Filed Pursuant to Rule 424(b)(5)
Registration No. 333-36926
PROSPECTUS SUPPLEMENT
(To Prospectus dated May 25, 2000)
[SBC LOGO]
U.S.$1,000,000,000
SBC COMMUNICATIONS INC.
5.875% GLOBAL NOTES DUE AUGUST 15, 2012
---------------------
Interest on the notes is payable semi-annually on February 15 and August
15, beginning on February 15, 2003. The notes will mature on August 15, 2012. We
may redeem some or all of the notes at any time at the "make whole premium"
price indicated under the heading "Description of the Notes -- Optional
Redemption" on page S-11 of this prospectus supplement.
We have applied to have the notes listed on the Luxembourg Stock Exchange
in accordance with the rules thereof.
---------------------
PER NOTE TOTAL
-------- ------------
Public offering price(1).................................... 98.476% $984,760,000
Underwriting discount....................................... 0.450% $ 4,500,000
Proceeds, before expenses, to SBC Communications Inc. ...... 98.026% $980,260,000
---------------
(1) Plus accrued interest from August 19, 2002, if settlement occurs after that
date.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The notes are expected to be delivered in book-entry form only to
purchasers through DTC, Clearstream and Euroclear on or about August 19, 2002.
---------------------
Joint Book-Running Managers
DEUTSCHE BANK SECURITIES JPMORGAN SALOMON SMITH BARNEY
---------------------
Co-Managers
ABN AMRO INCORPORATED BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC. WACHOVIA SECURITIES
BLAYLOCK & PARTNERS, L.P. GUZMAN & COMPANY
---------------------
The date of this prospectus supplement is August 14, 2002.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Special Note Regarding Forward-Looking
Statements.......................... S-2
Summary of the Offering............... S-4
SBC Communications Inc................ S-5
Use of Proceeds....................... S-6
Capitalization........................ S-6
Summary Financial Information......... S-7
Ratio of Earnings to Fixed Charges.... S-8
Management............................ S-9
Description of the Notes.............. S-11
United States Tax Considerations...... S-18
Underwriting.......................... S-22
Legal Opinions........................ S-24
Experts............................... S-24
Where You Can Find More Information --
Documents Incorporated by
Reference........................... S-24
General Information................... S-24
PROSPECTUS
PAGE
----
Description of SBC Communications
Inc................................. 1
Ratio of Earnings to Fixed Charges.... 1
Use of Proceeds....................... 1
Summary Description of the Securities
We May Issue........................ 1
Description of Debt Securities We May
Offer............................... 2
Description of Preferred Stock........ 11
Description of Series A Preferred
Stock............................... 12
Description of Depositary Shares...... 12
Description of Common Stock........... 15
Plan of Distribution.................. 17
Legal Opinions........................ 18
Experts............................... 18
Documents Incorporated by Reference... 18
Where You Can Find More Information... 19
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT, AND THE UNDERWRITERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU
WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE
UNDERWRITERS ARE NOT, MAKING AN OFFER TO SELL THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT
THE INFORMATION APPEARING IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS, AS WELL AS INFORMATION WE PREVIOUSLY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION AND INCORPORATED BY REFERENCE, IS ACCURATE AS OF THEIR
RESPECTIVE DATES. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
PROSPECTS MAY HAVE CHANGED SINCE THOSE DATES.
THE LUXEMBOURG STOCK EXCHANGE TAKES NO RESPONSIBILITY FOR THE CONTENTS OF
THIS DOCUMENT, MAKES NO REPRESENTATION AS TO ITS ACCURACY OR COMPLETENESS AND
EXPRESSLY DISCLAIMS ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM
OR IN RELIANCE UPON THE WHOLE OR ANY PART OF THE CONTENTS OF THIS PROSPECTUS
SUPPLEMENT AND ACCOMPANYING PROSPECTUS.
SBC, having made all reasonable inquiries, confirms that this prospectus
supplement and the accompanying prospectus are true and accurate in all material
respects and are not misleading, that the opinions and intentions expressed
herein are honestly held and that there are no other facts the omission of which
make this prospectus supplement or the accompanying prospectus, including any
information incorporated by reference herein, as a whole, or any of such
information or the expression of any such opinions or intentions misleading. SBC
accepts responsibility accordingly.
In this prospectus supplement, "we," "our," "us" and "SBC" refer to SBC
Communications Inc. and its consolidated subsidiaries.
We are offering the notes globally for sale in those jurisdictions in the
United States, Europe, Asia and elsewhere where it is lawful to make such
offers. The distribution of this prospectus supplement and the accompanying
prospectus and the offering of the notes in some jurisdictions may be restricted
by law. Persons who receive this prospectus supplement and the accompanying
prospectus should inform themselves about and observe any such restrictions.
This prospectus supplement and the accompanying prospectus do not constitute,
and may not be used in connection with, an offer or solicitation by anyone in
any jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is
not authorized or in which the person making such offer or solicitation is not
qualified to do so or to any person to whom it is unlawful to make such offer or
solicitation. See "Underwriting" beginning on page S-22.
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
Statements in this prospectus supplement, the accompanying prospectus and
the incorporated documents that are not historical facts are hereby identified
as "forward-looking statements" for the purpose of the safe harbor provided by
Section 21E of the Exchange Act and Section 27A of the Securities Act. Although
we believe that our expectations are based on reasonable assumptions within the
bounds of our knowledge of our business and operations, there can be no
assurance that actual results will not differ materially from our expectations.
Factors that could cause actual results to differ from expectations include:
- adverse economic changes in the markets served by SBC, or countries in
which SBC has significant investments;
- changes in available technology and the effects of such changes,
including product substitutions and deployment costs;
- the final outcome of FCC proceedings, including rulemakings and judicial
review, if any, of such rulemakings, including issues relating to
jurisdiction;
- the final outcome of state regulatory proceedings in our 13-state area,
and judicial review, if any, of such proceedings, including proceedings
relating to interconnection terms, access charges, universal service,
unbundled network elements and Platforms (UNE-Ps) and resale rates, SBC's
broadband initiative known as Project Pronto, service standards and
reciprocal compensation;
- enactment of additional state, Federal and/or foreign regulatory laws and
regulations pertaining to our subsidiaries and foreign investments;
- the timing of entry and the extent of competition in the local and
intraLATA toll markets in our 13-state area and the resulting pressure on
access line totals and operating margins;
- our ability to develop attractive and profitable product/service
offerings to offset increasing competition in our wireline and wireless
markets;
- the ability of our competitors to offer products and services at lower
prices due to adverse regulatory decisions, including state regulatory
proceedings relating to UNE-Ps;
- additional delays in our entry into the in-region long distance market;
- the issuance by the Financial Accounting Standards Board or other
accounting oversight bodies of new accounting standards or changes to
existing standards;
- the impact of the Ameritech transaction, including performance with
respect to regulatory requirements and merger integration efforts;
- the timing, extent and cost of deployment of our broadband initiative
also known as Project Pronto, its effect on the carrying value of the
existing wireline network and the level of consumer demand for offered
services;
- the impact of the wireless joint venture with BellSouth Corporation,
known as Cingular Wireless, including marketing and product development
efforts, access to additional spectrum, technological advancements and
financial capacity; and
- decisions by federal and state regulators and courts relating to
bankruptcies of industry participants.
Readers are cautioned that other factors discussed in the documents incorporated
in this prospectus supplement and accompanying prospectus, although not
enumerated here, also could materially impact our future earnings.
You should not construe these cautionary statements as an exhaustive list
or as any admission by us regarding the adequacy of our disclosures. We cannot
always predict or determine after the fact what factors would cause actual
results to differ materially from those indicated by our forward-looking
statements or other statements. In addition, you are urged to consider
statements that include the terms "believes," "belief," "expects," "plans,"
"objectives," "anticipates," "intends" or the like to be uncertain and
forward-looking. All cautionary
S-2
statements should be read as being applicable to all forward-looking statements
wherever they appear.
We do not undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed herein might not occur.
S-3
SUMMARY OF THE OFFERING
Issuer........................ SBC Communications Inc.
Securities Offered............ U.S.$1,000,000,000 principal amount of 5.875%
global notes due August 15, 2012.
Maturity Date................. August 15, 2012, at par.
Interest Rate................. The notes will bear interest from August 19,
2002 at the rate of 5.875% per annum, payable
semi-annually in arrears in two equal payments.
Interest Payment Dates........ February 15 and August 15 of each year,
commencing on February 15, 2003.
Optional Redemption........... The notes are redeemable at any time, in whole
or in part, at redemption prices equal to their
principal amount plus a "make whole premium,"
if any, and accrued and unpaid interest.
Markets....................... The notes are offered for sale in those
jurisdictions in the United States, Europe and
Asia where it is legal to make such offers. See
"Underwriting."
Listing....................... Application has been made to list the notes on
the Luxembourg Stock Exchange.
Form and Settlement........... Our notes will be issued in the form of one or
more fully registered global notes which will
be deposited with, or on behalf of, The
Depository Trust Company -- known as DTC -- as
the depositary, and registered in the name of
Cede & Co., DTC's nominee. Beneficial interests
in the global notes will be represented through
book-entry accounts of financial institutions
acting on behalf of beneficial owners as direct
and indirect participants in DTC. Investors may
elect to hold interests in the global notes
through either DTC (in the United States),
Clearstream Banking, Societe Anonyme, or
Euroclear Bank S.A./N.V., as operator of the
Euroclear System (outside of the United
States), if they are participants of these
systems, or indirectly through organizations
which are participants in these systems.
Cross-market transfers between persons holding
directly or indirectly through DTC
participants, on the one hand, and directly or
indirectly through Clearstream or Euroclear
participants, on the other hand, will be
effected in accordance with DTC rules on behalf
of the relevant international clearing system
by its U.S. depositary.
Governing Law................. The notes will be governed by the laws of the
State of New York.
S-4
SBC COMMUNICATIONS INC.
SBC was formed as one of several regional holding companies created to hold
AT&T Corp.'s local telephone companies. We were incorporated under the laws of
the State of Delaware on October 5, 1983. On January 1, 1984, we were spun-off
from AT&T pursuant to an anti-trust consent decree, becoming an independent
publicly traded telecommunications services provider. At formation, we primarily
operated in five southwestern states. SBC subsidiaries merged with Pacific
Telesis Group in 1997, Southern New England Telecommunications Corporation in
1998 and Ameritech Corporation in 1999.
We are among the largest telecommunications companies in the United States
and the world. Our products and services include local and long distance,
internet, telecommunications equipment, paging, and directory advertising and
publishing. We divide our business into the following groups:
- wireline, which is primarily land- and wire-based services;
- wireless, which is primarily radio wave-based services;
- directory, which is directory advertising and electronic publishing;
- international, which is our investments in foreign countries; and
- other, which is primarily corporate and other operations.
WIRELINE
Our wireline group primarily sells local telephone service in California,
Texas, Illinois, Michigan, Ohio, Missouri, Connecticut, Indiana, Wisconsin,
Oklahoma, Kansas, Arkansas and Nevada. We serve approximately 60 million access
lines in this 13-state area. We also sell access to our network to other
telephone carriers, long distance to some customers, internet services and
communications equipment. This group is regulated by each of the 13 states
mentioned above and by the Federal Communications Commission.
WIRELESS
Our wireless group sells local, long distance and roaming services. In the
fourth quarter of 2000, we contributed substantially all our wireless businesses
to Cingular Wireless LLC, our joint venture with BellSouth Corporation. We own a
60 percent economic interest in the joint venture and control is shared equally.
Cingular serves approximately 22 million customers.
DIRECTORY
Our directory group provides yellow and white pages directories, and
electronic publishing.
INTERNATIONAL
Our international group consists of our investments in companies in more
than 15 foreign countries, including Europe and Mexico. These foreign companies
provide local and long distance, wireless, messaging, internet services and
equipment, and directory publishing.
S-5
USE OF PROCEEDS
SBC will use the net proceeds from the sale of the notes primarily to repay
a portion of its outstanding commercial paper debt and for general corporate
purposes. The net proceeds of the offering, after deducting estimated offering
commissions and expenses, are estimated to be $980,160,000.
CAPITALIZATION
The following table sets forth the capitalization of SBC as of June 30,
2002 and as adjusted solely to reflect the issuance of the notes, assuming that
the net proceeds from the sale of the notes would be used to repay SBC's
outstanding commercial paper debt. See "Use of Proceeds" in this prospectus
supplement. SBC's total capital consists of debt (long-term debt and debt
maturing within one year), and shareowners' equity. Since June 30, 2002, there
has not been any material change in the information set forth below, except as
described elsewhere or in the accompanying prospectus or in any of the documents
incorporated by reference into this prospectus supplement. This table reflects
certain unaudited consolidated financial information for the six-month period
ended June 30, 2002 that was included in our quarterly report on Form 10-Q for
the quarter ended June 30, 2002.
AS OF JUNE 30, 2002
------------------------
UNADJUSTED AS ADJUSTED
---------- -----------
(IN MILLIONS)
Long-term debt.............................................. $18,057 $19,057
Debt maturing within one year(1)............................ 7,742 6,742
Shareowners' equity:
Common shares ($1 par value, 7,000,000,000 authorized,
3,433,124,836 issued).................................. 3,433 3,433
Capital in excess of par value............................ 11,896 11,896
Retained earnings......................................... 22,088 22,088
Treasury shares (107,869,155, at cost).................... (4,447) (4,447)
Other adjustments......................................... (1,242) (1,242)
Shareowners' equity......................................... $31,728 $31,728
------- -------
Total capitalization........................................ $57,527 $57,527
======= =======
---------------
(1) Debt maturing within one year consists principally of commercial paper, the
outstanding balances of which may fluctuate daily.
S-6
SUMMARY FINANCIAL INFORMATION
The following summary of audited consolidated financial information of SBC
as of and for the years ended December 31, 2001 and 2000 was derived from, and
is qualified in its entirety by reference to, the financial statements and other
information and data contained in our annual report on Form 10-K for the year
ended December 31, 2001 and should be read in conjunction with those financial
statements and other information and data. The summary of unaudited consolidated
financial information for the six-month periods ended June 30, 2002 and 2001,
and the summary balance sheet data as of June 30, 2002, was derived from and is
qualified in its entirety by reference to the financial statements and other
information and data contained in our quarterly report on Form 10-Q for the
quarter ended June 30, 2002. The summary of balance sheet data (total assets,
long-term debt and total shareowners' equity) as of June 30, 2001 was derived
from and is qualified in its entirety by reference to the financial statements
and other information and data contained in our quarterly report on Form 10-Q
for the quarter ended June 30, 2001. See "Where You Can Find More Information --
Documents Incorporated by Reference" in this prospectus supplement. For more
information on the ratios of earnings to fixed charges, including the method of
calculating those ratios, see "Ratio of Earnings to Fixed Charges" in this
prospectus supplement.
