in any material respect (other than
with respect to any dilution of such Holders' interests in
the Successor Entity);
(vi) such Successor Entity has a purpose identical to that of
the Trust;
(vii) prior to such merger, consolidation, amalgamation or
replacement, the Sponsor has received an opinion of a
nationally recognized independent counsel to the Trust
experienced in such matters to the effect that:
(A) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights,
preferences and privileges of the Holders of the
Securities (including any Successor Securities) in
any material respect (other than with respect to
any dilution of the Holders' interest in the
Successor Entity); and
(B) following such merger, consolidation, amalgamation
or replacement, neither the Trust nor the Successor
Entity will be required to register as an
Investment Company; and
(viii) the Sponsor guarantees the obligations of such Successor
Entity under the Successor Securities at least to the
extent provided by the Preferred Securities Guarantee.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except with
the consent of Holders of 100% in liquidation amount of the
Securities, consolidate, amalgamate, merge with or into, or be
replaced by any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger or replacement would cause the
Trust or Successor Entity to be classified as other than a grantor
trust for United States federal income tax purposes and each
Holder of the Securities not to be treated as owning an undivided
beneficial interest in the Subordinated Debentures.
SECTION 3.16 Preferential Collection of Claims Against Trust.
24
(a) Subject to the provisions of Section 3.16(b), if the Property
Trustee shall be or shall become a creditor, directly or
indirectly, secured or unsecured, of the Trust or any other
obligor on the Securities within three months prior to a default,
as defined in Section 3.16(c), or subsequent to such a default,
then, unless and until such default shall be cured, the Property
Trustee shall set apart and hold in a special account for the
benefit of the Property Trustee individually, the Holders of the
Securities for which it is acting as Property Trustee, and the
holders of other indenture securities (as defined in Section
3.16(c));
(i) an amount equal to any and all reductions in the amount
due owing upon any claim as such creditor in respect of
principal or interest, effected after the beginning of
such three months' period, and valid as against the Trust
or such other obligor on the Securities and its other
creditors, except any such reduction resulting from the
receipt or disposition of any property described in
paragraph (ii) of this subsection, or from the exercise of
any right of set-off which the Property Trustee could have
exercised if a petition in bankruptcy had been filed by or
against the Trust or such other obligor on the Securities
upon the date of such default; and
(ii) all property received by the Property Trustee in respect
of any claims as such creditor, either as security
therefor, or in satisfaction or composition thereof, or
otherwise, after the beginning of such three months'
period, or an amount equal to the proceeds of any such
property if disposed of, subject, however, to the rights,
if any, of the Trust or such other obligor on the
Securities and their respective other creditors in such
property or such proceeds.
Nothing herein contained, however, shall affect the right of the
Property Trustee:
(A) to retain for its own account (1) payments made on
account of any such claim by any Person (other than
the Trust or such other obligor on the Securities)
who is liable thereon, and (2) the proceeds of the
bona fide sale of any such claim by the Property
Trustee to a third Person, and (3) distributions
made in cash, securities or other property in
respect of claims filed against the Trust or such
other obligor on the Securities in bankruptcy or
receivership or in proceedings for reorganization
pursuant to Title 11 of the United States Code or
applicable state laws;
(B) to realize, for its own account, upon any property
held by it as security for any such claim, if such
property was so held prior to the beginning of such
three months' period;
(C) to realize, for its own account, but only to the
extent of the claim hereinafter mentioned, upon any
property held by it as security for any such claim,
if such claim was created after the beginning of
such three months' period and such property was
received as security therefor simultaneously with
the creation thereof, and if the Property Trustee
shall sustain the burden of proving that at the
time such property was so received, the Property
Trustee had no reasonable cause to believe that a
default, as defined in Section 3.16(c), would occur
within three months; or
(D) to receive payment on any claim referred to in
paragraph (B) or (C), against the release of any
property held as security for such claim as
provided in such paragraph (B) or (C), as the case
may be, to the extent of the fair value of such
property.
25
For the purposes of paragraphs (B), (C) and (D), property
substituted after the beginning of such three months' period for
property held as security at the time of such substitution shall,
to the extent of the fair value of the property released, have the
same status as the property released, and to the extent that any
claim referred to in any of such paragraphs is created in renewal
of or in substitution for or for the purposes of repaying or
refunding any preexisting claim of the Property Trustee as such
creditor, such claim shall have the same status as such
preexisting claim.
If the Property Trustee shall be required to account, the funds
and property held in such special account and the proceeds thereof
shall be apportioned among the Property Trustee, the Holders of
Securities for which it is acting as Property Trustee, and the
holders of other indenture securities in such manner that the
Property Trustee, such Holders of Securities and the holders of
other indenture securities realize, as a result of payments from
such special account and payments of dividends on claims filed
against the Trust or such other obligor on the Securities in
bankruptcy or receivership or in proceedings for reorganization
pursuant to Title 11 of the United States Code or applicable state
law, the same percentage of their respective claims, figured
before crediting to the claim of the Property Trustee anything on
account of the receipt by it from the Trust or such other obligor
on the Securities of the funds and property in such special
account and before crediting to the respective claims of the
Property Trustee, such Holders of Securities, and the holders of
other indenture securities dividends on claims filed against the
Trust or such other obligor on the Securities in bankruptcy or
receivership or in proceedings for reorganization pursuant to
Title 11 of the United States Code or applicable state law, but
after crediting thereon receipts on account of the indebtedness
represented by their respective claims from all sources other than
from such dividends and from the funds and property so held in
such special account. As used in this paragraph, with respect to
any claim, the term "dividends" shall include any distribution
with respect to such claim in bankruptcy or receivership or in
proceedings for reorganization pursuant to Title 11 of the United
States Code or applicable state law, whether such distribution is
made in cash, securities or other property, but shall not include
any such distribution with respect to the secured portion, if any,
of such claim. The court in which such bankruptcy, receivership
or proceeding for reorganization is pending shall have
jurisdiction (1) to apportion among the Property Trustee, such
Holders of Securities, and the holders of other indenture
securities, in accordance with the provisions of this paragraph,
the funds and property held in such special account and the
proceeds thereof, or (2) in lieu of such apportionment in whole or
in part, to give to the provisions of this paragraph due
consideration in determining the fairness of the distributions to
be made to the Property Trustee, such Holders of Securities and
the holders of other indenture securities with respect to their
respective claims, in which event it shall not be necessary to
liquidate or appraise the value of any securities or other
property held in such special account or as security for any such
claim, or to make a specific allocation of such distributions as
between the secured and unsecured portions of such claim, or
otherwise to apply the provisions of this paragraph as a
mathematical formula.
Any Property Trustee who has resigned or been removed after the
beginning of such three months' period shall be subject to the
provisions of this subsection (a) as though such resignation or removal
had not occurred. If any Property Trustee has resigned or been removed
prior to the beginning of such three months' period, it shall be
subject to the provisions of this subsection (a) if and only if the
following conditions exist:
(i) the receipt of property or reduction of claim which would
have given rise to the obligation to account, if such
Property Trustee had continued, as trustee, occurred after
the beginning of such three months' period; and
(ii) such receipt of property or reduction of claim occurred
within three months after such resignation or removal.
26
In every case commenced under the Bankruptcy Act of 1898, or any
amendment thereto enacted prior to November 6, 1978, all references to
periods of three months shall be deemed to be references to periods of
four months.
(b) There shall be excluded from the operation of Section 3.16(a) a
creditor relationship arising from:
(i) the ownership or acquisition of securities issued under
any indenture, or any security or securities having a
maturity of one year or more at the time of acquisition by
the Property Trustee;
(ii) advances authorized by a receivership or bankruptcy court
of competent jurisdiction, or by this Declaration, for the
purpose of preserving any property which shall at any time
be subject to the lien of this Declaration or of
discharging tax liens or other prior liens or encumbrances
thereon, if notice of such advance and of the
circumstances surrounding the making thereof is given to
the Holders of Securities at the time and in the manner
provided in Section 2.3 with respect to reports pursuant
thereto;
(iii) disbursements made in the ordinary course of business in
the capacity of trustee under an indenture, transfer
agent, registrar, custodian, paying agent, fiscal agent or
depository, or other similar capacity;
(iv) an indebtedness created as a result of services
rendered or premises rented, or an indebtedness
created as a result of goods or securities sold in
a "cash transaction" as defined in Section 3.16(c);
(v) the ownership of stock or other securities of a
company organized under the provisions of Section
25(a) of the Federal Reserve Act, as amended, which
is directly or indirectly a creditor of the Trust
or any other obligor on the Securities; and
(vi) the acquisition, ownership, acceptance or
negotiation of any drafts, bills of exchange,
acceptances or obligations which fall within the
definition of "self-liquidating paper" in Section
3.16(c).
(c) As used in this Section 3.16 the following terms shall be accorded
the following definitions:
(i) the term "default" shall mean any failure to make payment
in full of the principal of or interest on any of the
Securities or on the "other indenture securities" (as
defined in Section 3.16(c)(ii)) when and as such principal
or interest becomes due and payable.
(ii) the term "other indenture securities" shall mean
securities upon which the Trust or any other obligor on
the Securities is an "obligor" (as defined in the Trust
Indenture Act) outstanding under any other indenture (A)
under which the Property Trustee is also trustee, (B)
which contains provisions substantially similar to the
provisions of Section 3.16(a), and (c) under which a
default exists at the time of the apportionment of the
funds and property held in said special account.
(iii) the term "cash transaction" shall mean any transaction in
which full payment for goods or securities sold is made
within seven days after delivery of the goods or
securities in currency or in checks or other orders drawn
upon banks or bankers and payable upon demand.
(iv) the term "self-liquidating paper" shall mean any draft,
bill of exchange, acceptance or obligation which is made,
drawn, negotiated or incurred by the Trust or any other
obligor on the Securities for the purpose of financing the
purchase, processing, manufacture, shipment, storage or
27
sale of goods, wares or merchandise and which is secured
by documents evidencing title to, possession of, or a lien
upon, the goods, wares or merchandise or the receivables
or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided
the security is received by the Property Trustee
simultaneously with the creation of the creditor
relationship with the Trust or any other obligor on the
Securities arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or
obligation.
SECTION 3.17 Property Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon
the Securities or the property of the Trust or of such other obligor or
their creditors, the Property Trustee (irrespective of whether the principal
of the Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Property Trustee
shall have made any demand on the Trust for the payment of overdue principal
or interest) shall be entitled and empowered, to the fullest extent
permitted by law, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the
Securities (or, if the Securities are original issue discount
Securities, such portion of the principal amount as may be
specified in the terms of such Securities) and to file such other
papers or documents as may be necessary or advisable in order to
have the claims of the Property Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances
of the Property Trustee, its agents and counsel) and of the
Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Property Trustee and, in the
event that the Property Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Property Trustee any amount due it
for the reasonable compensation, expenses, disbursements and advances of the
Property Trustee, its agents and counsel, and any other amounts due the
Property Trustee.
Nothing herein contained shall be deemed to authorize the Property Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Property
Trustee to vote in respect of the claim of any Holder in any such
proceeding.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
On the Closing Date the Sponsor will purchase all the Common Securities
issued by the Trust, in an amount equal to 3% of the capital of the Trust,
giving effect to the sale of the Preferred Securities, at the same time as
the Preferred Securities are sold.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the Preferred Securities, the
Sponsor shall have the exclusive right and responsibility to engage in the
following activities:
(a) to prepare for filing by the Trust with the Commission a
registration statement on Form S-3 in relation to the Preferred
Securities, the Subordinated Debentures and the Preferred
Securities Guarantee, including any amendments thereto;
28
(b) to determine the states in which to take appropriate action to
qualify or register for sale all or part of the Preferred
Securities and to do any and all such acts, other than actions
which must be taken by the Trust, and advise the Trust of actions
it must take, and prepare for execution and filing any documents
to be executed and filed by the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable laws
of any such states;
(c) to prepare for filing by the Trust an application to the New York
Stock Exchange or any other national stock exchange or the Nasdaq
National Market for listing upon notice of issuance of any
Preferred Securities;
(d) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A relating to the registration of
the Preferred Securities under Section 12(b) of the Exchange Act,
including any amendments thereto; and
(e) to negotiate the terms of the Underwriting Agreement and Pricing
Agreement providing for the sale of the Preferred Securities.
SECTION 4.3 Expenses.
(a) The Sponsor shall be responsible for and shall pay for all debts
and obligations (other than with respect to the Securities) and
all costs and expenses of the Trust (including, but not limited
to, costs and expenses relating to the organization of the Trust,
the issuance and sale of the Preferred Securities, the fees and
expenses (including reasonable counsel fees and expenses) of the
Trustees, the costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing and
engraving and computing or accounting equipment, Paying Agents(s),
registrar(s), transfer agents(s), duplication, travel and
telephone and other telecommunications expenses and costs and
expenses incurred in connection with the disposition of Trust
assets).
(b) The Sponsor will pay any and all taxes (other than United States
withholding taxes attributable to the Trust or its assets) and all
liabilities, costs and expenses with respect to such taxes of the
Trust.
(c) The Sponsor's obligations under this Section 4.3 shall be for the
benefit of, and shall be enforceable by, any Person to whom any
such debts, obligations, costs, expenses and taxes are owed (a
"Creditor") whether or not such Creditor has received notice
hereof. Any such Creditor may enforce the Sponsor's obligations
under this Section 4.3 directly against the Sponsor and the
Sponsor irrevocably waives any right or remedy to require that any
such Creditor take any action against the Trust or any other
Person before proceeding against the Sponsor. The Sponsor agrees
to execute such additional agreements as may be necessary or
desirable in order to give full effect to the provisions of this
Section 4.3.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees.
The number of Trustees shall initially be five, and:
(a) at any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of
Trustees; and
(b) after the issuance of any Securities, the number of Trustees may
be increased or decreased by vote of the Holders of a Majority in
liquidation amount of the Common Securities voting as a class at a
meeting of the Holders of the Common Securities;
provided that, if the Property Trustee does not also act as Delaware
Trustee, the number of Trustees shall be at least five.
29
SECTION 5.2 Delaware Trustee.
If required by the Business Trust Act, one Trustee (the "Delaware Trustee")
shall be:
(a) a natural person who is a resident of the State of Delaware; or
(b) if not a natural person, an entity which has its principal place
of business in the State of Delaware and otherwise meets the
requirements of applicable law,
provided that, if the Property Trustee has its principal place of business
in the State of Delaware and otherwise meets the requirements of applicable
law, then the Property Trustee shall also be the Delaware Trustee and
Section 3.11 shall have no application.
SECTION 5.3 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee which shall act as
Property Trustee which shall:
(i) not be an Affiliate of the Sponsor;
(ii) be a corporation organized and doing business under the
laws of the United States of America or any state or
territory thereof or of the District of Columbia, or a
corporation or Person permitted by the Commission to act
as an institutional trustee under the Trust Indenture Act,
authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least
$50,000,000, and subject to supervision or examination by
federal, state, territorial or District of Columbia
authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority
referred to above, then for the purposes of this Section
5.3(a)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of
condition so published; and
(iii) to the extent the rules and regulations promulgated under
the Investment Company Act require a trustee having
certain qualifications to hold title to the "eligible
assets" of the Trust, the Property Trustee shall possess
those qualifications.
(b) If at any time the Property Trustee shall cease to be eligible to
so act under Section 5.3(a), the Property Trustee shall
immediately resign in the manner and with the effect set forth in
Section 5.6(c).
(c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Property Trustee and the Holder of the Common
Securities (as if it were the obligor referred to in Section
310(b) of the Trust Indenture Act) shall in all respects comply
with the provisions of Section 310(b) of the Trust Indenture Act.
SECTION 5.4 Qualifications of Regular Trustees and Delaware Trustee
Generally.
Each Regular Trustee and the Delaware Trustee (unless the Property Trustee
also acts as Delaware Trustee) shall be either a natural person who is at
least 21 years of age or a legal entity that shall act through one or more
Authorized Officers.
SECTION 5.5 Initial Trustees.
The initial Regular Trustees shall be:
Roomy F. Balaporia
Pacific Telesis Group
130 Kearny Street
San Francisco, California 94108
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Miles H. Mochizuki
Pacific Telesis Group
130 Kearny Street
San Francisco, California 94108
Marie B. Washington
Pacific Telesis Group
130 Kearny Street
San Francisco, California 94108
The initial Delaware Trustee shall be:
Michael J. Majchrzak
FCC National Bank
300 King Street
Wilmington, Delaware 19802
The initial Property Trustee shall be:
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670
SECTION 5.6 Appointment, Removal and Resignation of Trustees.
(a) Subject to Section 5.6(b), Trustees may be appointed or removed
without cause at any time:
(i) until the issuance of any Securities, by written
instrument executed by the Sponsor; and
(ii) after the issuance of any Securities, by vote of the
Holders of a Majority in liquidation amount of the Common
Securities voting as a class at a meeting of the Holders
of the Common Securities.
(b) (i) The Trustee that acts as Property Trustee shall not be
removed in accordance with Section 5.6(a) until a
Successor Property Trustee has been appointed and has
accepted such appointment by written instrument executed
by such Successor Property Trustee and delivered to the
Regular Trustees and the Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 5.6(a) until a
successor Trustee possessing the qualifications to act as
Delaware Trustee under Sections 5.2 and 5.4 (a "Successor
Delaware Trustee") has been appointed and has accepted
such appointment by written instrument executed by such
Successor Delaware Trustee and delivered to the Regular
Trustees and the Sponsor.
(c) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or
resignation. Any Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing signed
by the Trustee and delivered to the Sponsor and the Trust, which
resignation shall take effect upon such delivery or upon such
later date as is specified therein; provided, however, that:
(i) No such resignation of the Trustee that acts as the
Property Trustee shall be effective:
(A) until a Successor Property Trustee has been appointed and
has accepted such appointment by instrument executed by
such Successor Property Trustee and delivered to the
Trust, the Sponsor and the resigning Property Trustee; or
(B) until the assets of the Trust have been completely
liquidated and the proceeds thereof distributed to the
Holders of the Securities; and
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor
Delaware Trustee has been appointed and has accepted such
appointment by instrument executed by such Successor
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Delaware Trustee and delivered to the Trust, the Sponsor
and the resigning Delaware Trustee.
(d) The Holders of the Common Securities shall use their best efforts
to promptly appoint a Successor Delaware Trustee or Successor
Property Trustee as the case may be if the Property Trustee or the
Delaware Trustee delivers an instrument of resignation in
accordance with this Section 5.6.
(e) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in
this Section 5.6 within 60 days after delivery to the Sponsor and
the Trust of an instrument of resignation, the resigning Property
Trustee or Delaware Trustee, as applicable, may petition any court
of competent jurisdiction for appointment of a Successor Property
Trustee or Successor Delaware Trustee. Such court may thereupon,
after prescribing such notice, if any, as it may deem proper and
prescribe, appoint a Successor Property Trustee or Successor
Delaware Trustee, as the case may be.
SECTION 5.7 Vacancies among Trustees.
If a Trustee ceases to hold office for any reason and the number of Trustees
is not reduced pursuant to Section 5.1, or if the number of Trustees is
increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Regular Trustees or, if
there are more than two, a majority of the Regular Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 5.6.
SECTION 5.8 Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee
shall not operate to annul the Trust. Whenever a vacancy in the number of
Regular Trustees shall occur, until such vacancy is filled by the
appointment of a Regular Trustee in accordance with Section 5.6, the Regular
Trustees in office, regardless of their number, shall have all the powers
granted to the Regular Trustees and shall discharge all the duties imposed
upon the Regular Trustees by this Declaration.
SECTION 5.9 Meetings.
If there is more than one Regular Trustee, meetings of the Regular Trustees
shall be held from time to time upon the call of any Regular Trustee.
Regular meetings of the Regular Trustees may be held at a time and place
fixed by resolution of the Regular Trustees. Notice of any in-person
meetings of the Regular Trustees shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 48 hours before such meeting. Notice of any
telephonic meetings of the Regular Trustees or any committee thereof shall
be hand delivered or otherwise delivered in writing (including by facsimile,
with a hard copy by overnight courier) not less than 24 hours before a
meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of a Regular Trustee at a meeting shall constitute a waiver of
notice of such meeting except where a Regular Trustee attends a meeting for
the express purpose of objecting to the transaction of any activity on the
ground that the meeting has not been lawfully called or convened. Unless
provided otherwise in this Declaration, any action of the Regular Trustees
may be taken at a meeting by vote of a majority of the Regular Trustees
present (whether in person or by telephone) and eligible to vote with
respect to such matter, provided that a Quorum is present, or without a
meeting by the unanimous written consent of the Regular Trustees. In the
event there is only one Regular Trustee, any and all action of such Regular
Trustee shall be evidenced by a written consent of such Regular Trustee.
SECTION 5.10 Delegation of Power.
(a) Any Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age
of 21 his or her power for the purpose of executing any documents
contemplated in Section 3.6, including any registration statement
or amendment thereto filed with the Commission, or making any
other governmental filing; and
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(b) the Regular Trustees shall have power to delegate from time to
time to such of their number or to officers of the Trust the doing
of such things and the execution of such instruments either in the
name of the Trust or the names of the Regular Trustees or
otherwise as the Regular Trustees may deem expedient, to the
extent such delegation is not prohibited by applicable law or
contrary to the provisions of the Trust, as set forth herein.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
If and to the extent that the Subordinated Debenture Issuer makes a payment
of interest (including Compounded Interest (as defined in the Indenture) and
Additional Amounts (as defined in the Indenture)), premium and/or principal
on the Subordinated Debentures held by the Property Trustee (the amount of
any such payment being a "Payment Amount"), the Property Trustee shall and
is directed, to the extent funds are available for that purpose, to make a
distribution (a "Distribution") of the Payment Amount to Holders. Holders
shall receive Distributions in accordance with the applicable terms of the
relevant Holder's Securities. Distributions shall be made on the Preferred
Securities and the Common Securities in accordance with the preferences set
forth in their respective terms.
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
(a) The Regular Trustees shall on behalf of the Trust issue one class
of preferred securities representing undivided beneficial
interests in the assets (the "Preferred Securities") of the Trust
having such terms as are set forth in Exhibit A as such Exhibit
may be amended from time to time in accordance with the provisions
of this Declaration and which Exhibit A is hereby incorporated
herein and one class of common securities representing undivided
beneficial interests in the assets (the "Common Securities") of
the Trust having such terms as are set forth in Exhibit A as such
Exhibit may be amended from time to time in accordance with the
provisions of this Declaration. The Trust shall have no
securities or other interests in the assets of the Trust other
than the Preferred Securities and the Common Securities.
(b) The Securities shall be signed on behalf of the Trust by a Regular
Trustee. Such signature may be the manual or facsimile signature
of the present or any future Regular Trustee. Typographical and
other minor errors or defects in any such reproduction of any such
signature shall not affect the validity of any Security. In case
any Regular Trustee of the Trust who shall have signed any of the
Securities shall cease to be such Regular Trustee before the
Securities so signed shall be delivered by the Trust, such
Securities nevertheless may be delivered as though the person who
signed such Securities had not ceased to be such Regular Trustee;
and any Security may be signed on behalf of the Trust by such
persons who, at the actual date of execution of such Security,
shall be the Regular Trustees of the Trust, although at the date
of the execution and delivery of the Declaration any such person
was not such a Regular Trustee. Securities shall be printed,
lithographed or engraved or may be produced in any other manner as
is reasonably acceptable to the Regular Trustees, as evidenced by
their execution thereof, and may have such letters, numbers or
other marks of identification or designation and such legends or
endorsements as the Regular Trustees may deem appropriate, or as
may be required to comply with any law or with any rule or
regulation of any stock exchange on which Securities may be
listed, or to conform to usage.
(c) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the
Trust and shall not constitute a loan to the Trust.
(d) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued,
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fully paid and non-assessable.
(e) Every Person, by virtue of having become a Holder in accordance
with the terms of this Declaration, shall be deemed to have
expressly assented and agreed to the terms of, and shall be bound
by, this Declaration.
(f) Upon issuance of the Preferred Securities as provided in this
Declaration, the Regular Trustees on behalf of the Trust shall
return to the Sponsor the $10 constituting initial trust assets as
set forth in the Original Declaration.
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust.
(a) The Trust shall terminate upon the earliest of:
(i) the Bankruptcy of the Holder of the Common Securities, the
Sponsor or the Subordinated Debenture Issuer;
(ii) the filing of a certificate of dissolution or its
equivalent with respect to the Holder of the Common
Securities or the Sponsor; the filing of a certificate of
cancellation with respect to the Trust or the revocation
of the charter of the Holder of the Common Securities or
of the Sponsor and the expiration of 90 days after the
date of revocation without a reinstatement thereof;
(iii) the entry of a decree of judicial dissolution of the
Holder of the Common Securities, the Sponsor or the Trust;
(iv) when all of the Securities shall have been called for
redemption and the amounts necessary for redemption
thereof shall have been paid to the Holders in accordance
with the terms of the Securities;
(v) the occurrence and continuation of a Special Event
pursuant to which the Trust shall have been dissolved in
accordance with the terms of the Securities and all of the
Subordinated Debentures shall have been distributed to the
Holders of Securities in exchange for all of the
Securities;
(vi) before the issuance of any Securities upon the consent of
all of the Regular Trustees and the Sponsor; or
(vii) the expiration of the Trust specified in Section 3.14
hereof.
(b) As soon as is practicable after the occurrence of an event
referred to in Section 8.1(a), the Trustees shall file a
certificate of cancellation with the Secretary of State of the
State of Delaware.
(c) The provisions of Section 3.9 and Article X shall survive the
termination of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities.
(a) Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this
Declaration and in the terms of the Securities. Any transfer or
purported transfer of any Security not made in accordance with
this Declaration shall be null and void.
(b) Subject to this Article IX, Preferred Securities shall be freely
transferable, provided, however, that the Global Security or
Securities may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the
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Depository to the Depository or another nominee of the Depository
or by the Depository or any nominee to a successor Depository or a
nominee of any successor Depository.
(c) Subject to this Article IX, the Sponsor and any Related Party may
only transfer Common Securities to the Sponsor or a Related Party
of the Sponsor; provided that, any such transfer is subject to the
condition precedent prior to any such transfer that the transferor
or the transferee shall have obtained or caused to be obtained
either a ruling from the Internal Revenue Service or an
unqualified written opinion addressed to the Trust and delivered
to the Trustees of a nationally recognized independent counsel
experienced in such matters that such transfer will not cause:
(i) the Trust to be treated as issuing a class of interests in
the Trust differing from the class of interests
represented by the Common Securities originally issued;
(ii) result in the Trust acquiring or disposing of, or being
deemed to have acquired or disposed of, an asset;
(iii) the Trust to be classified as other than a grantor trust
for United States federal income tax purposes; and
(iv) the Trust to be an Investment Company or the transferee to
become an Investment Company.
SECTION 9.2 Registration, Transfer and Exchange of Securities
Except as specifically otherwise provided herein with respect to Securities
issued in the form of Global Securities, Securities may be exchanged for
Securities representing a like aggregate liquidation amount of Securities.
Securities to be exchanged shall be surrendered at the offices or agencies
of the Property Trustee and the Regular Trustees shall execute the
Securities, and the Property Trustee shall authenticate and deliver in
exchange therefor the Security or Securities which the Holder making the
exchange shall be entitled to receive.
The Property Trustee shall keep or cause to be kept, at its principal trust
office, the Register in which, subject to such reasonable regulations as it
may prescribe, the Property Trustee shall provide for the registration of
the Securities and the transfer of Securities as in this Article provided.
The Register shall be in written form or in any other form capable of being
converted into written form within a reasonable time. At all reasonable
times the Register shall be open for inspection by the Sponsor and the
Regular Trustees. Upon due presentment for transfer of any Security at the
principal trust office of the Property Trustee, the Regular Trustees shall
execute a new Security and the Property Trustee shall authenticate and
deliver in the name of the transferee or transferees a new Security or
Securities for a like aggregate liquidation amount in authorized
denominations.
Notwithstanding any other provisions of this Section 9.2, unless and until
it is exchanged in whole or in part for Securities in definitive form, a
Global Security representing all or a portion of the Securities may not be
transferred except as a whole by the Depository to a nominee of such
Depository or by a nominee of such Depository to such Depository or another
nominee of such Depository or by such Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
All Securities presented or surrendered for exchange, transfer, redemption,
or payment shall, if so required by the Property Trustee, be accompanied by
a written instrument or instruments of transfer, in form satisfactory to the
Regular Trustees, the Sponsor and the Property Trustee, duly executed by the
Holder or by such Holder's attorney duly authorized in writing. No service
charge shall be made for any exchange or registration of transfer of
Securities, but the Property Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in
relation thereto.
The Property Trustee shall not be required to exchange or transfer (a) any
Securities during a period beginning at the opening of business 15 days
before the day of the first mailing of a notice of redemption of Securities
and ending at the close of business on the day of such mailing or (b) any
Securities called or selected for redemption in whole or in part, except, in
the case of Securities called for redemption in part, the portion thereof
35
not so called for redemption or during a period beginning at the opening of
business on any record date and ending at the close of business on the
relevant Distribution payment date therefor.
SECTION 9.3 Deemed Security Holders.
The Trustees may treat the Person in whose name any Security shall be
registered on the Register as the sole holder of such Securities for
purposes of receiving Distributions and for all other purposes whatsoever
and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such Securities on the part of any Person, whether
or not the Trust shall have actual or other notice thereof.
SECTION 9.4 Global Preferred Securities and Common Securities.
(a) The Preferred Securities, on original issuance, shall be issued in
the form of one or more fully registered Global Securities, to be
delivered to the Depository, by, or on behalf of, the Trust. Each
Global Security shall:
(i) represent and be denominated in an aggregate amount equal
to the aggregate liquidation amount of the Preferred
Securities to be represented by such Global Security,
(ii) be registered in the name of either the Depository for
such Global Security or the nominee of such Depository,
(iii) be delivered by the Trustee to such Depository or pursuant
such Depository's written instruction, and
(iv) bear a legend substantially to the following effect:
"Unless and until it is exchanged in whole or in part for
Preferred Securities in definitive form, this Global
Security may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee
of the Depository to the Depository or another nominee of
the Depository or by the Depository or any nominee to a
successor Depository or a nominee of any successor
Depository." The notation of the record owner's interest
in such Global Security upon the original issuance thereof
shall be deemed to be delivery in connection with the
original issuance of each beneficial owner's interest in
such Global Security. Without limiting the foregoing, the
Sponsor and each of the Trustees shall have no
responsibility, obligation or liability with respect to:
(x) the maintenance, review or accuracy of the records of
the Depository or of any of its participating
organizations with respect to any ownership interest in or
payments with respect to such Global Security, (y) any
communication with or delivery of any notice (including
notices of redemption) with respect to the Preferred
Securities represented by the Global Security to any
Person having any ownership interest in such Global
Security or to any of the Depository's participating
organizations or (z) any payment made on account of any
beneficial ownership interest in such Global Security.
(b) Each Global Security may provide that it shall represent the
aggregate liquidation amount of outstanding Preferred Securities
from time to time endorsed thereon and may also provide that the
aggregate liquidation amount of outstanding Preferred Securities
represented thereby may from time to time be reduced to reflect
exchanges. Any endorsement of a Global Security to reflect the
liquidation amount of outstanding Preferred Securities represented
thereby shall be made by the Property Trustee in such manner as
shall be specified on such Global Security. Any instructions by
the Sponsor or the Regular Trustee with respect to a Global
Security, after its initial issuance, shall be in writing.
(c) Each Depository designated pursuant to the provisions of this
Declaration for a Global Security must, at the time of its
designation and at all times while it serves as a depository, be a
clearing agency registered under the Exchange Act, and any other
applicable statute or regulation. If at any time the Depository
for the Preferred Securities notifies the Property Trustee that it
is unwilling or unable to continue as Depository for the Preferred
36
Securities or if at any time the Depository for the Preferred
Securities shall no longer be eligible under this Declaration, the
Regular Trustees shall appoint a successor Depository. If a
successor Depository is not appointed by the Trust within 90 days
after the Property Trustee receives such notice or learns of such
ineligibility, the Regular Trustees shall execute and the Regular
Trustees shall direct the Property Trustee to authenticate and
deliver definitive Preferred Securities in exchange for the Global
Security or Securities. Upon receipt of such Direction, the
Property Trustee shall thereupon authenticate and deliver the
definitive Preferred Securities in the same aggregate liquidation
amount as the Global Security or Securities in exchange for such
Global Security or Securities, in accordance with the provisions
of Section 9.4(e), without any further action by the Regular
Trustees or the Sponsor.
(d) The Regular Trustees may at any time after consultation with the
Sponsor determine that the Preferred Securities shall no longer be
represented by a Global Security or Securities. In such event,
the Regular Trustees will execute and upon receipt of a written
order from the Regular Trustees, the Property Trustee shall
thereupon authenticate and deliver Preferred Securities in
definitive form and in an aggregate liquidation amount equal to
the principal amount of the Global Security or Securities in
exchange for such Global Security or Securities, in accordance
with the provisions of Section 9.4(e) without any further action
by the Regular Trustees or the Sponsor.
(e) Upon any exchange hereunder of the Global Security or Securities
for Preferred Securities in definitive form, such Global Security
or Securities shall be canceled by the Property Trustee.
Preferred Securities issued hereunder in exchange for the Global
Security or Securities shall be registered in such names as the
Depository for such Global Security, pursuant to instructions from
its direct or indirect participants or otherwise, shall instruct
the Property Trustee. The Property Trustee shall deliver such
definitive Preferred Securities in exchange for the Global
Security or Securities to the persons in whose name such
definitive Preferred Securities have been registered in accordance
with the directions of the Depository.
(f) Unless otherwise specified in the terms of the Common Securities,
on original issuance, the Common Securities will be issued in the
form of a single fully registered Common Security certificate
which shall (a) represent the aggregate liquidation amount of
Common Securities issued hereunder and (b) be registered in the
name of the Sponsor and delivered by the Trust to the Sponsor.
SECTION 9.5 Notices to Depository.
Whenever a notice or other communication to the Preferred Securities Holders
is required under this Declaration, unless and until Preferred Securities in
definitive form shall have been issued pursuant to Section 9.4, the Regular
Trustees shall give all such notices and communications specified herein to
be given to the Preferred Security Holders to the Depository.
SECTION 9.6 Mutilated, Destroyed, Lost or Stolen Securities.
If:
(a) any mutilated Securities should be surrendered to the Regular
Trustees, or if the Regular Trustees shall receive evidence to
their satisfaction of the destruction, loss or theft of any
Security; and
(b) there shall be delivered to the Regular Trustees, the Sponsor and
the Property Trustees such security or indemnity as may be
required by them to keep each of them harmless.
then:
In the absence of notice that such Security shall have been acquired by
a bona fide purchaser, the Regular Trustees shall execute and deliver,
in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Security, a new Security of like denomination and in the same
aggregate liquidation amount as the mutilated, destroyed, lost or
37
stolen Security. In connection with the issuance of any new Security
under this Section 9.6, the Regular Trustees may require the payment of
a sum sufficient to cover any tax or other governmental charge that may
be imposed in connection therewith. Any duplicate Security issued
pursuant to this Section shall constitute conclusive evidence of an
ownership interest in the relevant Securities, as if originally issued,
whether or not the lost, stolen or destroyed Security shall be found at
any time.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
(a) Except as expressly set forth in this Declaration, the Common
Security Guarantee and Preferred Security Guarantee and the terms
of the Securities the Sponsor shall not be:
(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the
Holders of the Securities which shall be made solely from
assets of the Trust; and
(ii) be required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or
otherwise.
(b) Pursuant to Section 3803(a) of the Business Trust Act, the Holders
of the Securities shall be entitled to the same limitation of
personal liability extended to stockholders of private
corporations for profit organized under the General Corporation
Law of the State of Delaware.
SECTION 10.2 Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Trust or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Indemnified Person in good faith on
behalf of the Trust and in a manner such Indemnified Person
reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by
law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified
Person's negligence or willful misconduct with respect to such
acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information,
opinions, reports or statements presented to the Trust by any
Person as to matters the Indemnified Person reasonably believes
are within such other Person's professional or expert competence
and who has been selected with reasonable care by or on behalf of
the Trust, including information, opinions, reports or statements
as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount
of assets from which Distributions to Holders of Securities might
properly be paid.
SECTION 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating
thereto to the Trust or to any other Covered Person, an
Indemnified Person acting under this Declaration shall not be
liable to the Trust or to any other Covered Person for its good
faith reliance on the provisions of this Declaration. The
provisions of this Declaration, to the extent that they restrict
the duties and liabilities of an Indemnified Person otherwise
existing at law or in equity (other than the duties imposed on the
Property Trustee under the Trust Indenture Act), are agreed by the
parties hereto to replace such other duties and liabilities of
such Indemnified Person.
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(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between
an Indemnified Person and any Covered Person; or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an
Indemnified Person shall act in a manner that is, or
provides terms that are, fair and reasonable to the Trust
or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest,
take such action or provide such terms, considering in each case
the relative interest of each party (including its own interest)
to such conflict, agreement, transaction or situation and the
benefits and burdens relating to such interests, any customary or
accepted industry practices, and any applicable generally accepted
accounting practices or principles. In the absence of bad faith
by the Indemnified Person, the resolution, action or term so made,
taken or provided by the Indemnified Person shall not constitute a
breach of this Declaration or any other agreement contemplated
herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such
interests and factors as it desires, including its own
interests, and shall have no duty or obligation to give
any consideration to any interest of or factors affecting
the Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard
and shall not be subject to any other or different
standard imposed by this Declaration or by applicable law.
SECTION 10.4 Indemnification.
(a) To the fullest extent permitted by applicable law, the Sponsor
shall indemnify and hold harmless each Indemnified Person from and
against any loss, damage, liability, tax, penalty, expense or
claim of any kind or nature whatsoever incurred by such
Indemnified Person by reason of the creation, operation or
termination of the Trust or any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the
Trust and in a manner such Indemnified Person reasonably believed
to be within the scope of authority conferred on such Indemnified
Person by this Declaration, except that no Indemnified Person
shall be entitled to be indemnified in respect of any loss, damage
or claim incurred by such Indemnified Person by reason of
negligence or willful misconduct with respect to such acts or
omissions.
(b) To the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by an Indemnified Person in
defending any claim, demand, action, suit or proceeding shall,
from time to time, be advanced by the Sponsor prior to the final
disposition of such claim, demand, action, suit or proceeding upon
receipt by the Sponsor of an undertaking by or on behalf of the
Indemnified Person to repay such amount if it shall be determined
that the Indemnified Person is not entitled to be indemnified as
authorized in Section 10.4(a). This indemnification shall survive
the termination of this Declaration.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Subordinated Debenture Issuer, any
Regular Trustee, the Delaware Trustee and the Property Trustee may engage in
or possess an interest in other business ventures of any nature or
description, independently or with others, similar or dissimilar to the
business of the Trust, and the Trust and the Holders of Securities shall
have no rights by virtue of this Declaration in and to such independent
ventures or the income or profits derived therefrom and the pursuit of any
39
such venture, even if competitive with the business of the Trust, shall not
be deemed wrongful or improper. No Covered Person, the Sponsor, the
Subordinated Debenture Issuer, any Regular Trustee, the Delaware Trustee, or
the Property Trustee shall be obligated to present any particular investment
or other opportunity to the Trust even if such opportunity is of a character
that, if presented to the Trust, could be taken by the Trust, and any
Covered Person, the Sponsor, the Subordinated Debenture Issuer, any Regular
Trustee, the Delaware Trustee and the Property Trustee shall have the right
to take for its own account (individually or as a partner or fiduciary) or
to recommend to others any such particular investment or other opportunity.
Any Covered Person, any Regular Trustee, the Delaware Trustee and the
Property Trustee may engage or be interested in any financial or other
transaction with the Sponsor or any Affiliate of the Sponsor, or may act as
depository for, trustee or agent for, or act on any committee or body of
holders of, securities or other obligations of the Sponsor or its
Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or
such other year as is required by the Code or any other applicable law.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the Trust, the Regular
Trustees shall keep, or cause to be kept, full books of account,
records and supporting documents, which shall reflect in
reasonable detail, each transaction of the Trust. The books of
account shall be maintained on the accrual method of accounting,
in accordance with generally accepted accounting principles,
consistently applied. The Trust shall use the accrual method of
accounting for United States federal income tax purposes. The
books of account and the records of the Trust shall be examined by
and reported upon as of the end of each Fiscal Year of the Trust
by a firm of independent certified public accountants selected by
the Regular Trustees.
(b) The Regular Trustees shall cause to be prepared and delivered to
each of the Holders of Securities, within 90 days after the end of
each Fiscal Year of the Trust, annual financial statements of the
Trust, including a balance sheet of the Trust as of the end of
such Fiscal Year, and the related statements of income or loss.
(c) The Regular Trustees shall cause to be duly prepared and delivered
to each of the Holders of Securities, any annual United States
federal income tax information statement required by the Code,
containing such information with regard to the Securities held by
each Holder as is required by the Code and the Treasury
Regulations. Notwithstanding any right under the Code to deliver
any such statement at a later date, the Regular Trustees shall
endeavor to deliver all such statements within 30 days after the
end of each Fiscal Year of the Trust.
(d) The Regular Trustees shall cause to be duly prepared and filed
with the appropriate taxing authority, an annual United States
federal income tax return, on a Form 1041 or such other form
required by United States federal income tax law, and any other
annual income tax returns required to be filed by the Regular
Trustees on behalf of the Trust with any state or local taxing
authority.
SECTION 11.3 Banking.
The Trust shall maintain one or more bank accounts in the name and for the
sole benefit of the Trust; provided, however, that all payments of funds in
respect of the Subordinated Debentures held by the Property Trustee shall be
made directly to the Property Trustee Account and no other funds of the
Trust shall be deposited in the Property Trustee Account. The signatories
for such accounts shall be designated by the Regular Trustees; provided,
however, that the Property Trustee shall designate the signatories for the
Property Trustee Account.
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SECTION 11.4 Withholding.
