<PAGE> 1
Filed Pursuant to Rule 424 (b)(2)
Registration Number 033-49477
PROSPECTUS SUPPLEMENT
(To Prospectus Dated April 12, 1993)
$250,000,000
LOGO
6 7/8% DEBENTURES DUE AUGUST 15, 2006
The Debentures will mature on August 15, 2006. Interest on the Debentures will
be payable semiannually on February 15 and August 15 of each year, commencing
February 15, 1997. The Debentures may not be redeemed prior to maturity and will
not be subject to any sinking fund.
The Debentures will be represented by Global Securities registered in the name
of the nominee of The Depository Trust Company, as the Depository (the
"Depository"). Interests in the Debentures represented by Global Securities will
be shown on, and transfers thereof will be effected only through, records
maintained by the Depository and its direct and indirect participants. Except as
described herein, Debentures in definitive form will not be issued. See
"Description of the Debentures."
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.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT COMPANY(1)(2)
Per Debenture........................ 99.303% .650% 98.653%
Total................................ $248,257,500 $1,625,000 $246,632,500
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from date of issuance to date of delivery.
(2) Before deduction of expenses payable by the Company estimated at $80,000.
The Debentures are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of Global Securities will be made through the
facilities of The Depository Trust Company on or about August 15, 1996.
SALOMON BROTHERS INC
LEHMAN BROTHERS
MERRILL LYNCH & CO.
The date of this Prospectus Supplement is August 12, 1996.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
USE OF PROCEEDS
Pacific Bell (the "Company") intends to apply the proceeds from the sale of
the Debentures to reduce a portion of the short-term debt used to refinance the
following Company indebtedness called for redemption effective December 29,
1995: $102 million of the Company's 9 1/8% Debentures due December 15, 2030;
$200 million of the Company's 7.80% Debentures due March 1, 2007; and $200
million of the Company's 7 5/8% Debentures due June 1, 2009.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges of the Company for the year ended
December 31, 1995 is 4.51 and for the six months ended June 30, 1996 is 5.86.
For the purpose of calculating this ratio, earnings consist of income before
taxes and fixed charges. Fixed charges include interest on indebtedness and the
portion of rentals representative of the interest factor.
RECENT DEVELOPMENTS
For the three months ended June 30, 1996, the Company reported earnings of
$304 million on revenues of $2.352 billion as compared to earnings of $243
million on revenues of $2.186 billion for the three months ended June 30, 1995.
For the six months ended June 30, 1996, the Company reported earnings of $594
million on revenues of $4.635 billion as compared to earnings of $489 million on
revenues of $4.398 billion for the six months ended June 30, 1995.
DESCRIPTION OF THE DEBENTURES
The Debentures will be limited to $250,000,000 aggregate principal amount
and will be issuable only in registered form in denominations of $1,000 and
integral multiples thereof under an Indenture dated as of April 7, 1993, which
is more fully described in the accompanying Prospectus under "Description of
Debt Securities."
The Debentures will mature on August 15, 2006. Interest on the Debentures
will be paid from the date of issuance of the Debentures, expected to be on or
around August 15, 1996, and will be payable semi-annually on February 15 and
August 15 of each year, commencing February 15, 1997, to the persons in whose
names the Debentures are registered at the close of business on the February 1
or August 1 prior to the payment date, at the annual rate set forth on the cover
page of this Prospectus Supplement. Principal of and interest on the Debentures
will be payable at the office or agency of the Company maintained for such
purpose, which, at the date of this Prospectus Supplement, is the office of
First Trust of California, National Association, as Trustee, One California
Street, San Francisco, California. Under the Indenture, at the option of the
Company, interest on the Debentures may be paid by check or draft mailed to the
person entitled thereto at the address of such person appearing on the register
of Debentures.
The Debentures may not be redeemed prior to maturity and will not be
subject to any sinking fund.
The Debentures will be issued in the form of one or more registered Global
Securities which will be deposited with, or on behalf of, the Depository. The
Global Securities will be registered in the name of Cede & Co., the Depository's
nominee. Except for certain exceptions set forth in the Indenture, the
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<PAGE> 3
registered Global Securities may be transferred, in whole but not in part, only
to another nominee of the Depository or to a successor of the Depository or its
nominee.
