Filed pursuant to Rule 424(b)(5)
SEC File No. 333-85142
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 10, 2002)
25,000,000 EQUITY UNITS
(INITIALLY CONSISTING OF 25,000,000 CORPORATE UNITS)
[LOGO] Alltel Corporation
ALLTEL CORPORATION
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ALLTEL Corporation is offering 25,000,000 equity units. The equity units
initially will consist of units referred to as corporate units, each with a
stated amount of $50. Each corporate unit will include a purchase contract
pursuant to which you will agree to purchase from us shares of our common stock
on May 17, 2005, and we will make quarterly contract adjustment payments to you
at the rate of 1.50% of the stated amount per year, as described in this
prospectus supplement. Each corporate unit will also include $50 principal
amount of our senior notes due May 17, 2007. The notes will bear interest at a
rate of 6.25% per year, which rate is expected to be reset on or after February
17, 2005. The notes will not trade separately from the corporate units unless
and until substitution is made or following early settlement as described in
this prospectus supplement.
The corporate units have been approved for listing on the New York Stock
Exchange, or NYSE, subject to official notice of issuance, under the symbol
"AYZ." On April 30, 2002, the last reported sale price of our common stock on
the NYSE was $49.50 per share.
INVESTING IN THE EQUITY UNITS INVOLVES RISKS THAT ARE DESCRIBED IN "RISK
FACTORS" BEGINNING ON PAGE S-21 OF THIS PROSPECTUS SUPPLEMENT.
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PER CORPORATE UNIT TOTAL
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Public offering price (1)........... $50.00 $1,250,000,000
Underwriting discount............... $1.50 $37,500,000
Proceeds, before expenses, to ALLTEL $48.50 $1,212,500,000
(1)Plus accrued interest and accumulated contract adjustment payments
from May 6, 2002, if settlement occurs after that date
The underwriters may also purchase up to an additional 3,750,000
corporate units at the public offering price less the underwriting discount
until 13 days after the closing of this offering in order to cover
overallotments, if any.
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 corporate units will be ready for delivery in book-entry form only
through The Depository Trust Company on or about May 6, 2002.
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JOINT BOOK-RUNNING MANAGERS
BANC OF AMERICA SECURITIES LLC MERRILL LYNCH & CO. SALOMON SMITH BARNEY
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WACHOVIA SECURITIES
BANC ONE CAPITAL MARKETS, INC.
MCDONALD INVESTMENTS INC.
STEPHENS INC.
SUNTRUST ROBINSON HUMPHREY
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The date of this prospectus supplement is April 30, 2002.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
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About this Prospectus Supplement.............................................. S-3
Prospectus Supplement Summary................................................. S-4
Risk Factors.................................................................. S-21
Use of Proceeds............................................................... S-27
Price Range of Common Stock and Dividend Policy............................... S-28
Capitalization................................................................ S-29
Accounting Treatment.......................................................... S-30
Description of the Equity Units............................................... S-31
Description of the Purchase Contracts......................................... S-35
Certain Provisions of the Purchase Contract Agreement and the Pledge Agreement S-47
Description of the Notes...................................................... S-51
Certain United States Federal Income Tax Consequences......................... S-56
Underwriting.................................................................. S-65
Legal Matters................................................................. S-68
PROSPECTUS
PAGE
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About this Prospectus.......................................................................... 1
Where You Can Find More Information............................................................ 1
Special Note Regarding Forward-Looking Statements.............................................. 2
ALLTEL Corporation............................................................................. 3
Use of Proceeds................................................................................ 4
Ratios of Earnings to Fixed Charges and to Combined Fixed Charges and Preferred Stock Dividends 4
Description of Debt Securities................................................................. 6
Description of Capital Stock................................................................... 12
Description of Warrants........................................................................ 16
Description of Depositary Shares............................................................... 17
Description of Stock Purchase Contracts and Equity Units....................................... 19
Plan of Distribution........................................................................... 20
Legal Opinions................................................................................. 21
Experts........................................................................................ 21
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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, the accompanying
prospectus and the documents incorporated by reference is accurate only as of
their respective dates. Our business, financial condition, results of
operations and prospects may have changed since those dates.
S-2
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first is this prospectus supplement,
which describes the specific terms of the securities we are offering and other
matters relating to us and our financial condition. The second part, the
accompanying prospectus, gives more general information about securities we may
offer from time to time, some of which may not apply to the equity units
offered by this prospectus supplement and accompanying prospectus.
If the description of the offering varies between this prospectus
supplement and the accompanying prospectus, you should rely on the information
in this prospectus supplement.
Unless we have indicated otherwise, all information in this prospectus
supplement assumes that the underwriters do not exercise their overallotment
option. Unless we have indicated otherwise, or the context otherwise requires,
references in this prospectus supplement and the accompanying prospectus to
"ALLTEL Corporation," "ALLTEL," "we," "us" and "our" or similar terms are to
ALLTEL Corporation and its predecessors, and references to our common stock
include the associated preferred stock purchase rights under our Rights
Agreement dated as of January 30, 1997.
S-3
PROSPECTUS SUPPLEMENT SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY IN CONJUNCTION WITH THE MORE
DETAILED INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING
PROSPECTUS, AND THE DOCUMENTS INCORPORATED THEREIN BY REFERENCE.
ALLTEL
ALLTEL is a customer-focused information technology company that provides
communications and information services. We own subsidiaries that provide
wireless and wireline local, long-distance, network access and internet
services, information processing management services and advanced application
software and wide area paging services. For the year ended December 31, 2001,
we had $7.5 billion in revenues, $1.7 billion in operating income and $1.1
billion in net income.
As of December 31, 2001, we provided wireless communications services to
approximately 6.7 million customers in 21 states. We own a majority interest in
wireless operations in 69 metropolitan statistical areas, or MSAs, covering a
population of approximately 33.2 million potential customers, or POPs. We also
own a majority interest in wireless operations in 132 rural statistical areas,
or RSAs, representing approximately 16.3 million wireless POPs. We hold
minority interests in operations in 35 other wireless markets, including the
Chicago, Illinois and Houston, Texas MSAs. At year-end 2001, our wireless
penetration rate (that is, the number of our customers as a percentage of the
total population in our service areas) was 13.5%. Wireless revenues and sales
comprised 50% of our total operating revenues from business segments in 2001.
Our wireline operations consist of subsidiaries that are incumbent local
exchange carriers, or ILECs and competitive local exchange carriers, or CLECs.
Through these subsidiaries, we provide local telephone service to more than 2.6
million customers primarily located in rural areas in 15 states. Local
telephone services include basic dial-tone, DSL (Digital Subscriber Line),
internet, and other enhanced services including call waiting, call forwarding,
three-way calling and voicemail. Our wireline subsidiaries also offer
facilities for private line, data transmission and other communications
services. Wireline revenues, which consist of local service, network access and
long-distance and miscellaneous revenues, comprised 26% of our total operating
revenues from business segments in 2001.
Our information services subsidiary, ALLTEL Information Services, Inc.,
provides a wide range of information processing services primarily to the
financial services and telecommunications industries through information
processing centers that it staffs, equips and operates. ALLTEL Information
Services, Inc. also develops and markets software worldwide to financial
services and telecommunications companies operating their own information
processing departments. Information services revenues and sales comprised 13%
of our total operating revenues from business segments in 2001.
Our communications support services business provides long-distance,
directory publishing and product supply. As of December 31, 2001, we provided
long-distance service to nearly 1.3 million customers. As of that date, our
directory publishing business coordinated advertising, sales, printing and
distribution for 452 telephone directory contracts in 35 states. Our product
supply business distributes telecommunications equipment and materials to
affiliated and non-affiliated communications and other companies.
Communications support services revenues comprised 11% of our total operating
revenues from business segments in 2001.
We are incorporated in Delaware. Our principal executive offices are
located at One Allied Drive, Little Rock, Arkansas 72202, and our telephone
number is (501) 905-8000. Our website is located at www.alltel.com. Information
on our website does not form part of this prospectus supplement or the
accompanying prospectus.
S-4
RECENT DEVELOPMENTS
RECENT OPERATING RESULTS
On April 25, 2002, we announced our results of operations for the quarter
ended March 31, 2002. The following table sets forth selected unaudited
consolidated financial data for ALLTEL and its subsidiaries for the three
months ended March 31, 2002 and 2001. The consolidated selected financial data
has been derived from our unaudited consolidated financial statements, and in
our opinion, reflects all adjustments, consisting of normal recurring accruals,
necessary to present fairly the data for those periods. Results of operations
for the three months ended March 31, 2002 are not necessarily indicative of
results that may be expected for the full year. You should read the table below
together with our Current Report on Form 8-K filed on April 25, 2002 and
incorporated by reference in this prospectus supplement and accompanying
prospectus.
THREE MONTHS ENDED
MARCH 31,
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2002 2001
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(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
Total revenue and sales
Wireless................................ $ 944 $ 919
Wireline................................ 499 485
Communications support services......... 183 198
Information services.................... 239 260
Intercompany eliminations............... (32) (35)
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Total............................... $1,833 $1,827
Operating income
Wireless................................ $ 220 $ 190
Wireline................................ 190 178
Communications support services......... 14 22
Information services.................... 35 34
Corporate expenses...................... (51) (78)
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Total............................... $ 408 $ 346
Income before taxes........................ $ 343/(1)/ $ 633/(2)/
Net income................................. $ 214 $ 396
Diluted earnings per share................. $ .68 $1.25
Ratio of earnings to fixed charges......... 5.37/(1)/ 7.75/(2)/
Ratio of earnings to combined fixed charges
and preferred stock dividends............ 5.37/(1)/ 7.75/(2)/
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Note: On January 1, 2002, ALLTEL, as required, adopted Statement of
Financial Accounting Standards No. 142 "Goodwill and Other Intangible
Assets." This standard changed the accounting for goodwill and other
indefinite-lived intangible assets from an amortization method to an
impairment-only approach. As of January 1, 2002, ALLTEL ceased
amortization of goodwill, including goodwill recorded in past
business combinations. In addition, we conducted a review of our
other identifiable intangible assets and determined that our
franchise rights and cellular and Personal Communications Services,
or PCS, licenses met the indefinite life criteria outlined in SFAS
No. 142, as we expect both the renewal by the granting authorities
and the cash flows generated from these intangible assets to continue
indefinitely. Accordingly, ALLTEL also ceased amortization of the
franchise rights and wireless licenses as of January 1, 2002.