The Trust and the Regular Trustees shall comply with all withholding
requirements under United States federal, state and local law. The Trust
shall request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding
with respect to each Holder, and any representations and forms as shall
reasonably be requested by the Trust to assist it in determining the extent
of, and in fulfilling, its withholding obligations. The Regular Trustees
shall file required forms with applicable jurisdictions and, unless an
exemption from withholding is properly established by a Holder, shall remit
amounts withheld with respect to the Holder to applicable jurisdictions. To
the extent that the Trust is required to withhold and pay over any amounts
to any authority with respect to distributions or allocations to any Holder,
the amount withheld shall be deemed to be a distribution in the amount of
the withholding to the Holder. In the event of any claimed over-
withholding, Holders shall be limited to an action against the applicable
jurisdiction. If the amount required to be withheld was not withheld from
actual Distributions made, the Trust may reduce subsequent Distributions by
the amount of such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
(a) Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may only be
amended by a written instrument approved and executed by the
Regular Trustees (or, if there are more than two Regular Trustees
a majority of the Regular Trustees); provided, however:
(i) if the amendment affects the rights, powers, duties,
obligations or immunities of the Property Trustee, the
amendment shall also be approved by the Property Trustee;
and
(ii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, the
amendment shall also be approved by the Delaware Trustee.
(b) No amendment shall be made, and any purported amendment shall be
void and ineffective to the extent the result of such amendment
would be to:
(i) cause the Trust to be classified as other than a grantor
trust for United States federal income tax purposes;
(ii) reduce or otherwise adversely affect the powers of the
Property Trustee in contravention of the Trust Indenture
Act; or
(iii) cause the Trust to be deemed to be an Investment Company
required to be registered under the Investment Company
Act.
(c) At such time after the Trust has issued any Securities that remain
outstanding, any amendment that would adversely affect the rights,
privileges or preferences of any Holder of Securities may be
effected only with such additional requirements as may be set
forth in the terms of such Securities.
(d) Sections 4.3 and 9.1(c) and this Section 12.1 shall not be amended
without the consent of all of the Holders of the Securities.
(e) Article IV shall not be amended without the consent of the Holders
of a Majority in liquidation amount of the Common Securities.
(f) The rights of the Holders of the Common Securities under Article V
to increase or decrease the number of, and appoint and remove
Trustees shall not be amended without the consent of the Holders
of a Majority in liquidation amount of the Common Securities.
(g) Notwithstanding Section 12.1(c), this Declaration may be amended
without the consent of the Holders of the Securities to:
41
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Declaration
that may be defective or inconsistent with any other
provision of this Declaration;
(iii) add to the covenants, restrictions or obligations of the
Sponsor;
(iv) add or change any of the provisions of this Declaration to
such extent as shall be necessary to facilitate the
issuance of Securities in definitive certificated form;
and
(v) conform to any change in the rules and regulations
promulgated under the Investment Company Act or change in
interpretation or application of the rules and regulations
promulgated under the Investment Company Act by any
legislative body, court, government agency or regulatory
authority; which amendment does not have a material
adverse effect on the rights, preferences or privileges of
the Holders.
(h) Prior to the issuance of the Securities any terms of the
Securities may be amended by a written instrument approved and
executed by the Regular Trustees (or if there are more than two
Regular Trustees a majority of the Regular Trustees).
SECTION 12.2 Meetings of the Holders of Securities; Action by Written
Consent.
(a) Meetings of the Holders of any class of Securities may be called
at any time by the Regular Trustees (or as provided in the terms
of the Securities) to consider and act on any matter on which
Holders of such class of Securities are entitled to act under the
terms of this Declaration, the terms of the Securities or the
rules of any stock exchange on which the Preferred Securities are
listed or admitted for trading. The Regular Trustees shall call a
meeting of the Holders of such class if directed to do so by the
Holders of at least 10% in liquidation amount of such class of
Securities. Such direction shall be given by delivering to the
Regular Trustees one or more calls in a writing stating that the
signing Holders of Securities wish to call a meeting and
indicating the general or specific purpose for which the meeting
is to be called. Any Holders of Securities calling a meeting
shall specify in writing the Securities held by the Holders of
Securities exercising the right to call a meeting and only those
Securities specified shall be counted for purposes of determining
whether the required percentage set forth in the second sentence
of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of
Holders of Securities:
(i) notice of any such meeting shall be given to all the
Holders of Securities having a right to vote thereat at
least 7 days and not more than 60 days before the date of
such meeting. Whenever a vote, consent or approval of the
Holders of Securities is permitted or required under this
Declaration, the terms of the Securities, or the rules of
any stock exchange on which the Preferred Securities are
listed or admitted for trading, such vote, consent or
approval may be given at a meeting of the Holders of
Securities. Any action that may be taken at a meeting of
the Holders of Securities may be taken without a meeting
if a consent in writing setting forth the action so taken
is signed by the Holders of Securities owning not less
than the minimum amount of Securities in liquidation
amount that would be necessary to authorize or take such
action at a meeting at which all Holders of Securities
having a right to vote thereon were present and voting.
Prompt notice of the taking of action without a meeting
shall be given to the Holders of Securities entitled to
vote who have not consented in writing. The Regular
Trustees may specify that any written ballot submitted to
42
the Security Holder for the purpose of taking any action
without a meeting shall be returned to the Trust within
the time specified by the Regular Trustees;
(ii) each Holder of a Security may authorize any Person to act
for it by proxy on all matters in which a Holder of
Securities is entitled to participate, including waiving
notice of any meeting, or voting or participating at a
meeting. No proxy shall be valid after the expiration of
11 months from the date thereof unless otherwise provided
in the proxy. Every proxy shall be revocable at the
pleasure of the Holder of Securities executing it. Except
as otherwise provided herein, all matters relating to the
giving, voting or validity of proxies shall be governed by
the General Corporation Law of the State of Delaware
relating to proxies, and judicial interpretations
thereunder, as if the Trust were a Delaware corporation
and the Holders of the Securities were stockholders of a
Delaware corporation;
(iii) each meeting of the Holders of the Securities shall be
conducted by the Regular Trustees or by such other Person
that the Regular Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration, the terms
of the Securities, the Trust Indenture Act or the listing
rules of any stock exchange on which the Preferred
Securities are then listed or trading, otherwise provides,
the Regular Trustees, in their sole discretion, shall
establish all other provisions relating to meetings of
Holders of Securities, including notice of the time, place
or purpose of any meeting at which any matter is to be
voted on by any Holders of Securities, waiver of any such
notice, action by consent without a meeting, the
establishment of a record date, quorum requirements,
voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote.
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee.
The Trustee that acts as initial Property Trustee represents and warrants to
the Trust and to the Sponsor at the date of this Declaration, and each
Successor Property Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:
(a) The Property Trustee is a banking association with trust powers,
duly organized, validly existing and in good standing under the
laws of the United States or one of the States of the United
States, with trust power and authority to execute and deliver, and
to carry out and perform its obligations under the terms of, the
Declaration.
(b) The execution, delivery and performance by the Property Trustee of
the Declaration has been duly authorized by all necessary
corporate action on the part of the Property Trustee. The
Declaration has been duly executed and delivered by the Property
Trustee, and it constitutes a legal, valid and binding obligation
of the Property Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting
creditors' rights generally and to general principles of equity
and the discretion of the court (regardless of whether the
enforcement of such remedies is considered in a proceeding in
equity or at law).
(c) The execution, delivery and performance of the Declaration by the
Property Trustee does not conflict with or constitute a breach of
the Articles of Organization or By-laws of the Property Trustee.
(d) No consent, approval or authorization of, or registration with or
notice to, any State or Federal banking authority is required for
43
the execution, delivery or performance by the Property Trustee, of
the Declaration.
(e) The Property Trustee satisfies the qualifications set forth in
Section 5.3(a) hereof.
SECTION 13.2 Representations and Warranties of Delaware Trustee
The Trustee that acts as initial Delaware Trustee represents and warrants to
the Trust and to the Sponsor at the date of this Declaration, and each
Successor Delaware Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee that:
(a) The Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and the Declaration.
The Declaration under Delaware law constitutes a legal, valid and
binding obligation of the Delaware Trustee, enforceable against it
in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws
affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether the
enforcement of such remedies is considered in a proceeding in
equity or at law).
(b) The Delaware Trustee is a natural person who is a resident of the
State of Delaware or, if not a natural person, an entity which has
its principal place of business in the State of Delaware.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices.
(a) All notices provided for in this Declaration shall be in writing,
duly signed by the party giving such notice, and shall be
electronically communicated or hand delivered, or sent by
overnight courier, addressed to the relevant Person as provided in
this Section 14.1 as follows:
(i) if given to the Trust, in care of the Regular Trustees at
the Trust's mailing address set forth below (or such other
address as the Trust may give notice of to the Holders of
the Securities):
Pacific Telesis Financing I
130 Kearny Street
San Francisco, CA 94108
Attention: Pacific Telesis Chief Financial Officer
(ii) if given to the Delaware Trustee, at the mailing address
set forth below (or such other address as Delaware Trustee
may give notice of to the Holders of the Securities):
Michael J. Majchrzak
FCC National Bank
300 King Street
Wilmington, Delaware 19802
(iii) if given to the Property Trustee, at the mailing address
set forth below (or such other address as the Property
Trustee maygive notice of tothe Holdersof the Securities):
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670
Attention: Corporate Trust Administration
(iv) if given to the Holder of the Common Securities, at the
mailing address of the Sponsor set forth below (or such
other address as the Holder of the Common Securities may
give notice to the Trust):
Pacific Telesis Group
130 Kearny Street
44
San Francisco, CA 94108
Attention: Chief Financial Officer
(v) if given to any other Holder, at the address set forth on
the books and records of the Trust.
For all purposes of this Declaration, a notice or communication will be
deemed effective:
(i) if delivered by hand or sent by overnight courier, on the day it
is delivered unless (A) that day is not a Business Day in the city
specified (a "Local Business Day") in the address for notice
provided by the recipient or (B) if delivered after the close of
business on a Local Business Day, then on the next succeeding
Local Business Day or
(ii) if sent by facsimile transmission, on the date transmitted,
provided that oral or written confirmation of receipt is obtained
by the sender unless the date of transmission and confirmation is
not a Local Business Day, in which case, on the next succeeding
Local Business Day.
Any notice, direction, request, demand, consent or waiver by the Sponsor or
any Holder of Securities, or the Regular Trustee to or upon the Property
Trustee shall be deemed to have been sufficiently given, made or filed, for
all purposes, if given, made or filed in writing at the principal office of
the Property Trustee in accordance with the provisions of this Section 14.1.
Any notice, request, consent or waiver by the Sponsor, the Regular Trustees
or the Property Trustee upon the Depository shall have been sufficiently
given, made or filed, for all purposes, if given or made in accordance with
he provisions of this Section 14.1 at the address shown for such Depository
in the Register or at such other address as the Depository shall have
provided for purposes of notice.
SECTION 14.2 Governing Law.
This Declaration and the rights of the parties hereunder shall be governed
by and interpreted in accordance with the laws of the State of Delaware and
all rights and remedies shall be governed by such laws without regard to
principles of conflict of laws.
SECTION 14.3 Intention of the Parties.
It is the intention of the parties hereto that the Trust not be
characterized for United States federal income tax purposes as an
association taxable as a corporation or a partnership but rather that the
Trust be characterized as a grantor trust or otherwise in a manner such that
each Holder of Securities will be treated as owning an undivided beneficial
interest in the Subordinated Debentures. The provisions of this Declaration
shall be interpreted to further this intention of the parties.
SECTION 14.4 Headings.
Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or
any provision hereof.
SECTION 14.5 Successors and Assigns
Whenever in this Declaration any of the parties hereto is named or referred
to, the successors and assigns of such party shall be deemed to be included,
and all covenants and agreements in this Declaration by the Sponsor and the
Trustees shall bind and inure to the benefit of their respective successors
and assigns, whether so expressed.
SECTION 14.6 Partial Enforceability.
If any provision of this Declaration, or the application of such provision
to any Person or circumstance, shall be held invalid, the remainder of this
Declaration, or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
45
SECTION 14.7 Counterparts.
This Declaration may contain more than one counterpart of the signature page
and this Declaration may be executed by the affixing of the signature of
each of the Trustees to one of such counterpart signature pages. All of
such counterpart signature pages shall be read as though one, and they shall
have the same force and effect as though all of the signers had signed a
single signature page.
IN WITNESS WHEREOF, the undersigned has caused these presents to be executed
as of the day and year first above written.
______________________________
Roomy F. Balaporia, as Trustee
______________________________
Miles H. Mochizuki, as Trustee
_______________________________
Marie B. Washington, as Trustee
________________________________
Michael J. Majchrzak, as Delaware
Trustee
PACIFIC TELESIS GROUP
as Sponsor
By: ___________________________
Name:___________________________
Title:__________________________
THE FIRST NATIONAL BANK OF CHICAGO
as Property Trustee
By: ___________________________
Name:___________________________
Title:__________________________
46
<PAGE>
EXHIBIT A
TERMS OF
__% TRUST ORIGINATED PREFERRED SECURITIES
__% TRUST ORIGINATED COMMON SECURITIES
Pursuant to Section 7.1 and subject to Section 12.1(c) of the Amended and
Restated Declaration of Trust, dated as of __________________, 1995 (as
amended from time to time in accordance with the provisions thereof, the
"Declaration"), the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred Securities and
the Common Securities are set out below (each capitalized term used but not
defined herein has the meaning set forth in the Declaration):
1. Designation and Number.
(a) "Preferred Securities." Preferred Securities of the Trust with an
aggregate liquidation amount with respect to the assets of the
Trust of $____________ and a liquidation amount with respect to
the assets of the Trust of $25 per Preferred Security, are hereby
designated for the purposes of identification only as "_____%
Trust Originated Preferred Securities" (the "Preferred
Securities"). The Preferred Securities shall be substantially in
the form attached hereto as Annex I, with such changes and
additions thereto or deletions therefrom as may be required by
ordinary usage, custom or practice or to conform to the rules of
any stock exchange on which the Preferred Securities are listed.
(b) "Common Securities." Common Securities of the Trust with an
aggregate liquidation amount with respect to the assets of the
Trust of $______ and a liquidation amount with respect to the
assets of the Trust of $25 per Common Security, are hereby
designated for the purposes of identification only as "____% Trust
Originated Common Securities" (the "Common Securities"). The
Common Securities shall be substantially in the form attached
hereto as Annex II, with such changes and additions thereto or
deletions therefrom as may be required by ordinary usage, custom
or practice.
2. Distributions.
(a) Periodic Distributions payable on each Security will be fixed at a
rate per annum of {*.*}% (the "Coupon Rate") of the stated
liquidation amount of $25 per Security, such rate being the rate
of interest payable on the Subordinated Debentures to be held by
the Property Trustee. Distributions in arrears for more than one
quarter will bear interest thereon compounded quarterly at the
Coupon Rate (to the extent permitted by applicable law). The term
"Distributions" as used herein includes such cash distributions
and any such interest payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made
in respect of the Subordinated Debentures held by the Property
Trustee and to the extent the Property Trustee has funds available
therefor. The amount of Distributions payable for any period will
be computed for any full quarterly Distribution period on the
basis of a 360-day year of twelve 30-day months, and for any
period shorter than a full quarterly Distribution period for which
Distributions are computed, Distributions will be computed on the
basis of the actual number of days elapsed per 90-day quarter.
(b) Distributions on the Securities will be cumulative, will accrue
from __________, 1995, and will be payable quarterly in arrears,
on March 31, June 30, September 30, and December 31 of each year,
commencing on __________________, except as otherwise described
below but only if and to the extent that the Trust has funds
available therefore the Subordinated Debenture Issuer has the
right under the Indenture to defer payments of interest by
extending the interest payment period from time to time on the
Subordinated Debentures for a period not exceeding 20 consecutive
quarters (each an "Extension Period"), provided that no Extension
47
Period shall last beyond the date of maturity of the Subordinated
Debentures, and, during such Extension Period, Distributions will
also be deferred. Despite such deferral, quarterly Distributions
will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the Coupon Rate compounded
quarterly during any such Extension Period. Prior to the
termination of any such Extension Period, the Subordinated
Debenture Issuer may further extend such Extension Period;
provided that such Extension Period together with all such
previous and further extensions thereof may not exceed 20
consecutive quarters. Payments of accrued Distributions will be
payable to Holders as they appear on the Register on the Record
Date for Distributions due at the end of the Extension Period.
Upon the termination of any Extension Period and the payment of
all amounts then due, the Subordinated Debenture Issuer may
commence a new Extension Period, subject to the above
requirements.
(c) Distributions on the Securities will be payable to the Holders
thereof as they appear on the Register on the relevant record
dates. While the Preferred Securities remain in the form of one
or more Global Securities, the relevant record dates shall be one
Business Day prior to the relevant payment dates which payment
dates correspond to the interest payment dates on the Subordinated
Debentures. Subject to any applicable laws and regulations and
the provisions of the Declaration, each such payment in respect of
the Preferred Securities will be made to the Depository or its
nominee. The relevant record dates for the Common Securities shall
be the same record date as for the Preferred Securities. If the
Preferred Securities are in definitive form, the relevant record
dates for the Preferred Securities, shall conform to the rules of
any securities exchange on which the securities are listed and, if
none, shall be selected by the Regular Trustees, which dates shall
be at least one Business Day but less than 60 Business Days before
the relevant payment dates, which payment dates correspond to the
interest payment dates on the Subordinated Debentures.
Distributions payable on any Securities that are not punctually
paid on any Distribution payment date, as a result of the
Subordinated Debenture Issuer having failed to make a payment
under the Subordinated Debentures, will cease to be payable to the
Person in whose name such Securities are registered on the
relevant record date, and such defaulted Distribution will instead
be payable to the Person in whose name such Securities are
registered on the special record date or other specified date
determined in accordance with the Indenture. If any date on which
Distributions are payable on the Securities is not a Business Day,
then payment of the Distribution payable on such date will be made
on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if
made on such date.
(d) In the event that there is any money or other property held by or
for the Trust that is not accounted for hereunder, such property
shall be distributed Pro Rata in accordance with paragraph 8
hereof among the Holders of the Securities.
(e) All Distributions paid with respect to the Preferred Securities
and the Common Securities will be paid Pro Rata in accordance with
paragraph 8 hereof to the Holders thereof entitled thereto. If an
Event of Default has occurred and is continuing, the Preferred
Securities shall have a priority over the Common Securities with
respect to Distributions.
3. Liquidation Distribution Upon Dissolution.
In the event of any voluntary or involuntary dissolution, winding-up or
termination of the Trust, the Holders of the Securities on the date of the
dissolution, winding-up or termination, as the case may be, will be entitled
to receive out of the assets of the Trust available for distribution to
Holders of Securities after satisfaction of liabilities of creditors an
amount equal to the aggregate of the stated liquidation amount of $25 per
Security plus accrued and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"), unless, in
48
connection with such dissolution, winding-up or termination, Subordinated
Debentures in an aggregate principal amount equal to the aggregate stated
liquidation amount of such Securities, with an interest rate equal to the
Coupon Rate of, and bearing accrued and unpaid interest in an amount equal
to the accrued and unpaid Distributions on, such Securities, shall be
distributed on a Pro Rata basis to the Holders of the Securities in exchange
for such Securities.
If, upon any such dissolution, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by
the Trust on the Securities shall be paid on a Pro Rata basis in accordance
with paragraph 8 hereof.
4. Redemption and Distribution.
(a) Upon the repayment of the Subordinated Debentures in whole or in
part, whether at maturity or upon redemption, the proceeds from
such repayment or payment shall be simultaneously applied to
redeem Securities having an aggregate liquidation amount equal to
the aggregate principal amount of the Subordinated Debentures so
repaid or redeemed at a redemption price of $25 per Security plus
an amount equal to accrued and unpaid Distributions thereon at the
date of the redemption, payable in cash (the "Redemption Price").
Holders will be given not less than 30 nor more than 60 days
notice of such redemption.
(b) If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the Preferred Securities will
be redeemed Pro Rata in accordance with paragraph 8 hereof and the
Preferred Securities to be redeemed will be as described in
Paragraph 4(f)(ii) below.
(c) If, at any time, a Tax Event or an Investment Company Event (each
as defined below, and each a "Special Event") shall occur and be
continuing the Regular Trustees shall, except in certain limited
circumstances in relation to a Tax Event described in this Section
4(c), dissolve the Trust and, after satisfaction of creditors,
cause Subordinated Debentures and, held by the Property Trustee,
having an aggregate principal amount equal to the aggregate stated
liquidation amount of, with an interest rate identical to the
Coupon Rate of, and accrued and unpaid interest equal to accrued
and unpaid Distributions on and having the same record date for
payment, as the Securities, to be distributed to the Holders of
the Securities in liquidation of such Holders' interests in the
Trust on a Pro Rata basis in accordance with paragraph 8 hereof,
within 90 days following the occurrence of such Special Event (the
"90 Day Period"); provided, however, that in the case of the
occurrence of a Tax Event, as a condition of such dissolution and
distribution, the Regular Trustees shall have received an opinion
of a nationally recognized independent tax counsel experienced in
such matters (a "No Recognition Opinion"), which opinion may rely
on published revenue rulings of the Internal Revenue Service, to
the effect that the Holders of the Securities will not recognize
any gain or loss for United States federal income tax purposes as
a result of the dissolution of the Trust and the distribution of
Subordinated Debentures, and provided, further, that, if at the
time there is available to the Trust the opportunity to eliminate,
within the 90 Day Period, the Special Event by taking some
ministerial action, such as filing a form or making an election,
or pursuing some other similar reasonable measure that has no
adverse effect on the Trust, the Subordinated Debenture Issuer,
the Sponsor or the Holders of the Securities ("Ministerial
Action"), the Trust will pursue such Ministerial Action in lieu of
dissolution.
If in the case of the occurrence of a Tax Event (i) the
Subordinated Debenture Issuer has received an opinion (a
"Redemption Tax Opinion") of a nationally recognized independent
tax counsel experienced in such matters that, as a result of a Tax
Event, there is more than an insubstantial risk that the
Subordinated Debenture Issuer would be precluded from deducting
the interest on the Subordinated Debentures for United States
federal income tax purposes even if the Subordinated Debentures
were distributed to the the Trust as described in this paragraph
4(c), or (ii) the Regular Trustees shall have been informed by
49
such tax counsel that a No Recognition Opinion cannot be delivered
to the Trust, the Subordinated Debenture Issuer shall have the
right, upon not less than 30 nor more than 60 days notice, to
redeem the Subordinanted Debentures in whole or in part for cash
within 90 days following the occurrence of such Tax Event, and,
following such redemption, Securities with an aggregate
liquidation amount equal to the aggregate principal amount of the
Subordinated Debentures so redeemed shall be redeemed by the Trust
at the Redemption Price on a Pro Rata basis in accordance with
paragraph 8 hereof; provided, however, that, if at the time there
is available to the Trust the opportunity to eliminate, within
such 90 day period, the Tax Event by taking some Ministerial
Action, the Trust or the Subordinated Debenture Issuer will pursue
such Ministerial Action in lieu of redemption. The Common
Securities will be redeemed Pro Rata with the Preferred
Securities, except that if an an Event of Default has occurred an
is continuing, the Preferred Securities will have priority over
the Common Securities with respect to payment of the Redemption
Price.
"Tax Event" means that the Regular Trustees shall hae received an
opinion of a nationally recognized independent tax counsel
experienced in such matters (a "Dissolution Tax Opinion") to the
effect that, as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any
regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or (b) any
amendment to, or change in, an interpretation or application of
any such laws or regulations by any legislative body, court,
governmental agency or regulatory authority, which amendments or
change is enacted, promulgated, issued or announced or which
interpretation or pronouncement is issued or announced or which
action is taken, in each case on or after the date of the
Prospectus Supplement, there is more than an insubstantial risk
that (i) the Trust would be subject to United States federal
income tax with respect to interest accrued or received on the
Subordinated Debentures, (ii) the Trust would be subject to more
than a de minimis amount of taxes, duties or other governmental
charges, or (iii) interest payable by the Subordinated Debenture
Issuer to the Trust on the Subordinated Debentures would not be
deductible, in whole or in part, by the Subordinated Debenture
Issuer for United States federal income tax purposes.
"Investment Company Event" means that the Regular Trustees shall
have received an opinion of a nationally recognized independent
counsel experienced in practice under the Investment Company Act
that, as a result of the occurrence of a change in law or
regulation or a written change in interpretation or application of
law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), there
is a more than an insubstantial risk that the Trust is or will be
considered an Investment Company which is required to be
registered under the Investment Company Act, which Change in 1940
Act Law becomes effective on or after the date of the Prospectus
Supplement.
On and from the date fixed by the Regular Trustees for any
distribution of Subordinated Debentures and dissolution of the
Trust: (i) the Securities will no longer be deemed to be
outstanding, (ii) the Depository or its nominee (or any successor
Depository or its nominee) will receive one or more global
certificate or certificates representing the Subordinated
Debentures to be delivered upon such distribution, and having an
aggregate principal amount equal to the aggregate stated
liquidation amount of, with an interest rate identical to the
Coupon Rate of, and accrued and unpaid interest equal to accrued
and unpaid Distributions on such Securities.
(d) The Trust may not redeem fewer than all the outstanding Securities
unless all accrued and unpaid Distributions have been paid on all
Securities for all quarterly Distribution periods terminating on
or before the date of redemption.
(e) If the Subordinated Debentures are distributed to Holders of the
Securities, pursuant to the terms of the Indenture, the
Subordinated Debenture Issuer will use its best efforts to have
50
the Subordinated Debentures listed on the New York Stock Exchange
or on such other exchange as the Preferred Securities were listed
immediately prior to the distribution of the Subordinated
Debentures.
(f) Redemption or Distribution Procedures.
(i) Notice of any redemption of, or notice of distribution of
Subordinated Debentures in exchange for the Securities (a
"Redemption/Distribution Notice") will be given by the
Trust by mail to each Holder of Securities to be redeemed
or exchanged not fewer than 30 nor more than 60 days
before the date fixed for redemption or exchange thereof
which, in the case of a redemption, will be the date fixed
for redemption of the Subordinated Debentures. For
purposes of the calculation of the date of redemption or
exchange and the dates on which notices are given pursuant
to this paragraph 4(f)(i), a Redemption/Distribution
Notice shall be deemed to be given on the day such notice
is first mailed by first-class mail, postage prepaid, to
Holders of Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of Securities at
the address of each such Holder appearing in the Register.
No defect in the Redemption/Distribution Notice or in the
mailing of either thereof with respect to any Holder shall
affect the validity of the redemption or exchange
proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding
Securities are to be redeemed, the Securities to be
redeemed shall be redeemed Pro Rata in accordance with
paragraph 8 hereof.
(iii) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice, which notice may only be
issued if the Subordinated Debentures are redeemed as set
out in this paragraph 4 (which notice will be
irrevocable), then (A) while the Preferred Securities are
in the form of Global Securities, with respect to the
Preferred Securities, by 12:00 noon, New York City time,
on the redemption date, provided that the Subordinated
Debenture Issuer has paid the Property Trustee a
sufficient amount of cash in connection with the related
redemption or maturity of the Subordinated Debentures, the
Property Trustee will pay the Depository (or successor
Depository or its nominee) the applicable Redemption Price
with respect to the Preferred Securities, and (B) with
respect to Preferred Securities issued in definitive form
and Common Securities, provided that the Subordinated
Debenture Issuer has paid the Property Trustee a
sufficient amount of cash in connection with the related
redemption or maturity of the Subordinated Debentures, the
Property Trustee will pay the relevant Redemption Price to
the Holders of such Securities by check mailed to the
address of the relevant Holder appearing on the Register
on the redemption date. If a Redemption/ Distribution
Notice shall have been given and funds deposited as
required, if applicable, then immediately prior to the
close of business on the date of such deposit, or on the
redemption date, as applicable, distributions will cease
to accrue on the Securities so called for redemption and
all rights of Holders of such Securities so called for
redemption will cease, except the right of the Holders of
such Securities to receive the Redemption Price, but
without interest on such Redemption Price. Neither the
Regular Trustees nor the Trust shall be required to
register or cause to be registered the transfer of any
Securities that have been so called for redemption. If
any date fixed for redemption of Securities is not a
Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such
Business Day falls in the next calendar year, such payment
will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on
51
such date fixed for redemption. If payment of the
Redemption Price in respect of any Securities is
improperly withheld or refused and not paid either by the
Property Trustee or by the Sponsor as guarantor pursuant
to the relevant Securities Guarantee, Distributions on
such Securities will continue to accrue from the original
redemption date to the actual date of payment, in which
case the actual payment date will be considered the date
fixed for redemption for purposes of calculating the
Redemption Price.
(iv) Redemption/Distribution Notices shall be sent by the
Regular Trustees on behalf of the Trust to (A) in respect
of the Preferred Securities, the Depository (or successor
Depository or its nominee) if Preferred Securities are in
the form of Global Securities or, if Preferred Securities
have been issued in definitive form, to the Holders
thereof, and (B) in respect of the Common Securities to
the Holder thereof.
(v) Subject to the foregoing and applicable law (including,
without limitation, United States federal securities
laws), provided the acquirer is not the Holder of the
Common Securities or the obligor under the Indenture, the
Sponsor or any of its subsidiaries may at any time and
from time to time purchase outstanding Preferred
Securities by tender, in the open market or by private
agreement.
5. Voting Rights - Preferred Securities.
(a) Except as provided under paragraphs 5(b) and 7 and as otherwise
required by law and the Declaration, the Holders of the Preferred
Securities will have no voting rights.
(b) Subject to the requirements set forth in this paragraph, the
Holders of a Majority in liquidation amount of the Preferred
Securities, voting separately as a class may direct the time,
method, and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or
power conferred upon the Property Trustee under the Declaration,
including (i) directing the time, method, place of conducting any
proceeding for any remedy available to the Subordinated Debenture
Trustee, or exercising any trust or power conferred on the
Subordinated Debenture Trustee with respect to the Subordinated
Debentures, (ii) waive any past default and its consequences that
is waivable under Section 513 of the Indenture, or (iii) exercise
any right to rescind or annul a declaration that the principal of
all the Subordinated Debentures shall be due and payable,
provided, however, that, where a consent under the Indenture would
require the consent or act of the Holders of greater than a
majority of the Holders in principal amount of Subordinated
Debentures affected thereby, (a "Super Majority"), the Property
Trustee may only give such consent or take such action at the
direction of the Holders of at least the proportion in liquidation
amount of the Preferred Securities which the relevant Super
Majority represents of the aggregate principal amount of the
Subordinated Debentures outstanding. The Property Trustee shall
not revoke any action previously authorized or approved by a vote
of the Holders of the Preferred Securities. Other than with
respect to directing the time, method and place of conducting any
remedy available to the Property Trustee or the Subordinated
Debenture Trustee as set forth above, the Property Trustee shall
not take any action in accordance with the directions of the
Holders of the Preferred Securities under this paragraph unless
the Property Trustee has obtained an opinion of tax counsel to the
effect that the Trust will not be classified as other than a
grantor trust for United States federal income tax purposes on
account of such action. Subject to certain limitations set forth
in the Declaration, if the Property Trustee fails to enforce its
rights under the Declaration, any Holder of Preferred Securities
may institute a legal proceeding directly against any Person to
enforce the Property Trustee's rights under the Declaration
without first instituting a legal proceeding against the Property
Trustee or any other Person.
52
Any approval or direction of Holders of Preferred Securities may
be given at a separate meeting of Holders of Preferred Securities
convened for such purpose, at a meeting of all of the Holders of
Securities in the Trust or pursuant to written consent. The
Regular Trustees will cause a notice of any meeting at which
Holders of Preferred Securities are entitled to vote, or of any
matter upon which action by written consent of such Holders is to
be taken, to be mailed to each Holder of record of Preferred
Securities. Each such notice will include a statement setting
forth (i) the date of such meeting or the date by which such
action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are
entitled to vote or of such matter upon which written consent is
sought, and (iii) instructions for the delivery of proxies or
consents.
No vote or consent of the Holders of the Preferred Securities will
be required for the Trust to redeem and cancel Preferred
Securities or to distribute the Subordinated Debentures in
accordance with the Declaration and the terms of the Securities.
Notwithstanding that Holders of Preferred Securities are entitled
to vote or consent under any of the circumstances described above,
any of the Preferred Securities that are owned by the Sponsor or
any Affiliate of the Sponsor shall not be entitled to vote or
consent and shall, for purposes of such vote or consent, be
treated as if they were not outstanding.
6. Voting Rights - Common Securities.
(a) Except as provided under paragraphs 6(b), (c) and 7 and as
otherwise required by law and the Declaration, the Holders of the
Common Securities will have no voting rights.
(b) The Holders of the Common Securities are entitled, in accordance
with Article V of the Declaration, to vote to appoint, remove or
replace any Trustee or to increase or decrease the number of
Trustees.
(c) Subject to Section 2.6 of the Declaration and only after any Event
of Default with respect to the Preferred Securities has been
cured, waived, or otherwise eliminated, and subject to the
requirements of the second to last sentence of this paragraph, the
Holders of a Majority in liquidation amount of the Common
Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or
power conferred upon the Property Trustee under the Declaration,
including (i) directing the time, method, place of conducting any
proceeding for any remedy available to the Subordinated Debenture
Trustee, or exercising any trust or power conferred on the
Subordinated Debenture Trustee with respect to the Subordinated
Debentures, (ii) waive any past default and its consequences that
is waivable under the Indenture, or (iii) exercise any right to
rescind or annul a declaration that the principal of all the
Subordinated Debentures shall be due and payable, provided,
however, that, where a consent or action under the Indenture would
require the consent or act of the Holders of a Super Majority in
principal amount of Subordinated Debentures affected thereby, the
Property Trustee may only give such consent or take such action at
the direction of the Holders of at least the proportion in
liquidation amount of the Common Securities which the relevant
Super Majority represents of the aggregate principal amount of the
Subordinated Debentures outstanding. Pursuant to this paragraph
6(c), the Property Trustee shall not revoke any action previously
authorized or approved by a vote of the Holders of the Preferred
Securities. Other than with respect to directing the time, method
and place of conducting any remedy available to the Property
Trustee or the Subordinated Debenture Trustee as set forth above,
the Property Trustee shall not take any action in accordance with
the directions of the Holders of the Common Securities under this
paragraph unless the Property Trustee has obtained an opinion of
tax counsel to the effect that the Trust will not be classified as
other than a grantor trust for United States federal income tax
purpose on account of such action. Subject to certain limitations
set forth in the Declaration, if the Property Trustee fails to
53
enforce its rights under the Declaration, any Holder of Common
Securities may institute a legal proceeding directly against any
Person to enforce the Property Trustee's rights under the
Declaration, without first instituting a legal proceeding against
the Property Trustee or any other Person.
Any approval or direction of Holders of Common Securities may be
given at a separate meeting of Holders of Common Securities
convened for such purpose, at a meeting of all of the Holders of
Securities in the Trust or pursuant to written consent. The
Regular Trustees will cause a notice of any meeting at which
Holders of Common Securities are entitled to vote, or of any
matter upon which action by written consent of such Holders is to
be taken, to be mailed to each Holder of record of Common
Securities. Each such notice will include a statement setting
forth (i) the date of such meeting or the date by which such
action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are
entitled to vote or of such matter upon which written consent is
sought, and (iii) instructions for the delivery of proxies or
consents.
No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or
to distribute the Subordinated Debentures in accordance with the
Declaration and the terms of the Securities.
7. Amendments to Declaration and Indenture.
(a) In addition to any requirements under Section 12.1 of the
Declaration, if any proposed amendment to the Declaration provides
for, or the Regular Trustees otherwise propose to effect, (i) any
action that would adversely affect the powers, preferences or
special rights of the Securities, whether by way of amendment to
the Declaration or otherwise, or (ii) the dissolution, winding-up
or termination of the Trust, other than as described in Section
8.1 of the Declaration, then the Holders of outstanding Securities
as a class, will be entitled to vote on such amendment or proposal
(but not on any other amendment or proposal) and such amendment or
proposal shall not be effective except with the approval of the
Holders of at least 66-2/3% in liquidation amount of the
Securities, voting together as a single class; provided, further,
if any amendment or proposal referred to in clause (i) above would
adversely affect only the Preferred Securities or only the Common
Securities, then only the affected class will be entitled to vote
on such amendment or proposal and such amendment or proposal shall
not be effective except with the approval of 66-2/3% in
liquidation amount of such class of Securities.
(b) In the event the consent of the Property Trustee as the holder of
the Subordinated Debentures is required under the Indenture with
respect to any amendment, modification or termination of the
Indenture or the Subordinated Debentures, the Property Trustee
shall request the direction of the Holders of the Securities with
respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification or termination
as directed by a Majority in liquidation amount of the Securities
voting together as a single class; provided, however, that where a
consent under the Indenture would require the consent of the
Holders of a Super Majority in aggregate principal amount of the
Subordinated Debentures, the Property Trustee may only give such
consent at the direction of the Holders of at least the proportion
in liquidation amount of the Securities which the relevant Super
Majority represents of the aggregate principal amount of the
Subordinated Debentures outstanding; provided, further, that the
Property Trustee shall not take any action in accordance with the
directions of the Holders of the Securities under this paragraph
7(b) unless the Property Trustee has obtained an opinion of tax
counsel to the effect that the Trust will not be classified as
other than a grantor trust for United States federal income tax
purposes on account of such action.
8. Pro Rata.
A reference in these terms of the Securities to any payment, distribution or
treatment as being "Pro Rata" shall mean pro rata to each Holder of
54
Securities according to the aggregate liquidation amount of the Securities
held by the relevant Holder in relation to the aggregate liquidation amount
of all Securities outstanding unless, in relation to a payment, an Event of
Default under the Indenture has occurred and is continuing, in which case
any funds available to make such payment shall be paid first to each Holder
of the Preferred Securities pro rata according to the aggregate liquidation
amount of Preferred Securities held by the relevant Holder relative to the
aggregate liquidation amount of all Preferred Securities outstanding, and
only after satisfaction of all amounts owed to the Holders of the Preferred
Securities, to each Holder of Common Securities pro rata according to the
aggregate liquidation amount of Common Securities held by the relevant
Holder relative to the aggregate liquidation amount of all Common Securities
outstanding.
9. Ranking.
The Preferred Securities rank pari passu and payment thereon shall be made
Pro Rata with the Common Securities except that, where an Event of Default
occurs and is continuing under the Indenture in respect of the Subordinated
Debentures held by the Property Trustee, the rights of Holders of the Common
Securities to payment in respect of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights to
payment of the Holders of the Preferred Securities.
10. Listing.
The Regular Trustees shall use their best efforts to cause the Preferred
Securities to be listed for quotation on the New York Stock Exchange, Inc.
11. Acceptance of Securities Guarantee and Indenture.
Each Holder of Preferred Securities and Common Securities, by the acceptance
thereof, agrees to the provisions of the Preferred Securities Guarantee and
the Common Securities Guarantee, respectively, including the subordination
provisions therein and to the provisions of the Indenture.
12. No Preemptive Rights.
The Holders of the Securities shall have no preemptive rights to subscribe
for any additional securities.
13. Miscellaneous.
These terms constitute a part of the Declaration and may be amended only in
accordance with the provisions of the Declaration.
These Securities shall be governed by the laws of the State of Delaware.
The Sponsor will provide a copy of the Declaration, the Preferred Securities
Guarantee or the Common Securities Guarantee (as may be appropriate), and
the Indenture to a Holder without charge on written request to the Trust at
its principal place of business.
55
<PAGE>
ANNEX I
Number Number of Preferred Securities
Aggregate Liquidation Amount
CUSIP NO. _____________
___% Trust Originated Preferred Securities.SM ("TOPrS"SM)
(liquidation amount $25 per Preferred Security)
of
PACIFIC TELESIS FINANCING I
PACIFIC TELESIS FINANCING I, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that
_____________________________ (the "Holder") is the registered owner of
preferred securities of the Trust representing undivided beneficial
interests in the assets of the Trust designated the _______% Trust
Originated Preferred Securities (liquidation amount $25 per Preferred
Security) (the "Preferred Securities"). The Preferred Securities are
transferable on the Register, in person or by a duly authorized attorney,
upon surrender of this certificate duly endorsed and in proper form for
transfer. The designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Preferred Securities are and shall in
all respects be subject to the provisions of the Amended and Restated
Declaration of Trust dated as of ________, 1995, as the same may be amended
from time to time (the "Declaration"), including the designation of the
terms of the Preferred Securities as set forth in Exhibit A to the
Declaration. Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the
benefits of the Declaration and of the Preferred Securities Guarantee to the
extent provided therein. Pacific Telesis Group as the Sponsor will provide
a copy of the Declaration, the Preferred Securities Guarantee and the
Indenture to a Holder without charge upon written request to the Trust at
its principal place of business.
Upon receipt hereof, the Holder is bound by the Declaration and is entitled
to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal income
tax purposes, the Subordinated Debentures as indebtedness and the Preferred
Securities as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this day of
___________________, 199__.
{ }
as Trustee
______________________________________
{ }
as Trustee
_______________________________________
56
_____________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security to:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Insert assignee's social security or tax identification number)
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
_________________________________________________________________
_________________________________________________________________
___________________________________________________________ agent
to transfer this Preferred Security on the Register. The agent may
substitute another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Preferred
Security)
57
<PAGE>
ANNEX II
Number Number of Common Securities
___% Trust Originated Common Securities.
(liquidation amount $25 per Common Security)
of
PACIFIC TELESIS FINANCING I
PACIFIC TELESIS FINANCING I, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that
_____________________________ (the "Holder") is the registered owner of
common securities of the Trust representing undivided beneficial interests
in the assets of the Trust designated the _______% Trust Originated Common
Securities (liquidation amount $25 per Common Security) (the "Common
Securities"). The Common Securities are transferable on the Register, in
person or by a duly authorized attorney, upon surrender of this certificate
duly endorsed and in proper form for transfer. The designation, rights,
privileges, restrictions, preferences and other terms and provisions of the
Common Securities are and shall in all respects be subject to the provisions
of the Amended and Restated Declaration of Trust dated as of
___________________, 1995, as the same may be amended from time to time (the
"Declaration"), including the designation of the terms of the Common
Securities as set forth in Exhibit A to the Declaration. Capitalized terms
used herein but not defined shall have the meaning given them in the
Declaration. The Holder is entitled to the benefits of the Common
Securities Guarantee to the extent provided therein. The Trust will provide
a copy of the Declaration, the Common Securities Guarantee and the Indenture
to a Holder without charge upon written request to the Trust at its
principal place of business.