The Depository holds securities for its participating organizations (the
"Participants") and facilitates the settlement among Participants of securities
transactions in such securities through electronic book-entry changes in its
Participants' accounts. Participants include securities brokers and dealers
(including the Underwriters), banks and trust companies, clearing corporations
and certain other organizations. Access to the Depository's system is also
available to others such as brokers, dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("indirect participants"). Persons who are not
Participants may beneficially own securities held by the Depository only through
Participants or indirect participants.
The Debentures will trade in the Same-Day Funds Settlement System of the
Depository until maturity, and settlement for the Debentures will be made in
immediately available funds. In connection therewith, all payments of principal
of and interest on the Debentures will be made in immediately available funds.
Because the Debentures will trade in the Depository's Same-Day Funds Settlement
System, secondary market trading activity in the Debentures will be required by
the Depository to settle in immediately available funds. No assurance can be
given as to the effect, if any, of settlement in immediately available funds on
trading activity in the Debentures.
LEGAL OPINIONS
Certain matters relating to the legality of the Debentures offered hereby
will be passed on for the Company by Mr. James S. Hamasaki, General Counsel of
the Company. As of June 30, 1996, Mr. Hamasaki beneficially owned or had an
interest in approximately 1,227 shares of Pacific Telesis Group Common Stock and
had unexercised options under the Pacific Telesis Group 1994 Stock Incentive
Plan or its predecessor in the aggregate amount of 77,000 shares of Pacific
Telesis Group Common Stock of which 53,000 shares are currently exercisable and
options to purchase 24,000 shares of Pacific Telesis Group Common Stock will
become exercisable within a year.
Certain matters relating to the legality of the Debentures offered hereby
will be passed on for the Underwriters by Pillsbury Madison & Sutro LLP. For
many years, such firm has acted and continues to act as counsel in certain
matters for the Company and certain of its affiliates.
UNDERWRITING
Salomon Brothers Inc, Lehman Brothers Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated (the "Underwriters") have, under the terms of and
subject to the conditions contained in an Underwriting Agreement dated August
12, 1996, severally agreed to purchase, and the Company has agreed to sell to
each of the Underwriters, the principal amount of Debentures set forth opposite
its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER OF DEBENTURES
- ---------------------------------------------------------- -------------
<S> <C>
Salomon Brothers Inc...................................... $83,500,000
Lehman Brothers Inc....................................... 83,250,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated........ 83,250,000
-------------
Total........................................... $250,000,000
=============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the Debentures if any
Debentures are purchased.
The Underwriters propose initially to offer the Debentures directly to the
public at the public offering price set forth on the cover page of this
Prospectus Supplement, and to certain dealers at such price less
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<PAGE> 4
a concession not in excess of .400% of the principal amount of the Debentures.
The Underwriters may allow, and dealers may reallow, a concession not in excess
of .250% of the principal amount of the Debentures to certain other dealers.
The Debentures are a new issue of securities with no established trading
market. The Company does not intend to apply for listing of the Debentures on a
national securities exchange. The Company has been advised by the Underwriters
that they currently intend to make a market in the Debentures as permitted by
applicable laws and regulations, but the Underwriters are not obligated to do so
and may discontinue market making at any time without notice. No assurance can
be given as to the liquidity of the trading market for the Debentures.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, or contribute to payments the Underwriters may be
required to make in respect thereof.
Salomon Brothers Inc is acting as financial advisor to Pacific Telesis
Group in connection with its pending merger with SBC Communications Inc. In its
compensation arrangements, Salomon Brothers Inc agreed to rebate a cumulative
total of $500,000 of its fee for financial advisory work to Pacific Telesis
Group or any of its subsidiaries against any fees received by Salomon Brothers
Inc in connection with financing assignments. The full amount of the rebate will
become payable to the Company upon closing of the sale of the Debentures.
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<PAGE> 5
PROSPECTUS
$1,950,000,000
(PACIFIC BELL LOGO)
DEBT SECURITIES
Pacific Bell (the "Company") may offer from time to time its unsecured debt
securities consisting of notes, debentures or other evidences of indebtedness
(the "Debt Securities") at an aggregate initial offering price of not more than
$1,950,000,000 or, if applicable, the equivalent thereof at the time of the
offering in any other currency or currency units. The Debt Securities may be
offered as separate series in amounts, at prices and on terms to be determined
in light of market conditions at the time of sale and set forth in a Prospectus
Supplement or Prospectus Supplements.