Assuming the change in accounting for goodwill and other intangible
assets was applied retroactively, pro forma net income and diluted
earnings per share would have been $416 million and $1.32,
respectively, for the three months ended March 31, 2001.
S-5
During the first quarter of 2002, ALLTEL also changed its business
segment reporting presentation by reclassifying the operating units
of its emerging communications businesses to better align its
financial reporting with our business segment mix and to provide
clear comparisons to other communications companies within ALLTEL's
peer group. Under the new reporting presentation, our CLEC operations
and internet access operations have been combined and reported as
part of the wireline business segment. All other segments, which
include long-distance and network management services, communications
products and directory publishing, have been reported together under
a new segment classification titled "Communications Support
Services." In addition, ALLTEL's information services segment no
longer includes services provided to ALLTEL affiliates. These
affiliate transactions have been reported in the corresponding
communications segments, and accordingly, information services
operating results only reflect ALLTEL's financial services business
and non-affiliated telecommunications operations. These
reclassifications did not affect previously reported consolidated
operating income, net income or earnings per share of ALLTEL and its
subsidiaries. Consolidated revenues and sales for prior periods were
reduced as a result of reclassifying information services revenues
previously billed to the wireline operations that were not eliminated
pursuant to SFAS No. 71 "Accounting for the Effects of Certain Types
of Regulation." All prior period business segment information that is
included in this prospectus supplement has been restated to give
effect to ALLTEL's current business segment presentation. In the
first quarter of 2002, ALLTEL also changed to a gross basis the
reporting presentation for reimbursements of out-of-pocket expenses
received from customers under the terms of its information services
agreements in accordance with Emerging Issues Task Force Topic D-103.
Previously, ALLTEL netted these reimbursements against expenses
incurred to provide data processing and consulting services and
included the net amount in operations expense. Prior period revenue
and expense information has been reclassified to conform to the new
reporting presentation. This change does not affect previously
reported operating or net income of ALLTEL and its subsidiaries.
(1)Income before taxes for the three months ended March 31, 2002
included pretax charges totaling $42.9 million consisting of $32.4
million incurred in connection with the restructuring of our CLEC,
call center and retail store operations, write-downs of $7.1 million
in the carrying value of cell site equipment and $3.4 million of
costs associated with the conversion and integration of the Kentucky
wireline properties. These items decreased net income by $26.1
million and diluted earnings per share by $0.09. Excluding these
items, the ratio of earnings to fixed charges and the ratio of
earnings to combined fixed charges and preferred stock dividends both
would have been 5.92 for the three months ended March 31, 2002.
(2)Income before taxes for the three months ended March 31, 2001
included pretax gains totaling $362.5 million and consisted of a
$345.4 million pretax gain from the sale of PCS licenses, a pretax
gain of $13.9 million from the dissolution of a wireless partnership
and a pretax gain of $3.2 million from the sale of certain
investments. Income before taxes also included pretax charges
totaling $69.0 million incurred in connection with the restructuring
of our operations. These items increased net income by $174.7 million
and diluted earnings per share by $0.55. Excluding these items, the
ratio of earnings to fixed charges and the ratio of earnings to
combined fixed charges and preferred stock dividends both would have
been 4.63 for the three months ended March 31, 2001.
S-6
PENDING ACQUISITIONS
On October 31, 2001, we signed an agreement with Verizon Communications
Inc. to purchase local telephone properties located in the State of Kentucky.
Under the terms of the purchase agreement, we will acquire approximately
600,000 access lines for $1.9 billion in cash. The acquired wireline properties
will overlap our existing wireless service in northeastern Kentucky and will
increase our total access lines by approximately 25% to more than 3.0 million
wireline customers. Upon the signing of this purchase agreement, we paid
Verizon Communications Inc. a deposit equal to 10% of the total purchase price,
or $190.7 million, with the balance of the cash payment (net of interest on the
$190.7 million deposit) due at the time the transaction is completed. On
February 13, 2002, we received the approval of the Kentucky Public Service
Commission for this transaction. The transaction is subject to certain closing
conditions, including regulatory approval by the Federal Communications
Commission, and is expected to be completed in the third quarter of 2002. We
refer to this transaction in this prospectus supplement as the "Verizon
Wireline Acquisition."
On March 19, 2002, we announced an agreement to purchase all the wireless
properties owned by CenturyTel, Inc. for $1.65 billion in cash. In connection
with this purchase, we expect to add more than 700,000 customers and expand our
wireless footprint into new markets across Arkansas, Louisiana, Michigan,
Mississippi, Texas and Wisconsin. Following the completion of the transaction,
we expect to have approximately 7.4 million wireless customers. Also included
in this transaction are minority partnership interests in cellular operations
of approximately 2.0 million proportionate POPs and PCS licenses covering 1.3
million POPs in Wisconsin and Iowa. The transaction is subject to certain
closing conditions, including FCC regulatory approval, and is expected to close
in the third quarter of 2002. We refer to this transaction in this prospectus
supplement as the "CenturyTel Wireless Acquisition."
S-7
THE OFFERING--Q&A
WHAT ARE EQUITY UNITS?
The equity units consist of units referred to as corporate units and
treasury units. The equity units offered will initially consist of 25,000,000
corporate units (28,750,000 corporate units if the underwriters exercise their
overallotment option in full), each with a stated amount of $50. From each
corporate unit, the holder may create a treasury unit, as described below.
WHAT ARE THE COMPONENTS OF A CORPORATE UNIT?
Each corporate unit consists of a purchase contract and, initially, $50
principal amount of our notes. The note that is a component of each corporate
unit is owned by you, but it will be pledged to us to secure your obligations
under the purchase contract. If the notes are successfully remarketed or a tax
event redemption occurs, in each case as described in this prospectus
supplement, the applicable ownership interest in the Treasury portfolio (as
described further below) will replace the note as a component of each corporate
unit and will be pledged to us to secure your obligations under the purchase
contract.
WHAT IS A PURCHASE CONTRACT?
Each purchase contract underlying an equity unit obligates the holder to
purchase, and us to sell, on May 17, 2005, for $50, a number of newly issued
shares of our common stock equal to the "settlement rate." The settlement rate
will be calculated, subject to adjustment as described under "Description of
the Purchase Contracts--Anti-Dilution Adjustments," as follows:
. if the applicable market value (as defined below) of our common stock
is equal to or greater than the threshold appreciation price of $60.39,
the settlement rate will be .8280 shares of our common stock;
. if the applicable market value of our common stock is less than the
threshold appreciation price but greater than the reference price (as
defined below), the settlement rate will be equal to the stated amount
of $50 divided by the applicable market value; and
. if the applicable market value is less than or equal to the reference
price, the settlement rate will be 1.0101 shares of our common stock.
The "applicable market value" means the average of the closing price per
share of common stock on each of the 20 consecutive trading days ending on the
third trading day immediately preceding May 17, 2005. The "reference price" is
$49.50, which is the last reported sale price of our common stock on the NYSE
on April 30, 2002.
CAN I SETTLE A PURCHASE CONTRACT EARLY?
Each holder has a right to settle a purchase contract at any time using
cash, in which case .8280 shares of our common stock will be issued pursuant to
the purchase contract. See "Description of the Purchase Contracts--Early
Settlement." In addition, if we are involved in a merger in which at least 30%
of the consideration for our common stock consists of cash or cash equivalents,
each holder of a purchase contract will have the right to accelerate and settle
such purchase contract at the settlement rate in effect immediately before the
cash merger. See "Description of the Purchase Contracts--Early Settlement Upon
Cash Merger."
Your right to exercise an early settlement right is subject to the
condition that, if required under the U.S. federal securities laws, we have a
registration statement under the Securities Act of 1933 in effect covering the
common stock or other securities deliverable upon settlement of a purchase
contract.
S-8
WHAT ARE TREASURY UNITS?
Treasury units consist of a purchase contract and a 1/20 or 5% undivided
beneficial ownership interest in a Treasury security. The Treasury security is
a zero-coupon U.S. Treasury security with a principal amount at maturity of
$1,000 that matures on May 15, 2005. The interest in the Treasury security that
is a component of each treasury unit will be pledged to us to secure a holder's
obligations under a purchase contract.
HOW CAN I CREATE TREASURY UNITS FROM CORPORATE UNITS?
Unless the Treasury portfolio has replaced the notes as a component of
corporate units as a result of a successful remarketing of the notes or a tax
event redemption, each as described in this prospectus supplement, each holder
of corporate units will have the right, at any time on or prior to the fifth
business day immediately preceding May 17, 2005, to substitute for the notes
held by the collateral agent zero-coupon Treasury securities (CUSIP No.
912803AD5) that mature on May 15, 2005 in a total principal amount at maturity
equal to the aggregate principal amount of the notes for which substitution is
being made. This substitution will create treasury units, and the applicable
notes will be released to the holder.