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------------- -----------------
2002 2001 2001 2000
------- ------- ------- -------
(UNAUDITED) (AUDITED)
(DOLLAR AMOUNTS IN MILLIONS)
FINANCIAL DATA
Operating revenues..................................... $21,365 $22,667 $45,908 $51,374
Operating expenses..................................... 16,802 16,931 35,020 40,631
Operating income....................................... 4,563 5,736 10,888 10,743
Interest expense....................................... 690 884 1,599 1,592
Interest income........................................ 290 371 682 279
Equity in net income of affiliates..................... 887 942 1,595 897
Other income (expense), net............................ 225 (58) (209) 2,561
Income taxes........................................... 1,720 2,164 4,097 4,921
Income before extraordinary item and cumulative effect
of accounting change................................. 3,555 3,943 7,260 7,967
------- ------- ------- -------
Extraordinary item, net of tax......................... -- (18) (18) --
------- ------- ------- -------
Cumulative effect of accounting change, net of tax..... (1,810) -- -- --
------- ------- ------- -------
Net income............................................. $ 1,745 $ 3,925 $ 7,242 $ 7,967
======= ======= ======= =======
Earnings per common share:
Income before extraordinary items and cumulative
effect of accounting change....................... $ 1.06 $ 1.17 $ 2.16 $ 2.35
------- ------- ------- -------
Net income........................................... $ 0.52 $ 1.16 $ 2.15 $ 2.35
======= ======= ======= =======
Earnings per common share -- assuming dilution:
Income before extraordinary items and cumulative
effect of accounting change....................... $ 1.06 $ 1.16 $ 2.14 $ 2.32
------- ------- ------- -------
Net income........................................... $ 0.52 $ 1.15 $ 2.13 $ 2.32
======= ======= ======= =======
Total assets........................................... $94,326 $95,934 $96,322 $98,651
Long-term debt......................................... $18,057 $19,024 $17,133 $15,492
Total shareowners' equity.............................. $31,728 $31,255 $32,491 $30,463
S-7
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth SBC's ratio of earnings to fixed charges for
each of the periods indicated. At December 31, 2001, no preferred stock was
outstanding.
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------- --------------
1997 1998 1999 2000 2001 2002 2001
---- ---- ---- ---- ---- ------ ------
4.10 6.79 6.52 6.95 6.14 6.52 6.31
For the purpose of calculating this ratio, earnings consist of income
before income taxes, extraordinary loss, cumulative effect of changes in
accounting principles, undistributed earnings from equity investments, interest
expense, dividends on preferred securities and one-third of rental expense (the
portion of rentals representative of the interest factor). Fixed charges include
total interest charges on indebtedness, dividends on preferred securities and
one-third of rental expense.
S-8
MANAGEMENT
DIRECTORS
Our Directors and their principal occupations as of the date hereof are set
forth in the following table.
NAME PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
---- ------------------------------------------
Edward E. Whitacre, Chairman of the Board and Chief Executive Officer
Jr...................
Gilbert F. Amelio...... Director
(Chairman and Chief Executive Officer, Beneventure Capital;
Senior Partner, Sienna Ventures)
Clarence C. Director
Barksdale............ (Member, Board of Trustees, Washington University)
James E. Barnes........ Director
(Chairman of the Board, President and Chief Executive
Officer, MAPCO Inc., Retired)
August A. Busch III.... Director
(Chairman of the Board, Anheuser-Busch Companies, Inc.)
William P. Clark....... Director
(Senior Counsel, Clark, Cali and Negranti, Attorneys at Law)
Martin K. Eby, Jr...... Director
(Chairman of the Board and Chief Executive Officer, The Eby
Corporation)
Herman E. Gallegos..... Director
(Independent Management Consultant)
Jess T. Hay............ Director
(Chairman, HCB Enterprises Inc.; Chairman of the Texas
Foundation for Higher Education)
James A. Henderson..... Director
(Retired Chairman and Chief Executive Officer, Cummins,
Inc.)
Bobby R. Inman......... Director
(Admiral, United States Navy, Retired)
Charles F. Knight...... Director
(Chairman of the Board, Emerson Electric Co.)
Lynn M. Martin......... Director
(Chair of the Council for the Advancement of Women; Advisor
to the Firm, Deloitte & Touche LLP; Professor, J.L. Kellogg
Graduate School of Management, Northwestern University)
John B. McCoy.......... Director
(Retired Chairman and Chief Executive Officer, Bank One
Corporation)
Mary S. Metz........... Director
(President, S.H. Cowell Foundation)
Toni Rembe............. Director
(Partner, Pillsbury Winthrop LLP)
S. Donley Ritchey...... Director
(Managing Partner, Alpine Partners)
Joyce M. Roche......... Director
(President and Chief Executive Officer, Girls Incorporated)
S-9
NAME PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
---- ------------------------------------------
Carlos Slim Helu....... Director
(Chairman of the Board, Carso Global Telecom, S.A. de C.V.;
Chairman of the Board, Telefonos de Mexico, S.A. de C.V.;
Chairman of the Board, America Movil, S.A. de C.V.)
Laura D'Andrea Tyson... Director
(Dean, London Business School, London, England)
Patricia P. Upton...... Director
(President and Chief Executive Officer, Aromatique, Inc.)
OFFICERS
In addition to the directors named above, the following persons, all of
whom are full-time employees of SBC, hold the offices indicated in the following
table as of August 14, 2002.
NAME POSITION
---- --------
Edward E. Whitacre, Jr. ...... Chairman of the Board and Chief Executive Officer
Stanley T. Sigman............. Group President and Chief Operating Officer
James W. Callaway............. Group President
Rayford Wilkins, Jr. ......... Group President
John H. Atterbury III......... Group President -- Strategic Processes
William M. Daley.............. President
Randall L. Stephenson......... Senior Executive Vice President and Chief Financial Officer
James D. Ellis................ Senior Executive Vice President and General Counsel
Karen E. Jennings............. Senior Executive Vice President -- Human Resources
James S. Kahan................ Senior Executive Vice President -- Corporate Development
The business address of our directors and officers is 175 E. Houston, San
Antonio, Texas 78205-2233, U.S.A.
S-10
DESCRIPTION OF THE NOTES
The following description of the general terms of the notes should be read
in conjunction with the statements under "Description of Debt Securities We May
Offer" in the accompanying prospectus. If this summary differs in any way from
the "Summary Description of the Securities We May Issue" in the accompanying
prospectus, you should rely on this summary.
GENERAL
The notes will be issued under our indenture with The Bank of New York,
acting as trustee, as described under "Description of Debt Securities We May
Offer" in the accompanying prospectus. The notes will constitute a separate
series under the indenture. The notes will bear interest at the rate of 5.875%
per annum and will mature on August 15, 2012. We will issue our notes in fully
registered form only and in denominations of $1,000 and integral multiples
thereof.
We may issue definitive notes in the limited circumstances set forth in
"Form and Title" below. If we issue definitive notes, principal of and interest
on our notes will be payable in the manner described below, the transfer of our
notes will be registrable, and our notes will be exchangeable for notes bearing
identical terms and provisions, at the office of The Bank of New York, the
paying agent and registrar for our notes, currently located at 101 Barclay
Street, New York, New York 10286, and at the office of Kredietbank S.A.
Luxembourgeoise, the Luxembourg paying agent, currently located at 43, Boulevard
Royal, L-2955, Luxembourg. However, payment of interest, other than interest at
maturity or upon redemption, may be made by check mailed to the address of the
person entitled to the interest as it appears on the security register at the
close of business on the regular record date corresponding to the relevant
interest payment date. Notwithstanding this, (1) the depositary as holder of our
notes or (2) a holder of more than $5 million in aggregate principal amount of
notes in definitive form can require the paying agent to make payments of
interest, other than interest due at maturity or upon redemption, by wire
transfer of immediately available funds into an account maintained by the holder
in the United States, by sending appropriate wire transfer instructions as long
as the paying agent receives the instructions not less than ten days prior to
the applicable interest payment date. The principal and interest payable in U.S.
dollars on a note at maturity or upon redemption will be paid by wire transfer
of immediately available funds against presentation of a note at the office of
the paying agent or the Luxembourg paying agent.
We will pay interest on our notes in arrears on each February 15 and August
15, commencing on February 15, 2003, to the persons in whose names our notes are
registered at the close of business on February 1 and August 1 preceding the
respective interest payment date, at the annual rate set forth on the cover page
of this prospectus supplement.
For purposes of the notes, a business day means a business day in The City
of New York, London and Luxembourg.
OPTIONAL REDEMPTION
Our notes will be redeemable, as a whole or in part, at our option, at any
time, on at least 30 days', but not more than 60 days', prior notice mailed to
the registered address of each holder of our notes. The redemption prices will
be equal to the greater of (1) 100% of the principal amount of the notes to be
redeemed or (2) the sum of the present values of the Remaining Scheduled
Payments (as defined below) discounted to the redemption date, on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months), at a rate
equal to the sum of the Treasury Rate (as defined below) and 30 basis points. In
the case of each of clauses (1) and (2), accrued interest will be payable to the
redemption date.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity or interpolation (on
a day count basis) of the interpolated Comparable Treasury Issue, assuming a
price for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such redemption
date.
"Comparable Treasury Issue" means the United States Treasury security or
securities selected by an Independent Investment Banker as having an actual or
interpolated maturity comparable to the remaining term of the notes to be
redeemed that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt
S-11
securities of a comparable maturity to the remaining term of such notes.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by the trustee after consultation with SBC.
"Comparable Treasury Price" means, with respect to any redemption date, (1)
the average of the Reference Treasury Dealer Quotations for such redemption date
after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (2) if the trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of all such quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by such Reference Treasury Dealer at 3:30 p.m., New York
City time, on the third business day preceding such redemption date.
"Reference Treasury Dealer" means each of Deutsche Bank Securities Inc.,
J.P. Morgan Securities Inc. and Salomon Smith Barney Inc., and their affiliates
which are primary U.S. Government securities dealers, and their respective
successors and at the option of SBC, other nationally recognized investment
banking firms that are primary U.S. government securities dealers. If any of the
foregoing or their affiliates shall cease to be a primary U.S. Government
securities dealer in The City of New York (a "Primary Treasury Dealer"), we
shall substitute therefor another Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to each note to be
redeemed, the remaining scheduled payments of principal of and interest on the
note that would be due after the related redemption date but for the redemption.
If that redemption date is not an interest payment date with respect to a note,
the amount of the next succeeding scheduled interest payment on the note will be
reduced by the amount of interest accrued on the note to the redemption date.
On and after the redemption date, interest will cease to accrue on the
notes or any portion of the notes called for redemption, unless we default in
the payment of the redemption price and accrued interest. On or before the
redemption date, we will deposit with a paying agent or the trustee money
sufficient to pay the redemption price of and accrued interest on the notes to
be redeemed on that date.
In the case of any partial redemption, selection of the notes for
redemption will be made by the trustee in compliance with the requirements of
the Luxembourg Stock Exchange, by lot or by such other method as the trustee in
its sole discretion deems to be fair and appropriate.
FORM AND TITLE
Our notes will be issued in the form of one or more fully registered global
notes which will be deposited with, or on behalf of, The Depository Trust
Company, known as DTC, as the depositary, and registered in the name of Cede &
Co., DTC's nominee. Beneficial interests in the global notes will be represented
through book-entry accounts of financial institutions acting on behalf of
beneficial owners as direct and indirect participants in DTC. Investors may
elect to hold interests in the global notes through either DTC (in the United
States), Clearstream Banking, Societe Anonyme, which we refer to as "Clearstream
Luxembourg," or Euroclear Bank S.A./N.V., as operator of the Euroclear System
(outside of the United States), if they are participants in these systems, or
indirectly through organizations which are participants in these systems.
Clearstream Luxembourg and Euroclear will hold interests on behalf of their
participants through customers' securities accounts in Clearstream Luxembourg's
and Euroclear's names on the books of their respective depositaries, which in
turn will hold these interests in customers' securities accounts in the names of
their respective U.S. depositaries on the books of DTC. Citibank, N.A. will act
as the U.S. depositary for Clearstream Luxembourg, and JPMorgan Chase Bank will
act as the U.S. depositary for Euroclear. Except under circumstances described
below, our notes will not be issuable in definitive form. The laws of some
states require that certain purchasers of securities take physical delivery of
their securities in definitive form. These limits and laws may impair the
ability to transfer beneficial interests in the global notes.
So long as the depositary or its nominee is the registered owner of the
global notes, the depositary or its nominee will be considered the sole owner or
holder of our notes represented by the global notes
S-12
for all purposes under the indenture. Except as provided below, owners of
beneficial interests in the global notes will not be entitled to have notes
represented by the global notes registered in their names, will not receive or
be entitled to receive physical delivery of notes in definitive form and will
not be considered the owners or holders thereof under the indenture.
Principal and interest payments on notes registered in the name of the
depositary or its nominee will be made to the depositary or its nominee, as the
case may be, as the registered owner of the global notes. None of us, the
trustee, any paying agent or registrar for our notes will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in the global notes or for
maintaining, supervising or reviewing any records relating to these beneficial
interests.
We expect that the depositary for our notes or its nominee, upon receipt of
any payment of principal or interest, will credit the participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of the global notes as shown on the records of the
depositary or its nominee. We also expect that payments by participants to
owners of beneficial interest in the global notes held through these
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name," and will be the responsibility of these
participants.
If the depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by us within 90 days, we
will issue notes in definitive form in exchange for the global notes. We will
also issue notes in definitive form in exchange for the global notes if an event
of default has occurred with regard to the notes represented by the global notes
and has not been cured or waived. In addition, we may at any time and in our
sole discretion determine not to have our notes represented by the global notes
and, in that event, will issue our notes in definitive form in exchange for the
global notes. In any such instance, an owner of a beneficial interest in the
global notes will be entitled to physical delivery in definitive form of notes
represented by the global notes equal in principal amount to such beneficial
interest and to have such notes registered in its name. Notes so issued in
definitive form will be issued as registered notes in denominations of $1,000
and integral multiples thereof, unless otherwise specified by us. Our definitive
notes can be transferred by presentation for registration to the registrar at
its New York or Luxembourg offices and must be duly endorsed by the holder or
his attorney duly authorized in writing, or accompanied by a written instrument
or instruments of transfer in form satisfactory to us or the trustee duly
executed by the holder or his attorney duly authorized in writing. We may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any exchange or registration of
transfer of definitive notes.
THE CLEARING SYSTEMS
DTC. The depositary has advised us as follows: the depositary 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 Exchange Act. The depositary
holds securities deposited with it by its participants and facilitates the
settlement of transactions among its participants in such securities through
electronic computerized book-entry changes in accounts of the participants,
thereby eliminating the need for physical movement of securities certificates.
The depositary's participants include securities brokers and dealers (including
the underwriters), banks, trust companies, clearing corporations and certain
other organizations, some of whom (and/or their representatives) own the
depositary. Access to the depositary's book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly.
According to the depositary, the foregoing information with respect to the
depositary has been provided to the financial community for informational
purposes only and is not intended to serve as a representation, warranty or
contract modification of any kind.
Clearstream Luxembourg. Clearstream Luxembourg advises that it is
incorporated under the laws of Luxembourg as a professional depositary.
S-13
Clearstream Luxembourg holds securities for its participating organizations and
facilitates the clearance and settlement of securities transactions between
Clearstream Luxembourg participants through electronic book-entry changes in
accounts of Clearstream Luxembourg participants, thereby eliminating the need
for physical movement of certificates. Clearstream Luxembourg provides to
Clearstream Luxembourg participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream Luxembourg
interfaces with domestic markets in several countries. As a professional
depositary, Clearstream Luxembourg is subject to regulation by the Luxembourg
Monetary Institute. Clearstream Luxembourg participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the underwriters. Indirect access to Clearstream
Luxembourg is also available to others, such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Clearstream Luxembourg participant either directly or indirectly.