Upon receipt hereof, the Holder is bound by the Declaration and is entitled
to the benefits thereunder.
By acceptance, the Holder agrees to treat for United States federal income
tax purposes the Subordinated Debentures as indebtedness and the Common
Securities as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this day of
_____________________, 199__.
{ }
as Trustee
___________________________________
{ }
as Trustee
_________________________________
58
<PAGE>
_____________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common
Security to:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Insert assignee's social security or tax identification number)
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
_________________________________________________________________
_________________________________________________________________
___________________________________________________________ agent to
transfer this Common Security on the Register. The agent may substitute
another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this Preferred
Security)
59
<PAGE
EXHIBIT B
SPECIMEN OF DEBENTURE
60
<PAGE>
EXHIBIT 4-G
-----------
FORM OF DEBT SECURITIES INDENTURE
AMONG PACIFIC TELESIS GROUP AND
FIRST NATIONAL BANK OF CHICAGO, AS TRUSTEE
1
<PAGE>
___________________________________________________________________________
PACIFIC TELESIS GROUP
TO
THE FIRST NATIONAL BANK OF CHICAGO
Trustee
_________________________________
Indenture
Dated as of _____________, 1995
_________________________________
___________________________________________________________________________
2
<PAGE>
CROSS-REFERENCE TABLE*
Section of Trust
Indenture Act of 1939, Section of
as amended Indenture
------------------- ------------
310(a)...................................................... 607
310(b)...................................................... 608
310(c)...................................................... Inapplicable
311(a)...................................................... 612
311(b)...................................................... 612
311(c)...................................................... Inapplicable
312(a)...................................................... 701
312(b)...................................................... 702
312(c)...................................................... 702
313(a)...................................................... 703
313(b)(1) .................................................. Inapplicable
313(b)(2) .................................................. 703
313(c)...................................................... 703
313(d)...................................................... 703
314(a)(1)................................................... 704 (1)
314(a)(2)................................................... 704 (2)
314(a)(3)................................................... 704 (3)
314(a)(4)................................................... 704 (4)
314(b)...................................................... Inapplicable
314(c)...................................................... 102
314(d)...................................................... Inapplicable
314(e)...................................................... 102
314(f)...................................................... Inapplicable
315(a)...................................................... 602
315(b)...................................................... 601
315(c)...................................................... 601
315(d)...................................................... 601
315(e)...................................................... 515
316(a)...................................................... 512
316(b)...................................................... 508
316(c)...................................................... 104(e)
317(a)...................................................... 503, 504
317(b)...................................................... 1003
318(a)...................................................... 113
318(b)...................................................... Inapplicable
318(c)...................................................... 113
____________________
* This Cross-Reference Table does not constitute part of the Indenture
and shall not have any bearing upon the interpretation of any of its
terms or provisions.
3
<PAGE>
TABLE OF CONTENTS*
Page
====
PARTIES
RECITALS
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions..................................
Act
Additional Amounts
Affiliate
Authenticating Agent
Authorized Newspaper
Bearer Security
Board of Directors
Board Resolution
Business Day
CEDEL S.A.
Commission
Common Depositary
Common Securities
Common Securities Guarantee
Company
Company Request or Company Order
Conversion Date
Conversion Event
Corporate Trust Office
corporation
coupon
Currency
Declaration
Default
Defaulted Interest
Dollar or $
Dollar Equivalent of the Currency Unit
Dollar Equivalent of the Foreign Currency
ECU
Election Date
Euroclear
European Communities
____________________
* This Table of Contents does not constitute part of the Indenture and
shall not have any bearing upon the interpretation of any of its terms or
provisions.
4
<PAGE>
TABLE OF CONTENTS*
(CONT'D)
Page
====
European Monetary System
Event of Default
Exchange Date
Exchange Rate Agent
Exchange Rate Officer's Certificate
Federal Bankruptcy Code
Foreign Currency
Government Obligations
Holder
Indenture
Indexed Security
Interest Payment Date
Market Exchange Rate
Maturity
Officers' Certificate
Opinion of Counsel
Original Issue Discount Security
Outstanding
Pacific Telesis Trust
Paying Agent
Person
Place of Payment
Predecessor Security
Preferred Securities
Preferred Securities Guarantee
Redemption Date
Redemption Price
Registered Security
Regular Record Date
Repayment Date
Responsible Officer
Securities
Security Register and Security Registrar
Special Record Date
Stated Maturity
Subsidiary
Trust Indenture Act or TIA
Trust Securities
Trust Securities Guarantees
Trustee
United States
United States person
Valuation Date
Vice President
Voting Stock
Yield to Maturity
SECTION 102. Compliance Certificates and Opinions..................
SECTION 103. Form of Documents Delivered to Trustee................
SECTION 104. Acts of Holders.......................................
5
<PAGE>
TABLE OF CONTENTS*
(CONT'D)
Page
====
SECTION 105. Notices, etc. to Trustee and Company..................
SECTION 106. Notice to Holders; Waiver.............................
SECTION 107. Effect of Headings and Table of Contents..............
SECTION 108. Successors and Assigns................................
SECTION 109. Separability Clause...................................
SECTION 110. Benefits of Indenture.................................
SECTION 111. Governing Law.........................................
SECTION 112. Legal Holidays........................................
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.......................................
SECTION 202. Form of Trustee's Certificate of Authentication.......
SECTION 203. Securities Issuable in Global Form....................
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series..................
SECTION 302. Denominations.........................................
SECTION 303. Execution, Authentication, Delivery and Dating........
SECTION 304. Temporary Securities..................................
SECTION 305. Registration of Transfer and Exchange.................
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities......
SECTION 307. Payment of Interest; Interest Rights Preserved;
Optional Interest Reset..........................
SECTION 308. Persons Deemed Owners.................................
SECTION 309. Cancellation..........................................
SECTION 310. Computation of Interest...............................
SECTION 311. Currency and Manner of Payments in Respect of
Securities.......................................
SECTION 312. Appointment and Resignation of Successor Exchange
Rate Agent.......................................
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture................
SECTION 402. Application of Trust Money.............................
ARTICLE FIVE
EVENTS OF DEFAULT AND REMEDIES
SECTION 501. Events of Default......................................
SECTION 502. Acceleration of Maturity; Rescission and Annulment.....
SECTION 503. Collection of Indebtedness and Suits for Enforcemnt
by Trustee........................................
SECTION 504. Trustee May File Proofs of Claim.......................
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities........................................
SECTION 506. Application of Money Collected.........................
SECTION 507. Limitation on Suits ...................................
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest..............................
SECTION 509. Restoration of Rights and Remedies.....................
SECTION 510. Rights and Remedies Cumulative.........................
SECTION 511. Delay or Omission Not Waiver...........................
SECTION 512. Control by Holders.....................................
SECTION 513. Waiver of Past Defaults ...............................
SECTION 514. Waiver of Stay or Extension Laws.......................
SECTION 515. Undertaking for Costs..................................
6
<PAGE>
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.....................................
SECTION 602. Certain Rights of Trustee. Subject to the provisions
of TIA Sections 315(a) through 315(d).............
SECTION 603. Trustee Not Responsible for Recitals or Issuance of
Securities........................................
SECTION 604. May Hold Securities ...................................
SECTION 605. Money Held in Trust ...................................
SECTION 606. Compensation and Reimbursement.........................
SECTION 607. Corporate Trustee Required; Eligibility................
SECTION 608. Resignation and Removal; Appointment of
Successor.........................................
SECTION 609. Acceptance of Appointment by Successor.................
SECTION 610. Merger, Conversion, Consolidation or Succession to
Business .........................................
SECTION 611. Appointment of Authenticating Agent....................
SECTION 612. Preferential Collection of Claims Against Company......
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Information As to Names
and Addresses of Holders of Securities............
SECTION 702 Preservation of Information; Communication to Holders
of Securities.....................................
SECTION 703. Reports by Trustee.....................................
SECTION 704. Reports by Company.....................................
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain
Terms............................................
SECTION 802. Successor Person Substituted..........................
SECTION 803. Assignment of Rights..................................
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders...
SECTION 902. Supplemental Indentures with Consent of Holders......
SECTION 903. Execution of Supplemental Indentures.................
SECTION 904. Effect of Supplemental Indentures....................
SECTION 905. Conformity with Trust Indenture Act..................
SECTION 906. Reference in Securities to Supplemental Indentures...
SECTION 907. Notice of Supplemental Indentures....................
7
<PAGE>
TABLE OF CONTENTS*
(CONT'D)
ARTICLE TEN
COVENANTS
Page
====
SECTION 1001. Payment of Principal, Premium, if any, and Interest..
SECTION 1002. Maintenance of Office or Agency .....................
SECTION 1003. Money for Securities Payments to Be Held in Trust....
SECTION 1004. Statement as to Compliance...........................
SECTION 1005. Additional Amounts...................................
SECTION 1006. Limitation on Dividends..............................
SECTION 1007. Covenants as to Pacific Telesis Trusts...............
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.............................
SECTION 1102. Election to Redeem; Notice to Trustee................
SECTION 1103. Selection by Trustee of Securities to Be Redeemed....
SECTION 1104. Notice of Redemption.................................
SECTION 1105. Deposit of Redemption Price .........................
SECTION 1106. Securities Payable on Redemption Date................
ECTION 1107. Securities Redeemed in Part..........................
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article.............................
SECTION 1202. Satisfaction of Sinking Fund Payments with
Securities......................................
SECTION 1203. Redemption of Securities for Sinking Fund............
ARTICLE THIRTEEN
REPAYMENT AT OPTION OF HOLDERS
SECTION 1301. Applicability of Article............................
SECTION 1302. Repayment of Securities ............................
SECTION 1303. Exercise of Option..................................
SECTION 1304. When Securities Presented for Repayment
Become Due and Payable .............................
SECTION 1305. Securities Repaid in Part ..........................
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. Discharge of Liability on Outstanding
Securities of any Series............................
Section 1402. Discharge of Certain Covenants and Other
Obligations.........................................
Section 1403. Discharge of Certain Obligations Upon Deposit of
Money or Government Obligations with Trustee........
Section 1404. Unclaimed Moneys......................................
ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1501. Purposes for Which Meetings May Be Called...........
SECTION 1502. Call, Notice and Place of Meetings..................
SECTION 1503. Persons Entitled to Vote at Meetings................
SECTION 1504. Quorum; Action......................................
SECTION 1505. Determination of Voting Rights; Conduct and
Adjournment of Meetings.............................
SECTION 1506. Counting Votes and Recording Action of Meetings.....
8
<PAGE>
INDENTURE, dated as of ______________, 1995, between Pacific Telesis
Group, a corporation duly organized and existing under the laws of the State
of Nevada (herein called the "Company") having its principal office at
130 Kearny Street, San Francisco, CA 94108, and The First National Bank of
Chicago, a national banking association duly organized and existing under
the laws of the United States, Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this Indenture
to provide for the issuance from time to time of its unsecured debentures,
notes or other evidences of indebtedness (herein called the "Securities"),
to be issued in one or more series as in this Indenture provided.
This Indenture is subject to the provisions of the Trust Indenture Act of
1939, as amended, that are required to be part of this Indenture and shall,
to the extent applicable, be governed by such provisions.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal
and proportionate benefit of all Holders of the Securities or of any series
thereof, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them in
this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to
them therein, and the terms "cash transaction" and "self-liquidating paper",
as used in TIA Section 311, shall have the meanings assigned to them in the
rules of the Commission adopted under the Trust Indenture Act;
(3) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as are
generally accepted at the date of such computation; and
(4) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
Certain terms, used principally in Article Three, are defined in that
Article.
"Act", when used with respect to any Holder (as defined below), has the
meaning specified in Section 104.
"Additional Amounts" has the meaning specified in Section 1005.
"Affiliate" of any specified Person (as defined below) means any other
Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person. For the purposes of
this definition, "control" of any specified Person means possession of the
power to direct or cause the direction of the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
9
"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 611 to act on behalf of the Trustee to authenticate Securities.
"Authorized Newspaper" means a newspaper, in the English language or in an
official language of the country of publication, customarily published on
each Business Day, whether or not published on Saturdays, Sundays or
holidays, and of general circulation in each place in connection with which
the term is used or in the financial community of each such place. Where
successive publications are required to be made in Authorized Newspapers,
such publications may be made in the same or in different newspapers in the
same city meeting the foregoing requirements and in each case on any
Business Day.
"Bearer Security" means any Security except a Registered Security (as
defined below).
"Board of Directors" means either the Board of Directors of the Company or
any duly authorized committee of such Board of Directors.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the
Board of Directors and to be in full force and effect on the date of such
certification.
"Business Day", when used with respect to any Place of Payment (as defined
below) or any other particular location referred to in this Indenture or in
the Securities, means, unless otherwise specified with respect to any
Securities pursuant to Section 301, each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in that
Place of Payment or other location are authorized or obligated by law or
regulation to close.
"CEDEL S.A." means Cedel, S.A., or its successor.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or, if
at any time after the execution of this Indenture such Commission is not
existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Depositary" has the meaning specified in Section 304.
"Common Securities" means undivided beneficial interests in the assets of a
Pacific Telesis Trust which rank pari passu with Preferred Securities (as
defined below) issued by such Pacific Telesis Trust (as defined below);
provided, however, that upon the occurrence of an Event of Default (as
defined below), the rights of Holders of Common Securities to payment in
respect to distributions and payments upon liquidation, redemption and
otherwise are subordinated to the rights of Holders of Preferred Securities.
"Common Securities Guarantee" means any Guarantee that the Company enters
into that operates directly or indirectly for the benefit of holders of
Common Securities of such Pacific Telesis Trust.
"Company" means the Person named as the "Company" in the first paragraph of
this Indenture until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall
mean such successor Person.
"Company Request" or "Company Order" means a written request or order signed
in the name of the Company by its Chairman, its President, any Executive
Vice President, any Vice President, its Chief Financial Officer, its
Controller, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Conversion Date" has the meaning specified in Section 311(d).
"Conversion Event" means the cessation of use of (i) a Foreign Currency (as
defined below) both by the government of the country which issued such
Currency and by a central bank or other public institution of or within the
international banking community for the settlement of transactions, (ii) the
ECU both within the European Monetary System (as defined below) and for the
settlement of transactions by public institutions of or within the European
Communities (as defined below) or (iii) any currency unit (or composite
currency) other than the ECU for the purposes for which it was established.
10
"Corporate Trust Office" means the principal corporate trust office of the
Trustee at which at any particular time its corporate trust business shall
be administered, which office on the date of execution of this Indenture is
located at The First National Bank of Chicago, One First National Plaza,
Suite 0126, Chicago, Illinois 60670-0126, except that with respect to
presentation of Securities for payment or for registration of transfer or
exchange, such term shall mean the office or agency of the Trustee at which,
at any particular time, its corporate agency business shall be conducted.
"corporation" includes corporations, associations, companies and business
trusts.
"coupon" means any interest coupon appertaining to a Bearer Security.
"Currency" means any currency or currencies, composite currency or currency
unit or currency units, including, without limitation, the ECU, issued by
the government of one or more countries or by any recognized confederation
or association of such governments.
"Declaration" means, in respect of a Pacific Telesis Trust, the declaration
of trust (or, if applicable, the most recent amended and restated version
thereof) of such Pacific Telesis Trust or any other governing instrument of
such Pacific Telesis Trust.
"Defaulted Interest" has the meaning specified in Section 307.
"Dollar" or "$" means a dollar or other equivalent unit in such coin or
currency of the United States of America as at the time shall be legal
tender for the payment of public and private debts.
"Dollar Equivalent of the Currency Unit" has the meaning specified in
Section 311(g).
"Dollar Equivalent of the Foreign Currency" has the meaning specified in
Section 311(f).
"ECU" means the European Currency Unit as defined and revised from time to
time by the Council of the European Communities.
"Election Date" has the meaning specified in Section 311(h).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
Office, or its successor as operator of the Euroclear System.
"European Communities" means the European Economic Community, the European
Coal and Steel Community and the European Atomic Energy Community.
"European Monetary System" means the European Monetary System established by
the Resolution of December 5, 1978 of the Council of the European
Communities.
"Event of Default" with respect to Securities of any series shall mean any
event specified in Section 501 and any other event as may be established
with respect to the Securities of such series pursuant to Section 301.
"Exchange Date" has the meaning specified in Section 304.
"Exchange Rate Agent" means, with respect to Securities of or within any
series, unless otherwise specified with respect to any Securities pursuant
to Section 301, a New York Clearing House bank, designated pursuant to
Section 301 or Section 312.
"Exchange Rate Officer's Certificate" means a tested telex or a certificate
setting forth (i) the applicable Market Exchange Rate (as defined below) and
(ii) the Dollar or Foreign Currency amounts of principal (and premium, if
any) and interest, if any (on an aggregate basis and on the basis of a
Security having the lowest denomination principal amount determined in
accordance with Section 302 in the relevant Currency), payable with respect
to a Security of any series on the basis of such Market Exchange Rate, sent
(in the case of a telex) or signed (in the case of a certificate) by the
Chief Financial Officer, any Executive Vice President, the Treasurer, any
Vice President or any Assistant Treasurer of the Company.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the United
States Code, as amended from time to time.
11
"Foreign Currency" means any Currency other than the Currency of the United
States.
"Government Obligations" means, unless otherwise specified with respect to
any series of Securities pursuant to Section 301, securities which are (i)
direct obligations of the government which issued the Currency in which the
Securities of a particular series are payable or (ii) obligations of a
Person controlled or supervised by and acting as an agency or
instrumentality of the government which issued the Currency in which the
Securities of such series are payable, the payment of which is
unconditionally guaranteed by such government, which, in either case, are
full faith and credit obligations of such government payable in such
Currency and are not callable or redeemable at the option of the issuer
thereof.
"Holder" means, in the case of a Registered Security, the Person in whose
name a Security is registered in the Security Register and, in the case of a
Bearer Security, the bearer thereof and, when used with respect to any
coupon, shall mean the bearer thereof.
"Indenture" means this instrument as originally executed and as it may from
time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions
hereof, and shall include the terms of particular series of Securities
established as contemplated by Section 301; provided, however, that, if at
any time more than one Person is acting as Trustee under this instrument,
"Indenture" shall mean, with respect to any one or more series of Securities
for which such Person is Trustee, this instrument as originally executed or
as it may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof and shall include the terms of particular series of
Securities for which such Person is Trustee established as contemplated by
Section 301, exclusive, however, of any provisions or terms which relate
solely to other series of Securities for which such Person is not Trustee,
regardless of when such terms or provisions were adopted, and exclusive of
any provisions or terms adopted by means of one or more indentures
supplemental hereto executed and delivered after such Person had become such
Trustee but to which such Person, as such Trustee, was not a party.
"Indexed Security" means a Security the terms of which provide that the
principal amount thereof payable at Stated Maturity (as defined below) may
be more or less than the principal face amount thereof at original issuance.
"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"Market Exchange Rate" means, unless otherwise specified with respect to any
Securities pursuant to Section 301, (i) for any conversion involving a
currency unit on the one hand and Dollars or any Foreign Currency on the
other, the exchange rate between the relevant currency unit and Dollars or
such Foreign Currency calculated by the method specified pursuant to Section
301 for the Securities of the relevant series, (ii) for any conversion of
Dollars into any Foreign Currency, the noon (New York City time) buying rate
for such Foreign Currency for cable transfers quoted in New York City as
certified for customs purposes by the Federal Reserve Bank of New York and
(iii) for any conversion of one Foreign Currency into Dollars or another
Foreign Currency, the spot rate at noon local time in the relevant market at
which, in accordance with normal banking procedures, the Dollars or Foreign
Currency into which conversion is being made could be purchased with the
Foreign Currency from which conversion is being made from major banks
located in either New York City, London or any other principal market for
Dollars or such purchased Foreign Currency, in each case determined by the
Exchange Rate Agent. Unless otherwise specified with respect to any
Securities pursuant to Section 301, in the event of the unavailability of
any of the exchange rates provided for in the foregoing clauses (i), (ii)
and (iii), the Exchange Rate Agent shall use, in its sole discretion and
without liability on its part, such quotation of the Federal Reserve Bank of
New York as of the most recent available date, or quotations from one or
more major banks in New York City, London or another principal market for
the Currency in question, or such other quotations as the Exchange Rate
Agent shall deem appropriate. Unless otherwise specified by the Exchange
Rate Agent, if there is more than one market for dealing in any Currency by
reason of foreign exchange regulations or otherwise, the market to be used
in respect of such Currency shall be that upon which a non-resident issuer
of securities designated in such Currency would purchase such Currency in
12
order to make payments in respect of such securities.
"Maturity", when used with respect to any Security, means the date on which
the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or
by declaration of acceleration, notice of redemption, notice of option to
elect repayment or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman, the
President, an Executive Vice President or a Vice President, and by the Chief
Financial Officer, the Controller, the Treasurer, an Assistant Treasurer,
the Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee. Each such certificate shall include the statements provided for in
Section 102, if and to the extent required by the provisions of such
Section.
"Opinion of Counsel" means a written opinion of legal counsel, who may be
counsel for the Company, including an employee of the Company.
"Original Issue Discount Security" means (a) any Security which provides for
an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section
502 or (b) any other Security which for United States federal income tax
purposes would be considered an Original Issue Discount Security.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered
under this Indenture except:
(i) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or redemption
moneys in the necessary amount has been theretofore deposited with
the Trustee or any Paying Agent (as defined below) (other than the
Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the
Holders of such Securities and any coupons appertaining thereto;
provided that, if such Securities are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or
provision therefor satisfactory to the Trustee has been made;
(iii) Securities, except to the extent provided in Sections 1402 and
1403, with respect to which the Company has effected defeasance
and/or covenant defeasance as provided in Article Fourteen; and
(iv) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than
any such Securities in respect of which there shall have been
presented to the Trustee proof satisfactory to it that such
Securities are held by a bona fide purchaser in whose hands such
Securities are valid obligations of the Company; provided,
however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any
request, demand, authorization, direction, notice, consent or
waiver hereunder or are present at a meeting of Holders for quorum
purposes, and for the purpose of making the calculations required
by TIA Section 313, (i) the principal amount of an Original Issue
Discount Security that may be counted in making such determination
or calculation and that shall be deemed to be Outstanding for such
purpose shall be equal to the amount of principal thereof that
would be (or shall have been declared to be) due and payable, at
the time of such determination, upon a declaration of acceleration
of the Maturity thereof pursuant to Section 502, (ii) the
principal amount of any Security denominated in a Foreign Currency
that may be counted in making such determination or calculation
and that shall be deemed Outstanding for such purpose shall be
equal to the Dollar equivalent, determined as of the date such
Security is originally issued by the Company as set forth in an
Exchange Rate Officer's Certificate delivered to the Trustee, of
the principal amount (or, in the case of an Original Issue
Discount Security, the Dollar equivalent as of such date of
original issuance of the amount determined as provided in clause
(i) above), of such Security, (iii) the principal amount of any
13
Indexed Security that may be counted in making such determination
or calculation and that shall be deemed Outstanding for such
purpose shall be equal to the principal face amount of such
Indexed Security at original issuance, unless otherwise provided
with respect to such Security pursuant to Section 301, and (iv)
Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other
obligor shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to
the satisfaction of the Trustee the pledgee's right so to act with
respect to such Securities and that the pledgee is not the Company
or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor.
"Pacific Telesis Trust" means each of Pacific Telesis Financing I, Pacific
Telesis Financing II and Pacific Telesis Financing III, each, a Delaware
statutory business trust.
"Paying Agent" means any Person (including the Company acting as Paying
Agent) authorized by the Company to pay the principal of (or premium, if
any, on) or interest on any Securities on behalf of the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, or a
government or any agency, authority or political subdivision thereof.
"Place of Payment" means, when used with respect to the Securities of or
within any series, the place or places where the principal of (and premium,
if any, on) and interest on such Securities are payable as specified as
contemplated by Sections 301 and 1002.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by
such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security or a Security to
which a mutilated, destroyed, lost or stolen coupon appertains shall be
deemed to evidence the same debt as the mutilated, destroyed, lost or stolen
Security or the Security to which the mutilated, destroyed, lost or stolen
coupon appertains, as the case may be.
"Preferred Securities" means undivided beneficial interests in the assets of
a Pacific Telesis Trust which rank pari passu with Common Securities issued
by such Pacific Telesis Trust, provided, however that upon the occurrence of
an Event of Default, the rights of Holders of Common Securities to payment
in respect of distributions and payments upon liquidation, redemption and
otherwise are subordinated to the rights of Holders of Preferred Securities.
"Preferred Securities Guarantee" means any Guarantee that the Company may
enter into with The First National Bank of Chicago, as Trustee or other
Persons that operate directly or indirectly for the benefit of Holders of
Preferred Securities of such Pacific Telesis Trust.
"Redemption Date", when used with respect to any Security to be redeemed, in
whole or in part, means the date fixed for such redemption pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Registered Security" means any Security registered in the Security
Register.
"Regular Record Date" for the interest payable on any Interest Payment Date
on the Registered Securities of or within any series means the date
specified for that purpose as contemplated by Section 301.
"Repayment Date" means, when used with respect to any Security to be repaid
at the option of the Holder, the date fixed for such repayment pursuant to
this Indenture.
14
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice chairman of the board of directors, the chairman or any
vice chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, or any vice president,
secretary, any assistant secretary, treasurer, any assistant treasurer,
cashier, any assistant cashier, any trust officer or assistant trust
officer, the controller or any assistant controller within the corporate
trust administration division or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above-designated officers, and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities without regard to series
authenticated and delivered under this Indenture; provided, however, that if
at any time there is more than one Person acting as Trustee under this
Indenture, "Securities" with respect to the Indenture as to which such
Person is Trustee shall have the meaning stated in the first recital of this
Indenture and shall more particularly mean Securities authenticated and
delivered under this Indenture, exclusive, however, of Securities of any
series as to which such Person is not Trustee.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest on the
Registered Securities of or within any series means a date fixed by the
Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any installment
of principal thereof or interest thereon, means the date specified in such
Security or a coupon representing such installment of interest as the fixed
date on which the principal of such Security or such installment of
principal or interest is due and payable, as such date may be extended
pursuant to the provisions of any Indenture Supplemental hereto.
"Subsidiary" means any corporation of which at the time of determination the
Company, directly and/or indirectly through one or more Subsidiaries, owns
more than 50% of the shares of Voting Stock (as defined below).
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in
force at the date as of which this Indenture was executed, except as
provided in Section 905.
"Trust Securities" means Common Securities and Preferred Securities.
"Trust Securities Guarantees" means the Common Securities Guarantee and the
Preferred Securities Guarantee.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this Indenture until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall
mean or include each Person who is then a Trustee hereunder; provided,
however, that if at any time there is more than one such Person, "Trustee"
as used with respect to the Securities of any series shall mean only the
Trustee with respect to Securities of that series.
"United States" means, unless otherwise specified with respect to any
Securities pursuant to Section 301, the United States of America (including
the states and the District of Columbia), its territories, its possessions
and other areas subject to its jurisdiction.
"United States person" means, unless otherwise specified with respect to any
Securities pursuant to Section 301, an individual who is 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 or any
political subdivision thereof or an estate or trust the income of which is
subject to United States federal income taxation regardless of its source.
"Valuation Date" has the meaning specified in Section 311(c).
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
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"Voting Stock" means stock of the class or classes having general voting
power under ordinary circumstances to elect at least a majority of the board
of directors, managers or trustees of a corporation (irrespective of whether
or not at the time stock of any other class or classes shall have or might
have voting power by reason of the happening of any contingency).
"Yield to Maturity" means the yield to maturity, computed at the time of
issuance of a Security (or, if applicable, at the most recent
redetermination of interest on such Security) and as set forth in such
Security in accordance with generally accepted United States bond yield
computation principles.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent,
if any, provided for in this Indenture (including any covenant compliance
with which constitutes a condition precedent) relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent which relate, or to
the extent they relate, to matters of law, if any, have been complied with,
except that in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of
this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture (other than pursuant to Section
1004) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such covenant or condition has been complied with.
Any certificate, statement or opinion of an officer of the Company or of
counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants, unless such officer or counsel, as the case may be, knows that
the certificate or opinion or representations with respect to accounting
matters upon which his or her certificate, statement or opinion may be based
as aforesaid are erroneous, or in the exercise of reasonable care should
know that the same are erroneous. Any certificate or opinion of any firm of
independent public accountants filed with the Trustee shall contain a
statement that such firm is independent.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but
one such Person may certify or give an opinion with respect to some matters
and one or more other such Persons as to other matters, and any such Person
may certify or give an opinion as to such matters in one or several
documents. Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to matters of law, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows that
the certificate or opinion or representations with respect to the matters
upon which his certificate or opinion is based are erroneous. Any such
certificate or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Company stating that the information with respect
16
to such factual matters is in the possession of the Company, unless such
counsel knows that the certificate or opinion or representations with
respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or
taken by Holders of the Outstanding Securities of all series or
one or more series, as the case may be, may be embodied in and
evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agents duly appointed
in writing. Alternatively, any request, demand, authorization,
direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders of such series may
be embodied in and evidenced by the record of Holders of
Securities of such series voting in favor thereof, either in
person or by proxies duly appointed in writing, at any meeting of
Holders of Securities of such series duly called and held in
accordance with the provisions of Article Fifteen, or a
combination of such instruments and any such record. Except as
herein otherwise expressly provided, such action shall become
effective when such instrument or instruments or record or both
are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments and any
such record (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments or so voting at any
such meeting. Proof of execution of any such instrument or of a
writing appointing any such agent, or of the holding by any Person
of a Security, shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section. The record of any
meeting of Holders of Securities shall be proved in the manner
provided in Section 1506.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness
of such execution or by a certificate of a notary public or other
officer authorized by law to take acknowledgments of deeds,
certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof. Where such execution
is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute
sufficient proof of authority. The fact and date of the execution
of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which
the Trustee reasonably deems sufficient.
(c) The principal amount and serial numbers of Registered Securities
held by any Person, and the date of holding the same, shall be
proved by the Security Register.
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(d) The principal amount and serial numbers of Bearer Securities held
by any Person, and the date of holding the same, may be proved by
the production of such Bearer Securities or by a certificate
executed, as depositary, by any trust company, bank, banker or
other depositary, wherever situated, if such certificate shall be
reasonably deemed by the Trustee to be satisfactory, showing that
at the date therein mentioned such Person had on deposit with such
depositary, or exhibited to it, the Bearer Securities therein
described; or such facts may be proved by the certificate or
affidavit of the Person holding such Bearer Securities, if such
certificate or affidavit is reasonably deemed by the Trustee to be
satisfactory. The Trustee and the Company may assume that such
ownership of any Bearer Security continues until (1) another
certificate or affidavit bearing a later date issued in respect of
the same Bearer Security is produced, or (2) such Bearer Security
is produced to the Trustee by some other Person, or (3) such
Bearer Security is surrendered in exchange for a Registered
Security, or (4) such Bearer Security is no longer Outstanding.
The principal amount and serial numbers of Bearer Securities held
by any Person, and the date of holding the same, may also be
proved in any other manner which the Trustee reasonably deems
sufficient.
(e) If the Company shall solicit from the Holders of Registered
Securities any request, demand, authorization, direction, notice,
consent, waiver or other Act, the Company may, at its option, by
or pursuant to a Board Resolution, fix in advance a record date
for the determination of Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other
Act, but the Company shall have no obligation to do so.
Notwithstanding TIA Section 316(c), such record date shall be the
record date specified in or pursuant to such Board Resolution,
which shall be a date not earlier than the date thirty (30) days
prior to the first solicitation of Holders generally in connection
therewith and not later than the date such solicitation is
completed. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may
be given before or after such record date, but only the Holders of
record at the close of business on such record date shall be
deemed to be Holders for the purposes of determining whether
Holders of the requisite proportion of Outstanding Securities have
authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act,
and for that purpose the Outstanding Securities shall be computed
as of such record date; provided that no such authorization,
agreement or consent by the Holders on such record date shall be
deemed effective unless it shall become effective pursuant to the
provisions of this Indenture not later than eleven months after
the record date.
(f) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every
Security issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made
upon such Security.
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SECTION 105. Notices, etc. to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other documents provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee at its Corporate Trust Office,
Attention: [Corporate Trust Administration Division,] or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid,
to the Company addressed to it at the address of its principal
office specified in the first paragraph of this Indenture or at
any other address previously furnished in writing to the Trustee
by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to Holders of
Registered Securities by the Company or the Trustee, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to each such Holder
affected by such event, at his address as it appears in the Security
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders of Registered Securities is given by mail, neither the failure to
mail such notice, nor any defect in any notice so mailed, to any particular
Holder shall affect the sufficiency of such notice with respect to other
Holders of Registered Securities or the sufficiency of any notice to Holders
of Bearer Securities given as provided. Any notice mailed to a Holder in
the manner herein prescribed shall be conclusively deemed to have been
received by such Holder, whether or not such Holder actually receives such
notice.
In case, by reason of the suspension of or irregularities in regular mail
service or by reason of any other cause, it shall be impractical to mail
notice of any event to Holders of Registered Securities when such notice is
required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be satisfactory to the Trustee shall
be deemed to be sufficient giving of such notice for every purpose
hereunder.
Except as otherwise expressly provided herein or otherwise specified with
respect to any Securities pursuant to Section 301, where this Indenture
provides for notice to Holders of Bearer Securities of any event, such
notice shall be sufficiently given to Holders of Bearer Securities if
published in an Authorized Newspaper in The City of New York and in such
other city or cities as may be specified in such Securities on a Business
Day at least twice, the first such publication to be not earlier than the
earliest date, and not later than the latest date, prescribed for the giving
of such notice. Any such notice shall be deemed to have been given on the
date of the first such publication.
In case by reason of the suspension of publication of any Authorized
Newspaper or Authorized Newspapers or by reason of any other cause it shall
be impracticable to publish any notice to Holders of Bearer Securities as
provided above, then such notification to Holders of Bearer Securities as
shall be given with the approval of the Trustee shall constitute sufficient
notice to such Holders for every purpose hereunder. Neither the failure to
give notice by publication to Holders of Bearer Securities as provided
above, nor any defect in any notice so published, shall affect the
sufficiency of such notice with respect to other Holders of Bearer
Securities or the sufficiency of any notice to Holders of Registered
Securities given as provided herein.
Any request, demand, authorization, direction, notice, consent or waiver
required or permitted under this Indenture shall be in the English language,
except that any published notice may be in an official language of the
country of publication.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either
19
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
SECTION 107. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind its
successors and assigns, whether so expressed or not.
SECTION 109. Separability Clause.
In case any provision in this Indenture or in any Security or coupon shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 110. Benefits of Indenture.
Nothing in this Indenture or in the Securities or coupons, express or
implied, shall give to any Person, other than the parties hereto, any
Authenticating Agent, any Paying Agent, any Securities Registrar and their
successors hereunder and the Holders of Securities or coupons, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 111. Governing Law.
THIS INDENTURE AND THE SECURITIES AND COUPONS SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. THIS
INDENTURE IS SUBJECT TO THE PROVISIONS OF THE TRUST INDENTURE ACT OF 1939,
AS AMENDED, THAT ARE REQUIRED TO BE PART OF THIS INDENTURE AND SHALL, TO THE
EXTENT APPLICABLE, BE GOVERNED BY SUCH PROVISIONS.
SECTION 112. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity or Maturity of any Security shall not be a Business Day at any
Place of Payment, then (notwithstanding any other provision of this
Indenture or of any Security or coupon other than a provision in the
Securities of any series which specifically states that such provision shall
apply in lieu of this Section) payment of interest or principal (and
premium, if any) need not be made at such Place of Payment on such date, but
may be made on the next succeeding Business Day at such Place of Payment
with the same force and effect as if made on the Interest Payment Date or
Redemption Date, or at the Stated Maturity or Maturity; provided that no
interest shall accrue for the period from and after such Interest Payment
Date, Redemption Date, Stated Maturity or Maturity, as the case may be. In
the event that such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day.
SECTION 113. Trust Indenture Act Controls.
If any provision of the Indenture limits, qualifies or conflicts with the
duties imposed by TIA Section 318(c), the imposed duties shall control.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Registered Securities, if any, of each series and the Bearer Securities,
if any, of each series and related coupons shall be in substantially the
forms as shall be established by or pursuant to a Board Resolution or in one
or more indentures supplemental hereto, in each case with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other
marks of identification and such legends or endorsements placed thereon as
may be required to comply with the rules of any securities exchange or as
may, consistently herewith, be determined by the officers executing such
20
Securities or coupons. If the forms of Securities or coupons of any series
are established by action taken pursuant to a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee at or prior
to the delivery of the Company Order contemplated by Section 303 for the
authentication and delivery of such Securities or coupons. Any portion of
the text of any Security may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Security.
Unless otherwise specified as contemplated by Section 301, Securities in
bearer form shall have interest coupons attached.
The Trustee's certificate of authentication on all Securities shall be in
substantially the form set forth in this Article.
The definitive Securities and coupons shall be printed, lithographed or
engraved on steel-engraved borders or may be produced in any other manner,
all as determined by the officers of the Company executing such Securities,
as evidenced by their execution of such Securities or coupons.
SECTION 202. Form of Trustee's Certificate of Authentication.
Subject to Section 611, the Trustee's certificate of authentication shall be
in substantially the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
The First National Bank of Chicago as Trustee
By:_______________________________
Authorized Officer
SECTION 203. Securities Issuable in Global Form.
If Securities of or within a series are issuable in global form, as
specified as contemplated by Section 301, then, notwithstanding clause (10)
of Section 301, any such Security shall represent such of the Outstanding
Securities of such series as shall be specified therein and may provide that
it shall represent the aggregate amount of Outstanding Securities of such
series from time to time endorsed thereon and that the aggregate amount of
Outstanding Securities of such series represented thereby may from time to
time be increased or decreased to reflect exchanges. Any endorsement of a
Security in global form to reflect the amount, or any increase or decrease
in the amount, of Outstanding Securities represented thereby shall be made
by the Trustee in such manner and upon instructions given by such Person or
Persons as shall be specified therein or in the Company Order to be
delivered to the Trustee pursuant to Section 303 or Section 304. Subject to
the provisions of Section 303 and, if applicable, Section 304, the Trustee
shall deliver and redeliver any Security in permanent global form in the
manner and upon instructions given by the Person or Persons specified
therein or in the applicable Company Order. If a Company Order pursuant to
Section 303 or Section 304 has been, or simultaneously is, delivered, any
instructions by the Company with respect to endorsement or delivery or
redelivery of a Security in global form shall be in writing but need not
comply with Section 102 and need not be accompanied by an Opinion of
Counsel.
The provisions of the last sentence of Section 303 shall apply to any
Security represented by a Security in global form if such Security was never
issued and sold by the Company and the Company delivers to the Trustee the
Security in global form together with written instructions (which need not
comply with Section 102 and need not be accompanied by an Opinion of
Counsel) with regard to the reduction in the principal amount of Securities
represented thereby, together with the written statement contemplated by the
last sentence of Section 303.
Notwithstanding the provisions of Section 307, unless otherwise specified as
contemplated by Section 301, payment of principal of and any premium and
interest on any Security in permanent global form shall be made to the
Person or Persons specified therein.
21
Notwithstanding the provisions of Section 309 and except as provided in the
preceding paragraph, the Company, the Trustee and any agent of the Company
and the Trustee shall treat as the Holder of such principal amount of
Outstanding Securities represented by a permanent global Security (i) in the
case of a permanent global Security in registered form, the Holder of such
permanent global Security in registered form, or (ii) in the case of a
permanent global Security in bearer form, Euroclear or CEDEL S.A.