Because U.S. Treasury securities are issued in multiples of $1,000,
holders of corporate units may make this substitution only in integral
multiples of 20 corporate units. If the Treasury portfolio has replaced the
notes as a component of corporate units as a result of a successful remarketing
of the notes or a tax event redemption, holders of corporate units may make
this substitution only in integral multiples of 32,000 corporate units, at any
time on or prior to the second business day immediately preceding May 17, 2005.
If such a substitution is made, holders would also obtain the release of the
appropriate applicable ownership interest in the Treasury portfolio rather than
a release of the applicable notes.
HOW CAN I RECREATE CORPORATE UNITS FROM TREASURY UNITS?
Unless the Treasury portfolio has replaced the notes as a component of
corporate units as a result of a successful remarketing of the notes or a tax
event redemption, each holder of treasury units will have the right, at any
time on or prior to the fifth business day immediately preceding May 17, 2005,
to substitute notes for the Treasury securities held by the collateral agent in
a total principal amount of such notes equal to the aggregate principal amount
at maturity of the Treasury securities for which substitution is being made.
This substitution would create corporate units, and the applicable Treasury
securities would be released to the holder.
Because U.S. Treasury securities are issued in integral multiples of
$1,000, holders of treasury units may make this substitution only in integral
multiples of 20 treasury units. If the Treasury portfolio has replaced the
notes as a component of corporate units as a result of a successful remarketing
of the notes or a tax event redemption, holders of the treasury units may make
this substitution at any time on or prior to the second business day
immediately preceding May 17, 2005, but using the appropriate applicable
ownership interest in the Treasury portfolio instead of notes, and only in
integral multiples of 32,000 treasury units.
WHAT PAYMENTS AM I ENTITLED TO AS A HOLDER OF CORPORATE UNITS?
Holders of corporate units will be entitled to receive total cash
distributions at a rate of 7.75% of the stated amount of $50 per year, payable
quarterly in arrears.
Cash distributions will consist of interest payments on the notes or, if
the Treasury portfolio has replaced the notes as a component of corporate units
as a result of a successful remarketing or tax event redemption, distributions
on the applicable ownership interest in the Treasury portfolio, at the rate of
6.25% of the stated amount per year and contract adjustment payments payable by
us at the rate of 1.50% of the stated
S-9
amount per year, subject to our right to defer the payment of such contract
adjustment payments as described below. We are not entitled to defer interest
payments on the notes. The original issue discount rules that apply to
contingent payment debt instruments should govern the income inclusions with
respect to the notes for United States federal income tax purposes.
WHAT PAYMENTS AM I ENTITLED TO IF I CONVERT MY CORPORATE UNITS TO TREASURY
UNITS?
Holders of treasury units will be entitled to receive quarterly cash
distributions of contract adjustment payments payable by us at the rate of
1.50% of the stated amount of $50 per year, subject to our rights of deferral
described below. In addition, original issue discount will accrue on each
Treasury security.
DOES ALLTEL HAVE THE OPTION TO DEFER CURRENT PAYMENTS?
We have the right to defer the payment of contract adjustment payments
until no later than May 17, 2005. However, such deferred contract adjustment
payments would accrue additional amounts at the rate of 7.75% per year (equal
to the rate on the notes plus the rate of contract adjustment payments on the
purchase contracts) until paid, compounded quarterly, to but excluding May 17,
2005.
If we exercise our option to defer the payment of contract adjustment
payments, then until the deferred contract adjustment payments have been paid,
we will not, and will not permit any subsidiary of ours to, with certain
exceptions, declare or pay dividends on, make distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to, any
shares of our capital stock. Our obligations with respect to contract
adjustment payments will be subordinate in right of payment to our obligations
under any of our senior debt.
We are not entitled to defer payments of interest on the notes.
WHAT ARE THE PAYMENT DATES FOR THE CORPORATE UNITS?
The current payments described above in respect of the corporate units
will be payable quarterly in arrears on February 17, May 17, August 17 and
November 17 of each year, commencing August 17, 2002. In the case of contract
adjustment payments, the payments will be payable to, but excluding, the
earlier of May 17, 2005 or the most recent quarterly payment date on or before
any early settlement of the purchase contracts. These contract adjustment
payments are subject to the deferral provisions described in this prospectus
supplement. Interest payments on the notes are described below under "--What
interest payments will I receive on the notes?"
WHAT IS REMARKETING?
The notes of corporate unit holders will be remarketed on the third
business day immediately preceding February 17, 2005. The remarketing agent
will use its reasonable efforts to obtain a price of approximately 100.5% of
the purchase price for the Treasury portfolio. Proceeds from the remarketing
equal to the Treasury portfolio purchase price will be applied to purchase the
Treasury portfolio. The Treasury portfolio will then be substituted for the
notes and will be pledged to the collateral agent to secure the corporate unit
holders' obligations to purchase our common stock under the purchase contracts.
When paid at maturity, an amount of the Treasury portfolio equal to the
principal amount of the notes will automatically be applied to satisfy the
corporate unit holders' obligations to purchase our common stock under the
purchase contracts.
In addition, the remarketing agent may deduct, as a remarketing fee, an
amount not exceeding 25 basis points (.25%) of the Treasury portfolio purchase
price from any amount of the proceeds in excess of the Treasury portfolio
purchase price. The remarketing agent will then remit the remaining portion of
the proceeds from the remarketing, if any, for the benefit of the holders.
S-10
If the remarketing of the notes on the third business day preceding
February 17, 2005 fails because the remarketing agent cannot obtain a price of
at least 100% of the Treasury portfolio purchase price or a condition precedent
to the remarketing has not been satisfied, the notes will continue to be a
component of the corporate units and another remarketing will be attempted on
the third business day preceding May 17, 2005, as described below.
If there has not been a prior successful remarketing of the notes, the
notes of corporate unit holders who have not notified the purchase contract
agent on or prior to the fifth business day before May 17, 2005 of their
intention to pay cash in order to satisfy their obligations under the purchase
contracts will be remarketed on the third business day immediately preceding
May 17, 2005. In this remarketing, the remarketing agent will use its
reasonable efforts to obtain a price of approximately 100.5% of the aggregate
principal amount of these notes. The portion of the proceeds from the
remarketing equal to the total principal amount of the notes will automatically
be applied to satisfy in full the corporate unit holders' obligations to
purchase our common stock under the purchase contracts.
The remarketing agent will deduct, as a remarketing fee, an amount equal
to 25 basis points (.25%) of the aggregate principal amount of the remarketed
notes from any amount of the proceeds in excess of the aggregate principal
amount of the remarketed notes. The remarketing agent will remit the remaining
portion of the proceeds from the remarketing, if any, for the benefit of the
holders.
If the remarketing of the notes on the third business day preceding May
17, 2005 fails because the remarketing agent cannot obtain a price of at least
100% of the total principal amount of the notes or a condition precedent to the
remarketing has not been satisfied, we will exercise our rights as a secured
party to dispose of the notes in accordance with applicable law and to satisfy
in full, from the proceeds of the disposition, the holder's obligation to
purchase our common stock under the purchase contracts.
WHAT IS THE TREASURY PORTFOLIO?
The Treasury portfolio is a portfolio of zero-coupon U.S. Treasury
securities consisting of:
. interest or principal strips of U.S. Treasury securities that mature on
or prior to May 15, 2005 in an aggregate amount equal to the principal
amount of the notes included in the corporate units, and
. with respect to the scheduled interest payment date on the notes that
occurs on May 17, 2005, in the case of a successful remarketing of the
notes, or with respect to each scheduled interest payment date on the
notes that occurs after the tax event redemption date and on or before
May 17, 2005 in the case of a tax event redemption, interest or
principal strips of U.S. Treasury securities that mature on or prior to
that interest payment date in an aggregate amount equal to the
aggregate interest payment that would be due on that interest payment
date on the principal amount of the notes included in the corporate
units assuming no reset of the interest rate on the notes.
IF I AM NOT A PARTY TO A PURCHASE CONTRACT, MAY I STILL PARTICIPATE IN A
REMARKETING OF MY NOTES?
Holders of notes that are not components of corporate units may elect, in
the manner described in this prospectus supplement under "Description of
Notes--Optional Remarketing," to have their notes remarketed by the remarketing
agent. If your notes are not components of corporate units and you do not elect
to participate in a remarketing, the interest rate on your notes will still be
reset at the earliest date upon which notes that are components of corporate
units are reset as described below under "--When will the interest rate on the
notes be reset?"
S-11
BESIDES PARTICIPATING IN A REMARKETING, HOW ELSE WILL MY OBLIGATIONS UNDER THE
PURCHASE CONTRACTS BE SATISFIED?
Holders of equity units may satisfy their obligations, or their
obligations will be terminated, under the purchase contracts:
. through early settlement by the early delivery of cash to the purchase
contract agent in the manner described in this prospectus supplement;
provided that at such time, if so required under the U.S. federal
securities laws, there is in effect a registration statement covering
the common stock to be delivered in respect of the purchase contracts
being settled;
. in the case of holders of corporate units, by settling the purchase
contracts with cash on the fifth business day prior to May 17, 2005
with prior notification to the purchase contract agent;
. through early settlement upon a cash merger in the manner described in
this prospectus supplement; provided that at such time, if so required
under the U.S. federal securities laws, there is in effect a
registration statement covering the securities to be delivered in
respect of the purchase contracts being settled; or
. without any further action, upon the termination of the purchase
contracts as a result of our bankruptcy, insolvency or reorganization.
If the holder of an equity unit settles a purchase contract early, or if
the holder's purchase contract is terminated as a result of our bankruptcy,
insolvency or reorganization, such holder will have no right to receive any
accrued contract adjustment payments or deferred contract adjustment payments.
WHAT INTEREST PAYMENTS WILL I RECEIVE ON THE NOTES?