Distributions with respect to the notes held beneficially through
Clearstream Luxembourg will be credited to cash accounts of Clearstream
Luxembourg participants in accordance with its rules and procedures, to the
extent received by the U.S. depositary for Clearstream Luxembourg.
Euroclear. Euroclear has advised that it was created in 1968 to hold
securities for its participants and to clear and settle transactions between
Euroclear participants through simultaneous electronic book-entry delivery
against payment, eliminating the need for physical movement of certificates and
eliminating any risk from lack of simultaneous transfers of securities and cash.
Euroclear provides various other services, including securities lending and
borrowing and interfaces with domestic markets in several countries. The
Euroclear System is owned by Euroclear Clearance System Public Limited Company
(ECSplc) and operated through a license agreement by Euroclear Bank S.A./N.V., a
bank incorporated under the laws of the Kingdom of Belgium as the "Euroclear
operator".
The Euroclear operator holds securities and book-entry interests in
securities for participating organizations and facilitates the clearance and
settlement of securities transactions between Euroclear participants, and
between Euroclear participants and participants of certain other securities
intermediaries through electronic book-entry changes in accounts of such
participants or other securities intermediaries.
The Euroclear operator provides Euroclear participants, among other things,
with safekeeping, administration, clearance and settlement, securities lending
and borrowing, and related services.
Non-participants of Euroclear may hold and transfer book-entry interests in
the securities through accounts with a direct participant of Euroclear or any
other securities intermediary that holds a book-entry interest in the securities
through one or more securities intermediaries standing between such other
securities intermediary and the Euroclear operator.
The Euroclear operator is regulated and examined by the Belgian Banking and
Finance Commission and the National Bank of Belgium.
Securities clearance accounts and cash accounts with the Euroclear operator
are governed by the "Terms and Conditions Governing Use of Euroclear" and the
related operating procedures of the Euroclear System, and applicable Belgian
law, which are collectively referred to as the "terms and conditions". The terms
and conditions govern transfers of notes and cash within Euroclear, withdrawals
of notes and cash from Euroclear, and receipts of payments with respect to notes
in Euroclear. All notes in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear operator acts under the terms and conditions only on behalf of
Euroclear participants, and has no record of or relationship with persons
holding through Euroclear participants.
Distributions with respect to each series of notes held beneficially
through Euroclear will be credited to the cash accounts of Euroclear
participants in accordance with the terms and conditions, to the extent received
by the U.S. depositary for Euroclear.
S-14
GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES
Initial settlement for the notes will be made in same-day U.S. dollar
funds.
Secondary market trading between DTC participants will occur in the
ordinary way in accordance with DTC rules. Secondary market trading between
Clearstream Luxembourg participants and/or Euroclear participants will occur in
the ordinary way in accordance with the applicable rules and operating
procedures of Clearstream Luxembourg and Euroclear and will be settled using the
procedures applicable to conventional eurobonds.
Cross-market transfers between persons holding directly or indirectly
through DTC participants, on the one hand, and directly or indirectly through
Clearstream Luxembourg or Euroclear participants, on the other hand, will be
effected in DTC in accordance with DTC rules on behalf of the relevant
international clearing system by its U.S. depositary. However, cross-market
transactions will require delivery of instructions to the relevant international
clearing system by the counterparty in that system in accordance with its rules
and procedures and within its established deadlines (European time). The
relevant international clearing system will, if a transaction meets its
settlement requirements, deliver instructions to its U.S. depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC. Clearstream Luxembourg participants and Euroclear
participants may not deliver instructions directly to the respective U.S.
depositary.
Because of time-zone differences, credits of notes received in Clearstream
Luxembourg or Euroclear as a result of a transaction with a DTC participant will
be made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. These credits or any
transactions in the notes settled during the processing will be reported to the
relevant Clearstream Luxembourg or Euroclear participants on that business day.
Cash received in Clearstream Luxembourg or Euroclear as a result of sales of
notes by or through a Clearstream Luxembourg participant or a Euroclear
participant to a DTC participant will be received with value on the DTC
settlement date but will be available in the relevant Clearstream Luxembourg or
Euroclear cash account only as of the business day following settlement in DTC.
Although it is expected that DTC, Clearstream Luxembourg and Euroclear will
follow the foregoing procedures in order to facilitate transfers of notes among
participants of DTC, Clearstream Luxembourg and Euroclear, they are under no
obligation to perform or continue such procedures and such procedures may be
changed or discontinued at any time.
PAYMENT OF ADDITIONAL AMOUNTS
We will, subject to the exceptions and limitations set forth below, pay as
additional interest on our notes such additional amounts as are necessary so
that the net payment by us or a paying agent of the principal of and interest on
our notes to a person that is a United States alien holder (as defined under the
heading "United States Tax Considerations -- United States Alien Holders"
below), after deduction for any present or future tax, assessment or
governmental charge of the United States or a political subdivision or taxing
authority thereof or therein, imposed by withholding with respect to the
payment, will not be less than the amount that would have been payable in
respect of our notes had no withholding or deduction been required.
Our obligation to pay additional amounts shall not apply:
(1) to any tax, assessment or governmental charge that is imposed or
withheld solely because the beneficial owner, or a fiduciary, settlor,
beneficiary or member of the beneficial owner if the beneficial owner is an
estate, trust or partnership, or a person holding a power over an estate or
trust administered by a fiduciary holder:
(a) is or was present or engaged in trade or business in the
United States or has or had a permanent establishment in the United
States;
(b) is or was a citizen or resident or is or was treated as a
resident of the United States;
(c) is or was a foreign or domestic personal holding company, a
passive foreign investment company or a controlled foreign corporation
with respect to the United States or is or was a corporation that has
accumulated earnings to avoid United States federal income tax; or
S-15
(d) is or was a "10-percent shareholder" of SBC;
(2) to any holder that is not the sole beneficial owner of our notes,
or a portion thereof, or that is a fiduciary or partnership, but only to
the extent that the beneficial owner, a beneficiary or settlor with respect
to the fiduciary, or a member of the partnership would not have been
entitled to the payment of an additional amount had such beneficial owner,
beneficiary, settlor or member received directly its beneficial or
distributive share of the payment;
(3) to any tax, assessment or governmental charge that is imposed or
withheld solely because the beneficial owner or any other person failed to
comply with certification, identification or information reporting
requirements concerning the nationality, residence, identity or connection
with the United States of the holder or beneficial owner of our notes, if
compliance is required by statute, by regulation of the United States
Treasury Department or by an applicable income tax treaty to which the
United States is a party as a precondition to exemption from such tax,
assessment or other governmental charge;
(4) to any tax, assessment or governmental charge that is imposed
other than by deduction or withholding by SBC or a paying agent from the
payment;
(5) to any tax, assessment or governmental charge that is imposed or
withheld solely because of a change in law, regulation, or administrative
or judicial interpretation that becomes effective after the day on which
the payment becomes due or is duly provided for, whichever occurs later;
(6) to an estate, inheritance, gift, sales, excise, transfer, wealth
or personal property tax or any similar tax, assessment or governmental
charge;
(7) to any tax, assessment or other governmental charge any paying
agent (which term may include us) must withhold from any payment of
principal of or interest on any note, if such payment can be made without
such withholding by any other paying agent; or
(8) in the case of any combination of the above items.
Our notes are subject in all cases to any tax, fiscal or other law or
regulation or administrative or judicial interpretation applicable. Except as
specifically provided under this heading "-- Payment of Additional Amounts" and
under the heading "-- Redemption Upon a Tax Event," we do not have to make any
payment with respect to any tax, assessment or governmental charge imposed by
any government or a political subdivision or taxing authority.
In particular, we will not pay additional amounts on any note
- where withholding or deduction is imposed on a payment to an individual
and is required to be made pursuant to any European Union Directive on
the taxation of savings implementing the conclusions of the ECOFIN
Council meeting of November 26 and 27, 2000 or any law implementing or
complying with, or introduced in order to conform to, that Directive, or
- presented for payment by or on behalf of a beneficial owner who would
have been able to avoid the withholding or deduction by presenting the
relevant global note to another paying agent in a Member State of the EU.
The European Union is currently considering a proposal for a new directive
regarding the taxation of savings income. Subject to a number of important
conditions being met, it is proposed that Member States will be required to
provide to the tax authorities of another Member State details of payments of
interest or other similar income paid by a person within its jurisdiction to an
individual resident in that other Member State, subject to the right of certain
Member States to opt instead for a withholding system for a transitional period
in relation to these payments and subject to the proposals not being required to
be applied to the global note.
REDEMPTION UPON A TAX EVENT
If (a) we become or will become obligated to pay additional amounts as
described herein under the heading "-- Payment of Additional Amounts" as a
result of any change in, or amendment to, the laws (or any regulations or
rulings promulgated
S-16
thereunder) of the United States (or any political subdivision or taxing
authority thereof or therein), or any change in, or amendments to, any official
position regarding the application or interpretation of such laws, regulations
or rulings, which change or amendment is announced or becomes effective on or
after the date of this prospectus supplement, or (b) a taxing authority of the
United States takes an action on or after the date of this prospectus
supplement, whether or not with respect to us or any of our affiliates, that
results in a substantial probability that we will or may be required to pay such
additional amounts, then we may, at our option, redeem, as a whole, but not in
part, our notes on any interest payment date on not less than 30 nor more than
60 calendar days' prior notice, at a redemption price equal to 100% of their
principal amount, together with interest accrued thereon to the date fixed for
redemption. However, we may determine, in our business judgment, that the
obligation to pay these additional amounts cannot be avoided by the use of
reasonable measures available to us, not including substitution of the obligor
under our notes. No redemption pursuant to (b) above may be made unless we shall
have received an opinion of independent counsel to the effect that an act taken
by a taxing authority of the United States results in a substantial probability
that we will or may be required to pay the additional amounts described herein
under the heading "-- Payment of Additional Amounts" and we shall have delivered
to the trustee a certificate, signed by a duly authorized officer stating, that
based on such opinion we are entitled to redeem our notes pursuant to their
terms.
FURTHER ISSUES
We may from time to time, without notice to or the consent of the holders
of the notes, create and issue further notes ranking equally and ratably with
the notes in all respects, or in all respects except for the payment of interest
accruing prior to the issue date or except for the first payment of interest
following the issue date of those further notes. Any further notes will be
consolidated and form a single series with the notes and will have the same
terms as to status, redemption or otherwise as the notes. Any further notes
shall be issued pursuant to a resolution of our board of directors, a supplement
to the indenture, or under an officers' certificate pursuant to the indenture.
NOTICES
Notices to holders of our notes will be published in authorized newspapers
in The City of New York, in London, and, so long as our notes are listed on the
Luxembourg Stock Exchange, in Luxembourg. As long as our notes are listed on the
Luxembourg Stock Exchange, these notices will only be valid if the notice is
published in a daily leading newspaper with general circulation in Luxembourg.
It is expected that publication will be made in The City of New York in The Wall
Street Journal, in London in the Financial Times and in Luxembourg in the
Luxemburger Wort. We will be deemed to have given this notice on the date of
each publication or, if published more than once, on the date of the first
publication.
PRESCRIPTION PERIOD
Any money that we deposit with the trustee or any paying agent for the
payment of principal or any interest on any global note of any series that
remains unclaimed for two years after the date upon which the principal and
interest are due and payable, will be repaid to us upon our request unless
otherwise required by mandatory provisions of any applicable unclaimed property
law. After that time, unless otherwise required by mandatory provisions of any
unclaimed property law, the holder of the global note will be able to seek any
payment to which that holder may be entitled to collect only from us.
AMENDMENTS
We can make changes to the indenture and the notes under certain
circumstances. Some types of changes require the approval of each holder of our
notes, others require approval by a majority vote, and some changes do not
require any approval at all. For more information on when we need your approval,
you should read "Description of Debt Securities We May Offer -- Modification and
Waiver of Your Contractual Rights" in the accompanying prospectus.
DEFAULT AND ACCELERATION OF MATURITY
You will have special rights if an event of default occurs and is not
cured. For instance, if we fail to make any interest payment on a note when it
is due, and we do not cure this default within 90 days, this will constitute an
event of default. For more information on events of default under our indenture
and remedies if an event of default
S-17
occurs, you should read "Description of Debt Securities We May Offer -- Default
and Related Matters" in the accompanying prospectus.
COVENANTS
In our indenture, we covenant to pay the principal of and interest on the
notes when due and in the manner provided herein.
We are not subject to any negative covenants under our indenture.
GOVERNING LAW
The notes are governed by and interpreted in accordance with the laws of
the State of New York.
UNITED STATES TAX CONSIDERATIONS
This section describes the material United States federal income tax
consequences of owning the notes we are offering. It applies to you only if you
acquire notes in the offering at the offering price and you hold your notes as
capital assets for tax purposes. This section does not apply to you if you are a
member of a class of holders subject to special rules, such as:
- a dealer in securities or currencies,
- a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings,
- a bank,
- a life insurance company,
- a tax-exempt organization,
- a person that owns notes that are a hedge or that are hedged against
interest rate risks,
- a person that owns notes as part of a straddle or conversion transaction
for tax purposes, or
- a person whose functional currency for tax purposes is not the U.S.
dollar.
This section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations under the Internal
Revenue Code, published rulings and court decisions, all as currently in effect.
These laws are subject to change, possibly on a retroactive basis.
If you purchase notes at other than the offering price, the amortizable
bond premium or market discount rules may also apply to you. You should consult
your tax advisor regarding this possibility.
Please consult your tax advisor concerning the consequences of owning these
notes, in your particular circumstances, under the Internal Revenue Code and
the laws of any other taxing jurisdiction.
UNITED STATES HOLDERS
This subsection describes the tax consequences to a United States holder.
You are a United States holder if you are a beneficial owner of a note and you
are:
- a citizen or resident of the United States,
- a domestic corporation,
- an estate whose income is subject to United States federal income tax
regardless of its source, or
- a trust if a United States court can exercise primary supervision over
the trust's administration and one or more United States persons are
authorized to control all substantial decisions of the trust.
If you are not a United States holder, this subsection does not apply to
you and you should refer to "-- United States Alien Holders" below.
Payments of Interest. You will be taxed on interest on your note as
ordinary income at the time you receive the interest or when it accrues,
depending on your method of accounting for tax purposes.
Purchase, Sale and Retirement of the Notes. Your tax basis in your note
generally will be its cost. You will generally recognize capital gain or loss on
the sale or retirement of your note equal to the difference between the amount
you realize on the sale or retirement, excluding any amounts attributable to
accrued but unpaid interest, and your tax basis in your note. Capital gain of a
noncorporate United States holder is generally taxed at a maximum rate of 20%
where the property is held more than one year and 18% where the property is held
more than five years.
S-18
UNITED STATES ALIEN HOLDERS
This subsection describes the tax consequences to a United States alien
holder. You are a United States alien holder if you are a beneficial owner of a
note and you are, for United States federal income tax purposes:
- a nonresident alien individual,
- a foreign corporation,
- a foreign partnership, or
- an estate or trust that in either case is not subject to United States
federal income tax on a net income basis on income or gain from a note.
If you are a United States holder, this section does not apply to you.