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in one or more Board Resolutions or pursuant to authority
granted by one or more Board Resolutions and, subject to Section 303, set
forth in, or determined in the manner provided in, an Officers' Certificate,
or established in one or more indentures supplemental hereto, prior to the
issuance of Securities of any series, any and all terms and provisions
thereof, including, without limitation, any or all of the following, as
applicable (each of which (except for the matters set forth in clauses (1),
(2) and (19) below), if so provided, may be determined from time to time by
the Company with respect to unissued Securities of the series and set forth
in such Securities of the series when issued from time to time):
(1) the title of the Securities of the series (which shall distinguish
the Securities of the series from all other series of Securities);
(2) any limit upon the aggregate principal amount of the Securities of
the series that may be authenticated and delivered under this
Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of,
other Securities of the series pursuant to Section 304, 305, 306,
906, 1107 or 1305);
(3) the date or dates, or the method by which such date or dates will
be determined or extended, and the right, if any, to extend such
date or dates on which the principal of the Securities of the
series is payable;
(4) the rate or rates at which the Securities of the series shall bear
interest, if any, or the method by which such rate or rates shall
be determined, the date or dates from which such interest shall
accrue, or the method by which such date or dates shall be
determined, the Interest Payment Dates on which such interest
shall be payable and the Regular Record Date, if any, for the
interest payable on any Registered Security on any Interest
Payment Date, or the method by which such date or dates shall be
determined, and the basis upon which interest shall be calculated
if other than on the basis of a 360-day year of twelve 30-day
months;
(5) the rights, if any, to defer payments of interest on the
Securities by extending the times for the payment of interest and
the terms and duration of such extension;
(6) the terms of subordination applicable to the Securities of the
series;
(7) the place or places, if any, other than or in addition to The City
of New York, where the principal of (and premium, if any, on) and
any interest on Securities of the series shall be payable, any
Registered Securities of the series may be surrendered for
registration of transfer, Securities of the series may be
surrendered for exchange and, if different than the location
specified in Section 105, the place or places where notices or
demands to or upon the Company in respect of the Securities of the
series and this Indenture may be served;
(8) the period or periods within which, the price or prices at which,
22
the Currency in which, and other terms and conditions upon which
Securities of the series may be redeemed, in whole or in part, at
the option of the Company, if the Company is to have that option;
(9) the obligation, if any, of the Company to redeem, repay or
purchase Securities of the series pursuant to any sinking fund or
analogous provision or at the option of a Holder thereof, and the
period or periods within which, the price or prices at which, the
Currency in which, and other terms and conditions upon which
Securities of the series shall be redeemed, repaid or purchased,
in whole or in part, pursuant to such obligation;
(10) if other than denominations of $25 and any integral multiple
thereof, the denomination or denominations in which any Registered
Securities of the series shall be issuable and, if other than
denominations of $5,000, the denomination or denominations in
which any Bearer Securities of the series shall be issuable;
(11) if other than the Trustee, the identity of each Security Registrar
and/or Paying Agent;
(12) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series that shall be payable
upon declaration of acceleration of the Maturity thereof pursuant
to Section 502 or the method by which such portion shall be
determined;
(13) if other than Dollars, the Currency in which payment of the
principal of (and premium, if any, on) or interest, if any, on the
Securities of the series shall be payable or in which the
Securities of the series shall be denominated and the particular
provisions applicable thereto in accordance with, in addition to
or in lieu of any of the provisions of Section 311;
(14) whether the amount of payments of principal of (and premium, if
any, on) or interest on the Securities of the series may be
determined with reference to an index, formula or other method
(which index, formula or method may be based, without limitation,
on one or more Currencies, commodities, equity indices or other
indices), and the manner in which such amounts shall be
determined;
(15) whether the principal of (and premium, if any, on) and interest,
if any, on the Securities of the series are to be payable, at the
election of the Company or a Holder thereof, in a Currency other
than that in which such Securities are denominated or stated to be
payable, the period or periods within which (including the
Election Date), and the terms and conditions upon which, such
election may be made, and the time and manner of determining the
exchange rate between the Currency in which such Securities are
denominated or stated to be payable and the Currency in which such
Securities are to be so payable, in each case in accordance with,
in addition to or in lieu of any of the provisions of Section 311;
(16) the designation of the initial Exchange Rate Agent, if any;
(17) any provisions in modification of, in addition to or in lieu of
the provisions of Article Fourteen that shall be applicable to the
Securities of the series;
(18) provisions, if any, granting special rights to the Holders of
Securities of the series upon the occurrence of such events as may
be specified;
23
(19) any deletions from, modifications of or additions to the Events of
Default or covenants of the Company with respect to Securities of
the series, whether or not such Events of Default or covenants are
consistent with the Events of Default or covenants set forth
herein;
(20) whether Securities of the series are to be issuable as Registered
Securities, Bearer Securities (with or without coupons) or both,
any restrictions applicable to the offer, sale or delivery of
Bearer Securities, whether any Securities of the series are to be
issuable initially in temporary global form and whether any
Securities of the series are to be issuable in permanent global
form with or without coupons and, if so, whether beneficial owners
of interests in any such permanent global Security may exchange
such interests for Securities of such series and of like tenor of
any authorized form and denomination and the circumstances under
which any such exchanges may occur, if other than in the manner
provided in Section 305, whether Registered Securities of the
series may be exchanged for Bearer Securities of the series (if
permitted by applicable laws and regulations), whether Bearer
Securities of the series may be exchanged for Registered
Securities of the series, and the circumstances under which and
the place or places where such exchanges may be made and if
Securities of the series are to be issuable in global form, the
identity of any initial depository therefor; provided, that,
unless otherwise provided, Securities shall be issued as
Registered Securities;
(21) the date as of which any Bearer Securities of the series and any
temporary global Security representing Outstanding Securities of
the series shall be dated if other than the date of original
issuance of the first Security of the series to be issued;
(22) the Person to whom any interest on any Registered Security of the
series shall be payable, if other than the Person in whose name
that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for
such interest, the manner in which, or the Person to whom, any
interest on any Bearer Security of the series shall be payable, if
otherwise than upon presentation and surrender of the coupons
appertaining thereto as they severally mature, and the extent to
which, or the manner in which, any interest payable on a temporary
global Security on an Interest Payment Date will be paid if other
than in the manner provided in Section 304;
(23) if Securities of the series are to be issuable in definitive form
(whether upon original issue or upon exchange of a temporary
Security of such series) only upon receipt of certain certificates
or other documents or satisfaction of other conditions, the form
and/or terms of such certificates, documents or conditions;
(24) whether and under what circumstances the Company will pay
Additional Amounts as contemplated by Section 1005 on the
Securities of the series to any Holder who is not a United States
person (including any modification to the definition of such term)
in respect of any tax, assessment or governmental charge and, if
so, whether the Company will have the option to redeem such
Securities rather than pay such Additional Amounts (and the terms
of any such option);
(25) if the Securities of the series are to be convertible into or
exchangeable for any securities of any Person (including the
Company), the terms and conditions upon which such Securities will
be so convertible or exchangeable; and
(26) any other terms, conditions, rights and preferences (or
limitations on such rights and preferences) relating to the series
(which terms shall not be inconsistent with the requirements of
the Trust Indenture Act or the provisions of this Indenture).
All Securities of any one series and the coupons appertaining to any Bearer
Securities of such series shall be substantially identical except, in the
case of Registered Securities, as to denomination and except as may
otherwise be provided in or pursuant to such Board Resolution (subject to
Section 303) and set forth in such Officers' Certificate or in any such
24
indenture supplemental hereto. Not all Securities of any one series need be
issued at the same time, and, unless otherwise provided, a series may be
reopened for issuances of additional Securities of such series.
If any of the terms of the series are established by action taken pursuant
to one or more Board Resolutions, a copy of an appropriate record of such
action(s) shall be certified by the Secretary or an Assistant Secretary of
the Company and such Board Resolutions shall be delivered to the Trustee at
or prior to the delivery of the Officers' Certificate setting forth the
terms of the series.
SECTION 302. Denominations.
The Securities of each series shall be issuable in such denominations as
shall be specified as contemplated by Section 301. With respect to
Securities of any series denominated in Dollars, in the absence of any such
provisions, the Registered Securities of such series, other than Registered
Securities issued in global form (which may be of any denomination), shall
be issuable in denominations of $25 and any integral multiple thereof and
the Bearer Securities of such series, other than the Bearer Securities
issued in global form (which may be of any denomination), shall be issuable
in denominations of $5,000 or any integral multiple threof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities and any coupons appertaining thereto shall be executed on
behalf of the Company by its Chairman, its President, its Chief Financial
Officer, an Executive Vice President, its Treasurer or a Vice President,
under its corporate seal reproduced thereon attested by its Secretary or an
Assistant Secretary. The signature of any of these officers on the
Securities or coupons may be the manual or facsimile signatures of the
present or any future such authorized officer and may be imprinted or
otherwise reproduced on the Securities.
Securities or coupons bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the authentication and delivery of such
Securities or did not hold such offices at the date of such Securities or
coupons.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series together with
any coupon appertaining thereto, executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Securities, and the Trustee in accordance with such Company
Order shall authenticate and deliver such Securities; provided, however,
that, in connection with its original issuance, no Bearer Security shall be
mailed or otherwise delivered to any location in the United States; and
provided, further, that, unless otherwise specified with respect to any
series of Securities pursuant to Section 301, a Bearer Security may be
delivered in connection with its original issuance only if the Person
entitled to receive such Bearer Security shall have furnished a certificate
in such forms and on such terms as may be established pursuant to Section
301. If any Security shall be represented by a permanent global Bearer
Security, then, for purposes of this Section and Section 304, the notation
of a beneficial owner's interest therein upon original issuance of such
Security or upon exchange of a portion of a temporary global Security shall
be deemed to be delivery in connection with its original issuance of such
beneficial owner's interest in such permanent global Security. Except as
permitted by Section 306, the Trustee shall not authenticate and deliver any
Bearer Security unless all appurtenant coupons for interest then matured
have been detached and canceled. If not all the Securities of any series
are to be issued at one time and if the Board Resolution, Officers'
Certificate or supplemental indenture establishing such series shall so
permit, such Company Order may set forth procedures acceptable to the
Trustee for the issuance of such Securities and determining terms of
particular Securities of such series such as interest rate, maturity date,
date of issuance and date from which interest shall accrue.
In authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to TIA Sections 315(a)
through 315(d)) shall be fully protected in relying upon, an Opinion of
Counsel to the effect:
25
(a) that the form or forms of such Securities and any coupons have
been established in conformity with the provisions of this
Indenture;
(b) that the terms of such Securities and any coupons have been
established in conformity with the provisions of this Indenture;
(c) that such Securities, together with any coupons appertaining
thereto, when completed by appropriate insertions and executed and
delivered by the Company to the Trustee for authentication in
accordance with this Indenture, authenticated and delivered by the
Trustee in accordance with this Indenture and issued by the
Company in the manner and subject to any conditions specified in
such Opinion of Counsel, will constitute the legal, valid and
binding obligations of the Company, enforceable in accordance with
their terms, subject to applicable bankruptcy, insolvency,
reorganization and other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights, to
general equitable principles and to such other qualifications as
such counsel shall conclude do not materially affect the rights of
Holders of such Securities and any coupons;
(d) that all laws and requirements in respect of the execution and
delivery by the Company of such Securities, any coupons and of the
supplemental indentures, if any, have been complied with and that
authentication and delivery of such Securities and any coupons and
the execution and delivery of the supplemental indenture, if any,
by the Trustee will not violate the terms of the Indenture;
(e) that the Company has the corporate power to issue such Securities
and any coupons, and has duly taken all necessary corporate action
with respect to such issuance; and
26
(f) that the issuance of such Securities and any coupons will not
contravene the articles of incorporation or by-laws of the Company
or result in any violation of any of the terms or provisions of
any law or regulation or of any indenture, mortgage or other
agreement known to such Counsel by which the Company is bound.
Notwithstanding the provisions of Section 301 and of the preceding two
paragraphs, if not all the Securities of any series are to be issued at one
time, it shall not be necessary to deliver the Officers' Certificate
otherwise required pursuant to Section 301 or the Company Order and Opinion
of Counsel otherwise required pursuant to the preceding two paragraphs prior
to or at the time of issuance of each Security, but such documents shall be
delivered prior to or at the time of issuance of the first Security of such
series.
The Trustee shall not be required to authenticate and deliver any such
Securities if the issue of such Securities pursuant to this Indenture will
affect the Trustee's own rights, duties or immunities under the Securities
and this Indenture or otherwise in a manner which is not reasonably
acceptable to the Trustee.
Each Registered Security shall be dated the date of its authentication, and
each Bearer Security shall be dated as of the date specified as contemplated
by Section 301.
No Security or coupon shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided
for herein duly executed by the Trustee by manual signature of an authorized
officer, and such certificate upon any Security shall be conclusive
evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder and is entitled to the benefits of
this Indenture. Notwithstanding the foregoing, if any Security shall have
been authenticated and delivered hereunder but never issued and sold by the
Company, and the Company shall deliver such Security to the Trustee for
cancellation as provided in Section 310 together with a written statement
(which need not comply with Section 102 and need not be accompanied by an
Opinion of Counsel) stating that such Security has never been issued and
sold by the Company, for all purposes of this Indenture such Security shall
be deemed never to have been authenticated and delivered hereunder and shall
never be entitled to the benefits of this Indenture.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, the Company
may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which
they are issued, in registered form or, if authorized, in bearer form with
one or more coupons or without coupons, and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as conclusively evidenced by their
execution of such Securities. Such temporary Securities may be in global
form.
Except in the case of temporary Securities in global form (which shall be
exchanged in accordance with the provisions of the following paragraphs), if
temporary Securities of any series are issued, the Company will cause
definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series, upon surrender of the temporary securities of
such series at the office or agency of the Company in a Place of Payment for
that series, without charge to the Holder. Upon surrender for cancellation
of any one or more temporary Securities of any series (accompanied by any
unmatured coupons appertaining thereto), the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Securities of the same series of authorized
denominations; provided, however, that no definitive Bearer Security shall
be delivered in exchange for a temporary Registered Security; and provided,
further, that a definitive Bearer Security shall be delivered in exchange
for a temporary Bearer Security only in compliance with the conditions set
forth in Section 303. Until so exchanged the temporary Securities of any
series shall in all respects be entitled to the same benefits under this
27
Indenture as definitive Securities of such series.
If temporary Securities of any series are issued in global form, any such
temporary global Security shall, unless otherwise provided therein, be
delivered to the London office of a depositary or common depositary (the
"Common Depositary"), for the benefit of Euroclear and CEDEL S.A., for
credit to the respective accounts of the beneficial owners of such
Securities (or to such other accounts as they may direct).
Without unnecessary delay but in any event not later than the date specified
in, or determined pursuant to the terms of, any such temporary global
Security (the "Exchange Date"), the Company shall deliver to the Trustee
definitive Securities, in aggregate principal amount equal to the principal
amount of such temporary global Security, executed by the Company. On or
after the Exchange Date such temporary global Security shall be surrendered
by the Common Depositary to the Trustee, as the Company's agent for such
purpose, to be exchanged, in whole or from time to time in part, for
definitive Securities without charge and the Trustee shall authenticate and
deliver, in exchange for each portion of such temporary global Security, an
equal aggregate principal amount of definitive Securities of the same series
of authorized denominations and of like tenor as the portion of such
temporary global Security to be exchanged. The definitive Securities to be
delivered in exchange for any such temporary global Security shall be in
bearer form, registered form, permanent global bearer form or permanent
global registered form, or any combination thereof, as specified as
contemplated by Section 301, and, if any combination thereof is so
specified, as requested by the beneficial owner thereof; provided, however,
that, unless otherwise specified in such temporary global Security, upon
such presentation by the Common Depositary, such temporary global Security
is accompanied by a certificate dated the Exchange Date or a subsequent date
and signed by Euroclear as to the portion of such temporary global Security
held for its account then to be exchanged and a certificate dated the
Exchange Date or a subsequent date and signed by CEDEL S.A. as to the
portion of such temporary global Security held for its account then to be
exchanged, each in such form as may be established pursuant to Section 301;
and provided, further, that definitive Bearer Securities shall be delivered
in exchange for a portion of a temporary global Security only in compliance
with the requirements of Section 303.
Unless otherwise specified in such temporary global Security, the interest
of a beneficial owner of Securities of a series in a temporary global
Security shall be exchanged for definitive Securities of the same series and
of like tenor following the Exchange Date when the account holder instructs
Euroclear or CEDEL S.A., as the case may be, to request such exchange on his
behalf and delivers to Euroclear or CEDEL S.A., as the case may be, a
certificate in such form as may be established pursuant to Section 301,
dated no earlier than 15 days prior to the Exchange Date, copies of which
certificate shall be available from the offices of Euroclear and CEDEL S.A.,
the Trustee, any Authenticating Agent appointed for such series of
Securities and each Paying Agent. Unless otherwise specified in such
temporary global Security, any such exchange shall be made free of charge to
the beneficial owners of such temporary global Security, except that a
Person receiving definitive Securities must bear the cost of insurance,
postage, transportation and the like in the event that such Person does not
take delivery of such definitive Securities in person at the offices of
Euroclear or CEDEL S.A. Definitive Securities in bearer form to be
delivered in exchange for any portion of a temporary global Security shall
be delivered only outside the United States.
Until exchanged in full as hereinabove provided, the temporary Securities of
any series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of the same series and of like tenor
authenticated and delivered hereunder, except that, unless otherwise
specified as contemplated by Section 301, interest payable on a temporary
global Security on an Interest Payment Date for Securities of such series
occurring prior to the applicable Exchange Date shall be payable to
Euroclear and CEDEL S.A. on such Interest Payment Date upon delivery by
Euroclear and CEDEL S.A. to the Trustee of a certificate or certificates in
such form as may be established pursuant to Section 301, for credit without
further interest on or after such Interest Payment Date to the respective
accounts of the Persons who are the beneficial owners of such temporary
global Security on such Interest Payment Date and who have each delivered to
Euroclear or CEDEL S.A., as the case may be, a certificate dated no earlier
than 15 days prior to the Interest Payment Date occurring prior to such
Exchange Date in such form as may be established pursuant to Section 301.
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Notwithstanding anything to the contrary herein contained, the
certifications made pursuant to this paragraph shall satisfy the
certification requirements of the preceding two paragraphs of this Section
and of the third paragraph of Section 303 of this Indenture and the
interests of the Persons who are the beneficial owners of the temporary
global Security with respect to which such certification was made will be
exchanged for definitive Securities of the same series and of like tenor on
the Exchange Date or the date of certification if such date occurs after the
Exchange Date, without further act or deed by such beneficial owners.
Except as otherwise provided in this paragraph, no payments of principal or
interest owing with respect to a beneficial interest in a temporary global
Security will be made unless and until such interest in such temporary
global Security shall have been exchanged for an interest in a definitive
Security. Any interest so received by Euroclear and CEDEL S.A. and not paid
as herein provided shall be returned to the Trustee immediately prior to the
expiration of two years after such Interest Payment Date in order to be
repaid to the Company in accordance with Section 1003.
SECTION 305. Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register for each series of Securities (referred to as the
"Security Register") in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Registered
Securities and of transfers of Registered Securities. The Security Register
shall be in written form or any other form capable of being converted into
written form within a reasonable time. At all reasonable times, the Security
Register shall be open to inspection by the Trustee. The Trustee is hereby
initially appointed as security registrar (the "Security Registrar") for the
purpose of registering Registered Securities and transfers of Registered
Securities as herein provided.
Upon surrender for registration of transfer of any Registered Security of
any series at the office of the Security Registrar for that series, the
Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee, one or more new Registered Securities
of the same series, of any authorized denominations and of a like aggregate
principal amount and tenor.
At the option of the Holder, Registered Securities of any series may be
exchanged for other Registered Securities of the same series, of any
authorized denomination and of a like aggregate principal amount, upon
surrender of the Registered Securities to be exchanged at such office or
agency. Whenever any Registered Securities are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate and deliver,
the Registered Securities which the Holder making the exchange is entitled
to receive. Unless otherwise specified with respect to any series of
Securities as contemplated by Section 301, Bearer Securities may not be
issued in exchange for Registered Securities.
If (but only if) expressly permitted in or pursuant to the applicable Board
Resolution and (subject to Section 303) set forth in the applicable
Officers' Certificate, or in any indenture supplemental hereto, delivered as
contemplated by Section 301, at the option of the Holder, Bearer Securities
of any series may be exchanged for Registered Securities of the same series
of any authorized denomination and of a like aggregate principal amount and
tenor, upon surrender of the Bearer Securities to be exchanged at any such
office or agency, with all unmatured coupons and all matured coupons in
default thereto appertaining. If the Holder of a Bearer Security is unable
to produce any such unmatured coupon or coupons or matured coupon or coupons
in default, any such permitted exchange may be effected if the Bearer
Securities are accompanied by payment in funds acceptable to the Company in
an amount equal to the face amount of such missing coupon or coupons, or the
surrender of such missing coupon or coupons may be waived by the Company and
the Trustee if there is furnished to them such security or indemnity as they
may require to save each of them and any Paying Agent harmless. If
thereafter the Holder of such Security shall surrender to any Paying Agent
any such missing coupon in respect of which such a payment shall have been
made, such Holder shall be entitled to receive the amount of such payment;
provided, however, that, except as otherwise provided in Section 1002,
interest represented by coupons shall be payable only upon presentation and
surrender of those coupons at an office or agency located outside the United
States. Notwithstanding the foregoing, in case a Bearer Security of any
series is surrendered at any such office or agency in a permitted exchange
for a Registered Security of the same series and like tenor after the close
29
of business at such office or agency on (i) any Regular Record Date and
before the opening of business at such office or agency on the relevant
Interest Payment Date, or (ii) any Special Record Date and before the
opening of business at such office or agency on the related proposed date
for payment of Defaulted Interest, such Bearer Security shall be surrendered
without the coupon relating to such Interest Payment Date or proposed date
for payment, as the case may be, and interest or Defaulted Interest, as the
case may be, will not be payable on such Interest Payment Date or proposed
date for payment, as the case may be, 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 provisions of this
Indenture.
Whenever any Securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
Notwithstanding the foregoing, except as otherwise specified as contemplated
by Section 301, any permanent global Security shall be exchangeable only as
provided in this paragraph. If any beneficial owner of an interest in a
permanent global Security is entitled to exchange such interest for
Securities of such series and of like tenor and principal amount of another
authorized form and denomination, as specified as contemplated by Section
301 and provided that any applicable notice provided in the permanent global
Security shall have been given, then without unnecessary delay but in any
event not later than the earliest date on which such interest may be so
exchanged, the Company shall deliver to the Trustee definitive Securities in
aggregate principal amount equal to the principal amount of such beneficial
owner's interest in such permanent global Security, executed by the Company.
On or after the earliest date on which such interests may be so exchanged,
such permanent global Security shall be surrendered by the Common Depositary
or such other depositary as shall be specified in the Company Order with
respect thereto to the Trustee, as the Company's agent for such purpose, to
be exchanged, in whole or from time to time in part, for definitive
Securities without charge, and the Trustee shall authenticate and deliver,
in exchange for each portion of such permanent global Security, an equal
aggregate principal amount of definitive Securities of the same series of
authorized denominations and of like tenor as the portion of such permanent
global Security to be exchanged which, unless the Securities of the series
are not issuable both as Bearer Securities and as Registered Securities, as
specified as contemplated by Section 301, shall be in the form of Bearer
Securities or Registered Securities, or any combination thereof, as shall be
specified by the beneficial owner thereof; provided, however, that no such
exchanges may occur during a period beginning at the opening of business 15
days before any selection of Securities to be redeemed and ending on the
relevant Redemption Date if the Security for which exchange is requested may
be among those selected for redemption; and provided, further, that no
Bearer Security delivered in exchange for a portion of a permanent global
Security shall be mailed or otherwise delivered to any location in the
United States. If a Registered Security is issued in exchange for any
portion of a permanent global Security after the close of business at the
office or agency where such exchange occurs on (i) any Regular Record Date
and before the opening of business at such office or agency on the relevant
Interest Payment Date, or (ii) any Special Record Date and before the
opening of business at such office or agency on the related proposed date
for payment of Defaulted Interest, interest or Defaulted Interest, as the
case may be, will not be payable on such Interest Payment Date or proposed
date for payment, as the case may be, in respect of such Registered
Security, but will be payable on such Interest Payment Date or proposed date
for payment, as the case may be, only to the Person to whom interest in
respect of such portion of such permanent global Security is payable in
accordance with the provisions of this Indenture.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the
Security Registrar) be duly endorsed, or be accompanied by a written
instrument of transfer, in form satisfactory to the Company and the Security
Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing.
30
No service charge shall be made for any registration of transfer or exchange
of Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906, 1107 or 1305 not involving any
transfer.
The Company shall not be required (i) to issue, register the transfer of or
exchange Securities of any series during a period beginning at the opening
of business 15 days before the day of the selection for redemption of
Securities of that series under Section 1103 or 1203 and ending at the close
of business on (A) if Securities of the series are issuable only as
Registered Securities, the date of the mailing of the relevant notice of
redemption and (B) if Securities of the series are issuable as Bearer
Securities, the date of the first publication of the relevant notice of
redemption or, if Securities of the series are also issuable as Registered
Securities and there is no publication, the mailing of the relevant notice
of redemption, or (ii) to register the transfer of or exchange any
Registered Security so selected for redemption in whole or in part, except
the unredeemed portion of any Security being redeemed in part, or (iii) to
exchange any Bearer Security so selected for redemption except that such a
Bearer Security may be exchanged for a Registered Security of that series
and like tenor; provided that such Registered Security shall be
simultaneously surrendered for redemption, or (iv) to issue, register the
transfer of or exchange any Security which has been surrendered for
repayment at the option of the Holder, except the portion, if any, of such
Security not to be so repaid.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security or a Security with a mutilated coupon appertaining
to it is surrendered to the Trustee, the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a new Security
of the same series and of like tenor and principal amount and bearing a
number not contemporaneously outstanding, with coupons corresponding to the
coupons, if any, appertaining to the surrendered Security, or, in case any
such mutilated Security or coupon has become or is about to become due and
payable, the Company in its discretion may, instead of issuing a new
Security, with coupons corresponding to the coupons, if any, appertaining to
the surrendered Security, pay such Security or coupon.
If there shall be delivered to the Company and to the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security or
coupon and (ii) such security or indemnity as may be required by them to
save each of them and any agent of either of them harmless, then, in the
absence of notice to the Company or the Trustee that such Security or coupon
has been acquired by a bona fide purchaser, the Company shall execute and
upon Company Order the Trustee shall authenticate and deliver, in lieu of
any such destroyed, lost or stolen Security or in exchange for the Security
for which a destroyed, lost or stolen coupon appertains (with all
appurtenant coupons not destroyed, lost or stolen), a new Security of the
same series and of like tenor and principal amount and bearing a number not
contemporaneously outstanding, with coupons corresponding to the coupons, if
any, appertaining to such destroyed, lost or stolen Security or to the
Security to which such destroyed, lost or stolen coupon appertains, or, in
case any such destroyed, lost or stolen Security or coupon has become or is
about to become due and payable, the Company in its discretion may, instead
of issuing a new Security, with coupons corresponding to the coupons, if
any, appertaining to such destroyed, lost or stolen Security or to the
Security to which such destroyed, lost or stolen coupon appertains, pay such
Security or coupon.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other government
charge that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series with its coupons, if any, issued pursuant
to this Section in lieu of any destroyed, lost or stolen Security or in
exchange for a Security to which a destroyed, lost or stolen coupon
appertains, shall constitute an original additional contractual obligation
of the Company, whether or not the destroyed, lost or stolen Security and
its coupons, if any, or the destroyed, lost or stolen coupon shall be at any
time enforceable by anyone, and shall be entitled to all the benefits of
this Indenture equally and proportionately with any and all other Securities
31
of that series and their coupons, if any, duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities or coupons.
SECTION 307. Payment of Interest; Interest Rights Preserved; Optional
Interest Reset.
Unless otherwise provided as contemplated by Section 301 with respect to any
series of Securities, interest on any Registered Security which is payable,
and is punctually paid or duly provided for, on any Interest Payment Date
shall be paid to the Person in whose name such Security (or one or more
Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest at the office or agency of the Company
maintained for such purpose pursuant to Section 1002; provided, however,
that each installment of interest on any Registered Security may at the
Company's option be paid by (i) mailing a check for such interest, payable
to or upon the written order of the Person entitled thereto pursuant to
Section 309, to the address of such Person as it appears on the Security
Register or (ii) transfer to an account maintained by the payee located in
the United States.
Unless otherwise provided as contemplated by Section 301 with respect to the
Securities of any series, payment of interest may be made, in the case of a
Bearer Security, by transfer to an account maintained by the payee with a
bank located outside the United States.
Unless otherwise provided as contemplated by Section 301, every permanent
global Security in bearer form will provide that interest, if any, payable
on any Interest Payment Date will be paid to each of Euroclear and CEDEL
S.A. with respect to that portion of such permanent global Security held for
its account by the Common Depositary, for the purpose of permitting each of
Euroclear and CEDEL S.A. to credit the interest received by it in respect of
such permanent global Security to the accounts of the beneficial owners
thereof.
Any interest on any Registered Security of any series which is payable, but
is not punctually paid or duly provided for, on any Interest Payment Date
shall forthwith cease to be payable to the Holder on the relevant Regular
Record Date by virtue of having been such Holder, and such defaulted
interest and, if applicable, interest on such defaulted interest (to the
extent lawful) at the rate specified in the Securities of such series (such
defaulted interest and, if applicable, interest thereon herein collectively
called "Defaulted Interest") may be paid by the Company, at its election in
each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Registered Securities of such series
(or their respective Predecessor Securities) are registered at the
close of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner.
The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Registered Security
of such series and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of money
in the Currency in which the Securities of such series are payable
(except as otherwise specified pursuant to Section 301 for the
Securities of such series and except, if applicable, as provided in
Sections 311(b), 311(d) and 311(e)) equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall
make arrangements satisfactory to the Trustee for such deposit on or
prior to the date of the proposed payment, such money when deposited
to be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of
such Special Record Date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be given
in the manner provided in Section 106, not less than 10 days prior
to such Special Record Date. Notice of the proposed payment of such
32
Defaulted Interest and the Special Record Date therefor having been
so given, such Defaulted Interest shall be paid to the Persons in
whose name the Registered Securities of such series (or their
respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Registered Securities of any series in any other lawful manner not
inconsistent with the requirements of any securities exchange on
which such Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to
the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be reasonably deemed practicable by the
Trustee.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Registered Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name such Registered Security is
registered as the owner of such Registered Security for the purpose of
receiving payment of principal of (and premium, if any, on) and (subject to
Sections 305 and 307) interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and none of the
Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
Title to any Bearer Security and any coupons appertaining thereto shall pass
by delivery. The Company, the Trustee and any agent of the Company or the
Trustee may treat the bearer of any Bearer Security and the bearer of any
coupon as the absolute owner of such Security or coupon for the purpose of
receiving payment thereof or on account thereof and for all other purposes
whatsoever, whether or not such Security or coupons be overdue, and none of
the Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
None of the Company, the Trustee, any Paying Agent or the Security Registrar
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of
a Security in global form or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
Notwithstanding the foregoing, with respect to any global Security, nothing
herein shall prevent the Company, the Trustee, or any agent of the Company
or the Trustee, from giving effect to any written certification, proxy or
other authorization furnished by any depositary, as a Holder, with respect
to such global Security or impair, as between such depositary and owners of
beneficial interests in such global Security, the operation of customary
practices governing the exercise of the rights of such depositary (or its
nominee) as Holder of such global Security.
SECTION 309. Cancellation.
All Securities and coupons surrendered for payment, redemption, repayment at
the option of the Holder, registration of transfer or exchange or for credit
against any current or future sinking fund payment shall, if surrendered to
any Person other than the Trustee, be delivered to the Trustee. All
Securities and coupons so delivered to the Trustee shall be promptly
canceled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and may
deliver to the Trustee (or to any other Person for delivery to the Trustee)
for cancellation any Securities previously authenticated hereunder which the
Company has not issued and sold, and all Securities so delivered shall be
promptly canceled by the Trustee. If the Company shall so acquire any of the
Securities, however, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Securities unless and
until the same are surrendered to the Trustee for cancellation. No
Securities shall be authenticated in lieu of or in exchange for any
Securities canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Securities held by the Trustee
shall be disposed of by the Trustee in accordance with its customary
procedures and certification of their disposal delivered to the Company
unless by Company Order the Company shall direct that canceled Securities be
33
returned to it.
SECTION 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 with respect to
any Securities, interest, if any, on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
SECTION 311. Currency and Manner of Payments in Respect of Securities.
(a) With respect to Registered Securities of any series not permitting
the election provided for in paragraph (b) below or the Holders of
which have not made the election provided for in paragraph (b)
below, and with respect to Bearer Securities of any series, except
as provided in paragraph (d) below, payment of the principal of
(and premium, if any, on) and interest, if any, on any Registered
or Bearer Security of such series will be made in the Currency in
which such Registered Security or Bearer Security, as the case may
be, is payable. The provisions of this Section 311 may be
modified or superseded with respect to any Securities pursuant to
Section 301.
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(b) It may be provided pursuant to Section 301 with respect to
Registered Securities of any series that Holders shall have the
option, subject to paragraphs (d) and (e) below, to receive
payments of principal of (and premium, if any, on) or interest, if
any, on such Registered Securities in any of the Currencies which
may be designated for such election by delivering to the Trustee a
written election with signature guarantees and in the applicable
form established pursuant to Section 301, not later than the close
of business on the Election Date immediately preceding the
applicable payment date. If a Holder so elects to receive such
payments in any such Currency, such election will remain in effect
for such Holder or any transferee of such Holder until changed by
such Holder or such transferee by written notice to the Trustee
(but any such change must be made not later than the close of
business on the Election Date immediately preceding the next
payment date to be effective for the payment to be made on such
payment date and no such change of election may be made with
respect to payments to be made on any Registered Security of such
series with respect to which an Event of Default has occurred or
with respect to which the Company has deposited funds pursuant to
Article Four or Fourteen or with respect to which a notice of
redemption has been given by the Company or a notice of option to
elect repayment has been sent by such Holder or such transferee).
Any Holder of any such Registered Security who shall not have
delivered any such election to the Trustee not later than the
close of business on the applicable Election Date will be paid the
amount due on the applicable payment date in the relevant Currency
as provided in Section 311(a). The Trustee shall notify the
Exchange Rate Agent as soon as practicable after the Election Date
of the aggregate principal amount of Registered Securities for
which Holders have made such written election.
(c) Unless otherwise specified pursuant to Section 301, if the
election referred to in paragraph (b) above has been provided for
pursuant to Section 301, then, unless otherwise specified pursuant
to Section 301, not later than the fourth Business Day after the
Election Date for each payment date for Registered Securities of
any series, the Exchange Rate Agent will deliver to the Company a
written notice specifying, in the Currency in which Registered
Securities of such series are payable, the respective aggregate
amounts of principal of (and premium, if any, on) and interest, if
any, on the Registered Securities to be paid on such payment date,
specifying the amounts in such Currency so payable in respect of
the Registered Securities as to which the Holders of Registered
Securities of such series shall have elected to be paid in another
Currency as provided in paragraph (b) above. If the election
referred to in paragraph (b) above has been provided for pursuant
to Section 301 and if at least one Holder has made such election,
then, unless otherwise specified pursuant to Section 301, on the
second Business Day preceding such payment date the Company will
deliver to the Trustee for such series of Registered Securities an
Exchange Rate Officer's Certificate in respect of the Dollar or
Foreign Currency payments to be made on such payment date. Unless
otherwise specified pursuant to Section 301, the Dollar or Foreign
Currency amount receivable by Holders of Registered Securities who
have elected payment in a Currency as provided in paragraph (b)
above shall be determined by the Company on the basis of the
applicable Market Exchange Rate in effect on the third Business
Day (the "Valuation Date") immediately preceding each payment date
and such determination shall be conclusive and binding for all
purposes, absent manifest error.
35
(d) If a Conversion Event occurs with respect to a Foreign Currency in
which any of the Securities are denominated or payable other than
pursuant to an election provided for pursuant to paragraph (b)
above, then with respect to each date for the payment of principal
of (and premium, if any, on) and interest, if any, on the
applicable Securities denominated or payable in such Foreign
Currency occurring after the last date on which such Foreign
Currency was used (the "Conversion Date"), the Dollar shall be the
Currency of payment for use on each such payment date. Unless
otherwise specified pursuant to Section 301, the Dollar amount to
be paid by the Company to the Trustee and by the Trustee or any
Paying Agent to the Holders of such Securities with respect to
such payment date shall be, in the case of a Foreign Currency
other than a currency unit, the Dollar Equivalent of the Foreign
Currency or, in the case of a currency unit, the Dollar Equivalent
of the Currency Unit, in each case as determined by the Exchange
Rate Agent in the manner provided in paragraph (f) or (g) below.
(e) Unless otherwise specified pursuant to Section 301, if the Holder
of a Registered Security denominated in any Currency shall have
elected to be paid in another Currency as provided in paragraph
(b) above, and a Conversion Event occurs with respect to such
elected Currency, such Holder shall receive payment in the
Currency in which payment would have been made in the absence of
such election; and if a Conversion Event occurs with respect to
the Currency in which payment would have been made in the absence
of such election, such Holder shall receive payment in Dollars as
provided in paragraph (d) above.
(f) The "Dollar Equivalent of the Foreign Currency" shall be
determined by the Exchange Rate Agent and shall be obtained for
each subsequent payment date by converting the specified Foreign
Currency into Dollars at the Market Exchange Rate on the
Conversion Date.
(g) The "Dollar Equivalent of the Currency Unit" shall be determined
by the Exchange Rate Agent and subject to the provisions of
paragraph (h) below shall be the sum of each amount obtained by
converting the Specified Amount of each Component Currency into
Dollars at the Market Exchange Rate for such Component Currency on
the Valuation Date with respect to each payment.
(h) For purposes of this Section 311 the following terms shall have
the following meanings:
A "Component Currency" shall mean any Currency which, on the
Conversion Date, was a component currency of the relevant
currency unit, including, but not limited to, the ECU.
A "Specified Amount" of a Component Currency shall mean the
number of units of such Component Currency or fractions
thereof which were represented in the relevant currency unit,
including, but not limited to, the ECU, on the Conversion
Date. If after the Conversion Date the official unit of any
Component Currency is altered by way of combination or
subdivision, the Specified Amount of such Component Currency
shall be divided or multiplied in the same proportion. If
after the Conversion Date two or more Component Currencies
are consolidated into a single currency, the respective
Specified Amounts of such Component Currencies shall be
replaced by an amount in such single Currency equal to the
sum of the respective Specified Amounts of such consolidated
Component Currencies expressed in such single Currency, and
such amount shall thereafter be a Specified Amount and such
single Currency shall thereafter be a Component Currency. If
after the Conversion Date any Component Currency shall be
divided into two or more currencies, the Specified Amount of
such Component Currency shall be replaced by amounts of such
two or more currencies, having an aggregate Dollar Equivalent
value at the Market Exchange Rate on the date of such
replacement equal to the Dollar Equivalent value of the
Specified Amount of such former Component Currency at the
Market Exchange Rate immediately before such division and
such amounts shall thereafter be Specified Amounts and such
currencies shall thereafter be Component Currencies. If,
36
after the Conversion Date of the relevant currency unit,
including, but not limited to, the ECU, a Conversion Event
(other than any event referred to above in this definition of
"Specified Amount") occurs with respect to any Component
Currency of such currency unit and is continuing on the
applicable Valuation Date, the Specified Amount of such
Component Currency shall, for purposes of calculating the
Dollar Equivalent of the Currency Unit, be converted into
Dollars at the Market Exchange Rate in effect on the
Conversion Date of such Component Currency.
"Election Date" shall mean the date for any series of
Registered Securities as specified pursuant to clause (13) of
Section 301 by which the written election referred to in
paragraph (b) above may be made.
All decisions and determinations of the Exchange Rate Agent regarding the
Dollar Equivalent of the Foreign Currency, the Dollar Equivalent of the
Currency Unit, the Market Exchange Rate and changes in the Specified Amounts
as specified above shall be in its sole discretion and shall, in the absence
of manifest error, be conclusive for all purposes and irrevocably binding
upon the Company, the Trustee and all Holders of such Securities denominated
or payable in the relevant Currency. The Exchange Rate Agent shall promptly
give written notice to the Company and the Trustee of any such decision or
determination.
In the event that the Company determines in good faith that a Conversion
Event has occurred with respect to a Foreign Currency, the Company will
immediately give written notice thereof to the Trustee and to the Exchange
Rate Agent (and the Trustee will promptly thereafter give notice in the
manner provided for in Section 106 to the affected Holders) specifying the
Conversion Date. In the event the Company so determines that a Conversion
Event has occurred with respect to the ECU or any other currency unit in
which Securities are denominated or payable, the Company will immediately
give written notice thereof to the Trustee and to the Exchange Rate Agent
(and the Trustee will promptly thereafter give notice in the manner provided
for in Section 106 to the affected Holders) specifying the Conversion Date
and the Specified Amount of each Component Currency on the Conversion Date.
In the event the Company determines in good faith that any subsequent change
in any Component Currency as set forth in the definition of Specified Amount
above has occurred, the Company will similarly give written notice to the
Trustee and the Exchange Rate Agent.
The Trustee shall be fully justified and protected in relying and acting
upon information received by it from the Company and the Exchange Rate Agent
and shall not otherwise have any duty or obligation to determine the
accuracy or validity of such information independent of the Company or the
Exchange Rate Agent.
SECTION 312. Appointment and Resignation of Successor Exchange Rate Agent.
(a) Unless otherwise specified pursuant to Section 301, if and so long
as the Securities of any series (i) are denominated in a Currency
other than Dollars or (ii) may be payable in a Currency other than
Dollars, or so long as it is required under any other provision of
this Indenture, then the Company will maintain with respect to
each such series of Securities, or as so required, at least one
Exchange Rate Agent. The Company will cause the Exchange Rate
Agent to make the necessary foreign exchange determinations at the
time and in the manner specified pursuant to Section 301 for the
purpose of determining the applicable rate of exchange and, if
applicable, for the purpose of converting the issued Currency into
the applicable payment Currency for the payment of principal (and
premium, if any) and interest, if any, pursuant to Section 311.
(b) No resignation of the Exchange Rate Agent and no appointment of a
successor Exchange Rate Agent pursuant to this Section shall
become effective until the acceptance of appointment by the
successor Exchange Rate Agent as evidenced by a written instrument
delivered to the Company and the Trustee.
(c) If the Exchange Rate Agent shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
the Exchange Rate Agent for any cause with respect to the
Securities of one or more series, the Company, by or pursuant to a
37
Board Resolution, shall promptly appoint a successor Exchange Rate
Agent or Exchange Rate Agents with respect to the Securities of
that or those series (it being understood that any such successor
Exchange Rate Agent may be appointed with respect to the
Securities of one or more or all of such series and that, unless
otherwise specified pursuant to Section 301, at any time there
shall only be one Exchange Rate Agent with respect to the
Securities of any particular series that are originally issued by
the Company on the same date and that are initially denominated
and/or payable in the same Currency).
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further effect with
respect to any series of Securities specified in such Company Request
(except as to any surviving rights of registration of transfer or exchange
of Securities of such series herein expressly provided for and the
obligation of the Company to pay any Additional Amounts as contemplated by
Section 1005) and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this
Indenture as to such series when
(1) either
(A) all Securities of such series theretofore authenticated and
delivered and all coupons, if any, appertaining thereto (other
than (i) coupons appertaining to Bearer Securities surrendered for
exchange for Registered Securities and maturing after such
exchange, whose surrender is not required or has been waived as
provided in Section 305, (ii) Securities and coupons of such
series which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 306, (iii) coupons
appertaining to Securities called for redemption and maturing
after the relevant Redemption Date, whose surrender has been
waived as provided in Section 1106, and (iv) Securities and
coupons of such series for whose payment money has theretofore
been deposited in trust with the Trustee or any Paying Agent or
segregated and held in trust by the Company and thereafter repaid
to the Company, as provided in Section 1003) have been delivered
to the Trustee for cancellation; or
(B) all Securities of such series and, in the case of (i) or (ii)
below, any coupons appertaining thereto not theretofore delivered
to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) if redeemable at the option of the Company, are to be
called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the Trustee
as trust funds in trust for such purpose an amount in the Currency
in which the Securities of such series are payable, sufficient to
pay and discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any) and interest to the date of such
deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case
may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
38
and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture as to such series have been complied
with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606, the obligations
of the Trustee to any Authenticating Agent under Section 611 and, if money
shall have been deposited with the Trustee pursuant to subclause (B) of
clause (1) of this Section, the obligations of the Trustee under Section 402
and the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities, the
coupons and this Indenture, to the payment either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal
(and premium, if any) and interest for whose payment such money has been
deposited with the Trustee; but such money need not be segregated from other
funds except to the extent required by law.