Interest payments on the notes will be payable initially at the annual
rate of 6.25% of the principal amount of $50 per note to, but excluding,
February 17, 2005, or May 17, 2005 if the interest rate is not reset three
business days prior to February 17, 2005. Following a reset of the interest
rate three business days prior to February 17, 2005 or three business days
prior to May 17, 2005, the notes will bear interest from the date of the
settlement of the successful remarketing at the reset rate to, but excluding,
May 17, 2007. The original issue discount rules that apply to contingent
payment debt instruments should govern the income inclusions with respect to
the notes for United States federal income tax purposes.
WHAT ARE THE PAYMENT DATES ON THE NOTES?
Interest payments on the notes will be payable quarterly in arrears on
each February 17, May 17, August 17 and November 17, commencing on August 17,
2002.
WHEN WILL THE INTEREST RATE ON THE NOTES BE RESET?
Unless a tax event redemption has occurred, the interest rate on the
notes will be reset on the third business day immediately preceding February
17, 2005, assuming there is a successful remarketing of the notes, and such
reset rate will become effective from the date of the settlement of the
successful remarketing. However, if the remarketing of the notes on the third
business day immediately preceding February 17, 2005 results in a failed
remarketing, the interest rate will not be reset on that date and instead will
be reset on the third business day immediately preceding May 17, 2005, and such
reset rate will become effective from the date of the settlement of the
successful remarketing. If the remarketing of the notes on the third business
day immediately preceding May 17, 2005 also results in a failed remarketing,
the interest rate on the notes will not be reset.
S-12
WHAT IS THE RESET RATE?
In the case of a reset on the third business day immediately preceding
February 17, 2005, the reset rate will be the rate determined by the reset
agent as the rate the notes should bear in order for the notes included in
corporate units to have an aggregate market value on the reset date of 100.5%
of the Treasury portfolio purchase price. In the case of a reset on the third
business day immediately preceding May 17, 2005, the reset rate will be the
rate determined by the reset agent as the rate the notes should bear in order
for each note to have an aggregate market value of 100.5% of the principal
amount of the note. The reset rate may not exceed the maximum rate, if any,
permitted by applicable law.
WHAT IS THE RANKING OF THE NOTES?
The notes will rank equally with all of our other senior unsecured debt.
The indenture does not limit the amount of debt that we or any of our
subsidiaries may incur. Because we are a holding company and we conduct all of
our operations through subsidiaries, the notes will be structurally
subordinated to the claims of creditors and preferred shareholders of our
subsidiaries.
WHEN MAY THE NOTES BE REDEEMED?
The notes are redeemable at our option, in whole but not in part, upon
the occurrence and continuation of a tax event under the circumstances
described in this prospectus supplement under "Description of Notes--Tax Event
Redemption." Following any such redemption of the notes, which we refer to as a
tax event redemption, prior to May 17, 2005, holders that own corporate units
will own the applicable ownership interest of the Treasury portfolio as a
component of their corporate units.
WHAT ARE THE PRINCIPAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES RELATED TO
THE CORPORATE UNITS, TREASURY UNITS AND NOTES?
A beneficial owner of corporate units or notes, if separated from
corporate units, will be treated as owning an interest in a debt instrument
that should be subject to the Treasury regulations that govern contingent
payment debt instruments. If the notes are subject to these rules, through
February 17, 2005 and possibly thereafter, a holder of corporate units or notes
would be required to include in gross income an amount in excess of the
interest actually received, regardless of the holder's usual method of tax
accounting, and would generally recognize ordinary income or loss, rather than
capital gain or loss, on the sale, exchange or disposition of the notes or of
the corporate units, to the extent such income or loss is allocable to the
notes.
A beneficial owner of treasury units will be required to include in gross
income any original issue discount with respect to the Treasury securities as
it accrues on a constant yield to maturity basis. If the Treasury portfolio has
replaced the notes as a component of corporate units as a result of a
successful remarketing of the notes or a tax event redemption, a beneficial
owner of corporate units will be required to include in gross income its
allocable share of original issue discount on the Treasury portfolio as it
accrues on a constant yield to maturity basis. We intend to report contract
adjustment payments and deferred contract adjustment payments, if any, as
income to you, but you may want to consult your tax advisor concerning possible
alternative characterizations.
WILL THE EQUITY UNITS BE LISTED ON A STOCK EXCHANGE?
The corporate units have been approved for listing on the New York Stock
Exchange, subject to official notice of issuance, under the symbol "AYZ."
Neither the treasury units nor the notes will be initially listed. However, if
either of those securities are separately traded to a sufficient extent that
the applicable exchange listing requirements are met, we may, but need not,
cause those securities to be listed on the exchange on which the corporate
units are then listed.
S-13
WHAT ARE THE RIGHTS AND PRIVILEGES OF THE COMMON STOCK?
The shares of common stock that you will be obligated to purchase under
the purchase contracts have one vote per share. For more information, please
see the discussion of our common stock in this prospectus supplement under
"Risk Factors--Risks Related to the Equity Units" and in the accompanying
prospectus under "Description of Capital Stock."
WHAT ARE THE USES OF PROCEEDS FROM THE OFFERING?
We estimate that the net proceeds from the sale of equity units in this
offering will be approximately $1.2 billion (approximately $1.4 billion if the
underwriters exercise their overallotment option in full), after deducting the
underwriting discount and estimated offering expenses payable by us. We intend
to use the net proceeds from this offering for general corporate purposes,
including working capital and the expansion of our business through strategic
acquisitions as opportunities arise. Currently, it is anticipated that a
significant portion of the net proceeds (together with proceeds from other
financings) will be used to fund a portion of the cash purchase price of the
Verizon Wireline Acquisition and CenturyTel Wireless Acquisition. See "Use of
Proceeds."
S-14
THE OFFERING--EXPLANATORY DIAGRAMS
The following diagrams demonstrate some of the key features of the
purchase contracts, the notes, the corporate units and the treasury units, and
the transformation of corporate units into treasury units and separate notes.
The following diagrams assume that the notes are successfully remarketed, the
interest rate on the notes is reset on the third business day immediately
preceding February 17, 2005, early settlement does not occur and there are no
adjustments to the settlement rate. For clarity, the following diagrams also
use approximate maturity and other dates.
PURCHASE CONTRACT
Corporate units and treasury units both include a purchase contract under
which the holder agrees to purchase, and we agree to sell, shares of our common
stock at the end of three years. In addition, the purchase contracts include
contract adjustment payments as shown in the diagrams on the following pages.
[GRAPHIC]
--------
(1)For each of the percentage categories shown, the percentage of shares to be
delivered upon settlement to a holder of corporate units or treasury units
is determined by dividing (a) the related number of shares to be delivered,
as indicated in the footnote for each category, by (b) an amount equal to
$50, the stated amount, divided by the reference price.
(2)If the applicable market value of our common stock is less than or equal to
$49.50, the number of shares to be delivered will be calculated by dividing
the stated amount by the reference price. The "applicable market value"
means the average of the closing price per share of our common stock on each
of the 20 consecutive trading days ending on the third trading day
immediately preceding May 17, 2005.
(3)If the applicable market value of our common stock is between $49.50 and
$60.39, the number of shares to be delivered will be calculated by dividing
the stated amount by the applicable market value.
(4)If the applicable market value of our common stock is greater than or equal
to $60.39, the number of shares to be delivered will be calculated by
dividing the stated amount by the threshold appreciation price.
(5)The "reference price" is $49.50, which is the last reported sale price of
our common stock on the NYSE on April 30, 2002.
(6)The "threshold appreciation price" is equal to $60.39 .
S-15
CORPORATE UNITS
[GRAPHIC]
--------
.. The holder owns the note but will pledge it to us to secure its obligations
under the purchase contract.
.. Following a successful remarketing of the notes or a tax event redemption,
the applicable ownership interest in the Treasury portfolio will replace the
notes as a component of the corporate unit.
TREASURY UNITS
[GRAPHIC]
--------
.. The investor owns the Treasury security but will pledge it to us to secure
its obligations under the purchase contract.
S-16
NOTES
[GRAPHIC]
S-17
TRANSFORMING CORPORATE UNITS INTO TREASURY UNITS AND NOTES
. To create a treasury unit, a holder separates a corporate unit into its
two components--purchase contract and the note--and then combines the
purchase contract with a zero-coupon Treasury security that matures
concurrently with the maturity of the purchase contract.
. The note, which is no longer a component of the corporate unit, is
tradeable as a separate security.
. The holder owns the Treasury security but will pledge it to us to
secure its obligations under the purchase contract.
. The Treasury security together with the purchase contract constitutes a
treasury unit.
[GRAPHIC]
. Following the successful remarketing of the notes or a tax event
redemption, upon the transformation of a corporate unit into a treasury
unit, the applicable ownership interest in the Treasury portfolio,
rather than the note, will be released to the holder and will trade
separately.
. The holder can also transform treasury units and notes into corporate
units. Following that transformation, the Treasury security, which is
no longer a component of the treasury unit, is tradeable as a separate
security.
. The transformation of corporate units into treasury units and notes,
and the transformation of treasury units and notes into corporate
units, require certain minimum amounts of securities, as more fully
described in this prospectus supplement.
S-18
SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth certain consolidated financial information
for ALLTEL and its subsidiaries. The periods presented include merger and
integration expenses, gain on disposal of assets and other special charges and
unusual items. You should read the following table together with the
consolidated financial statements and accompanying notes of ALLTEL and its
subsidiaries, incorporated by reference into this prospectus supplement.