The terms of each series of Debt Securities, including, where applicable,
the specific designation, aggregate principal amount, authorized denominations,
maturity, rate or rates (which may be fixed or variable) and time or times of
payment of any interest, any terms for optional or mandatory redemption or
payment of additional amounts or any sinking fund provisions, any initial public
offering price, the proceeds to the Company and any other specific terms in
connection with the offering and sale of such series will be set forth in a
Prospectus Supplement or Prospectus Supplements. As used herein, Debt Securities
shall include securities denominated in United States dollars or, at the option
of the Company if so specified in an applicable Prospectus Supplement, in any
other currency or in composite currencies or in amounts determined by reference
to an index.
The Debt Securities may be sold directly by the Company, through agents
designated from time to time or to or through underwriters or dealers. See "Plan
of Distribution." If any agents of the Company or any underwriters are involved
in the sale of any Debt Securities in respect of which this Prospectus is being
delivered, the names of such agents or underwriters and any applicable
commissions or discounts will be set forth in a Prospectus Supplement. The net
proceeds to the Company from such sale also will be set forth in a Prospectus
Supplement.
The Debt Securities may be issued in registered form or bearer form with or
without coupons attached. In addition, all or a portion of the Debt Securities
of a series may be issuable in temporary or permanent global form. Securities in
bearer form, Securities in permanent global form exchangeable for Securities in
bearer form and Securities initially represented by a temporary global Security
are offered only to non-United States persons and to offices of certain United
States financial institutions located outside the United States and its
possessions.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS APRIL 12, 1993.
<PAGE> 6
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER, DEALER OR
AGENT. NEITHER THIS PROSPECTUS NOR THE PROSPECTUS SUPPLEMENT CONSTITUTES 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 OR THE PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR
RESPECTIVE DATES OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE SUCH DATES.
AVAILABLE INFORMATION
The Company maintains its principal offices at 140 New Montgomery Street,
San Francisco, California 94105 (telephone number (415) 542-9000), is subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith files reports and
other information with the Securities and Exchange Commission (the "SEC"). Such
reports, and other information filed by the Company can be inspected and copied
at the public reference facilities of the SEC, Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, DC 20549, as well as at the following SEC
Regional Offices: Seven World Trade Center, 13th Floor, New York, NY 10048; and
Suite 1400, 500 West Madison Street, Chicago, IL 60661. Such material can also
be inspected at the New York, Midwest and Pacific Stock Exchanges. Copies can be
obtained from the SEC by mail at prescribed rates. Requests should be directed
to the SEC's Public Reference Section, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, DC 20549. This Prospectus does not contain all
information set forth in the Registration Statement and Exhibits thereto which
have been filed with the SEC under the Securities Act of 1933, as amended (the
"Act"), and to which reference is hereby made.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the SEC (File
No. 1-1414) and are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the year ended December
31, 1992.
(2) The Company's Current Report on Form 8-K, Date of Report, January
26, 1993.
(3) The Company's Current Report on Form 8-K, Date of Report, February
25, 1993.
(4) The Company's Current Report on Form 8-K, Date of Report, March 9,
1993.
All documents filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus shall be deemed to be
incorporated by reference in this Prospectus and to be part hereof from the date
of filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein or in any Prospectus Supplement
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Copies of the above documents (other than exhibits) may be obtained upon
request without charge from the Company's Investor Services office, 130 Kearny
Street, Suite 2926, San Francisco, California 94108 (telephone number (415)
394-3078).
2
<PAGE> 7
THE COMPANY
Pacific Bell (the "Company") was incorporated in 1906 under the laws of the
State of California. It has its principal executive offices at 140 New
Montgomery Street, San Francisco, California 94105 (telephone number (415)
542-9000). Through December 31, 1983, the Company was an associated company of
the Bell System and a subsidiary of American Telephone and Telegraph Company
("AT&T"). Effective January 1, 1984, the Company became a subsidiary of Pacific
Telesis Group, one of the seven regional holding companies (the "RHCs") formed
by AT&T in connection with the divestiture from AT&T of its 22 wholly owned
operating telephone companies pursuant to a consent decree approved by the
United States District Court for the District of Columbia (the "Consent
Decree").