ARTICLE FIVE
EVENTS OF DEFAULT AND REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein with respect to Securities of any
series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(1) default in the payment of any interest on any Security of that
series, or any related coupon, when such interest or coupon
becomes due and payable, and continuance of such default for a
period of 90 days; provided however, that an extension of one or
more Interest Payment Dates by the Company in accordance with the
terms of any indenture supplemental hereto, shall not constitute a
default in the payment of interest; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series at its Maturity; provided,
however, that a valid extension of the Maturity of the principal
or premium, if any, of such Securities in accordance with the
terms of any indenture supplemental hereto shall not constitute a
default in the payment of principal or premium, if any; or
(3) default in the deposit of any sinking fund payment, when and as
due by the terms of the Securities of that series and Article 12;
or
(4) default in the performance, or breach, of any covenant or
agreement of the Company in this Indenture which affects or is
applicable to the Securities of that series (other than a default
in the performance, or breach of a covenant or agreement which is
specifically dealt with elsewhere in this Section or which has
expressly been included in this Indenture solely for the benefit
of one or more series of Securities other than that series), and
continuance of such default or breach for a period of 90 days
after there has been given, by registered or certified mail, to
the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in principal amount of all Outstanding
Securities of that series a written notice specifying such default
or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(5) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the
39
Company under the Federal Bankruptcy Code or any other applicable
federal or state law, or appointing a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Company or of any substantial part of its property, or ordering
the winding up or liquidation of its affairs, and the continuance
of any such decree or order unstayed and in effect for a period of
90 consecutive days; or
(6) in the event Securities are issued and sold to a Pacific Telesis
Trust or a trustee of such trust in connection with the issuance
of Trust Securities by such Pacific Telesis Trust, such Pacific
Telesis Trust shall have voluntarily or involuntarily dissolved,
wound-up its business or otherwise terminated its existence except
in connection with (i) the distribution of Securities to Holders
of Trust Securities in liquidation or redemption of their
interests in such Pacific Telesis Trust, (ii) the redemption of
all of the Outstanding Trust Securities of such Pacific Telesis
Trust or (iii) certain mergers, consolidations or amalgamations,
each as permitted by the Declaration of such Pacific Telesis
Trust.
(7) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by
it of a petition or answer or consent seeking reorganization or
relief under the Federal Bankruptcy Code or any other applicable
federal or state law, or the consent by it to the filing of any
such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Company or of any substantial part of its property, or the making
by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts
generally as they become due; or
(8) any other Event of Default provided with respect to Securities of
that series.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default described in Section 501 with respect to Securities
of any series at the time Outstanding occurs and is continuing, then in
every such case the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Securities of that series may declare the
principal amount (or, if the Securities of that series are Original Issue
Discount Securities or Indexed Securities, such portion of the principal
amount as may be specified in the terms of that series) of all of the
Securities of that series to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), and upon
any such declaration such principal amount (or specified portion thereof)
shall become immediately due and payable.
At any time after a declaration of acceleration with respect to Securities
of any series (or of all series, as the case may be) has been made and
before a judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter provided in this Article, the Holders of a
majority in principal amount of the Outstanding Securities of that series
(or of all series, as the case may be), by written notice to the Company and
the Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay in the Currency in which the Securities of such
series are payable (except as otherwise specified pursuant to
Section 301 for the Securities of such series and except, if
applicable, as provided in Sections 311(b), 311(d) and 311(e)),
(A) all overdue interest on all Outstanding Securities of that
series (or of all series, as the case may be) and any related
coupons,
(B) all unpaid principal of (and premium, if any, on) any
Outstanding Securities of that series (or of all series, as
the case may be) which has become due otherwise than by such
declaration of acceleration, and interest on such unpaid
principal at the rate or rates prescribed therefor in such
Securities,
40
(C) interest on overdue interest at the rate or rates prescribed
therefore in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel; and
(2) all Events of Default with respect to Securities of that series
(or of all series, as the case may be), other than the non-payment
of amounts of principal of (or premium, if any, on) or interest on
Securities of that series (or of all series, as the case may be)
which have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
(1) default is made in the payment of any installment of interest on
any Security of any series and any related coupon as and when such
interest becomes due and payable and which payment has not been
extended in accordance with the provision of any indenture
supplemental hereto, and such default continues for a period of 90
days, or
(2) default is made in the payment of all or any part of the principal
of (or premium, if any, on) any of the Securities of any series
when the same shall have become due and payable and which payment
has not been extended in accordance with the terms of any
indenture supplemental hereto, whether at the Stated Maturity of
such series or by any call for redemption or by declaration of
acceleration or otherwise or
(3) default is made in the satisfaction of any sinking fund obligation
when and as such obligation becomes due and payable and which
payment has not been extended in accordance with the terms of any
indenture supplemental hereto,
then the Company will, upon demand of the Trustee, pay to the Trustee for
the benefit of the Holders of such Securities and coupons, the whole amount
then due and payable on such Securities and coupons for principal (and
premium, if any) and interest, and interest on any overdue principal (and
premium, if any) and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the
same against the Company or any other obligor upon such Securities and
collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon such
Securities, wherever situated.
If an Event of Default with respect to Securities of any series (or of all
series, as the case may be) occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders of Securities of such series (or of all series, as the case may be)
by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
41
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the
Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have
made any demand on the Company for the payment of overdue principal,
premium, if any, or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any), or such portion of the principal amount of any
series of Original Issue Discount Securities or Indexed Securities
as may be specified in the terms of such series, and interest
owing and unpaid in respect of the Securities and to file such
other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and of the Holders allowed
in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities or
coupons may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or coupons or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of the Holders
of the Securities and coupons in respect of which such judgment has been
recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be applied
in the following order, at the date or dates fixed by the Trustee and, in
case of the distribution of such money on account of principal (or premium,
if any) or interest, upon presentation of the Securities or coupons, or
both, as the case may be, and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
First: To the payment of all amounts due the Trustee under Section
606;
Second: To the payment of the amounts then due and unpaid for
principal of (and premium, if any, on) and interest on the
Securities and coupons in respect of which or for the benefit
of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts
due and payable on such Securities and coupons for principal
(and premium, if any) and interest, respectively; and
Third: The balance, if any, to the Company or any other Person or
Persons entitled thereto.
SECTION 507. Limitation on Suits.
No Holder of any Security of any series or any related coupons shall have
42
any right to institute any proceeding, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for
any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of
that series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series in the case of any Event of
Default described in Section 501, shall have made written request
to the Trustee to institute proceedings in respect of such Event
of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a
majority or more in principal amount of the Outstanding Securities
of that series in the case of any Event of Default described in
Section 501;
it being understood and intended that no one or more of such Holders shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of
any other Holders of Securities of the same series or to obtain or to seek
to obtain priority or preference over any other of such Holders or to
enforce any right under this Indenture, except in the manner herein provided
and for the equal and ratable benefit of all Holders of Securities of the
same series.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to
receive payment, as provided herein (including, if applicable, Article
Fourteen) and in such Security, of the principal of (and premium, if any,
on) and (subject to Section 307) interest on, such Security or payment of
such coupon on the respective Stated Maturities expressed in such Security
or coupon (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights
shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case, subject to
any determination in such proceeding, the Company, the Trustee and the
Holders of Securities and coupons shall be restored severally and
respectively to their former positions hereunder and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities or coupons in the last
paragraph of Section 306, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders of Securities or coupons is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition
to every other right and remedy given hereunder or now or hereafter existing
at law or in equity or otherwise. The assertion or employment of any right
or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
43
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security or
coupon to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such
Event of Default or an acquiescence therein. Every right and remedy given
by this Article or by law to the Trustee or to the Holders may be exercised
from time to time, and as often as may be deemed expedient, by the Trustee
or by the Holders, as the case may be.
SECTION 512. Control by Holders.
With respect to the Securities of any series, the Holders of not less than a
majority in principal amount of the Outstanding Securities of such series
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee relating to or arising under Section 501,
provided that in each case
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve it in
personal liability or be unjustly prejudicial to the Holders of
Securities of such series not consenting.
SECTION 513. Waiver of Past Defaults.
Subject to Section 502, the Holders of not less than a majority in principal
amount of the Outstanding Securities of any series may on behalf of the
Holders of all the Securities of such series waive any past default
described in Section 501 and its consequences, except a default
(1) in respect of the payment of the principal of (or premium, if any,
on) or interest on any Security or any related coupon, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected.
Upon any such waiver, any such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent
or other default or Event of Default or impair any right consequent thereon.
SECTION 514. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect
the covenants or the performance of this Indenture; and the Company (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 515. Undertaking for Costs
All parties to this Indenture agree, and each Holder of any Security by such
Holder's acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right
or remedy under this Indenture, or in any suit against the Trustee for any
action taken or omitted by it as Trustee, the filing by any party litigant
in such suit of an undertaking to pay the costs of such suit, and that such
court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard
to the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section 515 shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder of
Securities of any series, or group of such Holders, holding in the aggregate
44
more than ten percent in principal amount of the Securities of such series
Outstanding, or to any suit instituted by any Holder for the enforcement of
the payment of the principal of or any interest or premium on any Security,
on or after the due date expressed in such Security or for such interest (or
in the case of any redemption, on or after the Redemption Date).
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Events of Default.
Within 90 days after the occurrence of any Event of Default hereunder with
respect to the Securities of any series, the Trustee shall transmit in the
manner and to the extent provided in TIA Section 313(c), notice of such
default hereunder known to the Trustee, unless such Event of Default shall
have been cured or waived; provided, however, that, except in the case of an
Event of Default in the payment of the principal of (or premium, if any, on)
or interest on any Security of such series or in the payment of any sinking
fund installment with respect to Securities of such series, the Trustee
shall be protected in withholding such notice if and so long as the Board of
Directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interest of the Holders of Securities
of such series and any related coupons.
SECTION 602. Certain Rights of Trustee. Subject to the provisions of TIA
Sections 315(a) through 315(d):
(1) if an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their
exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;
(2) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party
or parties;
(3) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and
any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(4) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically prescribed) may, in
the absence of bad faith on its part, rely upon an Officers'
Certificate;
(5) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(6) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders of Securities of any series or any
related coupons pursuant to this Indenture, unless such Holders
shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(7) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or
other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or
45
matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled
to examine the books, records and premises of the Company,
personally or by agent or attorney;
(8) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(9) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by
this Indenture.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured
to it.
SECTION 603. Trustee Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except for the
Trustee's certificates of authentication, and in any coupons shall be taken
as the statements of the Company, and neither the Trustee nor any
Authenticating Agent assumes any responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities or coupons, except that the Trustee
represents that it is duly authorized to execute and deliver this Indenture,
authenticate the Securities and perform its obligations hereunder and that
the statements made by it in a Statement of Eligibility on Form T-1 supplied
to the Company are true and accurate, subject to the qualifications set
forth therein. Neither the Trustee nor any Authenticating Agent shall be
accountable for the use or application by the Company of Securities or the
proceeds thereof.
SECTION 604. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company or of the Trustee, in its
individual or any other capacity, may become the owner or pledgee of
Securities and coupons and, subject to TIA Sections 310(b) and 311, may
otherwise deal with the Company with the same rights it would have if it
were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or
such other agent.
SECTION 605. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except
as otherwise agreed with the Company.
SECTION 606. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation
shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or
advance as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
46
loss, liability or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder,
including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance
of any of its powers or duties hereunder.
The obligations of the Company under this Section to compensate the Trustee,
to pay or reimburse the Trustee for expenses, disbursements and advances and
to indemnify and hold harmless the Trustee shall constitute additional
indebtedness hereunder and shall survive the satisfaction and discharge of
this Indenture. As security for the performance of such obligations of the
Company, the Trustee shall have a claim prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds
held in trust for the payment of principal of (and premium, if any, on) or
interest on particular Securities or any coupons.
SECTION 607. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be eligible to
act as Trustee under TIA Section 310(a)(1) and shall have a combined capital
and surplus of at least $50,000,000. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements of
Federal, State, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
If at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 609.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the
Company. If the instrument of acceptance by a successor Trustee
required by Section 609 shall not have been delivered to the
Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of not less than a
majority in principal amount of the Outstanding Securities of such
series, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a
Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 607 and
shall fail to resign after written request therefor by the
Company or by any Holder who has been a bona fide Holder of a
Security for at least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee
or of its property shall be appointed or any public officer
shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation,
conservation or liquidation, or
(4) the Company shall determine that the Trustee has failed to
perform its obligations under this Indenture in any material
respect,
47
then, in any such case, (i) the Company, by a Board Resolution, may
remove the Trustee with respect to all Securities, or (ii) subject to
TIA Section 315(e), any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee with respect to all Securities and the
appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for
any cause, with respect to the Securities of one or more series,
the Company, by or pursuant to a Board Resolution, shall promptly
appoint a successor Trustee or Trustees with respect to the
Securities of that or those series (it being understood that any
such successor Trustee may be appointed with respect to the
Securities of one or more or all of such series and that at any
time there shall be only one Trustee with respect to the
Securities of any particular series). If, within one year after
such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee with respect to the Securities
of any series shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities of such
series delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the successor Trustee with
respect to the Securities of such series and to that extent
supersede the successor Trustee appointed by the Company. If no
successor Trustee with respect to the Securities of any series
shall have been so appointed by the Company or the Holders and
accepted appointment in the manner hereinafter provided, any
Holder who has been a bona fide Holder of a Security of such
series for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and
each appointment of a successor Trustee with respect to the
Securities of any series to the Holders of Securities of such
series in the manner provided for in Section 106. Each notice
shall include the name of the successor Trustee with respect to
the Securities of such series and the address of its Corporate
Trust Office.
SECTION 609. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so
appointed shall execute, acknowledge and deliver to the Company
and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the
retiring Trustee; but, on the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such
retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the
Company, the retiring Trustee and each successor Trustee with
respect to the Securities of one or more series shall execute and
deliver an indenture supplemental hereto wherein each successor
Trustee shall accept such appointment and which (1) shall contain
such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights,
powers, trusts and duties of the retiring Trustee with respect to
the Securities of that or those series to which the appointment of
such successor Trustee relates, (2) if the retiring Trustee is not
retiring with respect to all Securities, shall contain such
48
provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series as
to which the retiring Trustee is not retiring shall continue to be
vested in the retiring Trustee, and (3) shall add to or change any
of the provisions of this Indenture as shall be necessary to
provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that
nothing herein or in such supplemental indenture shall constitute
such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate
and apart from any trust or trusts hereunder administered by any
other such Trustee; and upon the execution and delivery of such
supplemental indenture the resignation or removal of the retiring
Trustee shall become effective to the extent provided therein and
each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of
such successor Trustee relates; but, on request of the Company or
any successor Trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder with respect to the
Securities of that or those series to which the appointment of
such successor Trustee relates. Whenever there is a successor
Trustee with respect to one or more (but less than all) series of
Securities issued pursuant to this Indenture, the terms
"Indenture" and "Securities" shall have the meanings specified in
the provisos to the respective definitions of those terms in
Section 101 which contemplate such situation.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all rights,
powers and trusts referred to in paragraph (a) or (b) of this
Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified
and eligible under this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under
this Article, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Securities shall
have been authenticated, but not delivered, by the Trustee then in office,
any successor by merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Securities so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities; and in case at that time any of the
Securities shall not have been authenticated, any successor Trustee may
authenticate such Securities either in the name of any predecessor hereunder
or in the name of the successor Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in the
Securities or in this Indenture provided that the certificate of the Trustee
shall have; provided, however, that the right to adopt the certificate of
authentication of any predecessor Trustee or to authenticate Securities in
the name of any predecessor Trustee shall apply only to its successor or
successors by merger, conversion or consolidation.
SECTION 611. Appointment of Authenticating Agent.
At any time when any of the Securities remain Outstanding, the Trustee may
appoint an Authenticating Agent or Agents with respect to one or more series
of Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities of such series and the Trustee shall give written
notice of such appointment to all Holders of Securities of the series with
respect to which such Authenticating Agent will serve, in the manner
provided for in Section 106. Securities so authenticated shall be entitled
49
to the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Any such appointment
shall be evidenced by an instrument in writing signed by a Responsible
Officer of the Trustee, and a copy of such instrument shall be promptly
furnished to the Company. Wherever reference is made in this Indenture to
the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf
of the Trustee by an Authenticating Agent. Each Authenticating Agent shall
be acceptable to the Company and shall at all times be a corporation
organized and doing business under the laws of the United States of America,
any state thereof or the District of Columbia, authorized under such laws to
act as Authenticating Agent, having a combined capital and surplus of not
less than $50,000,000 and subject to supervision or examination by federal
or state authority. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of said supervising
or examining authority, then for the purposes of this Section, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation to which
such Authenticating Agent shall be a party, or any corporation succeeding to
the corporate agency or corporate trust business of an Authenticating Agent,
shall continue to be an Authenticating Agent, provided such corporation
shall be otherwise eligible under this Section, without the execution or
filing of any paper or any further act on the part of the Trustee or the
Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any
time such Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
written notice of such appointment to all Holders of Securities of the
series with respect to which such Authenticating Agent will serve, in the
manner provided for in Section 106. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all the
rights, powers and duties of its predecessor hereunder, with like effect as
if originally named as an Authenticating Agent. No successor Authenticating
Agent shall be appointed unless eligible under the provisions of this
Section.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 606.
If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternate
certificate of authentication in the following form:
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
The First National Bank of Chicago,
as Trustee
By:_____________________________________________
as Authenticating Agent
By:_____________________________________________
Authorized Officer
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SECTION 612. Preferential Collection of Claims Against Company
(a) Subject to the provisions of subsection (b) of this Section 612, if the
Trustee shall be or shall become a creditor, directly or indirectly,
secured or unsecured, of the Company or any other obligor on the
Securities within three months prior to a default, as defined in
subsection (c) of this Section 612, or subsequent to such a default,
then, unless and until such default shall be cured, the Trustee shall
set apart and hold in a special account for the benefit of the Trustee
individually, the Holders of Securities for which it is acting as
Trustee, and the holders of other indenture securities (as defined in
subsection (c) of this Section 612):
(1) an amount equal to any and all reductions in the amount due and
owing upon any claim as such creditor in respect of principal or
interest, effected after the beginning of such three months'
period, and valid as against the Company or such other obligor on
the Securities and its other creditors, except any such reduction
resulting from the receipt or disposition of any property
described in paragraph (2) of this subsection, or from the
exercise of any right of set-off which the Trustee could have
exercised if a petition in bankruptcy had been filed by or against
the Company or such other obligor on the Securities upon the date
of such default; and
(2) all property received by the Trustee in respect of any claims as
such creditor either as security therefor, or in satisfaction or
composition thereof, or otherwise, after the beginning of such
three months' period, or an amount equal to the proceeds of any
such property if disposed of, subject, however, to the rights, if
any, of the Company or such other obligor on the Securities and
their respective other creditors in such property or such
proceeds.
Nothing herein contained, however, shall affect the right of the
Trustee:
(A) to retain for its own account (1) payments made on account of
any such claim by any Person (other than the Company or such
other obligor on the Securities) who is liable thereon, and
(ii) the proceeds of the bona fide sale of any such claim by
the Trustee to a third Person, and (iii) distributions made
in cash, securities or other property in respect of claims
filed against the Company or such other obligor on the
Securities in bankruptcy or receivership or in proceedings
for reorganization pursuant to Title 11 of the United States
Code or applicable state laws;
(B) to realize, for its own account, upon any property held by it
as security for any such claim, if such property was so held
prior to the beginning of such three months' period;
(C) to realize, for its own account, but only to the extent of
the claim hereinafter mentioned, upon any property held by it
as security for any such claim, if such claim was created
after the beginning of such three months' period and such
property was received as security therefor simultaneously
with the creation thereof, and if the Trustee shall sustain
the burden of proving that at the time such property was so
received, the Trustee had no reasonable cause to believe that
a default, as defined in subsection (c) of this Section 612,
would occur within three months; or
(D) to receive payment on any claim referred to in paragraph (B)
or (C) against the release of any property held as security
for such claim as provided in such paragraph (B) or (C), as
the case may be, to the extent of the fair value of such
property.
For the purposes of paragraphs (B), (C) and (D), property substituted
after the beginning of such three months' period for property held as
security at the time of such substitution shall, to the extent of the
fair value of the property released, have the same status as the
property released, and to the extent that any claim referred to in any
of such paragraphs is created in renewal of or in substitution for or
51
for the purpose of repaying or refunding any preexisting claim of the
Trustee as such creditor, such claim shall have the same status as such
preexisting claim.
If the Trustee shall be required to account, the funds and property
held in such special account and the proceeds thereof shall be
apportioned among the Trustee, the Holders of Securities for which it
is acting as Trustee, and the holders of other indenture securities in
such manner that the Trustee, such Holders of Securities and the
holders of other indenture securities realize, as a result of payments
from such special account and payments of dividends on claims filed
against the Company or such other obligor on the Securities in
bankruptcy or receivership or in proceedings for reorganization
pursuant to Title 11 of the United States Code or applicable state law,
the same percentage of their respective claims, figured before
crediting to the claim of the Trustee anything on account of the
receipt by it from the Company or such other obligor on the Securities
of the funds and property in such special account and before crediting
to the respective claims of the Trustee, such Holders of Securities,
and the holders of other indenture securities dividends on claims filed
against the Company or such other obligor on the securities in
bankruptcy or receivership or in proceedings for reorganization
pursuant to Title 11 of the United States Code or applicable state law,
but after crediting thereon receipts on account of the indebtedness
represented by their respective claims from all sources other than from
such dividends and from the funds and property so held in such special
account. As used in this paragraph, with respect to any claim, the
term "dividends" shall include any distribution with respect to such
claim in bankruptcy or receivership or in proceedings for
reorganization pursuant to Title 11 of the United States Code or
applicable State law, whether such distribution is made in cash,
securities or other property, but shall not include any such
distribution with respect to the secured portion, if any, of such
claim. The court in which such bankruptcy, receivership or proceeding
for reorganization is pending shall have jurisdiction (i) to apportion
among the Trustee, such Holders of Securities, and the holders of other
indenture securities, in accordance with the provisions of this
paragraph, the funds and property held in such special account and the
proceeds thereof, or (ii) in lieu of such apportionment in whole or in
part, to give to the provisions of this paragraph due consideration in
determining the fairness of the distributions to be made to the
Trustee, such Holders of Securities and the holders of other indenture
securities with respect to their respective claims, in which event it
shall not be necessary to liquidate or to appraise the value of any
securities or other property held in such special account or as
security for any such claim, or to make a specific allocation of such
distributions as between the secured and unsecured portions of such
claim, or otherwise to apply the provisions of this paragraph as a
mathematical formula.
Any Trustee who has resigned or been removed after the beginning of
such three moths' period shall be subject to the provisions of this
subsection (a) as though such resignation or removal had not occurred.
If any Trustee has resigned prior to the beginning of such three
months' period, it shall be subject to the provisions of this
subsection (a) if and only if the following conditions exist:
(i) the receipt of property or reduction of claim which would have
given rise to the obligation to account, if such Trustee had
continued, as trustee, occurred after the beginning of such three
months' period; and
(ii) such receipt of property or reduction of claim occurred within
three months after such resignation or removal.
In every case commenced under the Bankruptcy Act of 1898, or any
amendment thereto enacted prior to November 6, 1978, all references to
periods of three months shall be deemed to be references to periods of
four months.
(b) There shall be excluded from the operation of subsection (a) of
this Section 612 a creditor relationship arising from:
(1) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of
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one year or more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction, or by this Indenture, for the purpose
of preserving any property which shall at any time be subject
to the lien of this Indenture or of discharging tax liens or
other prior liens or encumbrances thereon, if notice of such
advance and of the circumstances surrounding the making
thereof is given to the Holders of Securities at the time and
in the manner provided in Section 703;
(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent,
registrar, custodian, paying agent, fiscal agent or
depositary, or other similar capacity;
(4) an indebtedness created as a result of services rendered or
premises rented, or an indebtedness created as a result of
goods or securities sold in a cash transaction as defined in
subsection (c) of this Section 612;
(5) the ownership of stock or of other securities of a company
organized under the provisions of Section 25(a) of the
Federal Reserve Act, as amended, which is directly or
indirectly a creditor of the Company or any other obligor on
the Securities; and
(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which
fall within the classification of self-liquidating paper as
defined in subsection (c) of this Section 612.
(c) As used in this Section 612 the following terms shall be accorded
the following definitions:
(1) the term "default" shall mean any failure to make payment in
full of the principal of or interest on any of the Securities
or on other indenture securities when and as such principal
or interest becomes due and payable.
(2) the term "other indenture securities" shall mean securities
upon which the Company or any other obligor on the Securities
is an "obligor" (as defined in the TIA) outstanding under any
other indenture (A) under which the Trustee is also trustee,
(B) which contains provisions substantially similar to the
provisions of subsection (a) of this Section 612, and (C)
under which a default exists at the time of the apportionment
of the funds and property held in said special account.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to furnish Trustee Information As to the Names and
Addresses of Holders of Securities.
The Company will furnish or cause to be furnished to the Trustee, not less
than 45 days nor more than 60 days after each date (month and day) specified
as an Interest Payment Date for the Securities of the first series issued
under this Indenture (whether or not any Securities of that series are then
Outstanding), but in no event less frequently than semiannually, and at such
other times as the Trustee may request in writing, within 30 days after
receipt by the Company of any such request, a list in such form as the
Trustee may reasonably require containing all information in the possession
or control of the Company, or any of its Paying Agents other than the
Trustee, as to the names and addresses of the Holders of Securities,
obtained since the date as of which the next previous list, if any, was
furnished, excluding from any such list the names and addresses received by
the Trustee in its capacity as registrar (if so acting). Any such list may
be dated as of a date not more than 15 days prior to the time such
information is furnished and need not include information received after
such date.
53
SECTION 702. Preservation of Information; Communication to Holders of
Securities.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Securities
of each series (1) contained in the most recent list furnished to
it as provided in Section 701, (2) received by the Trustee in the
capacity of Paying Agent or registrar (if so acting), and (3)
filed with the Trustee within the two preceding years as provided
for in Section 704. The Trustee may destroy any list furnished to
it as provided in Section 701 upon receipt of a new list so
furnished.
(b) If three or more Holders of Securities (hereinafter referred to as
"applicants") apply in writing to the Trustee, and furnish to the
Trustee reasonable proof that each such applicant has owned a
Security for a period of at least six months preceding the date of
such application, and such application states that the applicants
desire to communicate with other Holders of Securities of any
series or with Holders of all Securities with respect to their
rights under this Indenture or under such Securities and is
accompanied by a copy of the form of proxy or other communication
which such applicants propose to transmit, then the Trustee shall,
within five Business Days after the receipt of such application,
at its election, either:
(1) afford such applicants access to the information preserved at
the time by the Trustee in accordance with the provisions of
subsection (a) of this Section 702 or
(2) inform such applicants as to the approximate number of
Holders of Securities of such series or all Securities, as
the case may be, whose names and addresses appear in the
information preserved at the time by the Trustee in
accordance with the provisions of subsection (a) of this
Section 702, and as to the approximate cost of mailing to
such Holders of Securities the form of proxy or other
communications, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such
applicants, mail to each of the Holders of Securities of such series,
or all Securities, as the case may be, whose name and address appear in
the information preserved at the time by the Trustee in accordance with
the provisions of subsection (a) of this Section 702, a copy of the
form of proxy or other communication which is specified in such
request, with reasonable promptness after a tender to the Trustee of
the material to be mailed and of payment, or provision for the payment,
of the reasonable expenses of mailing, unless within five days after
such tender, the Trustee shall mail to such applicants and file with
the Commission, together with a copy of the material to be mailed, a
written statement to the effect that, in the opinion of the Trustee,
such mailing would be contrary to the best interests of the Holders of
Securities of such series or all Securities, as the case may be, or
would be in violation of applicable law. Such written statement shall
specify the basis of such opinion. If the Commission, after
opportunity for a hearing upon the objections specified in the written
statement so filed, shall enter an order refusing to sustain any of
such objections or if, after the entry of an order sustaining one or
more of such objections, the Commission shall find, after notice and
opportunity for hearing, that all the objections so sustained have been
met and shall enter an order so declaring, the Trustee shall mail
copies of such material to all such Holders of Securities with
reasonable promptness after the entry of such order and the renewal of
such tender; otherwise the Trustee shall be relieved of any obligation
or duty to such applicants respecting their application.
(c) Each and every Holder of the Securities, by receiving and holding
the same, agrees with the Company and the trustee that neither the
Company nor the Trustee nor any Paying Agent nor any registrar
shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders of
Securities in accordance with the provisions of subsection (b) of
this Section 702, regardless of the source from which such
information was derived, and that the Trustee shall not be held
54
accountable by reason of mailing any material pursuant to a
request made under said subsection (b).
SECTION 703. Reports by Trustee.
Within 60 days after May 15 of each year commencing with the first May 15
after the first issuance of Securities pursuant to this Indenture, the
Trustee shall transmit to the Holders of Securities, in the manner and to
the extent provided in TIA Section 313(c), a brief report dated as of such
May 15 if required by TIA Section 313(a).
SECTION 704. Reports by Company.
The Company shall:
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the
annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations
prescribe) which the Company may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934; or, if the Company is not
required to file information, documents or reports pursuant to
either of such Sections, then it shall file with the Trustee and
the Commission, in accordance with rules and regulations
prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports
which may be required pursuant to Section 13 of the Securities
Exchange Act of 1934 in respect of a security listed and
registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations;
(2) file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission,
such additional information, documents and reports with respect to
compliance by the Company with the conditions and covenants of
this Indenture as may be required from time to time by such rules
and regulations; and
(3) transmit to all Holders, in the manner and to the extent provided
in TIA Section 313(c), within 30 days after the filing thereof
with the Trustee, such summaries of any information, documents and
reports required to be filed by the Company pursuant to paragraphs
(1) and (2) of this Section as may be required by rules and
regulations prescribed from time to time by the Commission.
(4) furnish to the Trustee not less often than annually, a brief
certificate from the principal executive officer, principal
financial officer or principal accounting officer as to his or her
knowledge of the Company's compliance with all conditions and
covenants under the Indenture; such compliance to be determined
without regard to any period of grace or requirement of notice
provided under the Indenture.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other corporation
or convey, transfer or lease, or permit one or more of its Subsidiaries to
convey, transfer or lease, all or substantially all of the property and
assets of the Company and its Subsidiaries on a consolidated basis, to any
Person, unless the corporation formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance or
transfer, or which leases, the properties and assets of the Company and its
Subsidiaries on a consolidated basis is organized under the laws of the
United States or any state of the United States or the District of Columbia,
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form reasonably satisfactory to the Trustee,
the Company's obligation for the due and punctual payment of the principal
of (and premium, if any, on) and interest on all the Securities and the
55
performance and observance of every covenant of this Indenture on the part
of the Company to be performed or observed, and, immediately after giving
effect to the transaction, no Event of Default shall have occurred and be
continuing.
This Section shall only apply to a merger or consolidation in which the
Company is not the surviving corporation and to conveyances, leases and
transfers by the Company as transferor or lessor.
SECTION 802. Successor Person Substituted.
Upon any consolidation by the Company with or merger by the Company into any
other corporation or any conveyance, transfer or lease of the properties and
assets of the Company and its Subsidiaries on a consolidated basis to any
Person in accordance with Section 801, the successor Person formed by such
consolidation or into which the Company is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this
Indenture with the same effect as if such successor Person had been named as
the Company herein, and in the event of any such conveyance or transfer, the
Company (which term shall for this purpose mean the Person named as the
"Company" in the first paragraph of this Indenture or any successor Person
which shall theretofore become such in the manner described in Section 801),
except in the case of a lease, shall be discharged of all obligations and
covenants under this Indenture and the Securities and the coupons and may be
dissolved and liquidated.
SECTION 803. Assignment of Rights.
The Company will have the right at all times to assign any of its respective
rights or obligations under this Indenture to a direct or indirect wholly-
owned Subsidiary of the Company; provided, that in the event of any such
assignment, the Company will remain liable for all of its respective
obligations. Subject to the foregoing, this Indenture will be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns. This Indenture may not otherwise be assigned by the
parties hereto.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by or
pursuant to a Board Resolution, and the Trustee, at any time and from time
to time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the
Company contained herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities and any related coupons
(and if such covenants are to be for the benefit of less than all
series of Securities, stating that such covenants are being
included solely for the benefit of such series) or to surrender
any right or power herein conferred upon the Company; or
(3) to add any additional Events of Default (and if such Events of
Default are to be for the benefit of less than all series of
Securities, stating that such Events of Default are being included
solely for the benefit of such series); or
(4) to add to or change any of the provisions of this Indenture to
provide that Bearer Securities may be registrable as to principal,
to change or eliminate any restrictions on the payment of
principal of or any premium or interest on Bearer Securities, to
permit Bearer Securities to be issued in exchange for Registered
Securities, to permit Bearer Securities to be issued in exchange
for Bearer Securities of other authorized denominations or to
permit or facilitate the issuance of Securities in uncertificated
form; provided that any such action shall not adversely affect the
interests of the Holders of Securities of any series or any
56
related coupons in any material respect; or
(5) to change or eliminate any of the provisions of this Indenture;
provided that any such change or elimination shall become
effective only when there is no Security Outstanding of any series
created prior to the execution of such supplemental indenture
which is entitled to the benefit of such provision; or
(6) to establish the form or terms of Securities of any series as
permitted by Sections 201 and 301; or
(7) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of
one or more series and to add to or change any of the provisions
of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than
one Trustee, pursuant to the requirements of Section 609(b); or
(8) to close this Indenture with respect to the authentication and
delivery of additional series of Securities, to cure any
ambiguity, to correct or supplement any provision herein which may
be inconsistent with any other provision herein, or to make any
other provisions with respect to matters or questions arising
under this Indenture; provided such action shall not adversely
affect the interests of the Holders of Securities of any series
and any related coupons in any material respect.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in principal
amount of all Outstanding Securities of any series, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by or
pursuant to a Board Resolution, and the Trustee may enter into an indenture
or indentures supplemental hereto for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Indenture which affect such series of Securities or of modifying in any
manner the rights of the Holders of Securities of such series under this
Indenture; provided, however, that no such supplemental indenture shall,
without the consent of the Holder of each Outstanding Security of such
series,
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Security of such series, or reduce the
principal amount thereof or the rate of interest thereon or any
premium payable upon the redemption thereof, or change any
obligation of the Company to pay Additional Amounts contemplated
by Section 1005 (except as contemplated by Section 801 and
permitted by Section 901(1)), or reduce the amount of the
principal of an Original Issue Discount Security of such series
that would be due and payable upon a declaration of acceleration
of the Maturity thereof pursuant to Section 502 or the amount
thereof provable in bankruptcy pursuant to Section 504, or
adversely affect any right of repayment at the option of any
Holder of any Security of such series, or change any Place of
Payment where, or the Currency in which, any Security of such
series or any premium or interest thereon is payable, or impair
the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case
of redemption or repayment at the option of the Holder, on or
after the Redemption Date or Repayment Date, as the case may be),
or
(2) reduce the percentage in principal amount of the Outstanding
Securities of such series required for any such supplemental
indenture, for any waiver of compliance with certain provisions of
this Indenture which affect such series or certain defaults
applicable to such series hereunder and their consequences
provided for in this Indenture, or reduce the requirements of
Section 1504 for quorum or voting with respect to Securities of
such series, or
(3) change the time of payment or reduce the amount of any minimum
sinking fund payment, or
(4) modify any of the provisions of this Section or Section 513,
57
except to increase any such percentage or to provide that certain
other provisions of this Indenture which affect such series cannot
be modified or waived without the consent of the Holder of each
Outstanding Security of such series.
Any such supplemental indenture adding any provisions to or changing in any
manner or eliminating any of the provisions of this Indenture, or modifying
in any manner the rights of the Holders of Securities of such series, shall
not affect the rights under this Indenture of the Holders of Securities of
any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may, but shall
not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified and amended in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall conform
to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if
reasonably required by the Trustee, bear a notation in form reasonably
approved by the Trustee as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Securities of any series
so modified as to conform, in the opinion of the Trustee and the Company, to
any such supplemental indenture may be prepared and executed by the Company
and authenticated and delivered by the Trustee in exchange for Outstanding
Securities of such series.
SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 902, the
Company shall give notice thereof to the Holders of each Outstanding
Security affected, in the manner provided for in Section 106, setting forth
in general terms the substance of such supplemental indenture.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest.
The Company covenants and agrees for the benefit of the Holders of each
series of Securities and any related coupons that it will duly and
punctually pay or cause to be paid the principal of (and premium, if any,
on) and interest on the Securities of that series in accordance with the
terms of the Securities, any coupons appertaining thereto and this
Indenture, subject, however, to the limitations set forth in this Section
1001. Unless otherwise specified as contemplated by Section 301 with
respect to any series of Securities, any interest installments due on Bearer
Securities on or before Maturity shall be payable only upon presentation and
58
surrender of the several coupons for such interest installments as are
evidenced thereby as they severally mature.
SECTION 1002. Maintenance of Office or Agency.
If the Securities of a series are issuable only as Registered Securities,
the Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be
presented or surrendered for payment, where Securities of that series may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities of that series
and this Indenture may be served.
If Securities of a series are issuable as Bearer Securities, the Company
will maintain (A) in The City of New York, an office or agency where any
Registered Securities of that series may be presented or surrendered for
payment, where any Registered Securities of that series may be surrendered
for registration of transfer, where Securities of that series may be
surrendered for exchange, where notices and demands to or upon the Company
in respect of the Securities of that series and this Indenture may be served
and where Bearer Securities of that series and related coupons may be
presented or surrendered for payment in the circumstances described in this
Section (and not otherwise), (B) subject to any laws or regulations
applicable thereto, in a Place of Payment for that series which is located
outside the United States, an office or agency where Securities of that
series and related coupons may be presented and surrendered for payment;
provided, however, that, if the Securities of that series are listed on any
stock exchange located outside the United States and such stock exchange
shall so require, the Company will maintain a Paying Agent for the
Securities of that series in any required city located outside the United
States so long as the Securities of that series are listed on such exchange,
and (C) subject to any laws or regulations applicable thereto, in a Place of
Payment for that series which is located outside the United States, an
office or agency where any Registered Securities of that series may be
surrendered for registration of transfer, where Securities of that series
may be surrendered for exchange and where notices and demands to or upon the
Company in respect of the Securities of that series and this Indenture may
be served.
The Company will give prompt written notice to the Trustee of the location,
and any change in the location, of such office or agency.
If at any time the Company shall fail to maintain any such required office
or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the Corporate Trust Office of the Trustee, except that Bearer Securities of
any series and the related coupons may be presented and surrendered for
payment at the offices specified in the Security, in London, and the Company
hereby appoints the same as its agent to receive such respective
presentations, surrenders, notices and demands.
Unless otherwise specified with respect to any Securities pursuant to
Section 301, no payment of principal, premium or interest on Bearer
Securities shall be made at any office or agency of the Company in the
United States or by check mailed to any address in the United States or by
transfer to an account maintained with a bank located in the United States;
provided, however, that, if the Securities of a series are payable in
Dollars, payment of principal of (and premium, if any, on) and interest on
any Bearer Security shall be made at the office of the Company's Paying
Agent in The City of New York, if (but only if) payment in Dollars of the
full amount of such principal, premium or interest, as the case may be, at
all offices or agencies outside the United States maintained for the purpose
by the Company in accordance with this Indenture is illegal or effectively
precluded by exchange controls or other similar restrictions.
The Company may also from time to time designate one or more other offices
or agencies where the Securities of one or more series may be presented or
surrendered for any or all such purposes and may from time to time rescind
any such designation; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to
maintain an office or agency in accordance with the requirements set forth
above for Securities of any series for such purposes. The Company will give
prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency. Unless
otherwise specified with respect to any Securities as contemplated by
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Section 301 with respect to a series of Securities, the Company hereby
designates as a Place of Payment for each series of Securities the office or
agency of the Company in the City of Chicago, and initially appoints the
Trustee at its Corporate Trust Office as Paying Agent in such city and as
its agent to receive all such presentations, surrenders, notices and
demands.
Unless otherwise specified with respect to any Securities pursuant to
Section 301, if and so long as the Securities of any series (i) are
denominated in a Currency other than Dollars or (ii) may be payable in a
Currency other than Dollars, or so long as it is required under any other
provision of the Indenture, then the Company will maintain with respect to
each such series of Securities, or as so required, at least one Exchange
Rate Agent.
SECTION 1003. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect to
any series of Securities and any related coupons, it will, on or before each
due date of the principal of (and premium, if any, on) or interest on any of
the Securities of that series, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum in the Currency in which the
Securities of such series are payable (except as otherwise specified
pursuant to Section 301 for the Securities of such series and except, if
applicable, as provided in Sections 311(b), 311(d) and 311(e)) sufficient to
pay the principal (and premium, if any) or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents for any series of
Securities and any related coupons, it will, prior to or on each due date of
the principal of (and premium, if any, on) or interest on any Securities of
that series, deposit with a Paying Agent a sum (in the Currency described in
the preceding paragraph) sufficient to pay the principal (and premium, if
any) or interest so becoming due, such sum to be held in trust for the
benefit of the Persons entitled to such principal, premium or interest, and
(unless such Paying Agent is the Trustee) the Company will promptly notify
the Trustee of its action or failure so to act.