YEAR ENDED DECEMBER 31,
---------------------------------
2001(1) 2000(2) 1999(3)
------- ------- -------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA
Total revenues and sales
Wireless............................ $ 3,832 $ 3,536 $ 3,034
Wireline............................ 1,965 1,856 1,751
Communications support services..... 824 907 777
Information services................ 1,035 1,015 1,002
Intercompany eliminations........... (150) (154) (62)
------- ------- -------
Total........................... $ 7,506 $ 7,160 $ 6,502
Operating income
Wireless............................ $ 828 $ 867 $ 862
Wireline............................ 733 659 615
Communications support services..... 91 63 35
Information services................ 146 144 143
Corporate expenses.................. (133) (66) (130)
------- ------- -------
Total........................... $ 1,665 $ 1,667 $ 1,525
Income before taxes.................... $ 1,752/(1)/ $ 3,351/(2)/ $ 1,331/(3)/
Net income............................. $ 1,067 $ 1,929 $ 784
Diluted earnings per share............. $ 3.40 $ 6.08 $ 2.47
Ratio of earnings to fixed charges..... 5.92/(1)/ 10.01/(2)/ 4.81/(3)/
Ratio of earnings to combined fixed
charges and preferred stock dividends 5.92/(1)/ 10.00/(2)/ 4.79/(3)/
BALANCE SHEET DATA (AT PERIOD END)
Net property, plant and equipment...... $ 6,781 $ 6,549 $ 5,735
Total assets........................... $12,609 $12,182 $10,774
Total redeemable preferred stock
and long-term debt................... $ 3,863 $ 4,613 $ 3,752
Total shareholders' equity............. $ 5,566 $ 5,095 $ 4,206
Long-term debt as a percentage of total
capitalization....................... 41.3% 47.9% 47.6%
--------
Note:During the first quarter of 2002, ALLTEL changed its business segment
reporting presentation by reclassifying the operating units of its
emerging communications businesses to better align its financial reporting
with our business segment mix and to provide clear comparisons to other
communications companies within ALLTEL's peer group. Under the new
reporting presentation, our CLEC operations and internet access operations
have been combined and reported as part of the wireline business segment.
All other segments, which include long-distance and network management
services, communications products and directory publishing, have been
reported together under a new segment classification titled
S-19
"Communications support services." In addition, ALLTEL's information
services segment no longer includes services provided to ALLTEL affiliates.
These affiliate transactions have been reported in the corresponding
communications segments, and accordingly, information services operating
results only reflect ALLTEL's financial services business and
non-affiliated telecommunications operations. These reclassifications did
not affect previously reported consolidated operating income, net income or
earnings per share of ALLTEL and its subsidiaries. Consolidated revenues
and sales for prior periods were reduced as a result of reclassifying
information services revenues previously billed to the wireline operations
that were not eliminated pursuant to SFAS No. 71 "Accounting for the
Effects of Certain Types of Regulation." All prior period business segment
information that is included in this prospectus supplement has been
restated to give effect to ALLTEL's current business segment presentation.
In the first quarter of 2002, ALLTEL also changed to a gross basis the
reporting presentation for reimbursements of out-of-pocket expenses
received from customers under the terms of its information services
agreements in accordance with Emerging Issues Task Force Topic D-103.
Previously, ALLTEL netted these reimbursements against expenses incurred to
provide data processing and consulting services and included the net amount
in operations expense. Prior period revenue and expense information has
been reclassified to conform to the new reporting presentation. This change
does not affect previously reported operating or net income of ALLTEL and
its subsidiaries.
(1) Income before taxes for 2001 included pretax gains totaling $360.5 million
comprised of a $347.8 million pretax gain from the sale of PCS licenses, a
pretax gain of $9.5 million from the dissolution of a wireless partnership
and a pretax gain of $3.2 million from the sale of certain investments.
Income before taxes also included pretax charges totaling $95.1 million
comprised of termination fees of $2.9 million incurred in connection with
the early retirement of long-term debt, charges of $77.1 million incurred
in connection with the restructuring of operations of ALLTEL and its
subsidiaries, and write-downs of $15.1 million in the carrying value of
cell site equipment. These items increased net income by $157.9 million and
diluted earnings per share by $0.50. Excluding these items, the ratio of
earnings to fixed charges and the ratio of earnings to combined fixed
charges and preferred stock dividends both would have been 5.16 for 2001.
(2) Income before taxes for 2000 included pretax gains totaling $1,943.5
million comprised of a pretax gain of $1,345.5 million from the exchange of
wireless properties with Bell Atlantic and GTE, a pretax gain of $36.0
million from the sale of certain PCS assets and a pretax gain of $562.0
million from the sale of investments, principally consisting of WorldCom
common stock. Income before taxes also included pretax charges totaling
$51.9 million comprised of a $15.0 million write-down of an investment,
integration and other charges of $25.4 million incurred in connection with
the acquisition of wireless assets and certain restructuring activities of
the information services business of ALLTEL and its subsidiaries, and a
$11.5 million charge incurred in connection with a litigation settlement.
These items increased net income by $1,102.3 million and diluted earnings
per share by $3.48. Excluding these items, the ratio of earnings to fixed
charges would have been 4.85 for 2000 and the ratio of earnings to combined
fixed charges and preferred stock dividends would have been 4.84 for 2000.
(3) Income before taxes for 1999 included a pretax gain of $43.1 million from
the sale of WorldCom common stock. Income before taxes also included a
pretax charge of $90.5 million in connection with the closing of ALLTEL's
and/or subsidiaries' mergers with Aliant Communications Inc., Liberty
Cellular Inc., Advanced Information Resources Limited, and Southern Data
Systems and with certain loss contingencies and other restructuring
activities. These items decreased net income by $38.9 million and diluted
earnings per share by $0.12. Excluding these items, the ratio of earnings
to fixed charges would have been 4.95 for 1999 and the ratio of earnings to
combined fixed charges and preferred stock dividends would have been 4.93
for 1999.
S-20
RISK FACTORS
BEFORE PURCHASING THE EQUITY UNITS, YOU SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS TOGETHER WITH THE OTHER INFORMATION CONTAINED AND
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IN ORDER TO EVALUATE AN INVESTMENT IN THE EQUITY UNITS.
RISKS RELATED TO THE EQUITY UNITS
YOU ASSUME THE RISK THAT THE MARKET VALUE OF OUR COMMON STOCK MAY DECLINE.
Although as a holder of equity units you will be the beneficial owner of
the notes, Treasury portfolio or Treasury securities, as the case may be, you
do have an obligation pursuant to the purchase contract to buy our common
stock. Prior to May 17, 2005, unless you pay cash to satisfy your obligation
under the purchase contract early or the purchase contracts are terminated due
to our bankruptcy, insolvency or reorganization, either the principal of the
applicable ownership interest in the Treasury portfolio when paid at maturity
or the proceeds derived from the successful remarketing of the notes, in the
case of corporate units, or the principal of the Treasury securities when paid
at maturity, in the case of treasury units, will automatically be used to
purchase a specified number of newly issued shares of our common stock on your
behalf. The market value of the common stock that you receive on May 17, 2005
may be less than the effective price per share of $49.50 paid by you for our
common stock when you purchased your equity units. Accordingly, you assume the
risk that the market value of our common stock may decline, and that the
decline could be substantial.
THE OPPORTUNITY FOR EQUITY APPRECIATION PROVIDED BY AN INVESTMENT IN THE EQUITY
UNITS IS LESS THAN THAT PROVIDED BY A DIRECT INVESTMENT IN OUR COMMON STOCK.
Your opportunity for equity appreciation afforded by investing in the
equity units is less than your opportunity for equity appreciation if you
invested directly in our common stock. This opportunity is less because the
market value of our common stock to be received by you pursuant to the purchase
contract on May 17, 2005 (assuming that the market value is the same as the
applicable market value of our common stock) will only exceed the effective
price per share of $49.50 paid by you for our common stock when you purchased
your equity units if the applicable market value of our common stock exceeds
the threshold appreciation price (which represents an appreciation of
approximately 22% over $49.50). This situation occurs because, in this event,
you would receive on May 17, 2005 only approximately 82% (the percentage equal
to $49.50 divided by the threshold appreciation price) of the shares of our
common stock that you would have received if you had made a direct investment
in our common stock on the date of this prospectus supplement.
THE TRADING PRICES FOR THE EQUITY UNITS WILL BE DIRECTLY AFFECTED BY THE
TRADING PRICES OF OUR COMMON STOCK AND OTHER FACTORS.
The trading prices of corporate units and treasury units in the secondary
market will be directly affected by the trading prices of our common stock, the
general level of interest rates and our credit quality. It is impossible to
predict whether the price of our common stock or interest rates will rise or
fall. Trading prices of our common stock will be influenced by our operating
results and prospects and by economic, financial and other factors. In
addition, general market conditions, including the level of, and fluctuations
in, the trading prices of stocks generally, and sales of substantial amounts of
common stock by us or others in the market after the offering of the equity
units, or the perception that such sales could occur, could affect the price of
our common stock. Fluctuations in interest rates may give rise to arbitrage
opportunities based upon changes in the relative value of our common stock
underlying the purchase contracts and of the other components of the equity
units. Any such arbitrage could, in turn, affect the trading prices of the
corporate units, treasury units, notes and our common stock.
S-21
IF YOU HOLD EQUITY UNITS, YOU WILL NOT BE ENTITLED TO ANY RIGHTS WITH RESPECT
TO OUR COMMON STOCK, BUT YOU WILL BE SUBJECT TO ALL CHANGES MADE WITH RESPECT
TO OUR COMMON STOCK.
If you hold equity units, you will not be entitled to any rights with
respect to our common stock (including, without limitation, voting rights and
rights to receive any dividends or other distributions on our common stock),
but you will be subject to all changes affecting our common stock. You will
only be entitled to rights on our common stock if and when we deliver shares of
our common stock upon settlement of the purchase contracts on May 17, 2005, or
as a result of early settlement of a purchase contract, as the case may be, and
the applicable record date, if any, for the exercise of rights or the receipt
of dividends or other distributions that occur after that date. For example, if
an amendment is proposed to our Certificate of Incorporation or by-laws in
connection with a recapitalization of our capital stock and the record date for
determining the shareholders of record entitled to vote on the amendment occurs
prior to delivery of our common stock, you will not be entitled to vote on the
amendment, although you will nevertheless be subject to any changes in the
powers, preferences or special rights of our common stock.