Under United States federal income and estate tax law, and subject to the
discussion of backup withholding below, if you are a United States alien holder
of a note:
- we and other U.S. payors generally will not be required to deduct United
States withholding tax from payments of principal, premium, if any, and
interest, to you if, in the case of payments of interest:
1. you do not actually or constructively own 10% or more of the total
combined voting power of all classes of our stock entitled to vote,
2. you are not a controlled foreign corporation that is related to us
through stock ownership, and
3. the U.S. payor does not have actual knowledge or reason to know that
you are a United States person and:
a. you have furnished to the U.S. payor an Internal Revenue Service
Form W-8BEN or an acceptable substitute form upon which you certify,
under penalties of perjury, that you are a non-United States person,
b. in the case of payments made outside the United States to you at
an offshore account (generally, an account maintained by you at a bank or
other financial institution at any location outside the United States),
you have furnished to the U.S. payor documentation that establishes your
identity and your status as a non-United States person,
c. the U.S. payor has received a withholding certificate (furnished
on an appropriate Internal Revenue Service Form W-8 or an acceptable
substitute form) from a person claiming to be:
i. a withholding foreign partnership (generally a foreign
partnership that has entered into an agreement with the Internal
Revenue Service to assume primary withholding responsibility with
respect to distributions and guaranteed payments it makes to its
partners),
ii. a qualified intermediary (generally a non-United States
financial institution or clearing organization or a non-United
States branch or office of a United States financial institution or
clearing organization that is a party to a withholding agreement
with the Internal Revenue Service), or
iii. a U.S. branch of a non-United States bank or of a
non-United States insurance company,
and the withholding foreign partnership, qualified intermediary or
U.S. branch has received documentation upon which it may rely to
treat the payment as made to a non-United States person in
accordance with U.S. Treasury regulations (or, in the case of a
qualified intermediary, in accordance with its agreement with the
Internal Revenue Service),
d. the U.S. payor receives a statement from a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business,
i. certifying to the U.S. payor under penalties of perjury that
an Internal Revenue Service Form W-8BEN or an acceptable substitute
form has been received from you by it or by a similar financial
institution between it and you, and
ii. to which is attached a copy of the Internal Revenue Service
S-19
Form W-8BEN or acceptable substitute form, or
e. the U.S. payor otherwise possesses documentation upon which it
may rely to treat the payment as made to a non-United States person in
accordance with U.S. Treasury regulations; and
- no deduction for any United States federal withholding tax will be made
from any gain that you realize on the sale or exchange of your note.
Further, a note held by an individual who at death is not a citizen or resident
of the United States will not be includible in the individual's gross estate for
United States federal estate tax purposes if:
- the decedent did not actually or constructively own 10% or more of the
total combined voting power of all classes of our stock entitled to vote
at the time of death and
- the income on the note would not have been effectively connected with a
United States trade or business of the decedent at the same time.
BACKUP WITHHOLDING AND INFORMATION REPORTING
UNITED STATES HOLDERS
In general, if you are a noncorporate United States holder, we and other
payors are required to report to the Internal Revenue Service all payments of
principal, any premium and interest on your note. In addition, we and other
payors are required to report to the Internal Revenue Service any payment of
proceeds of the sale of your note before maturity within the United States.
Additionally, backup withholding will apply to any payments if you fail to
provide an accurate taxpayer identification number, or you are notified by the
Internal Revenue Service that you have failed to report all interest and
dividends required to be shown on your federal income tax returns.
UNITED STATES ALIEN HOLDERS
In general, payments of principal, premium or interest made by us and other
payors to you will not be subject to backup withholding and information
reporting, provided that the certification requirements described above under
"-- United States Alien Holders" are satisfied or you otherwise establish an
exemption. However, we and other payors are required to report payments of
interest on your notes on Internal Revenue Service Form 1042-S even if the
payments are not otherwise subject to information reporting requirements.
In addition, payment of the proceeds from the sale of notes effected at a
United States office of a broker will not be subject to backup withholding and
information reporting on such a sale provided that:
- the broker does not have actual knowledge or reason to know that you are
a United States person and you have furnished to the broker:
1. an appropriate Internal Revenue Service Form W-8 or an acceptable
substitute form upon which you certify, under penalties of perjury, that you
are a non-United States person, or
2. other documentation upon which it may rely to treat the payment as
made to a non-United States person in accordance with U.S. Treasury
regulations; or
- you otherwise establish an exemption.
If you fail to establish an exemption and the broker does not possess
adequate documentation of your status as a non-United States person, the
payments may be subject to information reporting and backup withholding.
However, backup withholding will not apply with respect to payments made to an
offshore account maintained by you unless the payor has actual knowledge that
you are a United States person.
In general, payment of the proceeds from the sale of notes effected at a
foreign office of a broker will not be subject to information reporting or
backup withholding. However, a sale effected at a foreign office of a broker
will be subject to information reporting and backup withholding if:
- the proceeds are transferred to an account maintained by you in the
United States,
- the payment of proceeds or the confirmation of the sale is mailed to you
at a United States address, or
- the sale has some other specified connection with the United States as
provided in U.S. Treasury regulations,
unless the broker does not have actual knowledge or reason to know that you are
a United States person
S-20
and the documentation requirements described above (relating to a sale of notes
effected at a United States office of a broker) are met or you otherwise
establish an exemption.
In addition, payment of the proceeds from the sale of notes effected at a
foreign office of a broker will be subject to information reporting if the
broker is:
- a United States person,
- a controlled foreign corporation for United States tax purposes,
- a foreign person 50% or more of whose gross income is effectively
connected with the conduct of a United States trade or business for a
specified three-year period, or
- a foreign partnership, if at any time during its tax year:
1. one or more of its partners are "U.S. persons", as defined in U.S.
Treasury regulations, who in the aggregate hold more than 50% of the income or
capital interest in the partnership, or
2. such foreign partnership is engaged in the conduct of a United States
trade or business,
unless the broker does not have actual knowledge or reason to know that you are
a United States person and the documentation requirements described above
(relating to a sale of notes effected at a United States office of a broker) are
met or you otherwise establish an exemption. Backup withholding will apply if
the sale is subject to information reporting and the broker has actual knowledge
that you are a United States person.
S-21
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement,
dated the date hereof, each underwriter named below has severally agreed to
purchase, and we have agreed to sell to that underwriter, the principal amount
of notes set forth opposite the name of the underwriter.
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
----------- ----------------
Deutsche Bank Securities
Inc. ...................... $ 266,668,000
J.P. Morgan Securities
Inc. ...................... 266,668,000
Salomon Smith Barney Inc. ... 266,668,000
ABN AMRO Incorporated........ 44,444,000
Banc of America Securities
LLC........................ 44,444,000
Banc One Capital Markets,
Inc. ...................... 44,444,000
Wachovia Securities, Inc. ... 44,444,000
Blaylock & Partners, L.P. ... 11,110,000
Guzman & Company............. 11,110,000
--------------
Total...................... $1,000,000,000
==============
The underwriting agreement provides that the obligations of the several
underwriters to purchase the notes included in this offering are subject to
certain conditions. The underwriters are obligated to purchase all the notes if
they purchase any of the notes.
SBC has been advised by the underwriters, for whom Deutsche Bank Securities
Inc., J.P. Morgan Securities Inc. and Salomon Smith Barney Inc. are acting as
representatives, that they propose to offer some of the notes directly to the
public at the public offering price set forth on the cover page of this
prospectus supplement and to dealers at the public offering price less a
concession not in excess of 0.30% of the principal amount of the notes.
The underwriters may allow, and the dealers may reallow, a discount to
certain other dealers not in excess of 0.25% of the principal amount of the
notes.
After the initial offering of the notes to the public, the public offering
price and the concessions may be changed by the representatives.
The underwriting discount to be paid to the underwriters by us in
connection with the offering (expressed as a percentage of the principal amount
of the notes) is 0.45%.
In addition to the underwriting discount, we estimate we will incur
expenses of approximately $100,000 in connection with the offering of the notes.
Purchasers of our notes may be required to pay stamp taxes and other
charges in accordance with the laws and practices of the country of purchase in
addition to the issue price set forth on the cover page hereof.
Our notes are a new issue of securities with no established trading market.
We have been advised by the underwriters that they intend to make a market in
our notes, but they are not obligated to do so and may discontinue such market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for our notes.
In connection with the offering, Deutsche Bank Securities Inc., J.P. Morgan
Securities Inc. and Salomon Smith Barney Inc., on behalf of the underwriters,
may purchase and sell notes in the open market. These transactions may include
over-allotment, syndicate covering transactions and stabilizing transactions.
Over-allotment involves syndicate sales of notes in excess of the principal
amount of notes to be purchased by the underwriters in the offering, which
creates a syndicate short position. Syndicate covering transactions involve
purchases of the notes in the open market after the distribution has been
completed in order to cover syndicate short positions. Stabilizing transactions
consist of certain bids or purchases of notes made for the purpose of preventing
or retarding a decline in the market price of the notes while the offering is in
progress.
Any of these activities may cause the price of the notes to be higher than
the price that otherwise would exist in the open market in the absence of such
transactions. These transactions may be effected in the over-the-counter market
or otherwise and, if commenced, may be discontinued at any time.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments the
underwriters may be required to make in respect of any of those liabilities.
In the ordinary course of their respective businesses, the underwriters and
their respective affiliates have engaged, and may in the future engage, in
commercial banking, general financing and/or
S-22
investment banking transactions with us and certain of our affiliates.
Certain of the underwriters are dealers under our commercial paper program
and may receive proceeds from this offering.
OFFERING RESTRICTIONS
GENERAL
Our notes are offered for sale in the United States and in jurisdictions
outside the United States, subject to applicable law.
Each of the underwriters has agreed that it will not offer, sell or deliver
any of our notes, directly or indirectly, or distribute this prospectus
supplement or the accompanying prospectus or any other offering material
relating to our notes, in or from any jurisdiction except under circumstances
that will to the best knowledge and belief of such underwriter result in
compliance with the applicable laws and regulations thereof and which will not
impose any obligations on us except as set forth in the underwriting agreement.
UNITED KINGDOM
Each underwriter has represented and agreed that it and each of its
affiliates:
(1) has not offered or sold and, prior to the expiry of the period of
six months from the settlement date, will not offer or sell any notes to
any persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in
an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995;
(2) has only communicated or caused to be communicated and will only
communicate or cause to be communicated any invitation or inducement to
engage in investment activity (within the meaning of Section 21 of the
Financial Services and Markets Act 2000, known as FSMA) received by it in
connection with the issue or sale of any notes in circumstances in which
Section 21(1) of the FSMA does not apply to the Issuer; and
(3) has complied and will comply with all applicable provisions of the
FSMA with respect to anything done by it in relation to the notes in, from
or otherwise involving the United Kingdom.
JAPAN
The notes have not been and will not be registered under the Securities and
Exchange Law of Japan and each of the underwriters and each of its affiliates
has represented and agreed that it has not offered or sold, and it will not
offer or sell, directly or indirectly, any of the notes in or to residents of
Japan or to any persons for reoffering or resale, directly or indirectly in
Japan or to any resident of Japan, except pursuant to any exemption from the
registration requirement of the Securities and Exchange Law available thereunder
and in compliance with the other relevant laws and regulations of Japan.
HONG KONG
Each underwriter has represented and agreed that (a) it has not offered or
sold and will not offer or sell in Hong Kong, by means of any document, any
notes, other than to persons whose ordinary business it is to buy or sell shares
or debentures, whether as principal or agent, or in circumstances which do not
constitute an offer to the public within the meaning of the Companies Ordinance
of Hong Kong, and (b) unless it is a person permitted to do so under the
securities laws of Hong Kong, it has not issued or had in its possession for the
purpose of issue, and will not issue or have in its possession for the purpose
of issue, in Hong Kong, any advertisement, invitation, or document relating to
the notes, other than with respect to notes which are or are intended to be
disposed of to persons outside Hong Kong or to be disposed of in Hong Kong only
to persons whose business involves the acquisition, disposal or holding of
securities whether as principal or agent.
SINGAPORE
Each underwriter represents and agrees that it has not offered or sold and
will not offer or sell any of the notes, nor will it circulate or distribute
this prospectus supplement and accompanying prospectus or any other offering
document or material in connection with the offer of notes, whether directly or
indirectly, to the public or any member of the
S-23
public in Singapore other than (i) to an institutional investor or other person
specified in Section 106C of the Companies Act, Chapter 50 of Singapore (the
"Singapore Companies Act"), (ii) to a sophisticated investor in accordance with
the conditions, specified in Section 106D of the Singapore Companies Act, or
(iii) otherwise pursuant to, and in accordance with the conditions of, any other
applicable provisions of the Singapore Companies Act.
THE NETHERLANDS
The notes may not be offered, transferred, sold or delivered, directly or
indirectly, as part of their initial distribution or at any time thereafter, in
The Netherlands other than to banks, pension funds, insurance companies,
securities firms, investment institutions, central government, large
international and supranational organizations and other entities (including,
among others, treasuries and finance companies of large enterprises) which trade
or invest in securities in the conduct of their business or profession.
LEGAL OPINIONS
James D. Ellis, Senior Executive Vice President and General Counsel of SBC,
is passing upon the validity of our notes for us.
Sullivan & Cromwell, New York, New York, is passing upon the validity of
our notes for the underwriters. Sullivan & Cromwell from time to time performs
legal services for us.
EXPERTS
The consolidated financial statements (including schedules incorporated by
reference) of SBC Communications Inc. at December 31, 2001 and 2000, and for
each of the two years in the period ended December 31, 2001, which are
incorporated by reference in this prospectus supplement and accompanying
prospectus, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing and incorporated by reference elsewhere
herein. The financial statements referred to above are included in reliance upon
such reports given on the authority of such firms as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE
INFORMATION -- DOCUMENTS
INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. We incorporate by reference our annual report on Form
10-K for the year ended December 31, 2001, our quarterly reports on Form 10-Q
for the quarters ended March 31, 2002 and June 30, 2002 and our current reports
on Form 8-K dated June 24, June 28, July 1, August 1 and August 12, 2002.
You may request a copy of this filing, at no cost, by writing or
telephoning us at our principal executive offices at the following address:
SBC's Specialist-External Reporting
SBC Communications Inc.
175 E. Houston Street
San Antonio, Texas 78205-2233
Documents incorporated by reference will also be made available free of
charge at the main office of the Luxembourg paying agent:
Kredietbank S.A. Luxembourgeoise
43, Boulevard Royal
L-2955
Luxembourg
GENERAL INFORMATION
Luxembourg Paying Agent. We have appointed Kredietbank S.A.
Luxembourgeoise as the Luxembourg Paying Agent. We will maintain a paying and
transfer agent in Luxembourg as long as our notes are listed on the Luxembourg
Stock Exchange. For as long as our notes are listed on the Luxembourg Stock
Exchange, we will publish any changes as to the identity or location of the
Luxembourg Paying Agent in a leading daily newspaper in Luxembourg, which is
expected to be the Luxemburger Wort.