The Company will cause each Paying Agent (other than the Trustee) for any
series of Securities to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the
provisions of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any, on) and interest on Securities of such series in
trust for the benefit of the Persons entitled thereto until such
sums shall be paid to such Persons or otherwise disposed of as
herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities of such series) in the making of
any payment of principal of (or premium, if any, on) or interest
on the Securities of such series; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust
by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such sums.
Except as provided in the Securities of any series, any money deposited with
the Trustee or any Paying Agent, or then held by the Company, in trust for
the payment of the principal of (and premium, if any, on) or interest on any
Security of any series, or any coupon appertaining thereto, and remaining
unclaimed for two years after such principal (and premium, if any) or
interest has become due and payable shall be paid to the Company on Company
60
Request, or (if then held by the Company) shall be discharged from such
trust; and the Holder of such Security or coupon shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such
trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the request and
expense of the Company cause to be published once, in an Authorized
Newspaper, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
SECTION 1004. Statement as to Compliance.
The Company will deliver to the Trustee the certificate required by Section
704(4) hereof.
SECTION 1005. Additional Amounts.
If any Securities of a series provide for the payment of additional amounts
to any Holder who is not a United States person in respect of any tax,
assessment or governmental charge ("Additional Amounts"), the Company will
pay to the Holder of any Security of such series or any coupon appertaining
thereto such Additional Amounts as may be specified as contemplated by
Section 301. Whenever in this Indenture there is mentioned, in any context,
the payment of the principal (or premium, if any, on) or interest on, or in
respect of, any Security of a series or payment of any related coupon or the
net proceeds received on the sale or exchange of any Security of a series,
such mention shall be deemed to include mention of the payment of Additional
Amounts, if any, provided for by the terms of such series established
pursuant to Section 301 to the extent that, in such context, Additional
Amounts are, were or would be payable in respect thereof pursuant to such
terms and express mention of the payment of Additional Amounts (if
applicable) in any provisions hereof shall not be construed as excluding
Additional Amounts in those provisions hereof where such express mention is
not made.
Except as otherwise specified as contemplated by Section 301, if the
Securities of a series provide for the payment of Additional Amounts, at
least 10 days prior to the first Interest Payment Date with respect to that
series of Securities (or if the Securities of that series will not bear
interest prior to Maturity, the first day on which a payment of principal
(and premium, if any) is made), and at least 10 days prior to each date of
payment of principal (and premium, if any) or interest if there has been any
change with respect to the matters set forth in the below-mentioned
Officers' Certificate, the Company will furnish the Trustee and the
Company's principal Paying Agent or Paying Agents, if other than the
Trustee, with an Officers' Certificate instructing the Trustee and such
Paying Agent or Paying Agents whether such payment of principal of (and
premium, if any, on) or interest on the Securities of that series shall be
made to Holders of Securities of that series or any related coupons who are
not United States persons without withholding for or on account of any tax,
assessment or other governmental charge described in the Securities of the
series. If any such withholding shall be required, then such Officers'
Certificate shall specify by country the amount, if any, required to be
withheld on such payments to such Holders of Securities of that series or
related coupons, and the Company will pay to the Trustee or such Paying
Agent the Additional Amounts required by the terms of such Securities. In
the event that the Trustee or any Paying Agent, as the case may be, shall
not so receive the above-mentioned certificate, then the Trustee or such
Paying Agent shall be entitled to (i) assume that no such withholding or
deduction is required with respect to any payment of principal (and premium,
if any) or interest with respect to any Securities of a series or related
coupons until it shall have received a certificate advising otherwise and
(ii) to make all payments of principal (and premium, if any) and interest
with respect to the Securities of a series or related coupons without
withholding or deductions until otherwise advised. The Company covenants to
indemnify the Trustee and any Paying Agent for, and to hold them harmless
against, any loss, liability or expense reasonably incurred without
negligence or bad faith on their part arising out of or in connection with
actions taken or omitted by any of them in reliance on any Officers'
Certificate furnished pursuant to this Section.
SECTION 1006. Limitation on Dividends.
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(a) If Securities are issued to a Pacific Telesis Trust or a trustee of
such trust in connection with the issuance of Trust Securities by such
Pacific Telesis Trust and (i) there shall have occurred any event that
would constitute an Event of Default or (ii) the Company shall be in
default with respect of its payment or any other obligations under the
Preferred Securities Guarantee or Common Securities Guarantee relating
to such Pacific Telesis Trust, then (A) the Company shall not declare
or pay any dividend on, make any distributions with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect
to, any of its capital stock, and (B) the Company shall not make any
payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by the Company which
rank pari passu with or junior to such Securities, provided that the
foregoing restriction in paragraph (A) does not apply to any stock
dividends paid by the Company where the dividend stock is the same
stock as that on which the dividend is being paid.
(b) If Securities are issued to a Pacific Telesis Trust or a trustee of
such a trust in connection with the issuance of Trust Securities by
such Pacific Telesis Trust and the Company shall have given notice of
its election to defer payments of interest on such Securities by
extending the interest payment period as provided in the Indenture and
such period, or any extension thereof, shall be continuing, then (A)
the Company shall not declare or pay any dividend or, make any
distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock, and (B)
the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities
issued by the Company which rank pari passu with or junior to such
Securities, provided that the foregoing restriction in paragraph (A)
does not apply to any stock dividends paid by the Company where the
dividend stock is the same as that on which the dividend is being paid.
SECTION 1007. Covenants as to Pacific Telesis Trusts.
In the event Securities are issued and sold to a Pacific Telesis Trust or a
trustee of such trust in connection with the issuance of Trust Securities by
such Pacific Telesis Trust, for so long as such Trust Securities remain
Outstanding, the Company will (i) maintain 100% direct or indirect ownership
of the Common Securities of such Pacific Telesis Trust; provided, however,
that any permitted successor of the Company under the Indenture may succeed
to the Company's ownership of the Common Securities, and (ii) use its
reasonable efforts to cause such Pacific Telesis Trust (a) to remain a
statutory business trust, except in connection with a distribution of
Securities as provided in the Declaration of such Pacific Telesis Trust, the
redemption of all of the Trust Securities and in connection with certain
mergers, consolidations or amalgamations permitted by the Declaration of
such Pacific Telesis Trust, and (b) otherwise continue to be treated as a
grantor trust for United States federal income tax purposes.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated Maturity
shall be redeemable in accordance with the terms of such Securities and
(except as otherwise specified as contemplated by Section 301 for Securities
of any series) in accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced by
or pursuant to a Board Resolution. In case of any redemption at the
election of the Company, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
reasonably satisfactory to the Trustee), notify the Trustee of such
Redemption Date and of the principal amount of Securities of such series to
be redeemed and shall deliver to the Trustee such documentation and records
as shall enable the Trustee to select the Securities to be redeemed pursuant
to Section 1103. In the case of any redemption of Securities prior to the
expiration of any restriction on such redemption provided in the terms of
such Securities or elsewhere in this Indenture, the Company shall furnish
the Trustee with an Officers' Certificate evidencing compliance with such
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restriction.
SECTION 1103. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities
of such series not previously called for redemption, by such method as the
Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions of the principal of Securities of such
series; provided, however, that no such partial redemption shall reduce the
portion of the principal amount of a Security not redeemed to less than the
minimum authorized denomination for Securities of such series established
pursuant to Section 301.
The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption and, in the case of any Securities selected for
partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount of such Security which has been or is to be
redeemed.
SECTION 1104. Notice of Redemption.
Except as otherwise specified as contemplated by Section 301,
notice of redemption shall be given in the manner provided for in
Section 106 not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series are to
be redeemed, the identification (and, in the case of partial
redemption, the principal amounts) of the particular Securities to
be redeemed,
(4) that on the Redemption Date the Redemption Price (together with
accrued interest, if any, to the Redemption Date payable as
provided in Section 1106) will become due and payable upon each
such Security, or the portion thereof, to be redeemed and, if
applicable, that interest thereon will cease to accrue on and
after said date,
(5) the place or places where such Securities, together in the case of
Bearer Securities with all coupons appertaining thereto, if any,
maturing after the Redemption Date, are to be surrendered for
payment of the Redemption Price,
(6) that the redemption is for a sinking fund, if such is the case,
(7) that, unless otherwise specified in such notice, Bearer Securities
of any series, if any, surrendered for redemption must be
accompanied by all coupons maturing subsequent to the Redemption
Date or the amount of any such missing coupon or coupons will be
deducted from the Redemption Price unless security or indemnity
satisfactory to the Company, the Trustee and any Paying Agent is
furnished, and
(8) if Bearer Securities of any series are to be redeemed and any
Registered Securities of such series are not to be redeemed, and
if such Bearer Securities may be exchanged for Registered
Securities not subject to redemption on such Redemption Date
pursuant to Section 305 or otherwise, the last date, as determined
by the Company, on which such exchanges may be made.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
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SECTION 1105. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the Trustee or
with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1003) an amount of money
in the Currency in which the Securities of such series are payable (except
as otherwise specified pursuant to Section 301 for the Securities of such
series and except, if applicable as provided in Sections 311(b), 311(d) and
312(e)) sufficient to pay the Redemption Price of, and accrued interest on,
all the Securities which are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to be
redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified in the Currency in which the Securities
of such series are payable (except as otherwise specified pursuant to
Section 301 for the Securities of such series and except, if applicable as
provided in Sections 311(b), 311(d) and 311(e)) (together with accrued
interest, if any, to the Redemption Date), and from and after such date
(unless the Company shall default in the payment of the Redemption Price and
accrued interest) such Securities shall, if the same were interest bearing,
cease to bear interest and the coupons for such interest appertaining to any
Bearer Securities so to be redeemed, except to the extent provided below,
shall be void. Upon surrender of any such Security for redemption in
accordance with said notice, together with all coupons, if any, appertaining
thereto maturing after the Redemption Date, such Security shall be paid by
the Company at the Redemption Price, together with accrued interest, if any,
to the Redemption Date; provided, however, that installments of interest on
Bearer Securities whose Stated Maturity is on or prior to the Redemption
Date shall be payable only at an office or agency located outside the United
States (except as otherwise provided in Section 1002) and, unless otherwise
specified as contemplated by Section 301, only upon presentation and
surrender of coupons for such interest, and provided, further, that
installments of interest on Registered Securities whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and
the provisions of Section 307.
If any Bearer Security surrendered for redemption shall not be accompanied
by all appurtenant coupons maturing after the Redemption Date, such Security
may be paid after deducting from the Redemption Price an amount equal to the
face amount of all such missing coupons, or the surrender of such missing
coupon or coupons may be waived by the Company and the Trustee if there be
furnished to them such security or indemnity as they may require to save
each of them and any Paying Agent harmless. If thereafter the Holder of
such Security shall surrender to the Trustee or any Paying Agent any such
missing coupon in respect of which a deduction shall have been made from the
Redemption Price, such Holder shall be entitled to receive the amount so
deducted; provided, however, that interest represented by coupons shall be
payable only at an office or agency located outside the United States
(except as otherwise provided in Section 1002) and, unless otherwise
specified as contemplated by Section 301, only upon presentation and
surrender of those coupons.
If any Security called for redemption or portion thereof shall not be so
paid upon surrender thereof for redemption, the principal (and premium, if
any) shall, until paid, bear interest from the Redemption Date at the rate
of interest or Yield to Maturity (in the case of Original Issue Discount
Securities) set forth in the Security.
SECTION 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part (pursuant to the
provisions of this Article or of Article Twelve) shall be surrendered at a
Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory
to the Company and the Trustee duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of
such Security without service charge, a new Security or Securities of the
same series, of any authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Security so surrendered.
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ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article.
Retirements of Securities of any series pursuant to any sinking fund shall
be made in accordance with the terms of such Securities and (except as
otherwise specified as contemplated by Section 301 for Securities of any
series) in accordance with this Article.
The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by
the terms of Securities of any series is herein referred to as an "optional
sinking fund payment". If provided for by the terms of Securities of any
series, the cash amount of any mandatory sinking fund payment may be subject
to reduction as provided in Section 1202. Each sinking fund payment shall
be applied to the redemption of Securities of any series as provided for by
the terms of Securities of such series.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.
Subject to Section 1203, in lieu of making all or any part of any mandatory
sinking fund payment with respect to any Securities of a series in cash,
subject to the limitations set forth at Section 1001, the Company may at its
option (1) deliver to the Trustee Outstanding Securities of a series (other
than any previously called for redemption) theretofore purchased or
otherwise acquired by the Company together in the case of any Bearer
Securities of such series with all unmatured coupons appertaining thereto,
and/or (2) receive credit for the principal amount of Securities of such
series which have been previously delivered to the Trustee by the Company or
for Securities of such series which have been redeemed either at the
election of the Company pursuant to the terms of such Securities or through
the application of permitted optional sinking fund payments pursuant to the
terms of such Securities, in each case in satisfaction of all or any part of
any mandatory sinking fund payment with respect to the Securities of the
same series required to be made pursuant to the terms of such Securities as
provided for by the terms of such series; provided, however, that such
Securities have not been previously so credited. Such Securities shall be
received and credited for such purpose by the Trustee at the Redemption
Price specified in such Securities for redemption through operation of the
sinking fund and the amount of such mandatory sinking fund payment shall be
reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any series
of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment
for that series pursuant to the terms of that series, the portion thereof,
if any, which is to be satisfied by payment of cash in the Currency in which
the Securities of such series are payable (except as otherwise specified
pursuant to Section 301 for the Securities of such series and except, if
applicable, as provided in Sections 311(b), 311(d) and 311(e)) and the
portion thereof, if any, which is to be satisfied by delivering or crediting
Securities of that series pursuant to Section 1202 (which Securities will,
if not previously delivered, accompany such certificate) and whether the
Company intends to exercise its right to make a permitted optional sinking
fund payment with respect to such series. Such certificate shall be
irrevocable and upon its delivery the Company shall be obligated to make the
cash payment or payments therein referred to, if any, on or before the next
succeeding sinking fund payment date. In the case of the failure of the
Company to deliver such certificate, the sinking fund payment due on the
next succeeding sinking fund payment date for that series shall be paid
entirely in cash and shall be sufficient to redeem the principal amount of
such Securities subject to a mandatory sinking fund payment without the
option to deliver or credit Securities as provided in Section 1202 and
without the right to make any optional sinking fund payment, if any, with
respect to such series.
Not more than 60 days before each such sinking fund payment date the Trustee
shall select the Securities to be redeemed upon such sinking fund payment
date in the manner specified in Section 1103 and cause notice of the
redemption thereof to be given in the name of and at the expense of the
65
Company in the manner provided in Section 1104. Such notice having been
duly given, the redemption of such Securities shall be made upon the terms
and in the manner stated in Sections 1106 and 1107.
Prior to any sinking fund payment date, the Company shall pay to the Trustee
or a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1103) in cash a sum equal
to any interest that will accrue to the date fixed for redemption of
Securities or portions thereof to be redeemed on such sinking fund payment
date pursuant to this Section 1203.
Notwithstanding the foregoing, with respect to a sinking fund for any series
of Securities, if at any time the amount of cash to be paid into such
sinking fund on the next succeeding sinking fund payment date, together with
any unused balance of any preceding sinking fund payment or payments for
such series, does not exceed in the aggregate $100,000, the Trustee, unless
requested by the Company, shall not give the next succeeding notice of the
redemption of Securities of such series through the operation of the sinking
fund. Any such unused balance of moneys deposited in such sinking fund
shall be added to the sinking fund payment for such series to be made in
cash on the next succeeding sinking fund payment date or, at the request of
the Company, shall be applied at any time or from time to time to the
purchase of Securities of such series, by public or private purchase, in the
open market or otherwise, at a purchase price for such Securities (excluding
accrued interest and brokerage commissions, for which the Trustee or any
Paying Agent will be reimbursed by the Company) not in excess of the
principal amount thereof.
ARTICLE THIRTEEN
REPAYMENT AT OPTION OF HOLDERS
SECTION 1301. Applicability of Article.
Repayment of Securities of any series before their Stated Maturity at the
option of Holders thereof shall be made in accordance with the terms of such
Securities and (except as otherwise specified as contemplated by Section 301
for Securities of any series) in accordance with this Article.
SECTION 1302. Repayment of Securities.
Securities of any series subject to repayment in whole or in part at the
option of the Holders thereof will, unless otherwise provided in the terms
of such Securities, be repaid at a price equal to the principal amount
thereof, together with interest, if any, thereon accrued to the Repayment
Date specified in or pursuant to the terms of such Securities. The Company
covenants that on or before the Repayment Date it will deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an
amount of money in the Currency in which the Securities of such series are
payable (except as otherwise specified pursuant to Section 301 for the
Securities of such series and except, if applicable, as provided in Sections
311(b), 311(d) and 311(e)) sufficient to pay the principal (or, if so
provided by the terms of the Securities of any series, a percentage of the
principal) of, and (except if the Repayment Date shall be an Interest
Payment Date) accrued interest on, all the Securities or portions thereof,
as the case may be, to be repaid on such date.
SECTION 1303. Exercise of Option.
Securities of any series subject to repayment at the option of the Holders
thereof will contain an "Option to Elect Repayment" form on the reverse of
such Securities. To be repaid at the option of the Holder, any Security so
providing for such repayment, with the "Option to Elect Repayment" form on
the reverse of such Security duly completed by the Holder (or by the
Holder's attorney duly authorized in writing), must be received by the
Company at the Place of Payment therefor specified in the terms of such
Security (or at such other place or places of which the Company shall from
time to time notify the Holders of such Securities) not earlier than 45 days
nor later than 30 days prior to the Repayment Date. If less than the entire
principal amount of such Security is to be repaid in accordance with the
terms of such Security, the principal amount of such Security to be repaid,
in increments of the minimum denomination for Securities of such series, and
the denomination or denominations of the Security or Securities to be issued
to the Holder for the portion of the principal amount of such Security
66
surrendered that is not to be repaid, must be specified. The principal
amount of any Security providing for repayment at the option of the Holder
thereof may not be repaid in part if, following such repayment, the unpaid
principal amount of such Security would be less than the minimum authorized
denomination of Securities of the series of which such Security to be repaid
is a part. Except as otherwise may be provided by the terms of any Security
providing for repayment at the option of the Holder thereof, exercise of the
repayment option by the Holder shall be irrevocable unless waived by the
Company.
SECTION 1304. When Securities Presented for Repayment Become Due and
Payable.
If Securities of any series providing for repayment at the option of the
Holders thereof shall have been surrendered as provided in this Article and
as provided by or pursuant to the terms of such Securities, such Securities
or the portions thereof, as the case may be, to be repaid shall become due
and payable and shall be paid by the Company on the Repayment Date therein
specified, and on and after such Repayment Date (unless the Company shall
default in the payment of such Securities on such Repayment Date) such
Securities shall, if the same were interest-bearing, cease to bear interest
and the coupons for such interest appertaining to any Bearer Securities so
to be repaid, except to the extent provided below, shall be void. Upon
surrender of any such Security for repayment in accordance with such
provisions, together with all coupons, if any, appertaining thereto maturing
after the Repayment Date, the principal amount of such Security so to be
repaid shall be paid by the Company, together with accrued interest, if any,
to the Repayment Date; provided, however, that coupons whose Stated Maturity
is on or prior to the Repayment Date shall be payable only at an office or
agency located outside the United States (except as otherwise provided in
Section 1002) and, unless otherwise specified as contemplated pursuant to
Section 301, only upon presentation and surrender of those coupons; and
provided further that, in the case of Registered Securities, installments of
interest, if any, whose Stated Maturity is on or prior to the Repayment Date
shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
307.
If any Bearer Security surrendered for repayment shall not be accompanied by
all appurtenant coupons maturing after the Repayment Date, such Security may
be paid after deducting from the amount payable therefor as provided in
Section 1302 an amount equal to the face amount of all such missing coupons,
or the surrender of such missing coupon or coupons may be waived by the
Company and the Trustee if there be furnished to them such security or
indemnity as they may require to save each of them and any Paying Agent
harmless. If thereafter the Holder of such Security shall surrender to the
Trustee or any Paying Agent any such missing coupon in respect of which a
deduction shall have been made as provided in the preceding sentence, such
Holder shall be entitled to receive the amount so deducted; provided,
however, that interest represented by coupons shall be payable only at an
office or agency located outside the United States (except as otherwise
provided in Section 1002) and, unless otherwise specified as contemplated by
Section 301, only upon presentation and surrender of those coupons.
If the principal amount of any Security surrendered for repayment shall not
be so repaid upon surrender thereof, such principal amount (together with
interest, if any, thereon accrued to such Repayment Date) shall, until paid,
bear interest from the Repayment Date at the rate of interest or Yield to
Maturity (in the case of Original Issue Discount Securities) set forth in
such Security.
SECTION 1305. Securities Repaid in Part.
Upon surrender of any Registered Security which is to be repaid in part
only, the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Security, without service charge and at the
expense of the Company, a new Registered Security or Securities of the same
series, of any authorized denomination specified by the Holder, in an
aggregate principal amount equal to and in exchange for the portion of the
principal of such Security so surrendered which is not to be repaid.
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
67
SECTION 1401. Discharge of Liability on Outstanding Securities of any
Series.
Upon the deposit with the Trustee, in trust, at or before Maturity, of money
or securities of the kind and in the necessary amount (as provided in
Section 1403 of this Indenture) to pay or redeem Outstanding Securities of
any Series (whether upon or prior to their Stated Maturity or the Redemption
Date of such Outstanding Securities, provided that, if such Outstanding
Securities are to be redeemed prior to the Stated Maturity thereof, notice
of such redemption shall have been given as in Article Eleven hereof
provided or provision satisfactory to the Trustee shall have been made for
the giving of such notice), the obligation of the Company duly and
punctually to pay or cause to be paid the principal of and any interest and
premium in respect of such Outstanding Securities and all liability of the
Company in respect of such payment shall cease, terminate and be completely
discharged and the Holders thereof shall thereafter be entitled only to
payment out of the money or securities deposited with the Trustee as
aforesaid for their payment; provided however, that this discharge of the
Company's obligation so to pay and of the liability of the Company in
respect of such payment shall not occur unless the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that Holders of
the Outstanding Securities of such Series will not recognize income, gain or
loss for Federal income tax purposes as a result of such discharge.
SECTION 1402. Discharge of Certain Covenants and Other Obligations.
Upon the deposit with the Trustee, in trust, prior to Maturity of money or
securities of the kind and in the necessary amount (as provided in Section
1403 of this Indenture) to pay or redeem Outstanding Securities of one or
more Series (whether upon or prior to their Stated Maturity or the
Redemption Date of such Outstanding Securities, provided that, if such
Outstanding Securities are to be redeemed prior to the Stated Maturity
thereof, notice of such redemption shall have been given as in Article
Eleven hereof provided or provision satisfactory to the Trustee shall have
been made for the giving of such notice), all of the obligations, covenants
and agreements of the Company with respect to such Outstanding Securities
except those set forth in Section 1001, 1002 and 1005 and except those
specified pursuant to Section 301 or in any supplemental indenture
pertaining to such Outstanding Securities, shall cease, terminate and be
completely discharged.
SECTION 1403. Discharge of Certain Obligations Upon Deposit of Money or
Government Obligations with Trustee.
The conditions for deposit of money or Government Obligations contained in
Sections 1401 and 1402 shall have been satisfied whenever with respect to
any Outstanding Securities denominated in Dollars, the Company shall have
deposited or caused to be deposited irrevocably in trust with the Trustee
dedicated solely to the benefit of the Holders of such Outstanding
Securities:
a) Dollars in an amount equal to the principal amount of such
Outstanding Securities and all unpaid interest thereon to Stated
Maturity, except that, in the case of Outstanding Securities which
are to be redeemed prior to Stated Maturity, the amount so to be
deposited or held shall be the principal amount of such
Outstanding Securities and interest thereon to the Redemption
Date, together with the redemption premium, if any; or
b) Government Obligations in such amounts and maturing at such times
that the proceeds of said obligations to be received upon their
respective maturities and interest payment dates will provide
funds sufficient to pay the principal, premium, if any, and
interest to Stated Maturity, or to the Redemption Date, as the
case may be, with respect to all of the Outstanding Securities to
be paid or redeemed, as such principal, premium and interest
become due, provided that the Trustee shall have been irrevocably
instructed to apply the proceeds of said obligations to the
payment of said principal, premium, if any, and interest with
respect to said Outstanding Securities.
The conditions for deposit of money or Government Obligations contained in
Sections 1401 and 1402 shall have been satisfied whenever with respect to
any Outstanding Securities denominated in one or more currencies or
composite currency other than Dollars, the Company shall have deposited or
68
caused to be deposited irrevocably in trust with the Trustee dedicated
solely to the benefit of the Holders of such Subordinated Securities:
(i) Lawful money in such Currency in which such Outstanding
Securities are payable and in an amount equal to the
principal amount of such Outstanding Securities and all
unpaid interest thereon to Stated Maturity, except that, in
the case of Outstanding Securities which are to be redeemed
prior to Stated Maturity, the amount so to be deposited or
held shall be the principal amount of such Outstanding
Securities and interest thereon to the Redemption Date,
together with the redemption premium, if any; or
(ii) Government Obligations in such amounts and maturing at such
times that the proceeds of said obligations to be received
upon their respective maturities and interest payment dates
will provide funds sufficient to pay the principal, premium,
if any, and interest to Stated Maturity, or to the Redemption
Date, as the case may be, with respect to all of the
Outstanding Securities to be paid or redeemed, as such
principal, premium and interest become due, provided that the
Trustee shall have been irrevocably instructed to apply to
the proceeds of said obligations to the payment of said
principal, premium, if any, and interest with respect to said
Outstanding Securities.
SECTION 1404. Unclaimed Moneys.
Any moneys deposited with or paid to the Trustee or any Paying Agent for the
payment of the principal of and any premium and interest on any Outstanding
Security and not so applied but remaining unclaimed under applicable law
shall be transferred by the Trustee to the appropriate Persons in accordance
with applicable laws, and the Holder of such Outstanding Security shall
thereafter look only to such Persons for any payment which such Holder may
be entitled to collect and all liability of the Trustee and such Paying
Agent with respect to such moneys shall thereupon cease.
ARTICLE FIFTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1501. Purposes for Which Meetings May Be Called.
If Securities of a series are issuable as Bearer Securities, a meeting of
Holders of Securities of such series may be called at any time and from time
to time pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided
by this Indenture to be made, given or taken by Holders of Securities of
such series.
SECTION 1502. Call, Notice and Place of Meetings.
(a) The Trustee may at any time call a meeting of Holders of
Securities of any series for any purpose specified in Section
1501, to be held at such time and at such place in the cities of
San Francisco, New York or London as the Trustee shall reasonably
determine after consultation with the Company. Notice of every
meeting of Holders of Securities of any series, setting forth the
time and the place of such meeting and in general terms the action
proposed to be taken at such meeting, shall be given, in the
manner provided for in Section 106, not less than 21 nor more than
180 days prior to the date fixed for the meeting.
(b) In case at any time the Company, pursuant to a Board Resolution,
or the Holders of at least 10% in principal amount of the
Outstanding Securities of any series shall have requested the
Trustee to call a meeting of the Holders of Securities of such
series for any purpose specified in Section 1501, by written
request setting forth in reasonable detail the action proposed to
be taken at the meeting, and the Trustee shall not have made the
first publication of the notice of such meeting within 21 days
after receipt of such request or shall not thereafter proceed to
cause the meeting to be held as provided herein, then the Company
or the Holders of Securities of such series in the amount above
specified, as the case may be, may determine the time and the
69
place in the cities of San Francisco, New York or London for such
meeting and may call such meeting for such purposes by giving
notice thereof as provided in paragraph (a) of this Section.
SECTION 1503. Persons Entitled to Vote at Meetings.
To be entitled to vote at any meeting of Holders of Securities of any
series, a Person shall be (1) a Holder of one or more Outstanding Securities
of such series, or (2) a Person appointed by an instrument in writing as
proxy for a Holder or Holders of one or more Outstanding Securities of such
series by such Holder or Holders. The only Persons who shall be entitled to
be present or to speak at any meeting of Holders of Securities of any series
shall be the Person entitled to vote at such meeting and their counsel, any
representatives of the Trustee and its counsel and any representatives of
the Company and its counsel.
SECTION 1504. Quorum; Action.
The Persons entitled to vote a majority in principal amount of the
Outstanding Securities of a series shall constitute a quorum for a meeting
of Holders of Securities of such series; provided, however, that, if any
action is to be taken at such meeting with respect to a consent or waiver
which this Indenture expressly provides may be given by the Holders of not
less than a specified percentage in principal amount of the Outstanding
Securities of a series, the Persons entitled to vote such specified
percentage in principal amount of the Outstanding Securities of such series
shall constitute a quorum. In the absence of a quorum within 30 minutes of
the time appointed for any such meeting, the meeting shall, if convened at
the request of Holders of Securities of such series, be dissolved. In any
other case the meeting may be adjourned for a period of not less than 10
days as determined by the chairman of the meeting prior to the adjournment
of such meeting. In the absence of a quorum at any such adjourned meeting,
such adjourned meeting may be further adjourned for a period of not less
than 10 days as determined by the chairman of the meeting prior to the
adjournment of such adjourned meeting. Notice of the reconvening of any
adjourned meeting shall be given as provided in Section 1502(a), except that
such notice need be given only once not less than five days prior to the
date on which the meeting is scheduled to be reconvened. Notice of the
reconvening of any adjourned meeting shall state expressly the percentage,
as provided above, of the principal amount of the Outstanding Securities of
such series which shall constitute a quorum.
Except as limited by the proviso to Section 902, any resolution presented to
a meeting or adjourned meeting duly reconvened at which a quorum is present
as aforesaid may be adopted by the affirmative vote of the Holders of not
less than a majority in principal amount of the Outstanding Securities of
that series; provided, however, that, except as limited by the proviso to
Section 902, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action which this
Indenture expressly provides may be made, given or taken by the Holders of a
specified percentage, which is less than a majority, in principal amount of
the Outstanding Securities of a series may be adopted at a meeting or an
adjourned meeting duly reconvened and at which a quorum is present as
aforesaid by the affirmative vote of the Holders of not less than such
specified percentage in principal amount of the Outstanding Securities of
that series.
Any resolution passed or decision taken at any meeting of Holders of
Securities of any series duly held in accordance with this Section shall be
binding on all the Holders of Securities of such series and the related
coupons, whether or not present or represented at the meeting.
Notwithstanding the foregoing provisions of this Section 1504, if any action
is to be taken at a meeting of Holders of Securities of any series with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that this Indenture expressly provides may be made,
given or taken by the Holders of a specified percentage in principal amount
of all Outstanding Securities affected thereby, or of the Holders of such
series and one or more additional series:
(i) there shall be no minimum quorum requirement for such
meeting; and
(ii) the principal amount of the Outstanding Securities of such
series that vote in favor of such request, demand,
70
authorization, direction, notice, consent, waiver or other
action shall be taken into account in determining whether
such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken
under this Indenture.
SECTION 1505. Determination of Voting Rights; Conduct and Adjournment of
Meetings.
(a) Notwithstanding any provisions of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any
meeting of Holders of Securities of a series in regard to proof of
the holding of Securities of such series and of the appointment of
proxies and in regard to the appointment and duties of inspectors
of votes, the submission and examination of proxies, certificates
and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall deem
appropriate. Except as otherwise permitted or required by any
such regulations, the holding of Securities shall be proved in the
manner specified in Section 104 and the appointment of any proxy
shall be proved in the manner specified in Section 104 or by
having the signature of the person executing the proxy witnessed
or guaranteed by any trust company, bank or banker authorized by
Section 104 to certify to the holding of Bearer Securities. Such
regulations may provide that written instruments appointing
proxies, regular on their face, may be presumed valid and genuine
without the proof specified in Section 104 or other proof.
(b) The Trustee shall, by an instrument in writing appoint a temporary
chairman of the meeting, unless the meeting shall have been called
by the Company or by Holders of Securities as provided in Section
1502(b), in which case the Company or the Holders of Securities of
the series calling the meeting, as the case may be, shall in like
manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the
Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting.
(c) At any meeting each Holder of a Security of such series or proxy
shall be entitled to one vote for each $25 principal amount of
Outstanding Securities of such series held or represented by him
(determined as specified in the definition of "Outstanding" in
Section 101); provided, however, that no vote shall be cast or
counted at any meeting in respect of any Security challenged as
not Outstanding and ruled by the chairman of the meeting to be not
Outstanding. The chairman of the meeting shall have no right to
vote, except as a Holder of a Security of such series or proxy.
(d) Any meeting of Holders of Securities of any series duly called
pursuant to Section 1502 at which a quorum is present may be
adjourned from time to time by Persons entitled to vote a majority
in principal amount of the Outstanding Securities of such series
represented at the meeting; and the meeting may be held as so
adjourned without further notice.
SECTION 1506. Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders of
Securities of any series shall be by written ballots on which shall be
subscribed the signatures of the Holders of Securities of such series or of
their representatives by proxy and the principal amounts and serial numbers
of the Outstanding Securities of such series held or represented by them.
The permanent chairman of the meeting shall appoint two inspectors of votes
who shall count all votes cast at the meeting for or against any resolution
and who shall make and file with the secretary of the meeting their verified
written reports in duplicate of all votes cast at the meeting. A record, at
least in duplicate, of the proceedings of each meeting of Holders of
Securities of any series shall be prepared by the secretary of the meeting
and there shall be attached to said record the original reports of the
inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more persons having knowledge of the facts setting forth a copy of
the notice of the meeting and showing that said notice was given as provided
in Section 1502 and, if applicable, Section 1504. Each copy shall be signed
and verified by the affidavits of the permanent chairman and secretary of
the meeting and one such copy shall be delivered to the Company, and another
71
to the Trustee to be preserved by the Trustee, the latter to have attached
thereto the ballots voted at the meeting. Any record so signed and verified
shall be conclusive evidence of the matters therein stated.
This Indenture may be executed in any number of counterparts, each of which
so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
{Seal} PACIFIC TELESIS GROUP
Attest:
__________________________ By:_____________________________
Name:___________________________
Title:__________________________
{Seal} THE FIRST NATIONAL BANK OF CHICAGO
Attest:
__________________________ By:_____________________________
Trust Officer Name:___________________________
Title:__________________________
72
<PAGE>
EXHIBIT 4-H
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FORM OF SUPPLEMENTAL INDENTURE
to be used in connection with the issuance of
SUBORDINATED DEBT SECURITIES AND PREFERRED SECURITIES
FIRST SUPPLEMENTAL INDENTURE, dated as of _________, 1995 (the "First
Supplemental Indenture"), between Pacific Telesis Group, a Nevada
corporation (the "Company"), and The First National Bank of Chicago, as
trustee (the "Trustee") under the Indenture dated as of ________, 1995
between the Company and the Trustee (the "Indenture").
WHEREAS, the Company executed and delivered the Indenture to the Trustee to
provide for the future issuance of the Company's unsecured debt securities
to be issued from time to time in one or more series as might be determined
by the Company under the Indenture, in an unlimited aggregate principal
amount which may be authenticated and delivered as provided in the
Indenture;
WHEREAS, pursuant to the terms of the Indenture, the Company desires to
provide for the establishment of a new series of its Securities (as defined
in the Indenture) to be known as its ___% Subordinated Deferrable Interest
Debentures due 2025 (the "Subordinated Debentures"), the form and substance
of such Subordinated Debentures and the terms, provisions and conditions
thereof to be set forth as provided in the Indenture and this First
Supplemental Indenture;
WHEREAS, Pacific Telesis Financing I, a Delaware statutory business trust
(the "Trust"), has offered to the public $_________ aggregate liquidation
amount of its ___% Trust Originated Preferred Securities (the "Preferred
Securities"), representing undivided beneficial interests in the assets of
the Trust and proposes to invest the proceeds from such offering in
$_________ aggregate principal amount of the Subordinated Debentures; and
WHEREAS, the Company has requested that the Trustee execute and deliver this
First Supplemental Indenture and all requirements necessary to make this
First Supplemental Indenture a valid instrument in accordance with its terms
and to make the Subordinated Debentures, when executed by the Company and
authenticated and delivered by the Trustee, the valid obligations of the
Company have been performed, and the execution and delivery of this First
Supplemental Indenture has been duly authorized in all respects:
NOW THEREFORE, in consideration of the purchase and acceptance of the
Subordinated Debentures by the Holders (as defined in the Indenture)
thereof, and for the purpose of setting forth, as provided in the Indenture,
the form and substance of the Subordinated Debentures and the terms,
provisions and conditions thereof, the Company covenants and agrees with the
Trustee as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.1. Definition of Terms.
Unless the context otherwise requires:
(a) a term defined in the Indenture has the same meaning when used in
this First Supplemental Indenture;
(b) a term defined anywhere in this First Supplemental Indenture has
the same meaning throughout;
(c) the singular includes the plural and vice versa;
(d) a reference to a Section or Article is to a Section or Article of
this First Supplemental Indenture;
(e) headings are for convenience of reference only and do not affect
interpretation;
(f) the following terms have the meanings given to them in the
Declaration (as defined hereafter): (i) Business Day; (ii)
Delaware Trustee; (iii) Redemption Tax Opinion; (iv) Distribution;
(v) Dissolution Tax Opinion; (vi) No Recognition Opinion; (vii)
Property Trustee; (viii) Regular Trustees; (ix) Special Event; and
(x) Tax Event; and
(g) the following terms have the meanings given to them in this
Section 1.1(g):
"Declaration" means the Amended and Restated Declaration of Trust of Pacific
Telesis Financing I dated as of ____________________ 1995.
"Depository" means DTC (as defined hereinafter) or its successor hereunder.
"Dissolution Event" means that as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance
with the Declaration, and the Subordinated Debentures held by the Property
Trustee are to be distributed to the holders of the Trust Securities (as
defined in the Indenture) issued by the Trust pro rata in accordance with
the Declaration.
"DTC" means The Depository Trust Company, the initial depository hereunder.
"Extended Maturity Date" means, if the Company elects to extend the Maturity
Date (as defined hereinafter) in accordance with Section 2.2(b), the date
selected by the Company which is after the Scheduled Maturity Date (as
defined hereinafter) but before _________, 2044.
"Maturity Date" means the date on which the Subordinated Debentures mature
and on which the principal shall be due and payable together with all
accrued and unpaid interest thereon including Compounded Interest (as
defined in Section 4.1 hereof), if any.
"Scheduled Maturity Date" means ______________, 2025.
"Senior Indebtedness" means with respect to the Company, all indebtedness of
such obligor, whether now existing or hereafter created, but excluding trade
accounts payable arising in the ordinary course of business. Without
limiting the generality of the foregoing, Senior Indebtedness" shall
include (i) the principal, premium, if any, and interest in respect of (A)
indebtedness of such obligor for money borrowed and (B) indebtedness
evidenced by securities, debentures, bonds or other similar instruments
issued by such obligor; (ii) all capital lease obligations of such obligor;
(iii) all obligations of such obligor issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such obligor
and all obligations of such obligor under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business); (iv) all obligations of such obligor for the reimbursement on any
letter of credit, banker's acceptance, security purchase facility or similar
credit transaction; (v) all obligations of the type referred to in clauses
(i) through (iv) of other persons for the payment of which such obligor is
responsible or liable as obligor, guarantor or otherwise, including, without
limitation, under all support agreements or guarantees by the Company of
debentures, notes and other securities issued by its subsidiaries PacTel
Capital Resources and PacTel Capital Funding; and (vi) all obligations of
the type referred to in clauses (i) through (v) above of other persons
secured by any lien on any property or asset of such obligor (whether or not
such obligation is assumed by such obligor); except for (1) any such
indebtedness that is by its terms subordinated to or pari passu with the
Subordinated Debentures, and (2) any indebtedness between or among such
obligor and its Affiliates (as defined in the Indenture), including all
other debt securities and guarantees in respect of those debt securities,
issued to (a) any other Pacific Telesis Trust (as defined in the Indenture)
or a trustee of such trust or (b) any other trust, or a trustee of such
trust, or any partnership or other entity affiliated with the Company that
is a financing vehicle of the Company ("Financing Entity") in connection
with the issuance by such Financing Entity of preferred securities or other
securities that rank pari passu with, or junior to, the Preferred
Securities. Such Senior Indebtedness shall continue to be Senior
Indebtedness and be entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any term of such
Senior Indebtedness.
ARTICLE TWO
GENERAL TERMS AND CONDITIONS OF THE SUBORDINATED DEBENTURES
2
SECTION 2.1. Designation and Principal Amount.
There is hereby authorized a series of Securities designated the "_____%
Subordinated Deferrable Interest Debentures due 2025", limited in aggregate
principal amount to $_____ million, which amount shall be as set forth in
any written Company Order (as defined in the Indenture) for the
authentication and delivery of Subordinated Debentures pursuant to Section
303 of the Indenture.
SECTION 2.2. Maturity.
(a) The Maturity Date will be either:
(i) the Scheduled Maturity Date; or
(ii) if the Company elects to extend the Maturity Date beyond
the Scheduled Maturity Date in accordance with Section 2.2(b),
the Extended Maturity Date;
(b) the Company may at any time before the day which is 90 days before
the Scheduled Maturity Date, elect to extend the Maturity Date
only once to the Extended Maturity Date, provided that the
following conditions in this Section 2.2(b) are satisfied both at
the date the Company gives notice in accordance with Section
2.2(c) of its election to extend the Maturity Date and at the
Scheduled Maturity Date:
(i) the Company is not in bankruptcy or otherwise insolvent;
(ii) the Company is not in default on any Securities issued to
any Pacific Telesis Trust or any trustee of such Pacific
Telesis Trust in connection with the issuance of Trust Securities
by such Pacific Telesis Trust;
(iii) the Company has made timely payments on the Subordinated
Debentures for the immediately preceding six quarters
without deferrals;
(iv) the Trust is not in arrears on payments of Distributions on
the Trust Securities issued by it; and
(v) the Subordinated Debentures are rated investment grade or
the equivalent by any one of Standard & Poor's Corporation,
Moody's Investors Service, Inc., Fitch Investor Services,
Duff & Phelps Credit Rating Company or any other nationally
recognized statistical rating organization; and
(c) if the Company elects to extend the Maturity Date in accordance
with Section 2.2(b), the Company shall give notice to Holders of
the Subordinated Debentures, the Property Trustee, the Trust and
the Trustee of the extension of the Maturity Date and the Extended
Maturity Date at least 90 days before the Scheduled Maturity Date.