The Company provides a wide variety of communications services in
California including local exchange and toll service, network access and,
through its subsidiary Pacific Bell Directory, directory advertising. Effective
January 1, 1993, the Company transferred the business unit which offers certain
services such as voice mail, electronic messaging and interactive voice response
to a wholly owned subsidiary known as Pacific Bell Information Services
("PBIS"). Under the terms of the Consent Decree and resulting Plan of
Reorganization, all territory served by the operating telephone companies was
divided into geographical areas called "Local Access and Transport Areas"
("LATAs" or "Service Areas"). These Service Areas are usually centered around a
city or other generally identifiable community of interest. California has been
divided into ten Service Areas. The Consent Decree generally prohibits the
Company and/or its affiliates from providing for hire communications services
that cross Service Area boundaries; however, the Company's networks interconnect
with carriers that provide such services (commonly referred to as "interexchange
carriers") and in this way the telephones and telecommunications equipment in
the Company's Service Areas can be connected with the telephones and
telecommunications systems throughout the United States and with
telecommunications systems in most other countries.
The Consent Decree provides that the Company and/or its affiliates shall
not engage in certain lines of business, including the provision of
interexchange telecommunications or telecommunications equipment. In addition,
the Company and/or its affiliates are generally prohibited from manufacturing
telecommunications equipment and customer premises equipment ("CPE"). However,
the Consent Decree does allow the Company and/or its affiliates to provide
exchange telecommunications and exchange access services, CPE, printed directory
advertising and, after September 10, 1987, any other products or services except
those specifically prohibited. Although the Consent Decree originally prohibited
the Company or its affiliates from providing information services, the U.S.
District Court for the District of Columbia removed this prohibition in July
1991 but stayed its decision pending appeal. In October 1991, the U.S. Court of
Appeals for the District of Columbia lifted the stay. The appeal is still
pending. The removal of this ban allows the Company to offer a variety of new
information services such as enhanced voice mail and electronic yellow pages.
The Company anticipates that legislation to reverse the lifting of the ban,
which the Company will oppose, will be considered in Congress in 1993. Other
subsidiaries of Pacific Telesis Group are engaged in the provision of cellular
telecommunications, cellular CPE and other lines of business.
For a description of the Company's business and the risks attendant
thereto, see the Pacific Bell Annual Report on Form 10-K for 1992.
3
<PAGE> 8
USE OF PROCEEDS
The Company intends to apply the proceeds from the sale of the Debt
Securities to refund maturing debt and to make additional optional repurchases
and retirements of previously issued Debt Securities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of the Company for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- ----------------------------------------------
1992 1991 1990 1989 1988
- ------ ----- ------ ------ ------
<S> <C> <C> <C> <C>
4.51 3.92 * 4.12 4.62 4.41
</TABLE>
For the purpose of calculating this ratio, earnings consist of income
before income taxes and fixed charges.** Fixed charges include interest on
indebtedness and the portion of rentals representative of the interest factor.
- ------------
* This figure reflects restructuring charges of approximately $121 million
after taxes which were taken in fourth quarter 1991.
** The Company is secondary obligor on $300 million of 8 7/8 percent debt due
July 1, 2015 assumed by AT&T at divestiture. In March 1993, AT&T announced
that it will redeem this debt effective April 23, 1993. In the Company's
opinion, the likelihood that it will be required to pay principal or interest
on this debt is remote. As a result, fixed charges associated with this debt
in the amount of approximately $27 million annually are not included in the
calculation of the above ratios.
RECENT DEVELOPMENTS
An Administrative Law Judge in the Late Payment Charge Complaint at the
California Public Utilities Commission (the "CPUC") issued her proposed decision
in the matter on April 6, 1993. The proposed decision states that the Company
violated the Public Utilities Code, a prior CPUC order and the Company's own
tariffs by imposing improper late payment charges and disconnecting customers in
error due to payment processing delays between 1986 and February 1991. The
proposed decision finds that $32 million in late payment and reconnection
charges are owed by the Company to its customers. Additionally, the proposed
decision would impose a $33 million penalty and order an extensive audit of the
Company's management of customer service operations.
Under the CPUC's Rules of Practice and Procedure, parties have until April
26, 1993 to file comments on the proposed decision, and 5 days thereafter to
file reply comments. The Commission will issue a final decision in the matter
thereafter, which decision the Company has the right to appeal. The Company
intends to file comments on the proposed decision alleging both legal and
factual errors. The Company believes the proposed decision is seriously flawed
in that it ignores extensive portions of the evidentiary record and reaches
conclusions not supported by the record.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions
of the Debt Securities to which any Prospectus Supplement may relate. The Debt
Securities may be issued from time to time in one or more series. The particular
terms of each series of Debt Securities offered by any Prospectus Supplement or
Prospectus Supplements, and the extent to which such general provisions
described below may apply thereto, will be described in such Prospectus
Supplement or Prospectus Supplements relating to such series.