LISTING
Application has been made to list the notes on the Luxembourg Stock
Exchange. In connection with the listing application, our certificate of
incorporation and by-laws and a legal notice relating to the issuance of the
notes have been deposited prior to listing with Greffier en Chef du Tribunal
d'Arrondissement de et a Luxembourg, where
S-24
copies thereof may be obtained upon request. Copies of the above documents
together with this prospectus supplement, the accompanying prospectus, the
indenture, the underwriting agreement and our annual report on Form 10-K for the
year ended December 31, 2001, our quarterly reports on Form 10-Q for the
quarters ended March 31, 2002 and June 30, 2002 as well as all future annual
reports, quarterly reports and financial current reports on Form 8-K, so long as
any of the notes are outstanding and listed on the Luxembourg Stock Exchange,
will be made available at the main office of Kredietbank S.A. Luxembourgeoise at
43, Boulevard Royal, L-2955, Luxembourg. We are required to file our annual
report on Form 10-K for the year ended December 31, 2002, which includes our
audited financial statements for the year ended December 31, 2002, within 90
days after the end of our fiscal year. Kredietbank S.A. Luxembourgeoise will act
as intermediary between the Luxembourg Stock Exchange and us and the holders of
the notes as long as the notes are in global form.
AUTHORIZATION
The notes will be issued pursuant to authority granted by our board of
directors on April 28, 2000, as that authority may be supplemented from time to
time.
MATERIAL CHANGE
There has been no material adverse change in the financial position or
operations of SBC and its subsidiaries on a consolidated basis since December
31, 2001, except as disclosed herein or in the documents incorporated by
reference.
LITIGATION
Save as disclosed in this prospectus supplement and the accompanying
prospectus, including the documents incorporated by reference therein, we are
not involved in any litigation, arbitration or administrative proceedings that
are material in the context of the issue of the notes, nor, so far as we are
aware, are any such litigation, arbitration or administrative proceedings
involving us pending or threatened.
CLEARING SYSTEMS
The notes have been accepted for clearance through DTC, Euroclear and
Clearstream (Common Code: 015343052; ISIN: US78387GAK94; and CUSIP: 78387GAK9).
S-25
PRINCIPAL OFFICE OF SBC COMMUNICATIONS INC.
175 E. Houston
San Antonio, Texas 78205-2233
TRUSTEE AND REGISTRAR
The Bank of New York
101 Barclay Street
New York, New York 10286
LUXEMBOURG PAYING AGENT/TRANSFER AGENT/LISTING AGENT
Kredietbank S.A. Luxembourgeoise
43, Boulevard Royal
L-2955
Luxembourg
LEGAL ADVISERS TO THE UNDERWRITERS
As to United States Law:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
AUDITORS TO SBC COMMUNICATIONS INC.
Ernst & Young LLP
Frost Bank Towers
Suite 1900
100 West Houston Street
San Antonio, Texas 78205-1457
PROSPECTUS
U.S. $7,500,000,000
SBC COMMUNICATIONS INC.
DEBT SECURITIES, PREFERRED STOCK,
[SBC LOGO] DEPOSITARY SHARES, COMMON STOCK
---------------------
By this prospectus, we may offer from time to time up to U.S.
$7,500,000,000 of debt securities, shares of preferred stock, depositary shares
representing fractions of shares of preferred stock, or shares of common stock.
---------------------
When we offer securities, we will provide you with a prospectus supplement
describing the terms of the specific issue of securities, including the offering
price of the securities. You should read this prospectus and the accompanying
prospectus supplement carefully before you invest.
Our common stock is listed on the New York Stock Exchange, the Chicago
Stock Exchange and the Pacific Stock Exchange under the symbol "SBC". Any common
stock offered will be listed, subject to notice of issuance, on these exchanges.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
THE DATE OF THIS PROSPECTUS IS MAY 25, 2000.
TABLE OF CONTENTS
PAGE
----
Description of SBC Communications Inc. ..................... 1
Ratio of Earnings to Fixed Charges.......................... 1
Use of Proceeds............................................. 1
Summary Description of the Securities We May Issue.......... 1
Description of Debt Securities We May Offer................. 2
Description of Preferred Stock.............................. 11
Description of Series A Preferred Stock..................... 12
Description of Depositary Shares............................ 12
Description of Common Stock................................. 15
Plan of Distribution........................................ 17
Legal Opinions.............................................. 18
Experts..................................................... 18
Documents Incorporated by Reference......................... 18
Where You Can Find More Information......................... 19
i
DESCRIPTION OF SBC COMMUNICATIONS INC.
SBC Communications Inc. is a holding company incorporated under the laws of
the State of Delaware in 1983. Through our subsidiaries, we provide wireline and
wireless telecommunications services and equipment, directory advertising and
electronic commerce services and software, among other products and services.
Our principal executive offices are located at 175 E. Houston Street, San
Antonio, Texas 78205-2233. Our telephone number is 210-821-4105. We maintain an
Internet site at the following location (which is not an active link):
http://www.sbc.com.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
SBC for the periods indicated. At March 31, 2000, no preferred stock was
outstanding.
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------- --------------------------------
1999 2000 1995 1996 1997 1998 1999
------ ------ ---- ---- ---- ---- ----
7.17 6.68 5.80 5.67 4.10 6.79 6.52
For the purpose of calculating this ratio, earnings consist of income
before income taxes, extraordinary loss, cumulative effect of changes in
accounting principles and fixed charges. Fixed charges include interest on
indebtedness and one-third of rental expense (the portion of rentals
representative of the interest factor).
USE OF PROCEEDS
Unless otherwise specified in the prospectus supplement, we will use the
proceeds from the sale of the securities for the following corporate purposes:
- to provide funds to repay our long- and short-term debt, if any,
- to provide the funds we need to diversify our activities,
- to provide funds for our subsidiaries, and
- to provide funds for our general corporate purposes.
SUMMARY DESCRIPTION OF THE SECURITIES WE MAY ISSUE
We may use this prospectus to offer up to U.S. $7,500,000,000 (or the
equivalent) of:
- Senior debt securities. These debt securities may be convertible or
exchangeable into preferred stock, depositary shares, common stock or equity
securities of a third party issuer. They will be unsecured and will rank
equally with all of our other unsubordinated and unsecured debt.
- Preferred stock, par value $1.00 per share. The preferred stock may be
convertible or exchangeable into other preferred stock, including depositary
shares, common stock or equity securities of a third party issuer. We can
offer different series of preferred stock with different dividend,
liquidation, redemption and voting rights.
- Depositary shares. We have the option of issuing depositary shares that would
represent a fraction of a share of preferred stock.
- Common stock, par value $1.00 per share.
In the case of securities that are exchangeable for securities of a third
party issuer, the applicable prospectus supplement will give you more
information about this issuer, the terms of its securities and the document in
which they are described. Our securities include securities denominated in U.S.
dollars, but we can choose to issue securities in any other currency, including
the Euro.
A prospectus supplement will describe the specific types, amounts, prices
and detailed terms of any of these securities.
-1-
DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
As required by U.S. federal law for all bonds and notes of companies that
are publicly offered, our debt securities will be governed by a document called
the indenture. The indenture is a contract between us and The Bank of New York,
which acts as trustee for you. The trustee has two main roles:
- First, the trustee can enforce your rights against us if we default. There are
some limitations on the extent to which the trustee acts on your behalf,
described later under "-- Remedies if an Event of Default Occurs".
- Second, the trustee performs administrative duties for us, such as sending you
interest payments, transferring your securities to new buyers and sending you
notices.
We may issue as many distinct series of securities under the indenture as
we wish. This section summarizes terms of the securities that are common to all
series. Most of the financial terms and other specific terms of your series are
described in the prospectus supplement attached to the front of this prospectus.
Those terms may vary from the terms described here. The prospectus supplement
may also describe special federal income tax consequences of the debt
securities.
THIS SECTION IS ONLY A SUMMARY
This section and your prospectus supplement summarize all the material
terms of the indenture and your debt securities. They do not, however, describe
every aspect of the indenture and your debt securities.
The indenture and its associated documents, including your debt securities,
contain the full text of the matters described in this section and your
prospectus supplement. The indenture and the debt securities are governed by New
York law. A copy of the indenture has been filed with the SEC as part of our
registration statement. See "-- Where You Can Find More Information" below for
information on how to obtain a copy. Section references in the description that
follows relate to the indenture.
LEGAL OWNERSHIP OF DEBT SECURITIES
We can issue debt securities in registered or bearer form or both, or in
the form of one or more global securities. We refer to those who have debt
securities registered in their own names on the books that we or the trustee
maintain for this purpose, or who hold bearer certificates representing bearer
debt securities, as the "holders" of those debt securities. These persons are
the legal holders of the debt securities. We refer to those who, indirectly
through others, own beneficial interests in debt securities that are not
registered in their own names, as "indirect holders" of those debt securities.
As we discuss below, indirect holders are not legal holders, and investors in
debt securities issued in book-entry form or in street name will be indirect
holders.
BOOK-ENTRY HOLDERS
We may issue debt securities in book-entry form only, as we will specify in
the applicable prospectus supplement. This means debt securities may be
represented by one or more global securities registered in the name of a
financial institution that holds them as depositary on behalf of other financial
institutions that participate in the depositary's book-entry system. These
participating institutions, in turn, hold beneficial interests in the debt
securities on behalf of themselves or their customers.
For registered debt securities, only the person in whose name a debt
security is registered is recognized under the indenture as the holder of that
debt security. Debt securities issued in global form will be issued in the form
of a global security registered in the name of the depositary or its
participants. Consequently, for debt securities issued in global form, we will
recognize only the depositary as the holder of the debt securities and we will
make all payments on the debt securities to the depositary. The depositary
passes along the payments it receives to its participants, which in turn pass
the payments along to their customers who are the beneficial owners. The
depositary and its participants do so under agreements they have made with one
another or with their customers; they are not obligated to do so under the terms
of the debt securities.
As a result, investors in a book-entry security will not own debt
securities directly. Instead, they will own beneficial interests in a global
security, through a bank, broker or other financial institution that
participates in the depositary's book-entry system or holds an interest through
a participant. As long as the debt securities are issued in global form,
investors will be indirect holders, and not holders, of the debt securities.
-2-
STREET NAME HOLDERS
In the future we may terminate a global security or issue debt securities
initially in non-global form. In these cases, investors may choose to hold their
debt securities in their own names or in "street name". Debt securities held by
an investor in street name would be registered in the name of a bank, broker or
other financial institution that the investor chooses, and the investor would
hold only a beneficial interest in those debt securities through an account he
or she maintains at that institution.
For debt securities held in street name, we will recognize only the
intermediary banks, brokers and other financial institutions in whose names the
debt securities are registered as the holders of those debt securities and we
will make all payments on those debt securities to them. These institutions pass
along the payments they receive to their customers who are the beneficial
owners, but only because they agree to do so in their customer agreements or
because they are legally required to do so. Investors who hold debt securities
in street name will be indirect holders, not holders, of those debt securities.
LEGAL HOLDERS
Our obligations, as well as the obligations of the trustee and those of any
third parties employed by us or the trustee, run only to the legal holders of
the debt securities. We do not have obligations to investors who hold beneficial
interests in global securities, in street name or by any other indirect means.
This will be the case whether an investor chooses to be an indirect holder of a
debt security or has no choice because we are issuing the debt securities only
in global form.
For example, once we make a payment or give a notice to the holder, we have
no further responsibility for the payment or notice even if that holder is
required, under agreements with depositary participants or customers or by law,
to pass it along to the indirect holders but does not do so. Similarly, if we
want to obtain the approval of the holders for any purpose -- e.g., to amend the
applicable indenture or to relieve us of the consequences of a default or of our
obligation to comply with a particular provision of the applicable
indenture -- we would seek approval only from the holders, and not the indirect
holders, of the debt securities. Whether and how the holders contact the
indirect holders is up to the holders.
When we refer to you, we mean those who invest in the debt securities being
offered by this prospectus, whether they are the holders or only indirect
holders of those debt securities. When we refer to your debt securities, we mean
the debt securities in which you hold a direct or indirect interest.
SPECIAL CONSIDERATIONS FOR HOLDERS OF BEARER DEBT SECURITIES
We will offer debt securities in bearer form only outside of the United
States to non-U.S. persons. You generally are a non-U.S. person if you are not:
- a citizen or resident of the United States;
- a corporation or partnership, including an entity treated as a corporation or
partnership for United States federal income tax purposes, created or
organized in or under the laws of the United States, any state of the United
States or the District of Columbia;
- an estate the income of which is subject to United States federal income
taxation regardless of its source; or
- a trust if a court within the United States is able to exercise primary
supervision of the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust.
In addition, we may offer bearer securities to offices of some U.S.
financial institutions who have offices located outside the United States. We
will describe any special restrictions on the offer, sale and delivery of bearer
debt securities and any special federal income tax considerations applicable to
bearer debt securities in the prospectus supplement.
SPECIAL CONSIDERATIONS FOR INDIRECT HOLDERS
If you hold debt securities through a bank, broker or other financial
institution, either in book-entry form or in street name, you should check with
your own institution to find out:
- how it handles securities payments and notices;
- whether it imposes fees or charges;
- how it would handle a request for the holders' consent, if ever required;
-3-
- whether and how you can instruct it to send you debt securities registered in
your own name so you can be a holder, if that is permitted in the future;
- how it would exercise rights under the debt securities if there were a default
or other event triggering the need for holders to act to protect their
interests; and
- if the debt securities are in book-entry form, how the depositary's rules and
procedures will affect these matters.
WHAT IS A GLOBAL SECURITY?
A global security is a security held by a depositary, which represents one
or any other number of individual debt securities. Generally, all debt
securities represented by the same global securities will have the same terms.
Each debt security issued in book-entry form will be represented by a
global security that we deposit with and register in the name of a financial
institution or its nominee that we select. The financial institution that we
select for this purpose is called the depositary. Unless we specify otherwise in
the applicable prospectus supplement, The Depository Trust Company, New York,
New York, known as DTC, will be the depositary for all debt securities issued in
book-entry form.
A global security may not be transferred to or registered in the name of
anyone other than the depositary, its nominee or a successor depositary, unless
special termination situations arise. We describe those situations below under
"-- Special Situations When a Global Security Will Be Terminated". As a result
of these arrangements, the depositary, or its nominee, will be the sole
registered owner and holder of all debt securities represented by a global
security, and investors will be permitted to own only beneficial interests in a
global security. Beneficial interests must be held by means of an account with a
broker, bank or other financial institution that in turn has an account with the
depositary or with another institution that does. Thus, an investor whose
security is represented by a global security will not be a holder of the debt
security, but only an indirect holder of a beneficial interest in the global
security.
If the prospectus supplement for a particular debt security indicates that
the debt security will be issued in global form only, then the debt security
will be represented by a global security at all times unless and until the
global security is terminated. We describe the situations in which this can
occur below under "-- Special Situations When a Global Security Will Be
Terminated". If termination occurs, we may issue the debt securities through
another book-entry clearing system or decide that the debt securities may no
longer be held through any book-entry clearing system.
SPECIAL CONSIDERATIONS FOR GLOBAL SECURITIES
As an indirect holder, an investor's rights relating to a global security
will be governed by the account rules of the investor's financial institution
and of the depositary, as well as general laws relating to securities transfers.
We do not recognize this type of investor as a holder of debt securities and
instead deal only with the depositary that holds the global security.