SECTION 2.3. Form and Payment.
Except as provided in Section 2.4, the Subordinated Debentures shall be
issued as Registered Securities (as defined in the Indenture) in fully
registered certificated form without interest coupons. Principal and
interest on the Subordinated Debentures issued in certificated form will be
payable, the transfer of such Subordinated Debentures will be registrable
and such Subordinated Debentures will be exchangeable for Subordinated
Debentures bearing identical terms and provisions at the Corporate Trust
Office (as defined in the Indenture) of the Trustee; provided, however, that
payment of interest may be made at the option of the Company by check mailed
to the Holder at such address as shall appear in the Security Register (as
defined in the Indenture). Notwithstanding the foregoing, so long as the
Holder of any Subordinated Debentures is the Property Trustee, the payment
of the principal of and interest (including Compounded Interest, if any) on
such Subordinated Debentures held by the Property Trustee will be made by
wire transfer in immediately available funds at such place and to such
account as may be designated by the Property Trustee. Payment of principal
of the Subordinated Debentures will only be made upon surrender of the
Subordinated Debentures to the Trustee.
SECTION 2.4. Global Subordinated Debenture.
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(a) In connection with a Dissolution Event;
(i) the Subordinated Debentures in certificated form may be
presented to the Trustee by the Property Trustee in exchange
for a global Subordinated Debenture in an aggregate principal
amount equal to all Outstanding (as defined in the Indenture)
Subordinated Debentures (a "Global Subordinated Debenture"),
to be registered in the name of the Depository, or its
nominee, and delivered by the Trustee to the Depository for
crediting to the accounts of its participants pursuant to the
instructions of the Regular Trustees. The Company upon any
such presentation shall execute a Global Subordinated
Debenture in such aggregate principal amount and deliver the
same to the Trustee for authentication and delivery in
accordance with the Indenture and this First Supplemental
Indenture. Payments on the Subordinated Debentures issued as
a Global Subordinated Debenture will be made to the
Depository; and
(ii) if any Preferred Securities are held in non book-entry
certificated form, the Subordinated Debentures in
certificated form may be presented to the Trustee by the
Property Trustee and any Preferred Security which represents
Preferred Securities other than Preferred Securities held by
the Depository or its nominee ("Non Book-Entry Preferred
Securities") will be deemed to represent beneficial interests
in Subordinated Debentures presented to the Trustee by the
Property Trustee having an aggregate principal amount equal
to the aggregate liquidation amount of the Non Book-Entry
Preferred Securities until such Preferred Securities are
presented to the Security Registrar for transfer or
reissuance at which time such Preferred Securities will be
canceled and a Subordinated Debenture registered in the name
of the holder of the Preferred Security or the transferee of
the holder of such Preferred Security, as the case may be,
with an aggregate principal amount equal to the aggregate
liquidation amount of the Preferred Security canceled will be
executed by the Company and delivered to the Trustee for
authentication and delivery in accordance with the Indenture
and this First Supplemental Indenture. On issue of such
Subordinated Debentures, Subordinated Debentures with an
equivalent aggregate principal amount that were presented by
the Property Trustee to the Trustee will be deemed to have
been canceled.
(b) Unless and until it is exchanged for Subordinated Debentures in
registered certificated form, a Global Subordinated Debenture may
be transferred, in whole but not in part only to another nominee
of the Depository or to the Depository, or to a successor
Depository selected or approved by the Company or to a nominee of
such successor Depository.
(c) If at any time the Depository notifies the Company that it is
unwilling or unable to continue as Depository or if at any time
the Depository for such series shall no longer be registered or in
good standing under the Securities Exchange Act of 1934, as
amended, or other applicable statute or regulation, the Company
shall appoint a successor Depository. If a successor Depository
for such series is not appointed by the Company within 90 days
after the Company receives such notice or becomes aware of such
condition, as the case may be, the Company will execute, and,
subject to Article Two of the Indenture, the Trustee will
authenticate and deliver the Subordinated Debentures in definitive
registered form without coupons, in authorized denominations, and
in an aggregate principal amount equal to the principal amount of
the Global Subordinated Debenture in exchange for such Global
Subordinated Debenture. In addition, the Company may at any time
determine that the Subordinated Debentures shall no longer be
represented by a Global Subordinated Debenture. In such event the
Company will execute and upon receipt of a Company Request (as
defined in the Indenture) evidencing such determination by the
Company, the Trustee will authenticate and deliver the
Subordinated Debentures in definitive registered form without
coupons, in authorized denominations, and in an aggregate
principal amount equal to the principal amount of the Global
Subordinated Debenture in exchange for such Global Subordinated
4
Debenture. Upon the exchange of the Global Subordinated Debenture
for such Subordinated Debentures in definitive registered form
without coupons, in authorized denominations, the Global
Subordinated Debenture shall be canceled by the Trustee. Such
Subordinated Debentures in definitive registered form issued in
exchange for the Global Subordinated Debenture shall be registered
in such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The
Trustee shall deliver such registered certificated Subordinated
Debentures in definitive form in exchange for the Global
Subordinated Debenture to the Depository for delivery to the
Persons (as defined in the Indenture) in whose names such
Subordinated Debentures are so registered.
(d) The Company and the Trustee shall have no responsibility,
obligation or liability with respect to: (x) the maintenance,
review or accuracy of the records of the Depository or of any of
its participating organizations with respect to any ownership
interest in or payments with respect to such Global Subordinated
Debentures, (y) any communication with or delivery of any notice
(including notices of redemption) with respect to the Subordinated
Debentures represented by any Global Subordinated Debenture to any
Person having any ownership interest in such Global Subordinated
Debenture or to any of the Depository's participating
organizations or (z) any payment made on account of any beneficial
ownership interest in such Global Subordinated Debenture.
SECTION 2.5. Interest.
(a) Each Subordinated Debenture will bear interest at the rate of ___%
per annum (the "Coupon Rate") from the original date of issuance
or from the most recent Interest Payment Date (as hereinafter
defined) to which interest has been paid or duly provided for
until the principal thereof becomes due and payable, and on any
overdue principal and (to the extent that payment of such interest
is enforceable under applicable law) on any overdue installment of
interest at the Coupon Rate, compounded quarterly, payable
(subject to the provisions of Article Four) quarterly in arrears
on March 31, June 30, September 30 and December 31 of each year
(each, an "Interest Payment Date"), commencing on __________,
1995, to the Person in whose name such Subordinated Debenture or
any predecessor Subordinated Debenture is registered, at the close
of business on the regular record date for such interest
installment, which, with respect to any Subordinated Debentures of
which the Property Trustee is the Holder or with respect to a
Global Subordinated Debenture, shall be the close of business on
the Business Day next preceding that Interest Payment Date.
Notwithstanding the foregoing sentence, if the Preferred
Securities are no longer in book-entry only form or if pursuant to
the Indenture and this First Supplemental Indenture the
Subordinated Debentures are not represented by a Global
Subordinated Debenture, the Company may select a regular record
date for such interest installment which shall conform to the
rules of any securities exchange on which the Subordinated
Debentures are listed, and which shall be at least one Business
Day but less than 60 Business Days before an Interest Payment
Date.
(b) The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. Except as
provided in the following sentence, the amount of interest payable
for any period shorter than a full quarterly period for which
interest is computed, will be computed on the basis of the actual
number of days elapsed in such a 30-day month. In the event that
any date on which interest is payable on the Subordinated
Debentures is not a Business Day, then payment of interest payable
on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day is in the
next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same
force and effect as if made on such date.
5
<PAGE>
ARTICLE THREE
REDEMPTION OF THE SUBORDINATED DEBENTURES
SECTION 3.1. Tax Event Redemption.
If a Tax Event has occurred and is continuing and
(a) the Company has received a Redemption Tax Opinion or
(b) after receiving a Dissolution Tax Opinion, the Regular Trustees
shall have been informed by tax counsel rendering the Dissolution
Tax Opinion that a No Recognition Opinion cannot be delivered to
the Trust, then, notwithstanding Section 3.2 but subject to
Section 3.3(b), the Company shall have the right, upon not less
than 30 days' nor more than 60 days' notice to the Holders of the
Subordinated Debentures, to redeem the Subordinated Debentures, in
whole or in part, for cash within 90 days following the occurrence
of such Tax Event (the "90 Day Period") at a redemption price
equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest thereon to the date of such redemption
(the "Special Redemption Price"), provided that, if at the time
there is available to the Company the opportunity to eliminate,
within the 90 Day Period, the Tax Event by taking some ministerial
action ("Ministerial Action"), such as filing a form or making an
election, or pursuing some other similar reasonable measure that
has no adverse effect on the Company, the Trust or the holders of
the Trust Securities issued by the Trust, the Company shall pursue
such Ministerial Action in lieu of redemption; and provided
further, that the Company shall have no right to redeem the
Subordinated Debentures while the Trust is pursuing any
Ministerial Action pursuant to its obligations under the
Declaration. The Special Redemption Price shall be paid prior to
12:00 noon, New York time, on the date of such redemption or at
such earlier time as the Company determines and specifies in the
notice of redemption, provided the Company shall deposit with the
Trustee an amount sufficient to pay the Special Redemption Price
by 11:00 a.m. on the date such Special Redemption Price is to be
paid.
SECTION 3.2. Optional Redemption by Company.
Subject to the provisions of Section 3.2(b) and to the provisions of Article
Eleven of the Indenture, except as otherwise may be specified in this First
Supplemental Indenture, the Company shall have the right to redeem the
Subordinated Debentures, in whole or in part, at any time and from time to
time, on or after ____________, 2000, at a redemption price equal to 100% of
the principal amount to be redeemed plus any accrued and unpaid interest
thereon, including Compounded Interest, if any, to the date of such
redemption (the "Optional Redemption Price"). Any redemption pursuant to
this paragraph will be made upon not less than 30 nor more than 60 days'
notice to the Holder of the Subordinated Debentures, at the Optional
Redemption Price.
SECTION 3.3 Partial Redemption
(a) If a partial redemption of the Subordinated Debentures would
result in the delisting of the Preferred Securities issued by the
Trust from any national securities exchange or other organization
on which the Preferred Securities are then listed, the Company
shall not be permitted to effect such partial redemption and may
only redeem the Subordinated Debentures in whole.
(b) The Company may not redeem fewer than all of the Subordinated
Debentures unless all accrued and unpaid interest on the
Subordinated Debentures has been paid as of the Interest Payment
Date next preceding the Redemption Date.
ARTICLE FOUR
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 4.1. Extension of Interest Payment Period.
The Company shall have the right, at any time during the term of the
6
Subordinated Debentures, from time to time to defer payments of interest by
extending the interest payment period of such Subordinated Debentures for up
to 20 consecutive quarters (the "Extended Interest Payment Period"), during
which Extended Interest Payment Period no interest shall be due and payable;
provided that no Extended Interest Payment Period may extend beyond the
Maturity Date of the Subordinated Debentures. At the end of the Extended
Interest Payment Period, the Company shall pay all interest accrued and
unpaid on the Subordinated Debentures (together with interest thereon to the
extent permitted by applicable law, at the Coupon Rate, compounded quarterly
("Compounded Interest")) to the Holders of the Subordinated Debentures as of
the record date relating to the Interest Payment Date that corresponds to
the end of such Extended Interest Payment Period. Before the termination of
any Extended Interest Payment Period, the Company may further extend such
period, provided that such period together with all such further extensions
thereof shall not exceed 20 consecutive quarters, or extend beyond the
Maturity Date of the Subordinated Debentures. Upon the termination of any
Extended Interest Payment Period and upon the payment of all deferred
interest then due, the Company may commence a new Extended Interest Payment
Period, subject to the foregoing requirements. No interest shall be due and
payable during an Extended Interest Payment Period, except at the end
thereof, but the Company may prepay at any time all or any portion of the
interest accrued during an Extended Interest Payment Period.
SECTION 4.2. Notice of Extension.
(a) If the Property Trustee is the only registered Holder of the
Subordinated Debentures at the time the Company selects an
Extended Interest Payment Period, the Company shall give written
notice to the Regular Trustees, the Property Trustee and the
Trustee of its selection of such Extended Interest Payment Period
one Business Day before the earlier of (a) the next succeeding
date on which Distributions on the Trust Securities issued by the
Trust are payable, or (b) the date the Trust is required to give
notice of the record date or the date such Distributions are
payable to the New York Stock Exchange or other applicable self-
regulatory organization or to holders of the Preferred Securities
issued by the Trust, but in any event at least one Business Day
before such record date.
(b) If the Property Trustee is not the only Holder of the Subordinated
Debentures at the time the Company selects an Extended Interest
Payment Period, the Company shall give the Holders of the
Subordinated Debentures and the Trustee written notice of its
selection of such Extended Interest Payment Period 10 Business
Days before the earlier of (i) the next succeeding Interest
Payment Date, or (ii) the date the Company is required to give
notice of the record or payment date of such interest payment to
the New York Stock Exchange or other applicable self-regulatory
organization or to Holders of the Subordinated Debentures.
(c) The quarter in which any notice is given pursuant to paragraphs
(a) or (b) of this Section 4.2 shall be counted as one of the 20
quarters permitted in the maximum Extended Interest Payment Period
permitted under Section 4.1.
ARTICLE FIVE
EXPENSES
SECTION 5.1. Payment of Expenses.
In connection with the offering, sale and issuance of the Subordinated
Debentures to the Property Trustee in connection with the sale of the Trust
Securities by the Trust and during the existence of the Trust, the Company
shall:
(a) pay for all costs and expenses relating to the offering, sale and
issuance of the Subordinated Debentures, including commissions to
the underwriters payable pursuant to the underwriting agreement
and the pricing agreement and compensation of the Trustee under
the Indenture in accordance with the provisions of Section 606 of
the Indenture;
(b) pay for all costs and expenses of the Trust (including, but not
limited to, costs and expenses relating to the organization of the
Trust, the offering, sale and issuance of the Trust Securities
7
(including commissions to the underwriters in connection
therewith), the fees and expenses of the Property Trustee and the
Delaware Trustee, the costs and expenses relating to the operation
of the Trust, including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services,
expenses for printing and engraving and computing or accounting
equipment, paying agent(s), registrar(s), transfer agent(s),
duplicating, travel and telephone and other telecommunications
expenses and costs and expenses incurred in connection with the
acquisition, financing, and disposition of Trust assets;
(c) be primarily liable for any indemnification obligations arising
with respect to the Declaration; and
(d) pay any and all taxes, duties, assessments or governmental charges
of whatever nature (other than withholding taxes) imposed on the
Trust or its assets and all liabilities, costs and expenses of the
Trust with respect to such taxes, duties, assessments or
governmental charges.
ARTICLE SIX
SUBORDINATION
SECTION 6.1. Agreement to Subordinate.
The Company covenants and agrees, and each Holder of Subordinated Debentures
issued hereunder by such Holder's acceptance thereof likewise covenants and
agrees, that all Subordinated Debentures shall be issued subject to the
provisions of this Article Six; and each Holder of a Subordinated Debenture,
whether upon original issue or upon transfer or assignment thereof, accepts
and agrees to be bound by such provisions.
The payment by the Company of the principal of and interest on all
Subordinated Debentures issued hereunder shall, to the extent and in the
manner hereinafter set forth, be subordinated and junior in right of payment
to the prior payment in full of all Senior Indebtedness of the Company,
whether outstanding at the date of this Indenture or thereafter incurred.
No provision of this Article Six shall prevent the occurrence of any default
or Event of Default (as defined in the Indenture) hereunder.
SECTION 6.2. Default on Senior Indebtedness.
In the event and during the continuation of any default by the Company in
the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness of the Company, or in the event that the maturity of any
Senior Indebtedness of the Company has been accelerated because of a
default, then, in either case, no payment shall be made by the Company with
respect to the principal (including redemption payments) of or interest on
the Subordinated Debentures.
In the event that, notwithstanding the foregoing or the provisions of
Section 6.3, any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, prohibited by
the foregoing or by Section 6.3, shall be received by the Trustee before all
Senior Indebtedness of the Company is paid in full, or provision is made for
such payment in money in accordance with its terms, such payment or
distribution shall be held in trust for the benefit of and shall be paid
over or delivered to the holders of such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior
Indebtedness may have been issued, as their respective interests may appear,
as calculated by the Company, for application to the payment of all Senior
Indebtedness of the Company remaining unpaid to the extent necessary to pay
such Senior Indebtedness in full in money in accordance with its terms,
after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness.
SECTION 6.3. Liquidation; Dissolution; Bankruptcy.
Upon any payment by the Company or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding-up or liquidation or reorganization of the
Company, whether voluntary or involuntary or in bankruptcy, insolvency,
8
receivership or other proceedings, all amounts due upon all Senior
Indebtedness of the Company shall first be paid in full, or payment thereof
provided for in money in accordance with its terms, before any payment is
made by the Company on account of the principal or interest on the
Subordinated Debentures; and upon any such dissolution or winding-up or
liquidation or reorganization, any payment by the Company, or distribution
of assets of the Company of any kind or character, whether in cash, property
or securities, to which the Holders of the Subordinated Debentures or the
Trustee would be entitled to receive from the Company, except for the
provisions of this Article Six, shall be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the Holders of the Subordinated
Debentures or by the Trustee under this Indenture if received by them or it,
directly to the holders of Senior Indebtedness of the Company (pro rata to
such holders on the basis of the respective amounts of Senior Indebtedness
held by such holders, as calculated by the Company) or their representative
or representatives, or to the trustee or trustees under any indenture
pursuant to which any instruments evidencing such Senior Indebtedness may
have been issued, as their respective interests may appear, to the extent
necessary to pay such Senior Indebtedness in full, in money or money's
worth, after giving effect to any concurrent payment or distribution to or
for the holders of such Senior Indebtedness, before any payment or
distribution is made to the Holders of Subordinated Debentures or to the
Trustee.
For purposes of this Article Six, the words "cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized
or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of
which is subordinated at least to the extent provided in this Article Six
with respect to the Subordinated Debentures to the payment of all Senior
Indebtedness of the Company that may at the time be outstanding, provided
that (i) such Senior Indebtedness is assumed by the new corporation, if any,
resulting from any such reorganization or readjustment, and (ii) the rights
of the holders of such Senior Indebtedness are not, without the consent of
such holders, altered by such reorganization or readjustment. The
consolidation of the Company with, or the merger of the Company into,
another corporation or the liquidation or dissolution of the Company
following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article Eight of the Indenture shall not be
deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this Section 6.3 if such other corporation shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the
conditions stated in Article Eight of the Indenture. Nothing in Section 6.2
or in this Section 6.3 shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 606 of the Indenture.
SECTION 6.4. Prior Payment to Senior Indebtedness Upon Acceleration of
Subordinated Debentures.
In the event that the Subordinated Debentures are declared due and payable
before the Maturity Date, then and in such event the holders of the Senior
Indebtedness outstanding at the time such Subordinated Debentures so become
due and payable shall be entitled to receive payment in full of all amounts
due or to become due on or in respect of all Senior Indebtedness, or
provision shall be made for such payment in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of such Senior
Indebtedness, before the Holders of the Subordinated Debentures are entitled
to receive any principal of or interest on the Subordinated Debentures
(including any payment which may be payable by reason of the payment of any
other indebtedness of the Company being subordinated to the payment of the
Subordinated Debentures).
In the event that, notwithstanding the foregoing, the Company shall make any
payment of principal or interest on the Subordinated Debentures to the
Trustee or any Holder prohibited by the foregoing provisions of this
Section, and if such fact shall, at or prior to the time of such payment,
have been made known to the Trustee or, as the case may be, such Holder,
then and in such event such payment shall be paid over and delivered
forthwith to the Company.
SECTION 6.5. Subrogation.
Subject to the payment in full of all amounts due or to become due on or in
respect of Senior Indebtedness of the Company, the rights of the Holders of
9
the Subordinated Debentures shall be subrogated (equally and ratably with
the holders of all indebtedness of the Company which by its express terms is
subordinated to indebtedness of the Company to substantially the same extent
as the Subordinated Debentures are subordinated and is entitled to like
rights of subrogation) to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of cash, property or
securities of the Company applicable to such Senior Indebtedness until the
principal of and interest on the Subordinated Debentures shall be paid in
full; and, for the purposes of such subrogation, no payments or
distributions to the holders of such Senior Indebtedness of any cash,
property or securities to which the Holders of the Subordinated Debentures
or the Trustee would be entitled except for the provisions of this Article
Six, and no payment over pursuant to the provisions of this Article Six to
or for the benefit of the holders of such Senior Indebtedness by Holders of
the Subordinated Debentures or the Trustee, shall, as between the Company,
its creditors other than holders of Senior Indebtedness of the Company, and
the Holders of the Subordinated Debentures, be deemed to be a payment by the
Company to or on account of such Senior Indebtedness. It is understood that
the provisions of this Article Six are and are intended solely for the
purposes of defining the relative rights of the Holders of the Subordinated
Debentures, on the one hand, and the holders of such Senior Indebtedness on
the other hand.
Nothing contained in this Article Six or elsewhere in this Indenture or in
the Subordinated Debentures is intended to or shall impair, as between the
Company, its creditors other than the holders of Senior Indebtedness of the
Company, and the Holders of the Subordinated Debentures, the obligation of
the Company, which is absolute and unconditional, to pay to the Holders of
the Subordinated Debentures the principal of and interest on the
Subordinated Debentures as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders of the Subordinated Debentures and creditors of the
Company, other than the holders of Senior Indebtedness of the Company, nor
shall anything herein or therein prevent the Trustee or the Holder of any
Subordinated Debenture from exercising all remedies otherwise permitted by
applicable law upon default under the Indenture, subject to the rights, if
any, under this Article Six of the holders of such Senior Indebtedness in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to in
this Article Six, the Trustee, subject to the provisions of Section 602 of
the Indenture, and the Holders of the Subordinated Debentures shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding-up, liquidation or
reorganization proceedings are pending, or a certificate of the receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making
such payment or distribution, delivered to the Trustee or to the Holders of
the Subordinated Debentures, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article Six.
SECTION 6.6. Trustee to Effectuate Subordination.
Each Holder of Subordinated Debentures by such Holder's acceptance thereof
authorizes and directs the Trustee on such Holder's behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article Six and appoints the Trustee such Holder's
attorney-in-fact for any and all such purposes.
SECTION 6.7. Notice by the Company.
The Company shall give prompt written notice to a Responsible Officer (as
defined in the Indenture) of the Trustee of any fact known to the Company
that would prohibit the making of any payment of moneys to or by the Trustee
in respect of the Subordinated Debentures pursuant to the provisions of this
Article Six. Notwithstanding the provisions of this Article Six or any
other provision of the Indenture and this First Supplemental Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts
that would prohibit the making of any payment of moneys to or by the Trustee
in respect of the Subordinated Debentures pursuant to the provisions of this
Article Six, unless and until a Responsible Officer of the Trustee shall
10
have received written notice thereof from the Company or a holder or holders
of Senior Indebtedness or from any trustee therefor; and before the receipt
of any such written notice, the Trustee, subject to the provisions of
Section 602 of the Indenture, shall be entitled in all respects to assume
that no such facts exist; provided, however, that, if the Trustee shall not
have received the notice provided for in this Section 6.7 at least two
Business Days prior to the date upon which by the terms hereof any money may
become payable for any purpose (including, without limitation, the payment
of the principal of or interest on any Subordinated Debenture), then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such money and to apply the same to
the purposes for which they were received, and shall not be affected by any
notice to the contrary that may be received by it within two Business Days
prior to such date.
The Trustee, subject to the provisions of Section 602 of the Indenture,
shall be entitled to rely on the delivery to it of a written notice by a
Person representing himself to be a holder of Senior Indebtedness of the
Company (or a trustee on behalf of such holder) to establish that such
notice has been given by a holder of such Senior Indebtedness or a trustee
on behalf of any such holder or holders. In the event that the Trustee
determines in good faith that further evidence is required with respect to
the right of any Person as a holder of such Senior Indebtedness to
participate in any payment or distribution pursuant to this Article Six, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness
held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to
the rights of such Person under this Article Six, and, if such evidence is
not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such
payment.
SECTION 6.8. Rights of the Trustee; Holders of Senior Indebtedness.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article Six in respect of any Senior Indebtedness at any
time held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any
of its rights as such holder.
With respect to the holders of Senior Indebtedness of the Company, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Six, and no
implied covenants or obligations with respect to the holders of such Senior
Indebtedness shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of such
Senior Indebtedness and, subject to the provisions of Section 602 of the
Indenture, the Trustee shall not be liable to any holder of such Senior
Indebtedness if it shall pay over or deliver to Holders of Subordinated
Debentures, the Company or any other Person money or assets to which any
holder of such Senior Indebtedness shall be entitled by virtue of this
Article Six or otherwise.
SECTION 6.9. Subordination May Not Be Impaired.
No right of any present or future holder of any Senior Indebtedness of the
Company to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by the Company with the terms, provisions
and covenants of this Indenture, regardless of any knowledge thereof that
any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Indebtedness of the Company may, at any time and from time
to time, without the consent of or notice to the Trustee or the Holders of
the Subordinated Debentures, without incurring responsibility to the Holders
of the Subordinated Debentures and without impairing or releasing the
subordination provided in this Article Six or the obligations hereunder of
the Holders of the Subordinated Debentures to the holders of such Senior
Indebtedness, do any one or more the following: (i) change the manner,
place or terms of payment or extend the time of payment of, or renew or
alter, such Senior Indebtedness, or otherwise amend or supplement in any
manner such Senior Indebtedness or any instrument evidencing the same or any
agreement under which such Senior Indebtedness is outstanding; (ii) sell,
11
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing such Senior Indebtedness; (iii) release any Person liable
in any manner for the collection of such Senior Indebtedness; and (iv)
exercise or refrain from exercising any rights against the Company and any
other Person.
12
ARTICLE SEVEN
COVENANT TO LIST ON EXCHANGE
SECTION 7.1. Listing on an Exchange.
If the Subordinated Debentures are to be issued as a Global Subordinated
Debenture in connection with the distribution of the Subordinated Debentures
to the holders of the Preferred Securities issued by the Trust upon a
Dissolution Event, the Company will use its best efforts to list such
Subordinated Debentures on the New York Stock Exchange or on such other
exchange as the Preferred Securities are then listed.
ARTICLE EIGHT
FORM OF SUBORDINATED DEBENTURE
SECTION 8.1. Form of Subordinated Debenture.
The Subordinated Debentures and the Trustee's Certificate of Authentication
to be endorsed thereon are to be substantially in the following forms:
(FORM OF FACE OF SUBORDINATED DEBENTURE)
{IF THE SUBORDINATED DEBENTURE IS TO BE A GLOBAL SUBORDINATED DEBENTURE,
INSERT - This Subordinated Debenture is a Global Subordinated Debenture
within the meaning of the Indenture hereinafter referred to and is
registered in the name of a Depository or a nominee of a Depository. This
Subordinated Debenture is exchangeable for Subordinated Debentures
registered in the name of a person other than the Depository or its nominee
only in the limited circumstances described in the Indenture, and no
transfer of this Subordinated Debenture (other than a transfer of this
Subordinated Debenture as a whole by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository) may be registered except in limited
circumstances.
Unless this Subordinated Debenture is presented by an authorized
representative of The Depository Trust Company, a New York corporation
( DTC") to the issuer or its agent for registration of transfer, exchange or
payment, and any Subordinated Debenture issued is registered in the name of
Cede & Co. or such other name as requested by an authorized representative
of DTC (and any payment hereon is made to Cede & Co. or to such other entity
as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL since the registered owner hereof, Cede & Co., has an interest
herein.}
No. __________________
$_____________
CUSIP No._____________
____________________
____% SUBORDINATED DEFERRABLE INTEREST SUBORDINATED DEBENTURE
DUE 2025
Pacific Telesis Group, a Nevada corporation (the "Company", which term
includes any successor corporation under the Indenture hereinafter referred
to), for value received, hereby promises to pay to _______________, or
registered assigns, the principal sum of _____________ Dollars on
____________, 2025, (or on such later date before ______, 2044, if the
Company elects to extend the Maturity Date as further described herein), and
to pay interest on said principal sum from ____________, 1995, or from the
most recent interest payment date (each such date, an "Interest Payment
Date") to which interest has been paid or duly provided for, quarterly
(subject to deferral as set forth herein) in arrears on March 31, June 30,
September 30 and December 31 of each year commencing _____________, 1995, at
the rate of _____% per annum until the principal hereof shall have become
due and payable, and on any overdue principal and (without duplication and
to the extent that payment of such interest is enforceable under applicable
law) on any overdue installment of interest at the same rate per annum
compounded quarterly. The amount of interest payable on any Interest
13
Payment Date shall be computed on the basis of a 360-day year of twelve 30-
day months. In the event that any date on which interest is payable on this
Subordinated Debenture is not a Business Day, then payment of interest
payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any
such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the person in whose name this Subordinated Debenture
(or one or more Predecessor Securities, as defined in said Indenture) is
registered at the close of business on the regular record date for such
interest installment, which shall be the close of business on the Business
Day next preceding such Interest Payment Date. {IF PURSUANT TO THE
PROVISIONS OF THE INDENTURE THE SUBORDINATED DEBENTURES ARE NO LONGER
REPRESENTED BY A GLOBAL SUBORDINATED DEBENTURE -- which shall be the close
of business on the ____ Business Day next preceding such Interest Payment
Date.} Any such interest installment not punctually paid or duly provided
for shall forthwith cease to be payable to the registered Holders on such
regular record date and may be paid to the Person in whose name this
Subordinated Debenture (or one or more Predecessor Securities) is registered
at the close of business on a special record date to be fixed by the Trustee
for the payment of such defaulted interest, notice whereof shall be given to
the registered Holders of this series of Subordinated Debentures not less
than 10 days prior to such special record date, or may be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Subordinated Debentures may be listed, and
upon such notice as may be required by such exchange, all as more fully
provided in the Indenture. The principal of and the interest on this
Subordinated Debenture shall be payable at the office or agency of the
Trustee maintained for that purpose in any coin or currency of the United
States of America that at the time of payment is legal tender for payment of
public and private debts; provided, however, that payment of interest may be
made at the option of the Company by check mailed to the registered Holder
at such address as shall appear in the Security Register. Notwithstanding
the foregoing, so long as the Holder of this Subordinated Debenture is the
Property Trustee, the payment of the principal of and interest on this
Subordinated Debenture will be made by wire transfer in immediately
available funds at such place and to such account as may be designated by
the Property Trustee. Payment of principal of the Subordinated Debentures
will only be made upon surrender of the Subordinated Debentures to the
Trustee.
The indebtedness evidenced by this Subordinated Debenture is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior Indebtedness, and this Subordinated
Debenture is issued subject to the provisions of the Indenture with respect
thereto. Each Holder of this Subordinated Debenture, by accepting the same,
(a) agrees to and shall be bound by such provisions, (b) authorizes and
directs the Trustee on his or her behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination so
provided and (c) appoints the Trustee his or her attorney-in-fact for any
and all such purposes. Each Holder hereof, by his or her acceptance hereof,
hereby waives all notice of the acceptance of the subordination provisions
contained herein and in the Indenture by each holder of Senior Indebtedness,
whether now outstanding or hereafter incurred, and waives reliance by each
such holder upon said provisions.
This Subordinated Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any
purpose until the Certificate of Authentication hereon shall have been
signed by or on behalf of the Trustee.
The provisions of this Subordinated Debenture are continued on the reverse
side hereof and such continued provisions shall for all purposes have the
same effect as though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed.
Dated___________________
PACIFIC TELESIS GROUP
By______________________
14
{ }
Attest:
By_____________________
Secretary
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Subordinated Debentures of the series of Subordinated
Debentures described in the within-mentioned Indenture.
The First National Bank of
Chicago The First National Bank of Chicago as Trustee
as Trustee
By:_______________________
or as Authenticating Agent
By:_______________________________ By:________________________
Authorized Officer Authorized Officer
(FORM OF REVERSE OF SUBORDINATED DEBENTURE)
This Subordinated Debenture is one of a duly authorized series of
Subordinated Debentures of the Company (herein sometimes referred to as the
Subordinated Debentures"), specified in the Indenture, all issued or to be
issued in one or more series under and pursuant to an Indenture dated as of
______________, 1995, duly executed and delivered between the Company and
The First National Bank of Chicago, as Trustee (the "Trustee"), as
supplemented by the First Supplemental Indenture dated as of ____________,
1995, between the Company and the Trustee (the Indenture as so supplemented,
the "Indenture"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the Holders of the Subordinated Debentures, and to all of which
provisions the Holder of this Subordinated Debenture, by acceptance hereof,
assents and agrees. By the terms of the Indenture, the Subordinated
Debentures are issuable in series that may vary as to amount, date of
maturity, rate of interest and in other respects as provided in the
Indenture. This series of Subordinated Debentures is limited in aggregate
principal amount as specified in said First Supplemental Indenture.
Except as provided in the next paragraph, the Subordinated Debentures may
not be redeemed by the Company prior to __________, 2000. The Company shall
have the right to redeem this Subordinated Debenture at the option of the
Company, without premium or penalty, in whole or in part at any time and
from time to time on or after __________, 2000 (an Optional Redemption"),
at a redemption price equal to 100% of the principal amount plus any accrued
but unpaid interest, including any Compounded Interest, if any, to the date
of such redemption (the Optional Redemption Price"). Any redemption
pursuant to this paragraph will be made upon not less than 30 nor more than
60 days' notice, at the Optional Redemption Price.
If, at any time, a Tax Event (as defined below) shall occur or be continuing
and (i) the Company shall have received an opinion (a Redemption Tax
Opinion") of a nationally recognized independent tax counsel experienced in
such matters that, as a result of a Tax Event, there is more than an
insubstantial risk that the Company would be precluded from deducting the
interest on the Subordinated Debentures for United States federal income tax
purposes even if the Subordinated Debentures were distributed to the holders
of Preferred Securities and Common Securities in liquidation of such
holders' interest in the Trust as set forth in the Declaration of Trust or
(ii) the Regular Trustees shall have been informed by such tax counsel that
a No Recognition Opinion (as defined below) cannot be delivered to the
Trust, the Company shall have the right, upon not less than 30 nor more than
60 days' notice, to redeem the Subordinated Debentures in whole or in part
15
for cash at the Optional Redemption Price within 90 days following the
occurrence of such Tax Event; provided, however, that, if at that time there
is available to the Trust the opportunity to eliminate, within such 90 day
period, the Tax Event by taking some ministerial action ( Ministerial
Action"), such as filing a form or making an election, or pursuing some
other similar reasonable measure, which has no adverse effect on the Trust,
the Company or the holders of the Trust Securities, the Company or the Trust
will pursue such measure in lieu of redemption and provided further that the
Company shall have no right to redeem the Subordinated Debentures while the
Trust is pursuing any such Ministerial Action.
"Tax Event" means that the Regular Trustees shall have obtained an opinion
of nationally recognized independent tax counsel experienced in such matters
(a "Dissolution Tax Opinion") to the effect that, as a result of (a) any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, (b) any amendment to, or
change in, an interpretation or application of any such laws or regulations
by any legislative body, court, governmental agency or regulatory authority,
which amendment, change interpretation or pronouncement is enacted,
promulgated, issued or announced or which action is taken, in each case on
or after the date of the Prospectus Supplement, there is more than an
insubstantial risk that (i) the Trust would be subject to United States
federal income tax with respect to income accrued or received on the
Subordinated Debentures, (ii) the Trust would be subject to more than a de
minimis amount of taxes, duties or other governmental charges or (iii)
interest payable to the Trust on the Subordinated Debentures would not be
deductible, in whole or in part, by the Company for United States federal
income tax purposes.
"No Recognition Opinion" means an opinion of a nationally recognized
independent tax counsel experienced in such matters, which opinion may rely
on published revenue rulings of the Internal Revenue Service, to the effect
that the holders of the Trust Securities will not recognize any gain or loss
for United States federal income tax purposes as a result of a dissolution
of the Trust and distribution of the Subordinated Debentures as provided in
the Declaration of Trust.
If the Debentures are only partially redeemed by the Company pursuant to an
Optional Redemption or as a result of a Tax Event as described above, the
Debentures will be redeemed pro rata or by lot or in some other equitable
manner determined by the Trustee. Notwithstanding the foregoing, if a
partial redemption of the Subordinated Debentures would result in the
delisting of the Preferred Securities by any national securities exchange or
other organization on which the Preferred Securities are then listed, the
Company shall not be permitted to effect such partial redemption and will
only redeem the Subordinated Debentures in whole.
In the event of redemption of this Subordinated Debenture in part only, a
new Subordinated Debenture or Subordinated Debentures of this series for the
unredeemed portion hereof will be issued in the name of the Holder hereof
upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Subordinated
Debentures may be declared, and upon such declaration shall become, due and
payable, in the manner, with the effect and subject to the conditions and
limitations provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Subordinated Debentures of each series affected at
the time outstanding, as defined in the Indenture, to execute supplemental
indentures for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or of modifying in any manner the rights of the
Holders of the Subordinated Debentures; provided, however, that no such
supplemental indenture shall (i) extend the fixed maturity of any
Subordinated Debentures of any series, or reduce the principal amount
thereof, or reduce the rate or extend the time of payment of interest
thereon, or reduce any premium payable upon the redemption thereof, without
the consent of the Holder of each Subordinated Debenture so affected, or
(ii) reduce the aforesaid percentage of Subordinated Debentures, the Holders
of which are required to consent to any such supplemental indenture, without
the consent of the Holders of each Subordinated Debenture then outstanding
and affected thereby. The Indenture also contains provisions permitting the
16
Holders of a majority in aggregate principal amount of the Subordinated
Debentures of any series at the time outstanding affected thereby, on behalf
of all of the Holders of the Subordinated Debentures of such series, to
waive any past default in the performance of any of the covenants contained
in the Indenture, or established pursuant to the Indenture with respect to
such series, and its consequences, except a default in the payment of the
principal of or premium, if any, or interest on any of the Subordinated
Debentures of such series. Any such consent or waiver by the registered
Holder of this Subordinated Debenture (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all
future Holders and owners of this Subordinated Debenture and of any
Subordinated Debenture issued in exchange herefor or in place hereof
(whether by registration of transfer or otherwise), irrespective of whether
or not any notation of such consent or waiver is made upon this Subordinated
Debenture.
No reference herein to the Indenture and no provision of this Subordinated
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Subordinated Debenture at the time and
place and at the rate and in the money herein prescribed.
The Company shall have the right at any time during the term of the
Subordinated Debentures from time to time to extend the interest payment
period of such Subordinated Debentures for up to 20 consecutive quarters not
to extend beyond the Maturity Date of the Subordinated Debentures (an
"Extended Interest Payment Period"), at the end of which period the Company
shall pay all interest then accrued and unpaid (together with interest
thereon at the rate specified for the Subordinated Debentures to the extent
that payment of such interest is enforceable under applicable law). In the
event that Pacific Telesis exercises this right to defer interest payments,
then, prior to the payment of all accrued interest on outstanding
Subordinated Debentures, (a) Pacific Telesis shall not declare or pay
dividends on, or make a distribution with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital
stock, (b) Pacific Telesis shall not make any payment of interest, principal
or premium, if any, on or repay, repurchase or redeem any debt securities
issued by Pacific Telesis that rank pari passu with or junior to the
Subordinated Debentures and (c) Pacific Telesis shall not make any guarantee
payments with respect to the foregoing (other than pursuant to the Preferred
Securities Guarantee); provided, however, that restriction (a) above does
not apply to any stock dividends paid by Pacific Telesis where the dividend
stock is the same stock as that on which the dividend is being paid. Before
the termination of any such Extended Interest Payment Period, the Company
may further extend such Extended Interest Payment Period, provided that such
Extended Interest Payment Period together with all such further extensions
thereof shall not exceed 20 consecutive quarters and shall not extend beyond
the Maturity Date of the Subordinated Debentures. At the termination of any
such Extended Interest Payment Period and upon the payment of all accrued
and unpaid interest and any additional amounts then due, the Company may
commence a new Extended Interest Payment Period.
The Company shall have the right, before the Maturity Date, to extend the
Maturity Date no more than one time for up to an additional 19 years,
provided that (a) the Company is not in bankruptcy or otherwise insolvent,
(b) the Company is not in default on any Securities issued to a Pacific
Telesis Trust or any trustee of such trust in connection with an issuance of
Trust Securities by such trust, (c) the Company has made timely payments on
the Subordinated Debentures for the immediately preceding six quarters
without deferrals, (d) the Trust is not in arrears on payments of
distributions on the Trust Securities of the Trust, and (e) the Subordinated
Debentures are rated investment grade by a nationally recognized statistical
rating organization.
As provided in the Indenture and subject to certain limitations therein set
forth, this Subordinated Debenture is transferable by the registered Holder
hereof on the Security Register of the Company, upon surrender of this
Subordinated Debenture for registration of transfer at the Corporate Trust
Office of the Trustee accompanied by a written instrument or instruments of
transfer in form satisfactory to the Company or the Trustee duly executed by
the registered Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Subordinated Debentures of authorized
denominations and for the same aggregate principal amount and series will be
issued to the designated transferee or transferees. No service charge will
be made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
17
thereto.
Prior to due presentment for registration of transfer of this Subordinated
Debenture, the Company, the Trustee, any paying agent and any Security
Registrar may deem and treat the registered holder hereof as the absolute
owner hereof (whether or not this Subordinated Debenture shall be overdue
and notwithstanding any notice of ownership or writing hereon made by anyone
other than the Security Registrar) for the purpose of receiving payment of
or on account of the principal hereof and premium, if any, and interest due
hereon and for all other purposes, and neither the Company nor the Trustee
nor any paying agent nor any Subordinated Debenture Registrar shall be
affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the interest
on this Subordinated Debenture, or for any claim based hereon, or otherwise
in respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether
by virtue of any constitution, statute or rule of law, or by the enforcement
of any assessment or penalty or otherwise, all such liability being, by the
acceptance hereof and as part of the consideration for the issuance hereof,
expressly waived and released.