The Debt Securities are to be issued under an indenture (the "Indenture")
dated as of April 7, 1993 between the Company and First Trust of California,
National Association, as Trustee (the "Trustee").
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<PAGE> 9
The following summaries of certain provisions of the Debt Securities and the
Indenture do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all provisions of the Indenture, including the
definition therein of certain terms. Particular sections of the Indenture which
are relevant to the discussion are cited parenthetically. Wherever particular
sections or defined terms of the Indenture are referred to, it is intended that
such sections or defined terms shall be incorporated herein by reference.
The term "Securities," as used under this caption, refers to all Securities
issued under the Indenture and includes the Debt Securities.
GENERAL
The Indenture does not limit the aggregate amount of Securities which may
be issued thereunder and additional Debt Securities may be issued thereunder
from time to time in separate series up to the aggregate amount from time to
time authorized by the Company for each series. The Securities will be unsecured
obligations of the Company and will rank on a parity with all other unsecured
and unsubordinated indebtedness of the Company.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the Debt Securities: (1) the title of the Debt
Securities; (2) any limit on the aggregate principal amount of the Debt
Securities; (3) whether the Debt Securities are to be issuable as registered
Securities or bearer Securities or both, whether any of the Debt Securities are
to be issuable initially in temporary global form and whether any of the Debt
Securities are to be issuable in permanent global form; (4) the price or prices
(expressed as a percentage of the aggregate principal amount thereof) at which
the Debt Securities will be issued; (5) the date or dates on which the Debt
Securities will mature; (6) the rate or rates per annum at which the Debt
Securities will bear interest, if any, or the formula pursuant to which such
rate or rates will be determined, and the date or dates from which any such
interest will accrue; (7) the interest payment dates on which any such interest
on the Debt Securities will be payable, the regular record date for any interest
payable on any Debt Securities which are registered Securities on any interest
payment date; (8) the Person to whom any registered Security of such series will
be payable, if other than the Person in whose name that Security 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
such series will be payable, if otherwise than upon presentation and surrender
of the coupons appertaining thereto, and the extent to which, or the manner in
which, any interest payable on a temporary or permanent global Security on an
interest payment date will be paid; (9) each office or agency where the
principal of and any premium and interest on the Debt Securities will be payable
and each office or agency where the Debt Securities may be presented for
registration of transfer or exchange; (10) the period or periods within which
and the price or prices at which the Debt Securities may, pursuant to any
optional redemption provisions, be redeemed, in whole or in part, and the other
detailed terms and provisions of any such optional redemption provisions; (11)
the obligation, if any, of the Company to redeem or purchase the Debt Securities
pursuant to any sinking fund or analogous provisions or at the option of the
Holder thereof and the period or periods within which and the price or prices at
which the Debt Securities will be redeemed or purchased, in whole or in part,
pursuant to such obligation, and the other detailed terms and provisions of such
obligation; (12) the denominations in which any Debt Securities which are
Registered Securities will be issuable, if other than denominations of $1,000
and any integral multiple thereof, and the denomination or denominations in
which any Debt Securities which are bearer Securities will be issuable, if other
than denominations of $5,000; (13) the currency or currencies, including
composite currencies, of payment of principal of, and any premium and interest
on, the Debt Securities if other than the currency of the United States; (14)
any index used to determine the amount of payments of principal of, and any
premium and interest on, the Debt Securities; (15) if other than the principal
amount thereof, the portion of the principal amount of the Debt Securities which
shall be payable upon acceleration of the maturity thereof; and (16) any other
terms of the Debt Securities not inconsistent with the provisions of the
Indenture. (Section 2.02.) Any such Prospectus
5
<PAGE> 10
Supplement will also describe any special provisions for the payment of
additional amounts with respect to the Debt Securities.
Securities may be issued as original issue discount Securities to be sold
at a substantial discount below their principal amount. Special United States
federal income tax considerations applicable to Securities issued at an original
issue discount, including original issue discount Securities, and special United
States tax considerations applicable to any Debt Securities which are
denominated in a currency or currency unit other than United States dollars will
be described in the applicable Prospectus Supplement or Prospectus Supplements.