If debt securities are issued only in the form of a global security, an
investor should be aware of the following:
- An investor cannot cause the debt securities to be registered in his or her
name, and cannot obtain non-global certificates for his or her interest in the
debt securities, except in the special situations we describe below;
- An investor will be an indirect holder and must look to his or her own bank or
broker for payments on the debt securities and protection of his or her legal
rights relating to the debt securities, as we describe under "-- Legal
Ownership of Debt Securities" above;
- An investor may not be able to sell interests in the debt securities to some
insurance companies and to other institutions that are required by law to own
their securities in non-book-entry form;
- An investor may not be able to pledge his or her interest in a global security
in circumstances where certificates representing the debt securities must be
delivered to the lender or other beneficiary of the pledge in order for the
pledge to be effective;
- The depositary's policies, which may change from time to time, will govern
payments, transfers, exchanges and other matters relating to an investor's
interest in a global security. We and the trustee have no responsibility for
any aspect of the depositary's actions or for its records of ownership
-4-
interests in a global security. We and the trustee also do not supervise the
depositary in any way;
- The depositary may (and we understand that DTC will) require that those who
purchase and sell interests in a global security within its book-entry system
use immediately available funds and your broker or bank may require you to do
so as well; and
- Financial institutions that participate in the depositary's book-entry system,
and through which an investor holds its interest in a global security, may
also have their own policies affecting payments, notices and other matters
relating to the debt securities. There may be more than one financial
intermediary in the chain of ownership for an investor. We do not monitor and
are not responsible for the actions of any of those intermediaries.
SPECIAL SITUATIONS WHEN A GLOBAL SECURITY WILL BE TERMINATED
In a few special situations described below, the global security will
terminate and interests in it will be exchanged for physical certificates
representing those interests. After that exchange, the choice of whether to hold
securities directly or in street name will be up to the investor. Investors must
consult their own bank or brokers to find out how to have their interests in
securities transferred to their own name, so that they will be direct holders.
We have described the rights of holders and street name investors above under
"-- Legal Ownership of Debt Securities".
The global security will terminate when the following special situations
occur:
- if the depositary notifies us that it is unwilling, unable or no longer
qualified to continue as depositary for that global security and we do not
appoint another institution to act as depositary within 90 days;
- if we notify the trustee that we wish to terminate that global security; or
- if an event of default has occurred with regard to debt securities represented
by that global security and has not been cured or waived. We discuss defaults
later under "-- Default and Related Matters".
The prospectus supplement may also list additional situations for
terminating a global security that would apply only to the particular series of
securities covered by the prospectus supplement. When a global security
terminates, the depositary -- and not we or the trustee -- is responsible for
deciding the names of the institutions that will be the initial direct holders.
(Sections 2.08(f) and (g))
IN THE REMAINDER OF THIS SECTION "YOU" MEANS DIRECT HOLDERS AND NOT "STREET
NAME" OR OTHER INDIRECT HOLDERS OF SECURITIES. INDIRECT HOLDERS SHOULD READ THE
PREVIOUS SUBSECTION ENTITLED "LEGAL OWNERSHIP OF DEBT SECURITIES".
OVERVIEW OF REMAINDER OF THIS SECTION
The remainder of this section summarizes:
- ADDITIONAL MECHANICS relevant to the securities under normal circumstances,
such as how you transfer ownership and where we make payments;
- Your rights under several SPECIAL SITUATIONS, such as if we merge with another
company, or if we want to change a term of the securities; and
- YOUR RIGHTS IF WE DEFAULT or experience other financial difficulties.
ADDITIONAL MECHANICS
FORM, EXCHANGE AND TRANSFER
The securities will be issued:
- in fully registered or in unregistered (bearer) form; and
- in denominations that are even multiples of $1,000. (Section 2.02(a)(8))
You may have your securities broken into more securities of smaller
denominations or combined into fewer securities of larger denominations, as long
as the total principal amount is not changed. This is called an "exchange".
(Section 2.08(a))
If you are holding bearer securities and it is permitted by the terms of
your series of debt securities, you may exchange bearer debt securities for an
equal amount of registered or bearer debt securities of the same series and date
of maturity. No bearer debt securities will be exchanged for registered
securities if in doing so we would suffer adverse consequences under any U.S.
law applicable to the
-5-
exchange. Registered debt securities may not be exchanged for bearer debt
securities.
You may exchange or transfer your securities at the office of the
registrar. The registrar acts as our agent for registering securities in the
names of holders and for transferring and exchanging securities, as well as
maintaining the list of registered holders. We have appointed The Bank of New
York to perform the role of registrar. We may change this appointment to another
entity or perform it ourselves. In order to exchange bearer securities, you have
to deliver them to the paying agent, together with all unmatured coupons for
interest and all matured coupons in default. (Section 2.08(b))
We can designate additional registrars or paying agents, acceptable to the
trustee, and they would be named in the prospectus supplement. We may cancel the
designation of any particular registrar or paying agent. We may also approve a
change in the office through which any registrar or paying agent acts. We must
maintain a registrar and paying agent office in the Borough of Manhattan in The
City of New York. If at any time we do not maintain a registrar or paying agent,
the trustee will act as such. (Section 2.04)
There is no charge for exchanges and transfers. You will not be required to
pay a service charge to transfer or exchange securities, but you may be required
to pay for any tax or other governmental charge associated with the exchange or
transfer. The transfer or exchange will only be made if the registrar is
satisfied with your proof of ownership. (Section 2.08)
At certain times, you may not be able to transfer or exchange your
securities. If we redeem any series of securities, or any part of any series,
then we may prevent you from transferring or exchanging these securities. We may
do this during the period beginning 15 days before the day we mail the notice of
redemption and ending on the day of that mailing, in order to freeze the list of
holders so we can prepare the mailing. We may also refuse to register transfers
or exchanges of securities selected for redemption, except that we will continue
to permit transfers and exchanges of the unredeemed portion of any security
being partially redeemed. (Section 2.08(d))
REPLACING YOUR LOST OR DESTROYED CERTIFICATES
If you bring a mutilated certificate or coupon to the trustee, we will
issue a new certificate or coupon to you in exchange for the mutilated one.
Please note that the trustee may have additional requirements that you must meet
in order to do this. (Section 2.09)
If you claim that a certificate or coupon has been lost, completely
destroyed, or wrongfully taken from you, then the trustee will give you a
replacement certificate or coupon if you meet the trustee's requirements. Also,
we may require you to provide reasonable security or indemnity to protect us
from any loss we may incur from replacing your certificates or coupons. We may
also charge you for our expenses in replacing your security. (Section 2.09)
PAYMENT AND PAYING AGENTS
We will pay interest to you if you are a direct holder listed in the
registrar's records at the close of business on a particular day in advance of
each due date for interest, even if you no longer own the security on the
interest due date. That particular day, usually about two weeks in advance of
the interest due date, is called the "record date" and is stated in the
prospectus supplement. (Section 2.05) Holders buying and selling securities must
work out between them how to compensate for the fact that we will pay all the
interest for an interest period to the one who is the registered holder on the
record date. The most common manner is to adjust the sales price of the
securities to prorate interest fairly between buyer and seller. This prorated
interest amount is called "accrued interest."
We will pay interest, principal and any other money due on the securities
at the corporate trust office of the trustee in New York City. That office is
currently located at The Bank of New York, 101 Barclay Street, Floor 21 West,
New York, New York 10286. You must make arrangements to have your payments
picked up at or wired from that office. We may also choose to pay interest by
mailing checks. (Section 2.05)
"STREET NAME" AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR BROKERS
FOR INFORMATION ON HOW THEY WILL RECEIVE PAYMENTS.
We may also arrange for additional payment offices, and may cancel or
change these offices, including our use of the trustee's corporate trust office.
These offices are called "paying agents". We
-6-
may also choose to act as our own paying agent. We must notify you if we change
the paying agents for any particular series of securities. (Section 2.04)
PAYMENT OF BEARER SECURITIES
We will only pay interest on bearer debt securities when you present and
surrender the coupons for the interest installments evidenced by the bearer
securities as they mature. You have to present your coupons at a paying agency
of SBC located outside of the United States. We will maintain a non-U.S. paying
agent for two years after the principal of a series of bearer debt securities
has become due. We will continue to maintain the paying agent after that period,
if it is necessary to comply with U.S. tax law or regulations. We will provide
the paying agent with the necessary funds for payment upon reasonable notice. We
generally will not make any payments in the United States. However, if payment
outside of the United States is illegal or precluded by exchange controls or
similar restrictions in a foreign country, we may instruct the trustee to make
payments at a paying agent located in the United States. (Section 2.05(c))
You can prove your ownership of a bearer security by presenting the actual
security, or a certificate or affidavit executed by the person holding the
bearer security or executed by a depositary with whom the bearer securities were
deposited, if the trustee is satisfied with the certificate or affidavit.
(Section 2.07(b))
NOTICES
We and the trustee will send notices regarding the securities only to
direct holders, using their addresses as listed in the trustee's records.
(Section 10.02)
Regardless of who acts as paying agent, all money we forward to a paying
agent that remains unclaimed will, at our request, be repaid to us at the end of
two years after the amount was due to the direct holder. After that two-year
period, you may look only to us for payment and not to the trustee, any other
paying agent or anyone else. (Section 8.03)
SPECIAL SITUATIONS
MERGERS AND SIMILAR TRANSACTIONS
We are generally permitted to consolidate or merge with another company. We
are also permitted to sell substantially all of our assets to another company,
or to buy substantially all of the assets of another company. However, we may
not take any of these actions unless all the following conditions are met:
- Where we merge out of existence or sell our assets, the other company may not
be organized under the laws of a foreign country. It must be a corporation
organized under the laws of a State or the District of Columbia or under
federal law.
- The company we merge into or sell to must agree to be legally responsible for
our debt securities.
- The merger, sale of assets or other transaction must not cause a default on
the securities, and we must not already be in default, unless the merger or
other transaction would cure the default. For purposes of this no-default
test, a default would include an event of default that has occurred and not
been cured, as described below under "-- Events of Default -- What Is an Event
of Default?". A default for this purpose would also include any event that
would be an event of default if the requirements for giving us default notice
or our default having to exist for a specific period of time were disregarded.
(Section 5.01)
MODIFICATION AND WAIVER OF YOUR CONTRACTUAL RIGHTS
Under certain circumstances, we can make changes to the indenture and the
securities. Some types of changes require the approval of each security holder
affected, some require approval by a majority vote, and some changes do not
require any approval at all. (Sections 9.01 -- 9.06)
Changes Requiring Your Approval. First, there are changes that cannot be
made to your securities without your specific approval. Following is a list of
those types of changes:
- reduce the percentage of holders of securities who must consent to a waiver or
amendment of the indenture;
- reduce the rate of interest on any security or change the time for payment of
interest;
- reduce the principal due on any security or change the fixed maturity of any
security;
- waive a default in the payment of principal or interest on any security;
- change the currency of payment on a security;
-7-
- in the case of convertible or exchangeable securities, make changes to your
conversion or exchange rights that would be adverse to your interests;
- change the right of holders to waive an existing default by majority vote;
- reduce the amount of principal or interest payable to you following a default
or change your conversion or exchange rights, or impair your right to sue for
payment; and
- make any change to this list of changes that require your specific approval.
(Section 9.02(a))
Changes Requiring a Majority Vote. The second type of change to the
indenture and the securities is the kind that requires a vote in favor by
security holders owning a majority of the principal amount of the particular
series affected. Most changes fall into this category, except for clarifying
changes and certain other changes that would not adversely affect holders of the
securities. The same vote would be required for us to obtain a waiver of a past
default. However, we cannot obtain a waiver of a payment default or any other
aspect of the indenture or the securities listed in the first category described
previously under "Changes Requiring Your Approval" unless we obtain your
individual consent to the waiver. (Section 9.02(a))
Changes Not Requiring Your Approval. The third type of change does not
require any vote by holders of securities. This type is limited to
clarifications of ambiguous contract terms and other changes that would not
adversely affect holders of the securities. (Section 9.01)
Further Details Concerning Voting. When taking a vote, we will use the
following rules to decide how much principal amount to attribute to a security:
- For original issue discount securities, we will use the principal amount that
would be due and payable on the voting date if the maturity of the securities
were accelerated to that date because of a default.
- For securities denominated in one or more foreign currencies or currency
units, we will use the U.S. dollar equivalent determined on the date of
original issuance of these securities.
Securities will not be considered outstanding, and therefore not eligible
to vote, if we have deposited or set aside in trust for you money for their
payment or redemption. A security does not cease to be outstanding because we or
an affiliate of us is holding the security. (Section 2.10)
We will generally be entitled to set any day as a record date for the
purpose of determining the holders of outstanding securities that are entitled
to vote or take other action under the indenture. However, the indenture does
not oblige us to fix any record date at all. If we set a record date for a vote
or other action to be taken by holders of a particular series, that vote or
action may be taken only by persons who are holders of outstanding securities of
that series on the record date and must be taken within 90 days following the
record date. (Section 9.02(b))
"STREET NAME" AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR
BROKERS FOR INFORMATION ON HOW APPROVAL MAY BE GRANTED OR DENIED IF WE SEEK TO
CHANGE THE INDENTURE OR THE SECURITIES OR REQUEST A WAIVER.
DISCHARGE OF OUR OBLIGATIONS
We can fully discharge ourselves from any payment or other obligations on
the securities of any series if we make a deposit for you with the trustee. The
deposit must be held in trust for your benefit and the benefit of all other
direct holders of the securities and must be a combination of money and U.S.
government or U.S. government agency notes or bonds that will generate enough
cash to make interest, principal and any other payments on the securities on
their various due dates.
However, we cannot discharge ourselves from the obligations under any
convertible or exchangeable securities, unless we provide for it in the terms of
these securities and the prospectus supplement.
If we accomplish full discharge, as described above, you will have to rely
solely on the trust deposit for repayment of the securities. You could not look
to us for repayment in the unlikely event of any shortfall. Conversely, the
trust deposit would most likely be protected from claims of our lenders and
other creditors if we ever become bankrupt or insolvent.
We will indemnify the trustee and you against any tax, fee or other charge
imposed on the U.S. government obligations we deposited with the
-8-
trustee or against the principal and interest received on these obligations.
(Sections 8.01 -- 8.04)
REDEMPTION
WE MAY CHOOSE TO REDEEM YOUR SECURITIES
We may be able to pay off your securities before their normal maturity. If
we have this right with respect to your specific securities, the right will be
mentioned in the prospectus supplement. It will also specify when we can
exercise this right and how much we will have to pay in order to redeem your
securities.
If we choose to redeem your securities, we will mail written notice to you
not less than 30 days prior to redemption, and not more than 60 days prior to
redemption. Also, you may be prevented from exchanging or transferring your
securities when they are subject to redemption, as described under "-- Form,
Exchange and Transfer" above. (Article 3)
LIENS ON ASSETS
The indenture does not restrict us from pledging or otherwise encumbering
any of our assets and those of our subsidiaries.
DEFAULT AND RELATED MATTERS
RANKING COMPARED TO OTHER CREDITORS
The securities are not secured by any of our property or assets.
Accordingly, your ownership of securities means you are one of our unsecured
creditors. The securities are not subordinated to any of our other debt
obligations and therefore they rank equally with all our other unsecured and
unsubordinated indebtedness. However, the trustee has a right to receive payment
for its administrative services prior to any payment to security holders after a
default.
EVENTS OF DEFAULT
You will have special rights if an event of default occurs and is not
cured, as described later in this subsection.