WE MAY ISSUE ADDITIONAL SHARES OF OUR COMMON STOCK WHICH COULD MATERIALLY AND
ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK.
The number of shares of our common stock that you are entitled to receive
on May 17, 2005 or as a result of early settlement of a purchase contract is
subject to adjustment for certain events, including stock splits and
combinations, stock dividends and certain other actions by us that modify our
capital structure. We will not adjust the number of shares of our common stock
that you are to receive on May 17, 2005, or as a result of early settlement of
a purchase contract, for other events, including issuances of common stock for
cash or in connection with employee benefit plans, arrangements or issuances by
us or in connection with acquisitions. We are not restricted from issuing
additional shares of our common stock during the term of the purchase contracts
and have no obligation to consider your interests for any reason. If we issue
additional shares of our common stock, it may materially and adversely affect
the price of our common stock, and, because of the relationship of the number
of shares to be received on May 17, 2005 to the price of our common stock, such
other events may adversely affect the trading price of corporate units or
treasury units.
THE SECONDARY MARKET FOR THE EQUITY UNITS MAY BE ILLIQUID, REDUCING THEIR
TRADING PRICES.
It is not possible to predict how corporate units, treasury units or
notes will trade in the secondary market or whether the market will be liquid
or illiquid. There is currently no secondary market for our corporate units,
our treasury units or the notes. The corporate units have been approved for
listing on the NYSE, subject to notice of official issuance. If the treasury
units or the notes are separately traded to a sufficient extent that applicable
exchange listing requirements are met, we may (but are not required to)
endeavor to cause the treasury units or notes to be listed on the exchange on
which the corporate units are then listed. There can be no assurance as to the
liquidity of any market that may develop for the corporate units, the treasury
units or the notes, your ability to sell these securities or whether a trading
market, if it develops, will continue. In addition, if you were to substitute
Treasury securities for notes or notes for Treasury securities, thereby
converting your corporate units to treasury units or your treasury units to
corporate units, as the case may be, the liquidity of corporate units or
treasury units could be adversely affected. There can be no assurance that the
corporate units will not be delisted from the NYSE or that trading in the
corporate units will not be suspended as a result of your election to create
treasury units by substituting collateral, which could cause the number of
corporate units to fall below the requirement for listing securities on the
NYSE that at least 1,000,000 corporate units be outstanding at any time.
YOUR RIGHTS TO THE PLEDGED SECURITIES WILL BE SUBJECT TO OUR SECURITY INTEREST,
THEREBY LIMITING YOUR ABILITY TO TRADE SUCH SECURITIES.
Although you will be the beneficial owner of the notes, Treasury
securities or Treasury portfolio, as applicable, those securities will be
pledged to the collateral agent to secure your obligations under the purchase
S-22
contracts. Thus, your rights to the pledged securities will be subject to our
security interest. Additionally, notwithstanding the automatic termination of
the purchase contracts if we become the subject of a case under the U.S.
Bankruptcy Code, the delivery of the pledged securities to you may be delayed
by the imposition of the automatic stay of Section 362 of the Bankruptcy Code.
WE MAY REDEEM THE NOTES UPON THE OCCURRENCE OF A TAX EVENT.
We have the option to redeem the notes, on not less than 30 days or more
than 60 days prior written notice, in whole but not in part, at any time before
May 17, 2007 if a tax event occurs and continues under the circumstances
described in this prospectus supplement under "Description of Notes--Tax Event
Redemption" (referred to as a "tax event redemption"). If we exercise this
option, we will redeem the notes at the redemption price (as defined in this
prospectus supplement) plus accrued and unpaid interest, if any. If we redeem
the notes, we will pay the redemption price in cash to the holders of the
notes. If the tax event redemption occurs before February 17, 2005, or before
May 17, 2005 if the notes are not successfully remarketed on the third business
day immediately preceding February 17, 2005, the redemption price payable to
you as a holder of the corporate units will be distributed to the collateral
agent. The collateral agent will, in turn, apply an amount equal to the
redemption price to purchase the Treasury portfolio on your behalf and will
remit the remainder of the redemption price to you. The Treasury portfolio will
then be substituted for the notes as collateral to secure your obligations
under the purchase contracts related to the corporate units. If your notes are
not components of corporate units, you will receive redemption payments
directly. There can be no assurance as to the effect on the market prices for
the corporate units if we substitute the Treasury portfolio as collateral in
place of any notes so redeemed. A tax event redemption will be a taxable event
to the holders of the notes.
THE PURCHASE CONTRACT AGREEMENT WILL NOT BE QUALIFIED UNDER THE TRUST INDENTURE
ACT AND THE OBLIGATIONS OF THE PURCHASE CONTRACT AGENT ARE LIMITED.
The purchase contract agreement between the purchase contract agent and
us will not be qualified as an indenture under the Trust Indenture Act of 1939,
and the purchase contract agent will not be required to qualify as a trustee
under the Trust Indenture Act. Thus, you will not have the benefit of the
protection of the Trust Indenture Act with respect to the purchase contract
agreement or the purchase contract agent.
The notes constituting a part of the corporate units will be issued
pursuant to an indenture, which has been qualified under the Trust Indenture
Act. Accordingly, if you hold equity units, you will not have the benefit of
the protections of the Trust Indenture Act other than to the extent applicable
to a note included in a corporate unit.
The protections generally afforded the holder of a security issued under
an indenture that has been qualified under the Trust Indenture Act include:
. disqualification of the indenture trustee for "conflicting interests,"
as defined under the Trust Indenture Act;
. provisions preventing a trustee that is also a creditor of the issuer
from improving its own credit position at the expense of the security
holders immediately prior to or after a default under such indenture;
and
. the requirement that the indenture trustee deliver reports at least
annually with respect to certain matters concerning the indenture
trustee and the securities.
S-23
THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF THE EQUITY UNITS ARE UNCLEAR.
No statutory, judicial or administrative authority directly addresses the
treatment of the equity units or instruments similar to the equity units for
United States federal income tax purposes. As a result, the United States
federal income tax consequences of the purchase, ownership and disposition of
equity units are not entirely clear. In addition, any gain on the disposition
of a note prior to the purchase contract settlement date should generally be
treated as ordinary interest income; thus, the ability to offset such interest
income with a loss, if any, on a purchase contract may be limited. For
additional tax-related risks, see "Certain United States Federal Income Tax
Consequences."
BECAUSE THE NOTES WILL BE ISSUED WITH ORIGINAL ISSUE DISCOUNT, YOU WILL HAVE TO
INCLUDE INTEREST IN YOUR TAXABLE INCOME BEFORE YOU RECEIVE CASH.
Because of the manner in which the interest rate on the notes is reset,
the notes should be classified as contingent payment debt instruments subject
to the "noncontingent bond method" for accruing original issue discount for
United States federal income tax purposes. Assuming the notes are so treated,
original issue discount will accrue from the issue date of the notes and will
be included in your gross income for United States income tax purposes on a
constant yield-to-maturity basis, regardless of your usual method of tax
accounting, and adjustments will be made to reflect actual payments on the
notes. For all accrual periods ending on or prior to February 17, 2005, the
original issue discount that accrues on the notes will exceed the stated
interest payments on the notes. In addition, any gain on the disposition of a
note before the purchase contract settlement date will generally be treated as
ordinary interest income, and the ability to offset this interest income with a
loss, if any, on a purchase contract may be limited. For additional tax-related
risks, see "Certain United States Federal Income Tax Consequences--Notes."
THE TRADING PRICE OF THE NOTES MAY NOT FULLY REFLECT THE VALUE OF THEIR ACCRUED
BUT UNPAID INTEREST.
The notes may trade at a price that does not fully reflect the value of
their accrued but unpaid interest. If you dispose of your notes between record
dates for interest payments, you will be required to include in gross income
the daily portions of original issue discount through the date of disposition
in income as ordinary income, and to add this amount to your adjusted tax basis
in the notes disposed of. To the extent the selling price is less than your
adjusted tax basis, you will recognize a loss.
RISKS RELATED TO ALLTEL
WE FACE INTENSE COMPETITION IN OUR WIRELESS BUSINESS THAT COULD REDUCE OUR
MARKET SHARE OR ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE.
Currently, the FCC allows up to 10 wireless carriers to operate in the
same geographic area. A majority of our markets have five or more wireless
carriers. The presence of multiple competitors within our wireless markets has
made it increasingly difficult to attract new customers and retain existing
ones. As a result of increased competition, we anticipate that the price per
minute for wireless voice services will decline while costs to acquire
customers, including handset subsidies and advertising and promotion costs, may
increase. Our ability to continue to compete effectively will depend upon our
ability to successfully market our products and services and to identify and
respond to various competitive factors affecting the wireless industry,
including changes in rate plans, introduction of new services and technologies,
changes in consumer preferences and demographics and economic trends. Failure
to successfully market our products and services or to adequately and timely
respond to competitive factors could reduce our market share or adversely
affect our revenue or net income.
In the current market, our ability to compete also depends on our ability
to offer regional and national calling plans to our customers. We rely on
roaming agreements with other wireless carriers to provide roaming
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capabilities in areas not covered by our network. These agreements are subject
to renewal and termination if certain events occur, including if network
quality standards are not maintained. If we are unable to maintain or renew
these agreements, our ability to continue to provide competitive regional and
nationwide wireless service to our customers could be impaired, which, in turn,
would have an adverse impact on our wireless operations.