EXCHANGE OF DEBT SECURITIES
Except in the case of Securities offered in the form of a global security,
registered Debt Securities may be exchanged for an equal aggregate principal
amount of registered Debt Securities of the same series and date of maturity in
such authorized denominations as may be requested upon surrender of the
registered Debt Securities at an agency of the Company maintained for such
purpose and upon fulfillment of the customary requirements of such agent.
(Section 2.08(a).)
To the extent permitted by the terms of a series of Debt Securities
authorized to be issued in registered form and bearer form, bearer Debt
Securities may be exchanged for an equal aggregate principal amount of
registered or bearer Debt Securities of the same series and date of maturity in
such authorized denominations as may be requested upon surrender of the bearer
Debt Securities with all unpaid coupons relating thereto at an agency of the
Company maintained for such purpose and upon fulfillment of all other
requirements of such agent. (Section 2.08(b).) As of the date of this
Prospectus, temporary United States Treasury regulations do not permit exchanges
of registered Debt Securities for bearer Debt Securities and, unless such
regulations are modified, the terms of a series of Debt Securities will not
permit registered Debt Securities to be exchanged for bearer Debt Securities.
The manner of exchanging an interest in any global security will be addressed in
the applicable Prospectus Supplement or Prospectus Supplements.
LIEN ON ASSETS
The Company covenants in the Indenture that, if at any time the Company
mortgages, pledges or otherwise subjects to any lien the whole or any part of
any property or assets now owned or hereafter acquired by it, except as
hereinafter provided, the Company will secure the outstanding Debt Securities
and any other obligations of the Company which may then be outstanding and
entitled to the benefit of a covenant similar in effect to this covenant,
equally and ratably with the indebtedness or obligations secured by such
mortgage, pledge or lien, for as long as any such indebtedness or obligation is
so secured. This covenant does not apply to the creation, extension, renewal or
refunding of purchase-money mortgages or liens or other liens to which any
property or asset acquired by the Company is subject as of the date of its
acquisition by the Company, as the case may be, or to the making of any deposit
or pledge to secure public or statutory obligations, or with any governmental
agency, at any time required by law in order to qualify the Company to conduct
its business or any part thereof or in order to entitle it to maintain
self-insurance or to obtain the benefits of any law relating to workers'
compensation, unemployment insurance, old age pensions or other social security,
or with any court, board, commission or governmental agency as security incident
to the proper conduct of any proceeding before it. Nothing contained in the
Indenture prevents a person directly or indirectly controlling or controlled by,
or under direct or indirect common control with, the Company from mortgaging,
pledging or subjecting to any lien any property or assets, whether or not
acquired from the Company. (Section 4.02.)
AMENDMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Debt Securities may be
amended or supplemented by the Company and the Trustee with the written consent
of the holders of a majority in principal amount of the outstanding Debt
Securities of each series affected by the amendment or supplement
6
<PAGE> 11
(with each series voting as a class), or compliance with any provision may be
waived with the consent of the holders of a majority in principal amount of the
outstanding Debt Securities of each series affected by such waiver (with each
series voting as a class), except a default in the payment of the principal of
and interest on any Debt Security. However, without the consent of each holder
of Debt Securities affected, an amendment or waiver may not (i) reduce the
amount of Debt Securities whose holders must consent to an amendment or waiver;
(ii) reduce the rate of or change the time for payment of interest on any Debt
Security; (iii) reduce the principal or change the fixed maturity of any Debt
Security; (iv) waive a default in the payment of the principal of or interest on
any Debt Security; (v) make any Debt Security payable in money other than that
stated in the Debt Security; or (vi) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security. (Section
9.02.) The Indenture may be amended or supplemented without the consent of any
holder of Debt Securities (i) to cure any ambiguity, defect or inconsistency in
the Indenture or in the Debt Securities of any series, provided that such action
shall not adversely affect the interest of the holders of Debt Securities of any
series or any related coupons in any material respect; (ii) to provide for the
issuance of and establish the form and terms and conditions of a series of Debt
Securities and to establish the form of any certifications required to be
furnished pursuant to the terms of the Indenture or any series of Debt
Securities; (iii) to secure the Debt Securities pursuant to Section 4.02 of the
Indenture; (iv) to provide for the assumption of all the obligations of the
Company under the Debt Securities and any coupons related thereto and the
Indenture by any corporation in connection with a merger, consolidation,
transfer or lease of the Company's property and assets substantially as an
entirety, as provided for in the Indenture; (v) to provide for uncertificated
Debt Securities in addition to or in place of certificated Debt Securities; (vi)
to add to rights of holders of Debt Securities or surrender any right or power
conferred on the Company; (vii) to make any change that does not adversely
affect the rights of any holder of Debt Securities; or (viii) to change or
eliminate any of the provisions of the Indenture, provided that any such change
or elimination shall become effective only when there is no Debt Security
outstanding of any series created prior to the execution of such supplemental
indenture which is entitled to the benefit of such provision. (Section 9.01.)