What Is an Event of Default? The term "event of default" with respect to
any series of securities means any of the following:
- We fail to make any interest payment on a security when it is due, and we do
not cure this default within 90 days.
- We fail to make any payment of principal when it is due at the maturity of any
security or upon redemption.
- We fail to comply with any of our other agreements regarding a particular
series of securities or with a supplemental indenture, and after we have been
notified of the default by the trustee or holders of 25% in principal amount
of the series, we do not cure the default within 90 days.
- We file for bankruptcy, or other events in bankruptcy, insolvency or
reorganization occur.
- Any other event of default described in the prospectus supplement occurs.
REMEDIES IF AN EVENT OF DEFAULT OCCURS
You will have the following remedies if an event of default occurs:
Acceleration. If an event of default has occurred and has not been cured or
waived, then the trustee or the holders of 25% in principal amount of the
securities of the affected series may declare the entire principal amount of and
any accrued interest on all the securities of that series to be due and
immediately payable. An acceleration of maturity may be cancelled by the holders
of at least a majority in principal amount of the securities of the affected
series, if all events of default have been cured or waived. (Section 6.02)
Special Duties of Trustee. If an event of default occurs, the trustee will
have some special duties. In that situation, the trustee will be obligated to
use those of its rights and powers under the indenture, and to use the same
degree of care and skill in doing so, that a prudent person would use in that
situation in conducting his or her own affairs. (Section 7.01)
Majority Holders May Direct the Trustee to Take Actions to Protect Their
Interests. The trustee is not required to take any action under the indenture at
the request of any holders unless the holders offer the trustee reasonable
protection from expenses and liability. This is called an "indemnity". If the
trustee is provided with an indemnity reasonably satisfactory to it, the holders
of a majority in principal amount of the relevant series of debt securities may
direct the time, method and place of conducting any lawsuit or other formal
legal action seeking any remedy available to the trustee. These majority holders
may also direct the trustee in
-9-
performing any other action under the indenture. (Section 6.05)
Individual Actions You May Take if the Trustee Fails to Act. Before you
bypass the trustee and bring your own lawsuit or other formal legal action or
take other steps to enforce your rights or protect your interests relating to
the securities, the following must occur:
- You must give the trustee written notice that an event of default has occurred
and remains uncured.
- The holders of 25% in principal amount of all outstanding securities of the
relevant series must make a written request that the trustee take action
because of the default, and must offer reasonable indemnity to the trustee
against the cost and other liabilities of taking that action.
- The trustee must not have taken action for 60 days after receipt of the above
notice and offer of indemnity.
- During the 60-day period, the holders of a majority in principal amount of the
securities of that series do not give the trustee a direction inconsistent
with the request. (Section 6.06)
However, you are entitled at any time to bring an individual lawsuit for
the payment of the money due on your security on or after its due date. (Section
6.07)
WAIVER OF DEFAULT
The holders of a majority in principal amount of the relevant series of
debt securities may waive a default for all the relevant series of debt
securities. If this happens, the default will be treated as if it has not
occurred. No one can waive a payment default on your debt security, however,
without your individual approval. (Section 6.04)
WE WILL GIVE THE TRUSTEE INFORMATION ABOUT DEFAULTS ANNUALLY
Every year we will give to the trustee a written statement of one of our
officers certifying that to the best of his or her knowledge we are in
compliance with the indenture and the debt securities, or else specifying any
default. (Section 4.03)
The trustee may withhold from you notice of any uncured default, except for
payment defaults, if it determines that withholding notice is in your interest.
(Section 7.05)
"STREET NAME" AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR
BROKERS FOR INFORMATION ON HOW TO GIVE NOTICE OR DIRECTION TO OR MAKE A REQUEST
OF THE TRUSTEE AND HOW TO MAKE OR CANCEL A DECLARATION OF ACCELERATION.
ORIGINAL ISSUE DISCOUNT SECURITIES
The debt securities may be issued as original issue discount securities,
which will be offered and sold at a substantial discount from their principal
amount. Only a discounted amount will be due and payable when the trustee
declares the acceleration of the maturity of these debt securities after an
event of default has occurred and continues, as described under "-- Remedies if
an Event of Default Occurs" above.
CONVERSION OF CONVERTIBLE DEBT SECURITIES
Your debt securities may be convertible into our preferred stock, including
depositary shares representing preferred stock, or common stock, or they may be
exchangeable for equity securities of another issuer if the prospectus
supplement so provides. If your debt securities are convertible or exchangeable,
the prospectus supplement will include provisions as to whether conversion or
exchange is mandatory, at your option or at our option. The prospectus
supplement would also include provisions regarding the adjustment of the number
of shares of common stock or other securities you will receive upon conversion
or exchange. In addition, the prospectus supplement will contain the conversion
price or exchange price and mechanisms for adjusting this price. In the case of
exchangeable debt securities, the prospectus supplement will set forth
information about the issuer for whose securities you would exchange your debt,
or where that information can be found.
WE MAY NOT ADJUST THE EXCHANGE OR CONVERSION PRICE
Unless it is specified in the prospectus supplement, we will not adjust the
exchange or conversion price of your debt securities for interest on your
securities or for any dividends payable on the new securities you will receive.
However, if you convert or exchange your securities between a regular record
date for the payment of interest and the next following interest payment date,
you must include funds equal to the interest that would be payable on
-10-
your securities on this following interest payment date. We are not required to
issue fractional shares of preferred stock, depositary shares or common stock,
but, unless we otherwise specify in the prospectus supplement, we will pay you a
cash adjustment calculated on the basis of the following:
- for debt securities convertible into preferred stock or depositary shares, the
liquidation preference of the series of preferred stock;
- for common stock, the market value of the common stock; and
- for exchangeable debt securities, the market value of the securities that you
will exchange your securities for.
TAX CONSEQUENCES
You may be deemed to have received a distribution that would be taxed as a
dividend under U.S. federal income tax law in a number of circumstances where
you receive a distribution that results in an adjustment of the conversion or
exchange price of your securities. In other circumstances, if your conversion or
exchange price will not be adjusted, that may result in a taxable dividend on
the common stock or preferred stock that you will receive upon conversion or on
the securities that were exchanged for debt securities.
REGARDING THE TRUSTEE
We maintain banking relationships in the ordinary course of business with
the trustee. The trustee is also the trustee under indentures with others of our
subsidiaries.
DESCRIPTION OF PREFERRED STOCK
The following briefly summarizes the material terms of our preferred stock
other than pricing and related terms disclosed in the accompanying prospectus
supplement. You should read the particular terms of any series of preferred
stock we offer, which will be described in more detail in the prospectus
supplement relating to that series. The prospectus supplement will also state
whether any of the terms summarized below do not apply to the series of
preferred stock being offered. In addition, for each series of preferred stock,
we will file a certificate of designations containing the specific terms of the
series as an exhibit to the registration statement or we will incorporate it by
reference before we issue any preferred stock.
GENERAL
We are authorized to issue up to 10,000,000 shares of preferred stock, par
value $1.00 per share. Under our restated certificate of incorporation, our
board of directors is authorized to issue shares of preferred stock in one or
more series. To establish a series of preferred stock the board must set the
following terms:
- the number of shares to be included in the series;
- the designation, powers, preferences and rights of the shares of the series;
- the qualifications, limitations or restrictions of the series; and
- the variations as between each series.
Before we issue any series of preferred stock, our board of directors will adopt
resolutions creating and designating the series as a series of preferred stock.
Stockholders will not need to approve these resolutions.
As of May 1, 2000, no shares of preferred stock were outstanding, but we
have designated 8,000,000 shares of preferred stock as Series A Junior
Participating Preferred Stock issuable pursuant to a rights agreement, which is
described below under "Description of Series A Preferred Stock". However, the
rights exercisable under this plan expired on January 27, 1999, and we have not
adopted a new rights plan.
TERMS CONTAINED IN PROSPECTUS SUPPLEMENT
A prospectus supplement will contain the dividend, liquidation, redemption
and voting rights of a series of preferred stock. The prospectus supplement will
describe the following terms of a series of preferred stock:
- the designation and stated value per share of the preferred stock and the
number of shares offered;
- the amount of liquidation preference per share;
- the initial public offering price at which we will issue the preferred stock;
-11-
- the dividend rate or method of calculation, the payment dates for dividends
and the dates from which dividends will start to cumulate;
- any redemption or sinking fund provisions;
- any conversion or exchange rights;
- whether we have elected to offer depositary shares, as described below under
"Description of Depositary Shares"; and
- any additional voting, dividend, liquidation, redemption, sinking fund and
other rights or restrictions.
NO PREEMPTIVE RIGHTS
The holders of preferred stock will have no preemptive rights to buy any
additional shares. The preferred stock will be, when issued, fully paid and
nonassessable. Neither the par value nor the liquidation preference can show you
the price at which the preferred stock will actually trade on or after the date
of issuance. The applicable prospectus supplement will describe some of the U.S.
federal income tax consequences of the purchase and ownership of the series of
preferred stock.
DESCRIPTION OF SERIES A PREFERRED STOCK
The information set forth below summarizes some of the provisions of our
Series A Junior Participating Preferred Stock. This series was never issued, but
remains designated as a series, so we must describe it.
Upon issuance, each share of Series A Preferred Stock is entitled to
quarterly cash dividends. The Series A Preferred Stock is not redeemable. Each
share of Series A Preferred Stock has 200 votes on all matters submitted to a
vote of our stockholders, voting together as one class with the common stock.
The Series A Preferred Stock ranks junior to all other series of our preferred
stock as to the payment of dividends and the distribution of assets, unless the
terms of any such series provide otherwise. It is entitled to a liquidation
preference if we should liquidate, dissolve or wind-up and to a preference in
the payment of dividends over stock ranking junior as to dividends or upon
liquidation. Up to 8,000,000 shares of Series A Preferred Stock are authorized
for issuance.
DESCRIPTION OF DEPOSITARY SHARES
We may offer depositary shares evidenced by depositary receipts. Each
depositary receipt represents a fraction of a share of the particular series of
preferred stock issued and deposited with a depositary. The fraction of a share
of preferred stock which each depositary share represents will be set forth in
the prospectus supplement relating to those depositary shares.
We will describe the transfer agent for each series of preferred stock in
the applicable prospectus supplement.
DESCRIPTION OF DEPOSITARY SHARES
The following briefly summarizes the material provisions of the deposit
agreement and of the depositary shares and depositary receipts, other than
pricing and related terms disclosed in the accompanying prospectus supplement.
You should read the particular terms of any depositary shares and any depositary
receipts that we offer. You should also read the deposit agreement relating to
the particular series of preferred stock and the more detailed description of
the deposit agreement in the prospectus supplement. The prospectus supplement
will also state whether any of the generalized provisions summarized below do
not apply to the depositary shares or depositary receipts being offered.
GENERAL
We will deposit the shares of any series of preferred stock represented by
depositary shares according to the provisions of a deposit agreement between us
and a bank or trust company which we will select as our preferred stock
depositary. The depositary must have its principal office in the United States
and have a combined capital and surplus of at least $50,000,000. Each owner of a
depositary share will be entitled to all the rights and preferences of the
underlying preferred stock in proportion to the applicable fraction of a share
of preferred stock represented by the depositary share. These rights include
dividend, voting, redemption, conversion and liquidation rights. The depositary
-12-
will send you all reports and communications which we will deliver to the
depositary and which we have to furnish to you.
The following is a summary of the deposit agreement. For more complete
information, you should read the entire agreement and the depositary receipt.
Directions on how to obtain copies of these are provided under "-- Where You Can
Find More Information" below.
DEPOSITARY RECEIPTS
The depositary shares will be evidenced by depositary receipts issued
pursuant to the deposit agreement. Depositary receipts will be distributed to
anyone who is buying the fractional shares of preferred stock in accordance with
the terms of the applicable prospectus supplement. We will either file the forms
of deposit agreement and depositary receipt as exhibits to the registration
statement of which this prospectus is a part, or we will incorporate them by
reference into that registration statement.
While definitive engraved depositary receipts (certificates) are being
prepared, we may instruct the depositary to issue temporary depositary receipts,
which will entitle you to all the rights of the definitive depositary receipts
and be substantially in the same form. The depositary will prepare definitive
depositary receipts without unreasonable delay, and we will pay for the exchange
of your temporary depositary receipts for definitive depositary receipts.
WITHDRAWAL OF PREFERRED STOCK
You may receive the number of whole shares of your series of preferred
stock and any money or other property represented by those depositary receipts
after surrendering the depositary receipts at the corporate trust office of the
depositary. Partial shares of preferred stock will not be issued. If the
depositary shares which you surrender exceed the number of depositary shares
that represent the number of whole shares of preferred stock you wish to
withdraw, then the depositary will deliver to you at the same time a new
depositary receipt evidencing the excess number of depositary shares. Once you
have withdrawn your preferred stock, you will not be entitled to re-deposit that
preferred stock under the deposit agreement in order to receive depositary
shares. We do not expect that there will be any public trading market for
withdrawn shares of preferred stock.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary has agreed to pay to you the cash dividends or other cash
distributions it receives on preferred stock, after deducting its fees and
expenses. You will receive these distributions in proportion to the number of
depositary shares you own. The depositary will distribute only whole U.S.
dollars and cents. The depositary will add any fractional cents not distributed
to the next sum received for distribution to record holders of depositary
shares.
In the event of a non-cash distribution, the depositary will distribute
property to the record holders of depositary shares entitled to it, unless the
depositary determines that it is not feasible to make such a distribution, in
which case the depositary may, with our approval, sell the property and
distribute the net proceeds from the sale to the holders.
REDEMPTION OF DEPOSITARY SHARES
If we redeem a series of preferred stock represented by depositary shares,
then we will give the necessary proceeds to the depositary. The depositary will
then redeem the depositary shares using the funds they received from us for the
preferred shares. The depositary will notify the record holders of the
depositary shares to be redeemed not less than 30 nor more than 60 days before
the date fixed for redemption at the holders' addresses appearing in the
depositary's books. The redemption price per depositary share will be equal to
the applicable fraction of the redemption price payable per share for the
applicable series of the preferred stock. Whenever we redeem shares of preferred
stock held by the depositary, the depositary will redeem the depositary shares
representing the shares of preferred stock on the same day. If fewer than all
the depositary shares of a series are to be redeemed, the depositary shares will
be selected by lot or ratably as the depositary will decide.
After the date fixed for redemption, the depositary shares called for
redemption will no longer be considered outstanding. Therefore, all your rights
as holders of the depositary shares will cease, except that you will still be
entitled to receive any cash payable upon the redemption and any money or other
property to which you were entitled at the time of redemption.
-13-
VOTING THE PREFERRED STOCK
How do you vote? The depositary will notify you of any upcoming vote and
arrange to deliver our voting materials to you, if you are a holder of record at
that time. The record date for determining if you are a holder of depositary
shares is the same as the record date for the preferred stock. The materials you
will receive will (1) describe the matters to be voted on and (2) explain how
you, on a certain date, may instruct the depositary to vote the shares
underlying your depositary receipts as you direct. For instructions to be valid,
the depositary must receive them on or before the date specified. The depositary
will try, as far as practical, to vote the shares as you instruct. We agree to
do anything the depositary asks us to do in order to enable it to vote as you
instruct. If you do not instruct the depositary how to vote your shares, the
depositary will abstain from voting those shares.