{The Subordinated Debentures of this series are issuable only in registered
form without coupons in denominations of $25 and any integral multiple
thereof provided that this Global Subordinated Debenture is exchangeable for
Subordinated Debentures in definitive form only under certain limited
circumstances set forth in the Indenture. Subordinated Debentures of this
series so issued are issuable only in registered form without coupons in
denominations of $25 and any integral multiple thereof.} As provided in the
Indenture and subject to certain limitations herein and therein set forth,
Subordinated Debentures of this series so issued are exchangeable for a like
aggregate principal amount of Subordinated Debentures of this series of a
different authorized denomination, as requested by the Holder surrendering
the same. All terms used in this Subordinated Debenture that are defined in
the Indenture shall have the meanings assigned to them in the Indenture.
ARTICLE NINE
ORIGINAL ISSUE OF SUBORDINATED DEBENTURES
SECTION 9.1. Original Issue of Subordinated Debentures.
Subordinated Debentures in the aggregate principal amount of $________ may,
upon execution of this First Supplemental Indenture, be executed by the
Company and delivered to the Trustee for authentication, and the Trustee
shall thereupon authenticate and deliver said Subordinated Debentures to or
upon the written order of the Company, signed by its Chairman, its
President, its Chief Financial Officer, or any Executive Vice President or
Vice President and its Treasurer or an Assistant Treasurer, without any
further action by the Company.
ARTICLE TEN
MISCELLANEOUS
SECTION 10.1. Ratification of Indenture.
The Indenture, as supplemented by this First Supplemental Indenture, is in
all respects ratified and confirmed, and this First Supplemental Indenture
shall be deemed part of the Indenture in the manner and to the extent herein
and therein provided.
SECTION 10.2. Trustee Not Responsible for Recitals.
The recitals herein contained are made by the Company and not by the
Trustee, and the Trustee assumes no responsibility for the correctness
thereof. The Trustee makes no representation as to the validity or
sufficiency of this First Supplemental Indenture.
SECTION 10.3. Governing Law.
This First Supplemental Indenture and each Subordinated Debenture shall be
deemed to be a contract made under the internal laws of the State of
California, and for all purposes shall be construed in accordance with the
laws of said State.
18
SECTION 10.4. Separability.
In case any one or more of the provisions contained in this First
Supplemental Indenture or in the Subordinated Debentures shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provisions of this First Supplemental Indenture or of the Subordinated
Debentures, but this First Supplemental Indenture and the Subordinated
Debentures shall be construed as if such invalid or illegal or unenforceable
provision had never been contained herein or therein.
SECTION 10.5. Counterparts.
This First Supplemental Indenture may be executed in any number of
counterparts each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested as of the day and year first above written.
PACIFIC TELESIS GROUP
By___________________________
Attest:
________________________
Secretary
The First National Bank of Chicago
as Trustee
By_____________________________
Attest:
__________________________________
Trust Officer
19
<PAGE>
EXHIBIT 4-K
-----------
PREFERRED SECURITIES GUARANTEE AGREEMENT
====================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
PACIFIC TELESIS FINANCING { }
Dated as of __________, 1995
====================================
1
<PAGE>
CROSS REFERENCE TABLE*
Section of Section of
Trust Indenture Act Guarantee
of 1939, as amended Agreement
310(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)
310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
311(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
312(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
313(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d); 3.2(a)
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7(a)
315(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)
315(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
315(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7(c)
316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6
316(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4(c)
316(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.10; 5.4
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7(b)
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
_________________________
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not have any bearing upon the interpretation of any
of its terms or provisions.
2
<PAGE>
PREFERRED SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as of _____________,
1995, is executed and delivered by Pacific Telesis Group, a Nevada
corporation (the "Guarantor"), and The First National Bank of Chicago, a
national banking association, as trustee (the "Preferred Guarantee Trustee"
as more fully defined herein)), for the benefit of the Holders (as defined
herein) from time to time of the Preferred Securities (as defined herein) of
Pacific Telesis Financing { }, a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of __________, among the trustees of the Issuer
named therein, the Guarantor as sponsor and the Holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof $__________ aggregate stated liquidation amount
of Preferred Securities designated the ____% Trust Originated Preferred
Securities (the "Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the Preferred Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the
extent set forth in this Guarantee Agreement, to pay to the Holders of the
Preferred Securities the Guarantee Payments (as defined herein) and to make
certain other payments on the terms and conditions set forth herein; and
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Common Securities Guarantee Agreement") in substantially
identical terms to this Guarantee Agreement for the benefit of the holders
of the Common Securities (as defined herein) except that if an Event of
Default (as defined in the Indenture (as defined herein)), has occurred and
is continuing, the rights of holders of the Common Securities to receive
Guarantee Payments under the Common Securities Guarantee are subordinated to
the rights of Holders of Preferred Securities to receive Guarantee Payments
under this Guarantee Agreement.
NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred
Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee Agreement for
the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
In this Guarantee Agreement, unless the context otherwise requires:
(a) Capitalized terms used in this Guarantee Agreement but not defined
in the preamble above have the respective meanings assigned to them
in this Section 1.1;
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented
or amended from time to time;
(d) all references in this Guarantee Agreement to Articles and Sections
are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act of 1933, as amended, or any successor rule thereunder.
3
"Authorized Officer" of a Person (as defined herein) means any Person that
is authorized to bind such Person.
"Business Day" means any day other than a day on which banking institutions
in New York, New York or Chicago, Illinois are authorized or required by law
to close.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Direction" by a Person means a written direction signed:
(a) if the Person is a natural person, by that Person; or
(b) in any other case in the name of such Person by one or more
Authorized Officers of that Person.
"Distribution" means the periodic distribution and other payments payable to
Holders of Preferred Securities in accordance with the terms of the
Preferred Securities set forth in Exhibit A to the Declaration.
"Guarantee Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not
paid or made by the Issuer: (i) any accrued and unpaid Distributions that
are required to be paid on such Preferred Securities to the extent the
Issuer shall have funds available therefor, (ii) the redemption price,
including all accrued and unpaid Distributions to the date of redemption
(the "Redemption Price")to the extent the Issuer has funds available
therefor, with respect to any Preferred Securities called for redemption by
the Issuer, and (iii) upon a voluntary or involuntary dissolution, winding-
up or termination of the Issuer (other than in connection with the
distribution of Subordinated Debentures (as defined herein) to the Holders
in exchange for Preferred Securities as provided in the Declaration or the
redemption of all the Preferred Securities upon the maturity or redemption
of the Subordinated Debentures), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid Distributions on the Preferred
Securities to the date of payment, and (b) the amount of assets of the
Issuer remaining available for distribution to Holders in liquidation of the
Issuer (in either case, the "Liquidation Distribution"). If an Event of
Default under the Indenture has occurred and is continuing, the rights of
holders of the Common Securities to receive payments under the Common
Securities Guarantee Agreement are subordinated to the rights of Holders of
Preferred Securities to receive Guarantee Payments.
"Holder" shall mean any registered owner shown on the register of the Issuer
of any Preferred Securities; provided however, that in determining whether
the holders of the requisite percentage of Preferred Securities have given
any request, notice, consent or waiver hereunder, "Holder" shall not include
the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate of
the Preferred Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives or agents of the Preferred
Guarantee Trustee.
"Indenture" means the Indenture dated as of ___________, 1995, as
supplemented by the First Supplemental Indenture dated as of ___________,
1995 (the "First Supplemental Indenture"), each being among Pacific Telesis
Group as issuer (the "Subordinated Debenture Issuer") and The First National
Bank of Chicago, as trustee and any indenture supplemental thereto pursuant
to which certain subordinated debt securities of the Subordinated Debenture
Issuer are to be issued to the Property Trustee (as defined in the
Declaration) of the Issuer.
"Majority in liquidation amount of the Preferred Securities" means, except
as provided by the Trust Indenture Act, a vote by Holder(s) of Preferred
Securities, voting separately as a class, of more than 50% of the
liquidation amount (including the stated amount that would be paid on
4
redemption, liquidation or otherwise, plus accrued and unpaid Distributions
to the date upon which the voting percentages are determined) of all
Preferred Securities. In determining whether the Holders of the requisite
amount of Preferred Securities have voted, Preferred Securities which are
owned by the Guarantor or any Affiliate of the Guarantor or any other
obligor on the Preferred Securities shall be disregarded for the purpose of
any such determination.
"Officer's Certificate" means, with respect to any Person, a certificate
signed by an Authorized Officer of such Person. Any Officer's Certificate
delivered with respect to compliance with a condition or covenant provided
for in this Guarantee Agreement shall include:
(a) a statement that such officer signing the Officer's Certificate has
read the covenant or condition and the definition relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation on which the statements or opinions contained in such
Officer's Certificate are based;
(c) a statement that such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company,
limited liability company, trust, unincorporated association, or government
or any agency, authority or political subdivision thereof.
"Preferred Guarantee Trustee" means The First National Bank of Chicago until
a Successor Preferred Guarantee Trustee (as defined herein) has been
appointed and has accepted such appointment pursuant to the terms of this
Guarantee Agreement and thereafter means each such Successor Preferred
Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any vice-president, any assistant vice-president, the secretary,
any assistant secretary, the treasurer, any assistant treasurer, any trust
officer or assistant trust officer or any other officer of the corporate
trust department of the Preferred Guarantee Trustee customarily performing
functions similar to those performed by any of the above designated officers
and also means, with respect to a particular corporate trust matter, any
other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.
"66 2/3% in liquidation amount of the Preferred Securities" means, except as
provided by the Trust Indenture Act, a vote by Holder(s) of Preferred
Securities, voting separately as a class, of 66 2/3% of the liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date
upon which the voting percentages are determined) of all Preferred
Securities. In determining whether the Holders of the requisite amount of
Preferred Securities have voted, Preferred Securities which are owned by the
Guarantor or any Affiliate of the Guarantor or any other obligor on the
Preferred Securities shall be disregarded for the purpose of any such
determination.
"Subordinated Debentures" means the series of subordinated debt securities
of the Guarantor designated the ___% Subordinated Deferrable Interest
Debentures due ____ held by the Property Trustee.
"Subsidiary" means any corporation of which at the time of determination the
Guarantor, directly and/or indirectly through one or more Subsidiaries owns
more than 50% of the shares of the voting stock of such corporation.
"Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred
Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended to
the date of this Guarantee Agreement.
5
6
"25% in liquidation amount of the Preferred Securities" means, except as
provided by the Trust Indenture Act, a vote by Holder(s) of Preferred
Securities, voting separately as a class, of 25% of the liquidation amount
(including the stated amount that would be paid on redemption, liquidation
or otherwise, plus accrued and unpaid Distributions to the date upon which
the voting percentages are determined) of all Preferred Securities. In
determining whether the Holders of the requisite amount of Preferred
Securities have voted, Preferred Securities which are owned by the Guarantor
or any Affiliate of the Guarantor or any other obligor on the Preferred
Securities shall be disregarded for the purpose of any such determination.
SECTION 1.2 Other Defined Terms
Capitalized terms not otherwise defined in this Guarantee Agreement shall
have the meaning ascribed to them in the Declaration.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of the
Trust Indenture Act that are required to be part of this
Guarantee Agreement and shall, to the extent applicable, be
governed by such provisions.
(b) If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties
imposed by Section 310 to 317, inclusive, of the Trust
Indenture Act, such imposed duties shall control.
SECTION 2.2 Lists of Holders of Securities.
(a) The Guarantor will furnish or cause to be furnished to the
Preferred Guarantee Trustee, not less than 45 days nor more
than 60 days after each date (month and day) that is a
Distribution payment date under the Declaration, but in no
event less frequently than semiannually, and at such other
times as the Preferred Guarantee Trustee may request in
writing, within 30 days after receipt by the Guarantor of any
such request, a list in such form as the Preferred Guarantee
Trustee may reasonably require containing all the information
in the possession or control of the Guarantor as to the names
and addressees of the Holders of Preferred Securities obtained
since the date as of which the next previous list, if any, was
furnished. Any such list may be dated as of a date not more
than 15 days prior to the time such information is furnished
and need not include information received after such date.
(b) The Preferred Guarantee Trustee shall comply with its
obligations under Section 311(a), 311(b) and Section 312(b) of
the Trust Indenture Act.
SECTION 2.3 Reports by the Preferred Guarantee Trustee.
Within 60 days after May 15 of each year, the Preferred Guarantee Trustee
shall provide to the Holders of the Preferred Securities such reports as are
required by Section 313 of the Trust Indenture Act, if any, in the form and
in the manner provided by Section 313 of the Trust Indenture Act. The
Preferred Guarantee Trustee shall also comply with the requirements of
Section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee.
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314 (if any) and
the compliance certificate required by Section 314 of the Trust Indenture
Act in the form, in the manner and at the times required by Section 314 of
the Trust Indenture Act.
7
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Preferred Guarantee Trustee such evidence
of compliance with any conditions precedent, if any, provided for in this
Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to
be given by an officer pursuant to Section 314(c)(1) may be given in the
form of an Officer's Certificate.
SECTION 2.6 Guarantee Events of Default; Waiver.
The Holders of a Majority in liquidation amount of the Preferred Securities
may, by vote, on behalf of the Holders of all of the Preferred Securities,
waive any past Guarantee Event of Default and its consequences. Upon such
waiver, any such Guarantee Event of Default shall cease to exist, and any
Guarantee Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Guarantee Agreement, but no such waiver
shall extend to any subsequent or other default or Guarantee Event of
Default or impair any right consequent thereon. The Guarantor may set a
special record date for purposes of determining the identity of the Holders
of the Preferred Securities entitled to vote or consent to any action by
vote or consent authorized or permitted by this Section 2.6. Such record
date shall be the later of 15 days prior to the first solicitation of such
consent or the date of the most recent list of Holders furnished to the
Preferred Guarantee Trustee pursuant to Section 2.2 of this Guarantee
Agreement prior to such solicitation.
SECTION 2.7 Guarantee Event of Default Notice.
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of a Guarantee Event of Default, transmit by mail,
first class postage prepaid, to the Holders of the Preferred
Securities, notices of all Guarantee Events of Default known to
the Preferred Guarantee Trustee, unless such defaults have been
cured before the giving of such notice, provided that the
Preferred Guarantee Trustee shall be protected in withholding
such notice if and so long as the board of directors, the
executive committee, or a trust committee of directors and/or
Responsible Officers of the Preferred Guarantee Trustee in good
faith determines that the withholding of such notice is in the
interests of the Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have
knowledge of any Guarantee Event of Default unless the
Preferred Guarantee Trustee shall have received written notice,
or a Responsible Officer charged with the administration of the
Declaration shall have obtained written notice, of such
Guarantee Event of Default.
(c) The provisions of Section 315(e) of the Trust Indenture Act
shall be excluded from this Guarantee Agreement.
SECTION 2.8 Disclosure of Information.
The disclosure of information as to the names and addresses of the Holders
of the Preferred Securities in accordance with Section 312 of the Trust
Indenture Act, regardless of the source from which such information was
derived, shall not be deemed to be a violation of any existing law, or any
law hereafter enacted which does not specifically refer to Section 312 of
the Trust Indenture Act, nor shall the Guarantee Trustee be held accountable
by reason of mailing any material pursuant to a request made under Section
312(b) of the Trust Indenture Act.
SECTION 2.9 Conflicting Interests.
The Preferred Securities Guarantee Agreements for the benefit of the Holders
of the Preferred Securities of each of Pacific Telesis Financing
{ } and { } shall be deemed to be specifically described in this Guarantee
Agreement for the purposes of clause (i) of the first proviso contained in
Section 310(b) of the Trust Indenture Act.
8
SECTION 2.10 Preferred Guarantee Trustee May File Proofs of Claim.
Upon the occurrence of a Guarantee Event of Default, the Preferred Guarantee
Trustee is hereby authorized to (a) recover judgment, in its own name and as
trustee of an express trust, against the Guarantor for the whole amount of
any Guarantee payments remaining unpaid and (b) file such proofs of claim
and other papers or documents as may be necessary or advisable in order to
have its claims and those of the Holders of the Preferred Securities allowed
in any judicial proceedings relative to the Guarantor, its creditors or its
property.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee.
(a) This Guarantee Agreement shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders of the
Preferred Securities, and the Preferred Guarantee Trustee shall
not transfer this Guarantee Agreement to any Person except a
Holder of Preferred Securities exercising his or her rights
pursuant to Section 5.4(b) or to a Successor Preferred
Guarantee Trustee on acceptance by such Successor Preferred
Guarantee Trustee of its appointment to act as Successor
Preferred Guarantee Trustee. The right, title and interest of
the Preferred Guarantee Trustee shall automatically vest in any
Successor Preferred Guarantee Trustee, and such vesting and
cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered
pursuant to the appointment of such Successor Preferred
Guarantee Trustee.
(b) If a Guarantee Event of Default has occurred and is continuing,
the Preferred Guarantee Trustee shall enforce this Guarantee
Agreement for the benefit of the Holders of the Preferred
Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any
Guarantee Event of Default and after the curing of all
Guarantee Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set
forth in this Guarantee Agreement, and no implied covenants
shall be read into this Guarantee Agreement against the
Preferred Guarantee Trustee. In case a Guarantee Event of
Default has occurred (that has not been cured or waived
pursuant to Section 2.6), the Preferred Guarantee Trustee shall
exercise such of the rights and powers vested in it by this
Guarantee Agreement, and use the same degree of care and skill
in its exercise thereof, as a prudent person would exercise or
use under the circumstances in the conduct of his or her own
affairs.
(d) No provision of this Guarantee Agreement shall be construed to
relieve the Preferred Guarantee Trustee from liability for its
own negligent action, its own negligent failure to act, or its
own willful misconduct, except that:
(i) prior to the occurrence of any Guarantee Event of Default and
after the curing or waiving of all such Guarantee Events of
Default that may have occurred:
(A) the duties and obligations of the Preferred Guarantee
Trustee shall be determined solely by the express
provisions of this Guarantee Agreement, and the Preferred
Guarantee Trustee shall not be liable except for the
performance of such duties and obligations as are
specifically set forth in this Guarantee Agreement, and no
implied covenants or obligations shall be read into this
Guarantee Agreement against the Preferred Guarantee
Trustee; and
(B) in the absence of bad faith on the part of the Preferred
Guarantee Trustee, the Preferred Guarantee Trustee may
9
conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
any certificates or opinions furnished to the Preferred
Guarantee Trustee and conforming to the requirements of
this Guarantee Agreement; but in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Preferred
Guarantee Trustee, the Preferred Guarantee Trustee shall
be under a duty to examine the same to determine whether
or not they conform to the requirements of this Guarantee
Agreement;
(ii) the Preferred Guaranty Trustee shall not be
liable for any error of judgment made in good
faith by a Responsible Officer of the Preferred
Guarantee Trustee, unless it shall be proved
that the Preferred Guarantee Trustee was
negligent in ascertaining the pertinent facts
upon which such judgment was made;
(iii) the Preferred Guarantee Trustee shall not be
liable with respect to any action taken or
omitted to be taken by it in good faith in
accordance with the direction of the Holders of
not less than a Majority in liquidation amount
of the Preferred Securities relating to the
time, method and place of conducting any
proceeding for any remedy available to the
Preferred Guarantee Trustee, or exercising any
trust or power conferred upon the Preferred
Guarantee Trustee under this Guarantee
Agreement; and
(iv) no provision of this Guarantee Agreement shall
require the Preferred Guarantee Trustee to
expend or risk its own funds or otherwise incur
personal financial liability in the performance
of any of its duties or in the exercise of any
of its rights or powers, if the Preferred
Guarantee Trustee shall have reasonable grounds
for believing that the repayment of such funds
or liability is not reasonably assured to it
under the terms of this Guarantee Agreement or
adequate indemnity against such risk or
liability is not reasonably assured to it.
(e) The Preferred Guarantee Trustee may authorize one or more persons
(each a "Paying Agent") to pay Guarantee Payments and any such
Paying Agent shall comply with Section 317(b) of the Trust
Indenture Act. Any Paying Agent may be removed by the Preferred
Guarantee Trustee at any time and a successor Paying Agent or
additional Paying Agents may be appointed at any time by the
Preferred Guarantee Trustee.
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may rely and shall be
fully protected in acting or refraining from acting upon
any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to
be genuine and to have been signed, sent or presented by
the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Guarantee Agreement shall be sufficiently evidenced by a
Direction or an Officer's Certificate.
(iii) Whenever, in the administration of this Guarantee
Agreement, the Preferred Guarantee Trustee shall deem it
desirable that a matter be proved or established before
taking, suffering or omitting any action hereunder, the
10
Preferred Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad
faith on its part, request and rely upon an Officer's
Certificate which, upon receipt of such request, shall be
promptly delivered by the Guarantor.
(iv) The Preferred Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument
(or any rerecording, refiling or registration thereof).
(v) The Preferred Guarantee Trustee may consult with counsel,
and the written advice or opinion of such counsel with
respect to legal matters shall be full and complete
authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith
and in accordance with such advice or opinion. Such
counsel may be counsel to the Guarantor or any of its
Affiliates and may include any of its employees. The
Preferred Guarantee Trustee shall have the right at any
time to seek instructions concerning the administration of
this Guarantee Agreement from any court of competent
jurisdiction.
(vi) The Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested
in it by this Guarantee Agreement at the request or
direction of any Holder, unless such Holder shall have
provided to the Preferred Guarantee Trustee such adequate
security and indemnity as would satisfy a reasonable
person in the position of the Preferred Guarantee Trustee,
against the costs, expenses (including attorneys' fees and
expenses) and liabilities that might be incurred by it in
complying with such request or direction, including such
reasonable advances as may be requested by the Preferred
Guarantee Trustee; provided that, nothing contained in
this Section 3.2(a)(vi) shall be taken to relieve the
Preferred Guarantee Trustee, upon the occurrence of a
Guarantee Event of Default, of its obligation to exercise
the rights and powers vested in it by this Guarantee
Agreement.
(vii) The Preferred Guarantee Trustee shall not be bound to make
any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document, but the Preferred Guarantee Trustee, in
its discretion, may make such further inquiry or
investigation into such facts or matters as it may see
fit.
(viii) The Preferred Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents or attorneys, and
the Preferred Guarantee Trustee shall not be responsible
for any misconduct or negligence on the part of any agent
or attorney appointed with due care by it hereunder.
(ix) Any action taken by the Preferred Guarantee Trustee or its
agents hereunder shall bind the Holders of the Preferred
Securities, and the signature of the Preferred Guarantee
Trustee or its agents alone shall be sufficient and
effective to perform any such action. No third party
shall be required to inquire as to the authority of the
Preferred Guarantee Trustee to so act or as to its
compliance with any of the terms and provisions of this
Guarantee Agreement, both of which shall be conclusively
evidenced by the Preferred Guarantee Trustee's or its
agent's taking such action.
(x) Whenever in the administration of this Guarantee Agreement
the Preferred Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy
or right or taking any other action hereunder, the
Preferred Guarantee Trustee (i) may request instructions
from the Holders of a Majority in liquidation amount of
11
the Preferred Securities, (ii) may refrain from enforcing
such remedy or right or taking such other action until
such instructions are received, and (iii) shall be
protected in acting in accordance with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed to impose
any duty or obligation on the Preferred Guarantee Trustee to
perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it in any jurisdiction in which
it shall be illegal, or in which the Preferred Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable
law, to perform any such act or acts or to exercise any such
right, power, duty or obligation. No permissive power or
authority available to the Preferred Guarantee Trustee shall be
construed to be a duty.
(c) The Guarantor assumes responsibility for being and remaining
informed of the financial condition of the Subordinated Debenture
Issuer and of all other circumstances bearing upon the risk of
non-payment of amounts owing under the Preferred Securities which
diligent inquiry would reveal and agrees that the Holders of the
Preferred Securities shall have no duty to advise the Guarantor of
information known to any of them regarding such condition or any
such circumstances.
SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee
Agreement.
The recitals contained in this Guarantee Agreement shall be taken as the
statements of the Guarantor, and the Preferred Guarantee Trustee does not
assume any responsibility for their correctness. The Preferred Guarantee
Trustee makes no representation as to the validity or sufficiency of this
Guarantee Agreement.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 Preferred Guarantee Trustee; Eligibility.
(a) There shall at all times be a Preferred Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws
of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or
Person permitted by the Securities and Exchange Commission to
act as an institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least
$50,000,000, and subject to supervision or examination by
Federal, State, Territorial or District of Columbia
authority. If such corporation publishes reports of
condition at least annually pursuant to law or to the
requirements of the supervising or examining authority
referred to above, then, for the purposes of this Section
4.1(a)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition
so published.
(b) If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Preferred Guarantee
Trustee shall immediately resign in the manner and with the effect
set out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the
Trust Indenture Act, the Preferred Guarantee Trustee and Guarantor
shall in all respects comply with the provisions of Section 310(b)
of the Trust Indenture Act.
SECTION 4.2 Appointment, Removal and Resignation of Preferred Guarantee
12
Trustees.
(a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in accordance
with Section 4.2(a) until a Successor Preferred Guarantee Trustee
has been appointed and has accepted such appointment by written
instrument executed by such Successor Preferred Guarantee Trustee
and delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall hold
office until a Successor Preferred Guarantee Trustee shall have
been appointed or until its removal or resignation. The Preferred
Guarantee Trustee may resign from office (without need for prior
or subsequent accounting) by an instrument in writing executed by
the Preferred Guarantee Trustee and delivered to the Guarantor,
which resignation shall not take effect until a Successor
Preferred Guarantee Trustee has been appointed and has accepted
such appointment by instrument in writing executed by such
Successor Preferred Guarantee Trustee and delivered to the
Guarantor and the resigning Preferred Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2
within 60 days after delivery to the Guarantor of an instrument of
resignation, the resigning Preferred Guarantee Trustee may
petition any court of competent jurisdiction for appointment of a
Successor Preferred Guarantee Trustee. Such court may thereupon,
after prescribing such notice, if any, as it may deem proper,
appoint a Successor Preferred Guarantee Trustee.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee.
The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Issuer), as and when due, regardless of any defense, right of
set-off or counterclaim that the Issuer may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by the Guarantor to the Holders or by causing the
Issuer to pay such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this Guarantee Agreement
and of any liability to which it applies or may apply, presentment, demand
for payment, any right to require a proceeding first against the Issuer or
any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices
and demands.
SECTION 5.3 Unconditional Nature of Obligations.
The obligations of the Guarantor under this Guarantee Agreement shall be
absolute and unconditional and shall remain in full force and effect until
the entire liquidation amount of all outstanding Preferred Securities shall
have been paid and such obligation shall not be affected, modified or
impaired upon the happening from time to time of any event, including
without limitation any of the following, whether or not with notice to, or
the consent of, the Guarantor:
(a) the waiver, surrender, compromise, settlement, release or
termination of any or all of the obligations, covenants or
agreements of the Issuer under the Preferred Securities;
(b) the failure to give notice to the Guarantor of the occurrence
of a default under the Preferred Securities;
(c) the waiver, compromise or release of the payment, performance
or observance by the Issuer or by the Guarantor, respectively,
of any or all of the obligations, covenants or agreements
contained in the case of the Issuer, in the Preferred
13
Securities, and, in the case of the Guarantor, in this
Guarantee Agreement;
(d) the extension of the time for payment of the liquidation amount
of any Preferred Securities or of the time for performance of
any other obligations, covenants or agreements under or arising
out of the Preferred Securities;
(e) the modification or amendment (whether material or otherwise)
of any obligation, covenant or agreement set forth in the
Preferred Securities;
(f) any failure, omission, delay or lack on the part of any Holder
to enforce, assert or exercise any right, power or remedy
conferred on it in or in connection with the Preferred
Securities;
(g) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all the assets,
marshalling of assets and liabilities, receivership,
insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition with
creditors or readjustment of, or other similar proceedings
affecting the Guarantor or the Issuer or any of the respective
assets of either of them, or any allegation or contest of the
validity of this Guarantee Agreement in any such proceeding;
(h) any defense based upon any legal disability of the Issuer or,
to the extent permitted by law, any release, discharge,
reduction or limitation of or with respect of any sums owing by
the Issuer or any other liability of the Issuer to any Holder;
(i) to the extent permitted by law, the release or discharge by
operation of law of the Guarantor from the performance or
observance of any obligation, covenant or agreement contained
in this Guarantee Agreement;
(j) the default or failure of the Guarantor fully to perform any of
its obligations set forth in this Guarantee Agreement; or
(k) the invalidity of the Preferred Securities or any defense which
the Issuer may have against any Holder.
If any payment by the Issuer to any Holder is rescinded or must be returned
by such Holder, the obligations of the Guarantor hereunder shall be
reinstated with respect of such payment.
No set-off, counterclaim, reduction, or diminution of any obligation, or any
defense of any kind or nature which the Guarantor has or may have against
any Holder shall be available hereunder to the Guarantor against such Holder
to reduce the payments to it under this Guarantee Agreement.
The Guarantor assumes responsibility for being and remaining informed of the
financial condition of the Issuer and of all other circumstances bearing
upon the risk of nonpayment of amounts owing under the Preferred Securities
which diligent inquiry would reveal and agrees that no Holder shall have any
duty to advise the Guarantor of information known to it regarding such
condition or any such circumstances.
SECTION 5.4 Rights of Holders.
(a) The Holders of a Majority in liquidation amount of the
Preferred Securities have the right to direct the time, method
and place of conducting of any proceeding for any remedy
available to the Preferred Guarantee Trustee in respect of this
Guarantee Agreement or exercising any trust or power conferred
upon the Preferred Guarantee Trustee under this Guarantee
Agreement.
(b) If the Preferred Guarantee Trustee fails to enforce this
Guarantee Agreement, any Holder of Preferred Securities may
institute a legal proceeding directly against the Guarantor to
enforce its rights under this Guarantee Agreement, without
first instituting a legal proceeding against the Issuer, the
Preferred Guarantee Trustee or any other Person.
14
(c) Notwithstanding any other provisions in this Guarantee
Agreement, the right of any Holder of any Preferred Security to
receive payment of the Guarantee Payments when due or to
institute suit for the enforcement of any such payment on or
after such respective dates shall not be impaired or affected
without the consent of such Holder.
(d) Notwithstanding any other provision in this Guarantee
Agreement, the Holder of any Preferred Security shall have the
right, which is absolute and unconditional, to receive payment
of Guarantee Payments when due and to institute suit for the
enforcement of any such payments, and such rights shall not be
impaired without the consent of such Holder.
SECTION 5.5 Enforcement of Guarantee.
The Guarantor and the Preferred Guarantee Trustee expressly acknowledge that
(i) this Guarantee Agreement will be deposited with the Preferred Guarantee
Trustee to be held for the benefit of the Holders; (ii) the Preferred
Guarantee Trustee has the right to enforce this Guarantee Agreement on
behalf of the Holders; (iii) Holders representing not less than a Majority
in liquidation amount of the Preferred Securities have the right to direct
the time, method and place of conducting any proceeding for any remedy
available in respect of this Guarantee Agreement including the giving of
directions to the Preferred Guarantee Trustee, or exercising any trust or
other power conferred upon the Preferred Guarantee Trustee under this
Guarantee Agreement, and (iv) if the Preferred Guarantee Trustee fails to
enforce this Guarantee Agreement, any Holder of Preferred Securities may
institute a legal proceeding directly against the Guarantor to enforce its
rights under this Guarantee Agreement, without first instituting a legal
proceeding against the Issuer, the Preferred Guarantee Trustee, or any other
Person; all as provided in this Guarantee Agreement.
SECTION 5.6 Guarantee of Payment.
This Guarantee Agreement creates a guarantee of payment and not of
collection.
SECTION 5.7 Subrogation.
The Guarantor shall be subrogated to all (if any) rights of the Holders of
Preferred Securities against the Issuer in respect of any amounts paid to
such Holders by the Guarantor under this Guarantee Agreement; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any right
that it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Guarantee
Agreement, if, at the time of any such payment, any amounts are due and
unpaid under this Guarantee Agreement. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to
hold such amount in trust for the Holders and to pay over such amount to the
Holders. The Guarantor shall not exercise its right of subrogation if such
exercise would adversely affect the rights of Holders of any outstanding
Preferred Securities.
SECTION 5.8 Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are independent of
the obligations of the Issuer with respect to the Preferred Securities, and
that the Guarantor shall be liable hereunder to make Guarantee Payments
pursuant to the terms of this Guarantee Agreement notwithstanding the
occurrence of any event referred to in subsections (a) through (k),
inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions.
So long as any Preferred Securities remain outstanding, if there shall have
occurred a Guarantee Event of Default or an event of default under the
Declaration or if the Subordinated Debenture Issuer shall have selected an
Extended Interest Payment Period (as defined in the First Supplemental
Indenture), then (a) the Guarantor shall not declare or pay any dividend on,
15
or make any distributions with respect to, or redeem, purchase, or acquire
or make a liquidation payment with respect to, any of its capital stock and
(b) the Guarantor shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities
issued by the Guarantor which rank pari passu with or junior to this
Guarantee Agreement, and (c) the Guarantor shall not make any guarantee
payments with respect to the foregoing (other than pursuant to this
Guarantee Agreement); provided, that, the foregoing restriction in Section
6.1 (a) shall not apply to any stock dividends paid by the Guarantor where
the dividend stock is the same stock as that on which the dividend is being
paid. In addition, so long as any Preferred Securities remain outstanding,
the Guarantor (i) will remain the sole direct or indirect owner of all of
the outstanding Common Securities and shall not cause or permit the Common
Securities to be transferred except to the extent such transfer is permitted
under Section 9.1(c) of the Declaration; provided that any permitted
successor of the Guarantor under the Indenture may succeed to the
Guarantor's ownership of the Common Securities and (ii) will not take any
action which would cause the Issuer to be treated as other than grantor
trust for United States federal income tax purposes except in connection
with a distribution of Subordinated Debentures as provided in the
Declaration.
SECTION 6.2 Ranking.
This Guarantee Agreement will constitute an unsecured obligation of the
Guarantor and will rank (i) subordinate and junior in right of payment to
all other liabilities of the Guarantor except those made pari passu or
subordinate by their terms, (ii) pari passu with the most senior preferred
or preference stock now or hereafter issued by the Guarantor and with any
guarantee now or hereafter entered into by the Guarantor in respect of any
preferred or preference stock of any Affiliate of the Guarantor, and (iii)
senior to the Guarantor's common stock.
If an Event of Default has occurred and is continuing under the Indenture,
the rights of the holders of the Common Securities to receive any payments
under the Common Securities Guarantee Agreement shall be subordinated to the
rights of the Holders of Preferred Securities to receive Guarantee Payments
hereunder.
SECTION 6.3 Guarantor Existence.
The Guarantor shall not consolidate with or merge into any other corporation
or convey, transfer or lease, or permit one or more of its Subsidiaries to
convey, transfer or lease, all or substantially all of the property and
assets of the Guarantor and its Subsidiaries on a consolidated basis, to any
Person, unless the corporation formed by such consolidation or into which
the Guarantor is merged or the Person which acquires by conveyance or
transfer, or which leases, the properties and assets of the Guarantor and
its Subsidiaries on a consolidated basis (i) is a corporation organized
under the laws of the United States, any state of the United States or the
District of Columbia, (ii) such surviving corporation shall expressly assume
the Guarantor's obligations hereunder and (iii) immediately after giving
effect to the transaction no Event of Default shall have occurred and be
continuing.
This Section shall only apply to a merger or consolidation in which the
Guarantor is not the surviving corporation and to conveyances, leases and
transfers by the Guarantor as transferor or lessor.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination.
This Guarantee Agreement shall terminate upon the earliest of (i) full
payment of the Redemption Price of all Securities, (ii) the distribution of
the Subordinated Debentures to the Holder's of all of the Preferred
Securities or (iii) full payment of the amounts payable in accordance with
the Declaration upon liquidation of the Issuer. Notwithstanding the
foregoing, this Guarantee Agreement will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred
Securities or under this Preferred Securities Guarantee.
16
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any
Covered Person for any loss, damage or claim incurred by reason
of any act or omission performed or omitted by such Indemnified
Person in good faith in accordance with this Guarantee
Agreement and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Guarantee
Agreement or by law, except that an Indemnified Person shall be
liable for any such loss, damage or claim incurred by reason of
such Indemnified Person's negligence or willful misconduct with
respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Guarantor and upon such
information, opinions, reports or statements presented to the
Guarantor by any Person as to matters the Indemnified Person
reasonably believes are within such other Person's professional
or expert competence and who has been selected with reasonable
care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of
the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which
Distributions to Holders of Preferred Securities might properly
be paid.
SECTION 8.2 Indemnification.
(a) To the fullest extent permitted by applicable law, the
Guarantor shall indemnify and hold harmless each Indemnified
Person from and against any loss, damage or claim incurred by
such Indemnified Person by reason of any act or omission
performed or omitted by such Indemnified Person in good faith
in accordance with this Guarantee Agreement and in a manner
such Indemnified Person reasonably believed to be within the
scope of authority conferred on such Indemnified Person by this
Guarantee Agreement, except that no Indemnified Person shall be
entitled to be indemnified in respect of any loss, damage or
claim incurred by such Indemnified Person by reason of such
Indemnified Person s negligence or willful misconduct with
respect to such acts or omissions.
(b) To the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by an Indemnified Person in
defending any claim, demand, action, suit or proceeding shall,
from time to time, be advanced by the Guarantor prior to the
final disposition of such claim, demand, action, suit or
proceeding upon receipt by the Guarantor of an undertaking by
or on behalf of the Indemnified Person to repay such amount if
it shall be determined that the Indemnified Person is not
entitled to be indemnified as authorized in Section 8.2(a).
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns.
All guarantees and agreements contained in this Guarantee Agreement shall
bind the successors, assigns, receivers, trustees and representatives of the
Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding.
SECTION 9.2 Amendments.
Except with respect to any changes that do not adversely affect the rights
of Holders (in which case no consent of Holders will be required), this
Guarantee Agreement may only be amended with the prior approval of the
17
Holders of at least 66-2/3% in liquidation amount of the Preferred
Securities. The provisions of Section 12.2 of the Declaration with respect
to meetings of Holders of the Securities apply to the giving of such
approval.
18
SECTION 9.3 Notices.
All notices provided for in this Guarantee Agreement shall be in writing,
duly signed by the party giving such notice, and shall be electronically
communicated or hand delivered or sent by overnight courier, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such
other address as the Preferred Guarantee Trustee may give
notice of to the Holders of the Preferred Securities):
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670
Attention: Corporate Trust Administration
(b) If given to the Guarantor, at the Guarantor's mailing address
set forth below (or such other address as the Guarantor may
give notice of to the Holders of the Preferred Securities):
Pacific Telesis Group
130 Kearny Street
San Francisco, California 94108
Attention: Chief Financial Officer
(c) If given to any Holder of Preferred Securities, at the address
set forth on the books and records of the Issuer.
For all purposes of this Guarantee Agreement, a notice or communication will
be deemed effective:
(a) if delivered by hand or sent by overnight courier, on the day
it is delivered unless (i) that day is not a Business Day in
the city specified (a Local Business Day") in the address for
notice provided by the recipient or (ii) if delivered after the
close of business on a Local Business Day, then on the next
succeeding Local Business Day, or
(b) if sent by facsimile transmission, on the date transmitted,
provided that oral or written confirmation of receipt is
obtained by the sender unless the date of transmission and
confirmation is not a Local Business Day, in which case, on the
next succeeding Local Business Day.
Any notice, direction, request, demand, consent or waiver by the
Subordinated Debenture Issuer or any Holder of Securities to or upon the
Preferred Guarantee Trustee shall be deemed to have been sufficiently given,
made or filed, for all purposes, if given, made or filed in writing at the
principal office of the Preferred Guarantee Trustee in accordance with the
provisions of this Section 9.3.
SECTION 9.4 Benefit.
This Guarantee Agreement is solely for the benefit of the Holders of the
Preferred Securities and, subject to Section 3.1(a), is not separately
transferable from the Preferred Securities.
SECTION 9.5 Governing Law.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
Pacific Telesis Group
By:_______________________________
Name:_____________________________
Title:____________________________
19
The First National Bank of Chicago
as Preferred Guarantee Trustee
By:_______________________________
Name:_____________________________
Title:____________________________
20
<PAGE> EXHIBIT 12
----------
PACIFIC TELESIS GROUP AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
9/30/95 9/30/94
------- -------
1. Earnings
--------
Adjusted income from continuing operations before
income taxes $1,274 $1,395
Interest expense 350 336
Interest in operating rental expense (a) 24 26
------- -------
Total earnings - continuing operations $1,648 $1,757
------- -------
2. Fixed Charges
-------------
Interest expense (b) $ 366 $ 336
Interest in operating rental expense (a) 24 26
------- -------
Total fixed charges - continuing operations $ 390 $ 362
------- -------
RATIO OF EARNINGS TO FIXED CHARGES
(1 divided by 2) 4.23 4.85
======= =======
(a) Computed as 1/3 of operating rental expense.
(b) Includes capitalized interest.
<PAGE> EXHIBIT 15
----------
COOPERS & LYBRAND
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen and Ladies:
Re: Pacific Telesis Group Registration on Form S-3
of Trust Originated Preferred Securities
-------------------------------------------------------
We are aware that our reports dated May 12, 1995, August 11, 1995, and
November 14, 1995 on our reviews of interim financial information of Pacific
Telesis Group for the periods ended March 31, 1995, June 30, 1995, and
September 30, 1995 included in the Company's quarterly reports on Form 10-Q
for the quarters then ended are incorporated by reference in this
registration statement. Pursuant to Rule 436(c) under the Securities Act of
1993, this report should not be considered part of the registration
statement prepared or certified by us within the meaning of Sections 7 and
11 of that Act.
Very truly yours,
/s/Coopers & Lybrand
San Francisco, California
November 30, 1995
<PAGE> EXHIBIT 23A
-----------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Pacific Telesis Group on Form S-3 (for the Trust Originated Preferred
Securities) of our reports dated February 23, 1995 on our audits of the
consolidated financial statements and financial statement schedules of
Pacific Telesis Group as of December 31, 1994 and 1993 and for the years
ended December 31, 1994, 1993, and 1992, which reports are included or
incorporated by reference in Pacific Telesis Group's 1994 Annual Report on
Form 10-K.
/s/ Coopers & Lybrand
San Francisco, California
November 30, 1995