SUCCESSOR ENTITY
The Company may consolidate with or merge into, or transfer or lease its
property and assets substantially as an entirety to, another entity, provided
the successor entity is a United States corporation and assumes all the
obligations of the Company under the Debt Securities and any coupons related
thereto and the Indenture and, after giving effect thereto, no default under the
Indenture shall have occurred and be continuing. Thereafter, except in the case
of a lease, all such obligations of the Company terminate. (Section 5.01.)
DEPOSIT OF MONEY OR GOVERNMENT OBLIGATIONS TO PAY DEBT SECURITIES
The Company has the right to terminate certain of its obligations under the
Debt Securities and the Indenture with respect to the Debt Securities of any
series or any installment of principal of or interest on that series if the
Company deposits with the Trustee, in trust for the benefit of the holders of
that series, money or obligations of the United States sufficient to pay, when
due, principal and interest on the Debt Securities of that series to maturity or
redemption or such installment of principal or interest, as the case may be. In
such event, however, the Company's obligation to pay the principal of and
interest on the Debt Securities shall survive until the earlier to occur of such
time as (i) none of the Debt Securities of that series is outstanding, or (ii)
in the case of a deposit sufficient to pay, when due, principal and interest on
the Debt Securities of that series to maturity or redemption and if all other
conditions set forth in the Indenture and the Debt Securities of that series are
met, the Company shall have delivered to the Trustee an opinion of counsel to
the effect that holders of the Debt Securities of that series will not recognize
income or loss for federal income tax purposes as a result of the termination of
obligations. (Section 8.01.)
7
<PAGE> 12
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default"
with respect to a series of Debt Securities: (i) default in the payment of
interest on any Debt Security of such series for 30 days; (ii) default in the
payment of the principal of any Debt Security of such series when the same
becomes due and payable; (iii) failure by the Company for 60 days, after notice
to it, to comply with any of its other agreements in the Debt Securities of such
series, in the Indenture or in any supplemental indenture under which the Debt
Securities of that series may have been issued (other than covenants relating
only to other series); and (iv) certain events of bankruptcy or insolvency.
(Section 6.01.) If an Event of Default occurs with respect to the Debt
Securities of any series and is continuing, the Trustee or the holders of at
least 25% in aggregate principal amount of all of the outstanding Debt
Securities of that series may declare the principal (or, if the Debt Securities
of that series are original issue discount Debt Securities, such portion of the
principal amount as may be specified in the terms of that series) of, and any
accrued interest on, all the Debt Securities of that series to be due and
payable. Upon such declaration, such principal (or, in the case of original
issue discount Debt Securities, such specified amount) and interest shall be due
and payable immediately. (Section 6.02.)
Holders of Debt Securities may not enforce the Indenture or the Debt
Securities, except as provided in the Indenture. (Section 6.06.) The Trustee may
require indemnity satisfactory to it before it enforces the Indenture or the
Debt Securities. (Section 7.01(e).) Subject to certain limitations, holders of a
majority in principal amount of the Debt Securities of each series affected
(with each series voting as a class) may direct the Trustee in its exercise of
any trust power. (Section 6.05.) The Trustee may withhold from holders of Debt
Securities notice of any continuing default (except a default in payment of
principal or interest) if a committee of the Trustee's officers determines that
withholding notice is in the interests of the Holders of Debt Securities.
(Section 7.05.) The Company is not required under the Indenture to furnish any
periodic evidence as to the absence of default or as to compliance with the
terms of the Indenture.
CONCERNING THE TRUSTEE
The Trustee is trustee of most of the Company's outstanding long-term debt
issues.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to one or more underwriters for public
offering and sale by them or may sell Debt Securities to investors directly or
through agents. Any such underwriter or agent involved in the offer and sale of
the Debt Securities will be named in an applicable Prospectus Supplement or
Prospectus Supplements.