CONVERSION OR EXCHANGE
What happens when we convert preferred stock into other securities, or
exchange it for securities of another company? The depositary will convert or
exchange all your depositary shares on the same day that the preferred stock
underlying your depositary receipts is converted or exchanged. In order for the
depositary to do so, we will need to deposit the other preferred stock, common
stock or other securities into which the preferred stock is to be converted or
for which it will be exchanged.
The exchange or conversion rate per depositary share will be equal to:
- the exchange or conversion rate per share of preferred stock, multiplied by
the fraction of a share of preferred stock represented by one depositary
share,
- plus all money and any other property represented by the depositary shares,
and
- including all amounts paid by us for dividends that have accrued on the
preferred stock on the exchange or conversion date and that have not yet been
paid.
The following are some more terms of conversions and exchanges that you
should keep in mind:
The depositary shares, as such, cannot be converted or exchanged into other
preferred stock, common stock, securities of another issuer or any other
securities or property of us. Nevertheless, if so specified in the applicable
prospectus supplement, you may be able to surrender the depositary receipts to
the depositary with written instructions asking the depositary to instruct us to
convert the preferred stock represented by the depositary shares into other
shares of preferred stock or common stock of us or to exchange the preferred
stock for securities of another issuer. If you have this right, we have agreed
that we will cause the conversion or exchange of the preferred stock using the
same procedures as we use for the delivery of preferred stock. If you are only
converting part of your depositary shares represented by a depositary receipt,
new depositary receipts will be issued for any depositary shares that you do not
convert or exchange.
TAXATION
As owner of depositary shares, you will be treated for U.S. federal income
tax purposes as if you were an owner of the series of preferred stock
represented by the depositary shares. Therefore, you will be required to take
into account for U.S. federal income tax purposes income and deductions to which
you would be entitled if you were a holder of the underlying series of preferred
stock. In addition,
- no gain or loss will be recognized for U.S. federal income tax purposes upon
the withdrawal of preferred stock in exchange for depositary shares as
provided in the deposit agreement,
- the tax basis of each share of preferred stock to you as exchanging owner of
depositary shares will, upon exchange, be the same as the aggregate tax basis
of the depositary shares exchanged for the preferred stock, and
- if you held the depositary shares as a capital asset at the time of the
exchange for preferred stock, the holding period for shares of the preferred
stock will include the period during which you owned the depositary shares.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
How may the deposit agreement be amended? We may agree with the depositary
to amend the deposit agreement and the form of depositary receipt without your
consent at any time. However, if the amendment adds or increases fees or charges
or prejudices an important right of holders, it will only become effective with
the approval of holders of at
-14-
least a majority of the affected depositary shares then outstanding. If an
amendment becomes effective, and you continue to hold your depositary receipts,
you are deemed to agree to the amendment and to be bound by the amended deposit
agreement.
How may the deposit agreement be terminated? The deposit agreement
automatically terminates if:
- all outstanding depositary shares have been redeemed;
- each share of preferred stock has been converted into or exchanged for common
stock; or
- a final distribution in respect of the preferred stock has been made to the
holders of depositary shares in connection with our liquidation, dissolution
or winding-up.
We may also terminate the deposit agreement at any time we wish. If we do
so, the depositary will give you notice of termination not less than 30 days
before the termination date. Once you surrender your depositary receipts to the
depositary, it will send you the number of whole or fractional shares of the
series of preferred stock underlying your depositary receipts.
CHARGES OF DEPOSITARY AND THE EXPENSES
We will pay all transfer and other taxes and governmental charges in
connection with the existence of the depositary arrangements. We will pay
charges of the depositary for the initial deposit of the preferred stock and any
redemption. You will pay other transfer and other taxes and governmental charges
and the charges that are expressly provided in the deposit agreement to be for
your account.
LIMITATIONS ON OUR OBLIGATIONS AND LIABILITY TO HOLDERS OF DEPOSITARY RECEIPTS
The deposit agreement expressly limits our obligations and the obligations
of the depositary to you. It also limits our liability and the liability of the
depositary. We and the depositary:
- are only obligated to take the actions specifically set forth in the deposit
agreement in good faith;
- are not liable if either of us is prevented or delayed by law or circumstances
beyond our control from performing our obligations under the deposit
agreement;
- are not liable if either of us exercises discretion permitted under the
deposit agreement;
- have no obligation to become involved in a lawsuit or other proceeding related
to the depositary receipts or the deposit agreement on your behalf or on
behalf of any other party, unless you provide us with satisfactory indemnity;
- may rely upon any written advice of counsel or accountants and on any
documents we believe in good faith to be genuine and to have been signed or
presented by the proper party.
In the deposit agreement, we and the depositary agree to indemnify each
other under certain circumstances.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by notifying us of its election to do
so. In addition, we may remove the depositary at any time. The resignation or
removal will take effect when we appoint a successor depositary and it accepts
the appointment. We must appoint the successor depositary within 60 days after
delivery of the notice of resignation or removal and the new depositary must be
a bank or trust company having its principal office in the United States and
having a combined capital and surplus of at least $50,000,000.
DESCRIPTION OF COMMON STOCK
Our authorized share capital consists of 7,010,000,000 shares, of which
7,000,000,000 are common shares having a par value of $1 per share and
10,000,000 are preferred shares having a par value of $1 per share. As of April
28, 2000, 3,401,719,865 shares of common stock were outstanding. The common
stock is listed on the NYSE, the Chicago Stock Exchange and the Pacific Stock
Exchange under the symbol "SBC".
The following briefly summarizes the provisions of our restated certificate
of incorporation and our bylaws that are important for you. Both documents are
incorporated by reference as exhibits to the registration statement and you can
obtain them
-15-
as described below in "Where you can find more information".
You should note that some of the provisions of our restated certificate of
incorporation and the bylaws may tend to deter any potential unfriendly tender
offers or other efforts to obtain control of us. At the same time, these
provisions will tend to assure continuity of management and corporate policies
and to induce any persons seeking control or a business combination with us to
negotiate on terms acceptable to our then-elected board of directors.
GENERAL
All outstanding shares of common stock are, and any shares of common stock
offered will, when issued, be fully paid and nonassessable.
We typically do not issue physical stock certificates. Instead, we record
evidence of your stock ownership solely on our corporate records. However, we
will issue a physical stock certificate to you if you so request.
Holders of common stock do not have any conversion, redemption, preemptive
or cumulative voting rights. In the event of our dissolution, liquidation or
winding-up, common stockholders share ratably in any assets remaining after all
creditors are paid in full, including holders of our debt securities and after
the liquidation preference of holders of preferred stock has been satisfied.
The transfer agent for the common stock is First Chicago Trust Company of
New York, P.O. Box 2508, Jersey City, New Jersey 07303-2508.
DIVIDENDS
Common stockholders are entitled to participate equally in dividends when
dividends are declared by our board of directors out of funds legally available
for dividends.
VOTING RIGHTS
Each holder of common stock is entitled to one vote for each share for all
matters voted on by common stockholders. Holders of common stock may not
cumulate their votes in the election of directors. Directors are elected by a
plurality of the votes cast, while all other matters are determined by a
majority of the votes cast, unless otherwise required by law or our restated
certificate of incorporation.
At least 40% of the shares entitled to vote at the meeting must be present
in person or by proxy, in order to constitute a quorum.
BOARD OF DIRECTORS
Our bylaws provide that our board of directors shall be divided into three
classes each consisting of an equal, or as nearly equal as possible, number of
directors. Each class will be elected for a three-year term, and the term of
each class will expire in succeeding years. It will, therefore, require
elections in three consecutive years to reelect or to replace our entire board
of directors. At any meeting of our board of directors, a majority of the total
number of the directors constitutes a quorum.
SUPERMAJORITY VOTE FOR BUSINESS COMBINATIONS
Our bylaws also provide that a number of business combinations must be
approved by an affirmative vote of the holders of 66% of the then-outstanding
shares of our capital stock entitled to vote generally in the election of
directors, voting together as a single class. A vote of approval is required for
any of the following business combinations to which an interested stockholder
beneficially owning more than ten percent of the voting stock or any of its
affiliates is a party:
- mergers or consolidations;
- sales, leases, exchanges, mortgages or other dispositions of property in
excess of $10,000,000 fair market value;
- any issuance or transfer of securities of us or one of our subsidiaries having
a fair market value of $10,000,000 or more;
- any plan or proposal for liquidation or dissolution; and
- reclassifications of securities or recapitalization of SBC.
The 66% vote of approval is not required if:
- the business combination is approved by a majority of directors not affiliated
with any interested stockholder; or
- the consideration received for their interest in SBC reflects a fair value for
their interest in SBC,
-16-
which is determined by a formula described in the bylaws; and
- certain other requirements are met, including maintenance of dividends during
the business combination and the furnishing of information about the business
combination to our stockholders.
AMENDMENT OF BYLAWS
Our restated certificate of incorporation requires a two-thirds affirmative
vote of the stockholders to amend any bylaw, which provides for:
- the maximum number of directors on our board;
- a classified board with staggered terms of office; or
- approval by the stockholders or by our board of directors of any business
combination.
ACTION WITHOUT STOCKHOLDER MEETING
Our restated certificate of incorporation also requires that stockholders
representing at least two-thirds of the total number of shares must sign a
written consent for any action without a meeting of the stockholders.
PLAN OF DISTRIBUTION
We may sell securities to purchasers, directly through agents, dealers, or
underwriters, or through a combination of any of those methods of sale.
The distribution of the securities may be made from time to time in one or
more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to these prevailing
market prices or at negotiated prices.
THROUGH AGENTS
We and the agents designated by us may solicit offers to purchase
securities. Agents that participate in the distribution of securities may be
deemed underwriters under the Securities Act of 1933. We will name any agent
that will participate in the distribution of the securities, and any commission
we will pay to it will be described in the prospectus supplement. Any agent will
be acting on a "best efforts" basis for the period of its appointment, unless we
indicate differently in the prospectus supplement.
TO DEALERS
The securities may be sold to a dealer as principal. The dealer may then
resell the securities to the public at varying prices determined by it at the
time of resale. The dealer may be deemed to be an underwriter under the
Securities Act of 1933.
TO UNDERWRITERS
The securities may also be sold to one or more underwriters and we will
then execute an underwriting agreement with them at the time of sale. The names
of the underwriters will be set forth in the prospectus supplement, which will
be used by the underwriters to resell the securities.
CONVERTIBLE, REDEEMABLE AND EXCHANGEABLE SECURITIES
If we choose to offer debt securities or preferred stock that is
convertible, redeemable or exchangeable into or for third-party securities, we
will identify in the applicable prospectus supplement:
- the third party,
- the third-party securities offered,
- all documents filed by the third party pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act since the end of the third party's last completed
fiscal year, to the extent the third party is subject to the periodic
reporting requirements of the Exchange Act, and
- the document containing the description of the third-party securities.
We may enter into indemnification agreements with underwriters, dealers,
agents and other persons participating in the distribution of securities, who
will then be entitled to indemnification by us against some civil liabilities.
The indemnification covers liabilities under the Securities Act.
DELAYED DELIVERY ARRANGEMENTS
We may authorize underwriters, dealers or other persons acting as our
agents to solicit offers from a number of institutions to purchase securities
from us. We will indicate our intention to do this in
-17-
the prospectus supplement. The contracts for these purchases will provide for
payment and delivery on a future date or dates. These institutions include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and others and must be
approved by us. The obligations of purchasers under these contracts will be
unconditional, except that:
- at the time of delivery, the purchase of the securities shall not be
prohibited under the laws of the jurisdiction of the purchaser, and
- if the securities are also being sold to underwriters, we have to sell the
securities not sold for delayed delivery to the underwriters.
The underwriters, dealers and other persons will not have any
responsibility for the validity or performance of these contracts.
LEGAL OPINIONS
Unless otherwise indicated in the prospectus supplement, the validity of
the securities offered by this prospectus will be passed upon for us by Mr.
James D. Ellis, Senior Executive Vice President and General Counsel of SBC, and
for any underwriters, dealers or agents by Sullivan & Cromwell, New York, New
York. As of May 10, 2000, Mr. Ellis owned less than 1% of the outstanding shares
of SBC. Sullivan & Cromwell from time to time performs legal services for SBC.
EXPERTS
Our audited consolidated financial statements and financial statement
schedules included in our annual report on Form 10-K for the year ended December
31, 1999, which are incorporated by reference in this prospectus, have been
examined by Ernst & Young LLP, independent auditors. They have been so
incorporated in reliance on the report given on the authority of Ernst & Young
LLP as experts in auditing and accounting. In addition, we are incorporating by
reference the audited and consolidated financial statements and financial
statement schedules for the years 1997 and 1998 of Ameritech Corporation,
included in Ameritech's annual report on Form 10-K for the year ended December
31, 1998, which have been examined by Arthur Andersen LLP, independent public
accountants. They have been so incorporated in reliance on the report given on
the authority of Arthur Andersen LLP as experts in auditing and accounting.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with the SEC. This permits us to disclose important information to you by
referring to these filed documents. Any information incorporated by reference is
considered part of this prospectus, and any information we file with the SEC
after the date of this prospectus will automatically update and supersede this
information. We incorporate by reference the following documents filed with the
SEC:
- Our annual report on Form 10-K for the year ended December 31, 1999.
- Our quarterly report on Form 10-Q for the quarter ended March 31, 2000.
- Our current reports on Form 8-K filed on January 13, 2000, January 25, 2000,
January 28, 2000, February 22, 2000, April 10, 2000 and April 26, 2000.
- Any other reports we file with the SEC pursuant to Section 13(a) or 15(d) of
the Exchange Act after the date of filing of the registration statement and
prior to its effectiveness.
- We also incorporate by reference any documents that we filed with or furnished
to the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this prospectus and before the termination of the offering.
If any statement in this prospectus conflicts with any statement in a document
which we have incorpo-
-18-
rated by reference, then you should consider only the statement in the more
recent document.
If you request them, we will provide you with a free copy of any of the
above documents, including exhibits specifically incorporated by reference in
those documents. You may make your request by calling us at (210) 351-3049, or
by writing to us at the following address:
SBC's Specialist-External Reporting
SBC Communications Inc.
175 E. Houston Street
San Antonio, Texas 78205-2233
WHERE YOU CAN FIND MORE INFORMATION
As required by the Securities Act of 1933, we filed a registration
statement (No. 333-36926) relating to the securities offered by this prospectus
with the Securities and Exchange Commission. This prospectus is a part of that
registration statement, which includes additional information.
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy this information at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. You can also request copies of the documents, upon payment of a
duplicating fee, by writing the Public Reference Section of the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. These SEC filings are also available to the public from the
SEC's web site at http://www.sec.gov.
-19-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[SBC LOGO]
U.S.$1,000,000,000
SBC COMMUNICATIONS INC.
5.875% GLOBAL NOTES DUE AUGUST 15, 2012
-----------------------------------------------------
PROSPECTUS SUPPLEMENT
-----------------------------------------------------
DEUTSCHE BANK SECURITIES
JPMORGAN
SALOMON SMITH BARNEY
ABN AMRO INCORPORATED
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
WACHOVIA SECURITIES
BLAYLOCK & PARTNERS, L.P.
GUZMAN & COMPANY
August 14, 2002
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------