WE ARE SUBJECT TO GOVERNMENT REGULATION OF THE TELECOMMUNICATIONS INDUSTRY.
As a provider of wireless communication services, we are subject to
regulation by the FCC. The FCC has rules governing the construction and
operation of wireless communications systems and licensing and technical
standards for the provision of wireless communication services. In addition,
the FCC and the Federal Aviation Administration regulate the siting, lighting,
and construction of transmitter towers and antennae. Tower siting and
construction is also subject to state and local zoning as well as federal
statutes regarding environmental and historic preservation.
Licenses granted to us by the FCC to provide wireless communications
services were originally issued for 10-year terms and may be renewed for
additional 10-year terms subject to FCC approval of the renewal applications.
Failure to comply with FCC requirements in a given service area could result in
the revocation of our license for that area or in the imposition of fines.
As a provider of wireline communication services, we have been granted
franchises by each of the 15 states in which we operate. We are subject to
regulation from the regulatory commissions in each of these 15 states as well
as from the FCC. State regulatory commissions have primary jurisdiction over
local and intrastate rates that we charge customers, including other
telecommunications companies, and service quality standards. The FCC has
primary jurisdiction over the interstate access rates that we charge other
telecommunications companies that use our network and issues related to
interstate service. Future revenues, costs, and capital investment in our
wireline business could be adversely affected by material changes to these
regulations.
RAPID AND SIGNIFICANT CHANGES IN TECHNOLOGY COULD REQUIRE US TO SIGNIFICANTLY
INCREASE CAPITAL INVESTMENT OR COULD RESULT IN REDUCED DEMAND FOR OUR SERVICES.
Technologies for communications and information services are rapidly
changing. In our wireless business, we employ Code Division Multiple Access, or
CDMA, digital technology in the majority of our markets. This technology is
still evolving and we expect further developments that would allow us to
provide new products and services to our customers. However, if this happens,
we may be required to make significant capital investments to implement this
new technology.
New communications technologies may also impact our wireline and
long-distance businesses. For example, we may be unable to retain existing
wireline customers who decide to replace their wireline telephone service with
wireless telephone service. Furthermore, the development and deployment of
fixed wireless technology in our wireline markets could provide our competitors
with an alternative means to access the home and provide local telephone
service to our wireline customers. In the long-distance business, new
technologies such as voice over internet protocol could provide our
long-distance customers with a lower cost alternative to our long-distance
services.
Finally, changing technologies may impact our information services
business. Our information services business has developed and continues to
develop products that are utilized in a UNIX based environment. New
technologies as well as changes in regulation and the development of new
products, create the need to continually update and modify our software and
systems offered to our customers. Developing and adapting to these new
technologies may require significant investment by us, and our success in doing
so will determine our ability to retain existing customers and attract new ones.
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The failure to invest in and deploy new technologies for our wireless or
information services businesses, or the proliferation of replacement
technologies impacting our wireline or long-distance businesses, could require
us to make significant additional capital investment or could result in reduced
demand for our services, both of which could adversely impact our financial
performance and results of operations.
OUR FINANCIAL RESULTS COULD BE ADVERSELY IMPACTED IF WE ARE UNABLE TO
SUCCESSFULLY INTEGRATE PENDING OR COMPLETED ACQUISITIONS.
We have made several acquisitions over the past several years as part of
our strategy to grow the scale and scope of each of our primary businesses. On
October 31, 2001 we signed a definitive agreement to acquire Verizon
Communications Inc.'s approximately 600,000 local telephone lines in Kentucky
for $1.9 billion in cash. On March 19, 2002, we announced a definitive
agreement to acquire CenturyTel Inc.'s approximately 700,000 wireless customers
and certain other assets for $1.65 billion in cash. We expect each of these
acquisitions to close in the third quarter of 2002 (see "Prospectus Supplement
Summary--Recent Developments").
We expect certain benefits to arise from these acquisitions, including
revenue and market penetration improvements and certain efficiencies and
synergies. Our ability to realize these benefits will depend on the successful
completion and integration of the acquisitions. The acquisitions are subject to
various closing conditions and there can be no assurance that such conditions
will be met. Further, our success in integrating the acquisitions will involve,
among other things, the conversion of network and billing systems, changes in
branding and product offerings, and combining our operations with those of the
acquired properties. If we are not successful in this integration, our
financial results could be adversely impacted. Additionally, our management may
be required to dedicate significant time and effort to this integration process
which could divert their attention from other business concerns.
OUR HOLDING COMPANY STRUCTURE RESULTS IN STRUCTURAL SUBORDINATION AND MAY
AFFECT OUR ABILITY TO MAKE PAYMENTS ON THE EQUITY UNITS.
The equity units and notes are obligations exclusively of ALLTEL. We are
a holding company and, accordingly, substantially all of our operations are
conducted through our subsidiaries. As a result, our cash flow and our ability
to service our debt, including the equity units, depends upon the earnings of
our subsidiaries. In addition, we depend on the distribution of earnings, loans
or other payments by our subsidiaries to us.
Our subsidiaries are separate and distinct legal entities. Our
subsidiaries have no obligation to pay any amounts due on the equity units or
to provide us with funds for our payment obligations, whether by dividends,
distributions, loans or other payments. In addition, any payment of dividends,
distributions, loans or advances by our subsidiaries to us could be subject to
statutory or contractual restrictions. Payments to us by our subsidiaries will
also be contingent upon our subsidiaries' earnings and business considerations.
Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders of the
equity units to participate in those assets, will be effectively subordinated
to the claims of that subsidiary's creditors, including trade creditors. In
addition, even if we were a creditor of any of our subsidiaries, our rights as
a creditor would be subordinate to any security interest in the assets of our
subsidiaries and any indebtedness of our subsidiaries senior to that held by us.
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USE OF PROCEEDS
We estimate that the net proceeds from the sale of equity units in this
offering will be approximately $1.2 billion (approximately $1.4 billion if the
underwriters exercise their overallotment option in full), after deducting the
underwriting discount and estimated offering expenses payable by us. We expect
to use the net proceeds from this offering for general corporate purposes,
including working capital and the expansion of our business through strategic
acquisitions as opportunities arise. Currently, it is anticipated that a
significant portion of the net proceeds (together with proceeds from other
financings as described below) will be used to fund the remaining $1.7 billion
cash purchase price for the Verizon Wireline Acquisition and the $1.65 billion
cash purchase price for the CenturyTel Wireless Acquisition.
Pending the application of the net proceeds as described immediately
above, we will apply such proceeds to either (i) reduce our outstanding
commercial paper borrowings or (ii) purchase short-term marketable securities.
As of March 31, 2002, we had $21.0 million of commercial paper borrowing
outstanding (with a weighted averaged interest rate of 2.05%).
On April 10, 2002, the SEC declared effective our shelf registration
statement, filed on March 29, 2002, which allows us to offer up to $5.0 billion
of our securities from time to time, of which this offering is a part. The
aggregate remaining cost of our recently announced acquisitions is estimated at
approximately $3.35 billion. In addition to the net proceeds from this
offering, we currently anticipate funding the remaining cost of these
acquisitions through funds borrowed or received under (i) a senior bridge
credit facility for which we have received commitments, (ii) our commercial
paper program and (iii) debt securities issued under the shelf registration
statement referred to above. Affiliates of the underwriters are lenders under
our existing revolving credit facility which supports borrowings under our
commercial paper program and have provided the commitments under the senior
bridge credit facility. Those affiliates may receive some of the proceeds of
this offering.
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PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock trades on the NYSE and the Pacific Stock Exchange under
the symbol "AT." The following table sets forth on a per share basis the high
and low sales prices for our common stock for the periods indicated as reported
on the NYSE composite transactions reporting system, as well as the dividends
declared on our common stock for these periods.
HIGH LOW DIVIDENDS
------ ------ ---------
2000
First Quarter........................... $82.38 $55.88 $0.32
Second Quarter.......................... 70.44 59.06 0.32
Third Quarter........................... 64.94 47.75 0.32
Fourth Quarter.......................... 65.63 50.50 0.33
2001
First Quarter........................... $68.69 $49.43 $0.33
Second Quarter.......................... 61.30 50.01 0.33
Third Quarter........................... 65.15 54.57 0.33
Fourth Quarter.......................... 65.15 56.90 0.34
2002
First Quarter........................... $63.25 $52.15 $0.34
Second Quarter (through April 30, 2002). 56.35 47.80 0.34
On April 30, 2002, the last reported sale price of our common stock on
the NYSE was $49.50 per share. As of April 30, 2002, there were approximately
256,500 holders of record of our common stock.
We declare and pay dividends on our common stock on a quarterly basis and
we currently expect to continue this practice in the foreseeable future. Our
board of directors periodically considers appropriate dividend policies and
practices relating to future dividends on our common stock.
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CAPITALIZATION
The following table sets forth our capitalization at December 31, 2001
and our capitalization as adjusted to reflect the sale of 25,000,000 equity
units and the application of the net proceeds therefrom as described under "Use
of Proceeds." When you read this data, you should also read the detailed
information and financial statements appearing in documents incorporated by
reference in this prospectus supplement and the accompanying prospectus.
AS OF DECEMBER 31, 2001
-----------------------
ACTUAL AS ADJUSTED
--------- -----------
(DOLLARS IN MILLIONS)
Long-term debt (including current maturities)........... $ 3,913 $ 5,163
Common stock:
$1 par value; 1.0 billion shares
authorized, 310.5 million issued and outstanding (1). 311 311
Other shareholders' equity (2).......................... 5,255 5,171
Total shareholders' equity........................... 5,566 5,482
--------- -------
Total capitalization............................. $ 9,479 $10,645
========= =======
--------
(1)Amount excludes the common stock issuable upon settlement of the purchase
contracts underlying the corporate units and common stock issuable upon the
exercise of 16.3 million outstanding options.