Underwriters may offer and sell the Debt Securities at a fixed price or
prices, which may be changed, or, from time to time, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may, from time to time, authorize
underwriters acting as the Company's agents to offer and sell the Debt
Securities upon the terms and conditions as shall be set forth in any Prospectus
Supplement or Prospectus Supplements. In connection with the sale of Debt
Securities, underwriters may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of Debt Securities for whom they may act as
agent. Underwriters may sell Debt Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions (which may be changed from
time to time) from the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Debt Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in an applicable Prospectus Supplement or Prospectus
Supplements. Underwriters, dealers and agents participating in the distribution
of the Debt Securities
8
<PAGE> 13
may be deemed to be underwriters, and any discounts and commissions received by
them and any profit realized by them on resale of the Debt Securities may be
deemed to be underwriting discounts and commissions under the Act. Underwriters,
dealers and agents may be entitled, under agreements with the Company, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Act, and to reimbursement by the Company for
certain expenses.
If so indicated in an applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Debt Securities from the Company at the public offering
price set forth in such Prospectus Supplement or Prospectus Supplements pursuant
to Delayed Delivery Contracts (the "Contracts") providing for payment and
delivery on the date or dates stated in such Prospectus Supplement. Each
Contract will be for an amount not less than, and the aggregate principal amount
of Debt Securities sold pursuant to Contracts shall be not less nor more than,
the respective amounts stated in such Prospectus Supplement. Institutions with
whom Contracts, when authorized, may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions and other institutions, but will in all cases be subject
to the approval of the Company. Contracts will not be subject to any conditions
except (i) the purchase by an institution of the Debt Securities covered by its
Contracts shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject and (ii)
if the Debt Securities are being sold to underwriters, the Company shall have
sold to such underwriters the total principal amount of the Debt Securities less
the principal amount thereof covered by Contracts. Agents and underwriters will
have no responsibility in respect of the delivery or performance of Contracts.
All Debt Securities will be a new issue of securities with no established
trading market. Any underwriters to whom Debt Securities are sold by the Company
for public offering and sale may make a market in such Debt Securities, but such
underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. No assurance can be given as to the liquidity
of or the trading markets for any Debt Securities.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with and perform services for the Company in the
ordinary course of business.
LEGAL OPINIONS
Certain matters relating to the legality of the Debt Securities offered
hereby will be passed on for the Company by Mr. James S. Hamasaki, General
Counsel of the Company. As of January 31, 1993, Mr. Hamasaki beneficially owned
or had an interest in approximately 1,185 shares of Pacific Telesis Group Common
Stock. In addition, as of the same date, Mr. Hamasaki had been granted options
under the Pacific Telesis Group Stock Option and Stock Appreciation Rights Plan
with respect to 29,475 shares of Pacific Telesis Group Common Stock.
Certain matters relating to the legality of the Debt Securities offered
hereby will be passed on for any underwriters, dealers or agents by Pillsbury
Madison & Sutro. For many years, such firm has acted and continues to act as
counsel in certain matters for the Company and certain of its affiliates.
FINANCIAL STATEMENTS OF THE COMPANY
The financial statements and financial statement schedules of the Company
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1992 have been audited by Coopers & Lybrand, independent accountants, whose
report is incorporated by reference herein. These financial statements and
financial statement schedules are incorporated herein by reference in reliance
on the report of Coopers & Lybrand which is given on the authority of that firm
as experts in accounting and auditing.
9
<PAGE> 14
NO DEALER, SALESPERSON OR ANY OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION, OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS, IN
CONNECTION WITH THE OFFER CONTAINED
IN THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY OR BY THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS
PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS ARE NOT AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY
ANY SECURITY IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.
- ------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Use of Proceeds.......................... S-2
Ratio of Earnings to Fixed Charges....... S-2
Recent Developments...................... S-2
Description of the Debentures............ S-2
Legal Opinions........................... S-3
Underwriting............................. S-3
PROSPECTUS
Available Information.................... 2
Incorporation of Documents by
Reference.............................. 2
The Company.............................. 3
Use of Proceeds.......................... 4
Ratio of Earnings to Fixed Charges....... 4
Recent Developments...................... 4
Description of Debt Securities........... 4
Plan of Distribution..................... 8
Legal Opinions........................... 9
Financial Statements of the Company...... 9
</TABLE>
$250,000,000
LOGO
6 7/8% DEBENTURES
DUE AUGUST 15, 2006
SALOMON BROTHERS INC
LEHMAN BROTHERS
MERRILL LYNCH & CO.
PROSPECTUS SUPPLEMENT
DATED AUGUST 12, 1996