(2)Reflects an adjustment of approximately $51.4 million representing the
present value of the contract adjustment payments payable in connection with
the purchase contracts underlying the corporate units and approximately
$32.5 million representing a portion of the issuance costs allocated to the
purchase contracts.
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ACCOUNTING TREATMENT
The net proceeds from the sale of the equity units will be allocated
between the purchase contracts and the notes on our financial statements. The
present value of the contract adjustment payments will be initially charged to
equity, with an offsetting credit to liabilities. Subsequent contract
adjustment payments will be allocated between this liability account and
interest expense based on a constant rate calculation over the life of the
transaction.
The purchase contracts are forward transactions in our common stock. Upon
settlement of a purchase contract, we will receive $50 on that purchase
contract and will issue the requisite number of shares of our common stock. The
$50 we receive will be credited to shareholders' equity and allocated between
the common stock and paid-in-capital accounts.
Before the issuance of shares of our common stock upon settlement of the
purchase contracts, we expect that the equity units will be reflected in our
diluted earnings per share calculations using the treasury stock method. Under
this method, the number of shares of common stock used in calculating diluted
earnings per share (based on the settlement formula applied at the end of the
reporting period) is deemed to be increased by the excess, if any, of the
number of shares issuable upon settlement of the purchase contracts over the
number of shares that could be purchased by us in the market, at the average
market price during the period, using the proceeds receivable upon settlement.
Consequently, we anticipate that there will be no dilutive effect on our
earnings per share except during periods when the average market price of a
share of our common stock is above the threshold appreciation price of $60.39.
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DESCRIPTION OF THE EQUITY UNITS
The summary of the equity units and certain provisions of the purchase
contract agreement set forth below is not complete and is qualified in all
respects by reference to that agreement, a form of which has been filed as an
exhibit to a Form 8-K which is incorporated by reference in the registration
statement of which this prospectus supplement forms a part.
We will issue the equity units under the purchase contract agreement
between the purchase contract agent and us. The equity units initially will
consist of 25,000,000 corporate units (28,750,000 corporate units if the
underwriters exercise their overallotment option in full), each with a stated
amount of $50.
Each corporate unit will consist of a unit comprising:
(1) a purchase contract pursuant to which:
. the holder will purchase from us no later than May 17, 2005, for
the stated amount, a number of newly issued shares of our common
stock equal to the settlement rate described below under
"Description of the Purchase Contracts--Purchase of Common Stock,"
. we will make unsecured contract adjustment payments to the holder
at the rate of 1.50% of the $50 stated amount per year, paid
quarterly, subject to our right to defer these payments; and
(2) either
. a note having a principal amount equal to the stated amount, or
. following a successful remarketing of the notes on the third
business day immediately preceding February 17, 2005, or the
occurrence of a tax event redemption prior to May 17, 2005, the
appropriate applicable ownership interest in a portfolio of
zero-coupon U.S. Treasury securities, which we refer to as the
"Treasury portfolio".
"Applicable ownership interest" means, with respect to a corporate unit
and the U.S. Treasury securities in the Treasury portfolio:
. a 1/20, or 5%, undivided beneficial ownership interest in a $1,000
principal or interest amount of a principal or interest strip in a U.S.
Treasury security included in the Treasury portfolio that matures on or
prior to May 15, 2005; and
. for the scheduled interest payment date on the notes that occurs on May
17, 2005, in the case of a successful remarketing of the notes, or for
each scheduled interest payment date on the notes that occurs after the
tax event redemption date and on or before May 17, 2005, in the case of
a tax event redemption, a .078125% undivided beneficial ownership
interest in a $1,000 principal or interest amount of a principal or
interest strip in a U.S. Treasury security included in the Treasury
portfolio that matures on or prior to that interest payment date.
For United States federal income tax purposes, the purchase price of each
corporate unit will be allocated between the purchase contract and the note in
proportion to their respective fair market values at the time of issuance. We
expect that, at the time of issuance, the fair market value of each note will
be $50 and the fair market value of each purchase contract will be $0. This
position will generally be binding on each beneficial owner of a corporate
unit, but not on the Internal Revenue Service.
As long as an equity unit is in the form of a corporate unit, the note or
the appropriate applicable ownership interest in the Treasury portfolio, as
applicable, forming a part of the corporate unit will be pledged to the
collateral agent to secure the holder's obligation to purchase shares of our
common stock under the purchase contract.
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CREATING TREASURY UNITS
Unless the Treasury portfolio has replaced the notes as a component of
the corporate units as the result of a successful remarketing of the notes or a
tax event redemption, each holder of corporate units will have the right, at
any time on or prior to the fifth business day immediately preceding May 17,
2005, to substitute for the notes held by the collateral agent zero-coupon
Treasury securities (CUSIP No. 912803AD5) maturing on May 15, 2005, which we
refer to as "Treasury securities," in a total principal amount at maturity
equal to the aggregate principal amount of the notes for which substitution is
being made. This substitution will create treasury units, and the applicable
notes will be released to the holder.
Because Treasury securities are issued in multiples of $1,000, holders of
corporate units may make this substitution only in integral multiples of 20
corporate units. If the Treasury portfolio has replaced the notes as a
component of the corporate units as the result of a successful remarketing of
the notes or a tax event redemption, holders of corporate units may make
substitutions only in multiples of 32,000 corporate units, at any time on or
prior to the second business day immediately preceding May 17, 2005. In such a
case, holders would also obtain the release of the appropriate applicable
ownership interest in the Treasury portfolio rather than a release of the
applicable notes.
Each treasury unit will consist of a unit with a stated amount of $50 and
will contain two components:
(1) a purchase contract pursuant to which:
. the holder will purchase from us no later than May 17, 2005, for
the stated amount, a number of newly issued shares of our common
stock equal to the settlement rate described below under
"Description of the Purchase Contracts--Purchase of Common Stock,"
and
. we will make unsecured contract adjustment payments to the holders
at the rate of 1.50% of the $50 stated amount per year, paid
quarterly, subject to our rights to defer these payments; and
(2) a 1/20, or 5%, undivided beneficial ownership interest in a
Treasury security that matures on May15, 2005 and has a principal amount at
maturity of $1,000.
For example, to create 20 treasury units if the Treasury portfolio has
not replaced the notes as a component of the corporate units, the corporate
unit holder will:
. deposit with the collateral agent a Treasury security that matures
on May 15, 2005 and has a principal amount at maturity of $1,000,
and
. transfer 20 corporate units to the purchase contract agent
accompanied by a notice stating that the holder has deposited a
Treasury security with the collateral agent and requesting the
release to the holder of the 20 notes relating to the 20 corporate
units.
Upon that deposit and the receipt of an instruction from the purchase
contract agent to the collateral agent, the collateral agent will release the
related 20 notes from the pledge under the pledge agreement, free and clear of
our security interest, to the purchase contract agent. The purchase contract
agent will then:
. cancel the 20 corporate units,
. transfer the 20 related notes to the holder, and
. deliver 20 treasury units to the holder.
The Treasury security will be substituted for the notes and will be
pledged to the collateral agent to secure the holder's obligation to purchase
our common stock under the purchase contract. The notes released to the holder
thereafter will trade separately from the resulting treasury units. Contract
adjustment payments will be
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payable by us on these treasury units on each payment date from the later of
August 17, 2002 and the last payment date on which contract adjustment payments
were made. In addition, original issue discount will accrue on the related
Treasury securities.
RECREATING CORPORATE UNITS
Unless the Treasury portfolio has replaced the notes as a component of
the corporate units as a result of a successful remarketing of the notes or a
tax event redemption, each holder of treasury units will have the right, at any
time on or prior to the fifth business day immediately preceding May 17, 2005,
to substitute for the Treasury securities held by the collateral agent notes in
an aggregate principal amount equal to the aggregate principal amount at
maturity of the Treasury securities. This substitution would create corporate
units, and the applicable Treasury securities would be released to the holder.
Because Treasury securities are issued in integral multiples of $1,000,
holders of treasury units may make this substitution only in integral multiples
of 20 treasury units. If the Treasury portfolio has replaced the notes as a
component of the corporate units as the result of a successful remarketing of
the notes or a tax event redemption, holders of the treasury units may make
this substitution at any time on or prior to the second business day
immediately preceding May 17, 2005, but using the appropriate applicable
ownership interest in the Treasury portfolio instead of notes and only in
integral multiples of 32,000 treasury units.
For example, to create 20 corporate units, the treasury units holder will:
. deposit with the collateral agent 20 notes, which notes must have
been purchased in the open market at the holder's expense, and
. transfer 20 treasury units certificates to the purchase contract
agent accompanied by a notice stating that the treasury units
holder has deposited 20 notes with the collateral agent and
requesting that the purchase contract agent instruct the collateral
agent to release the Treasury security relating to those treasury
units.
Upon that deposit and the receipt of an instruction from the purchase
contract agent to the collateral agent, the collateral agent will release the
Treasury securities from the pledge under the pledge agreement, free and clear
of our security interest, to the purchase contract agent. The purchase contract
agent will then:
. cancel the 20 treasury units,
. transfer the Treasury securities to the holder of treasury units,
and
. deliver 20 corporate units to the holder.
The substituted notes will be pledged with the collateral agent to secure
the corporate unit holder's obligation to purchase common stock under the
purchase contract.
Holders that elect to substitute pledged securities, thereby creating
treasury units or recreating corporate units, will be responsible for any fees
or expenses payable in connection with the substitution.
CURRENT PAYMENTS
Holders of corporate units are entitled to receive aggregate cash
payments at the rate of 7.75% of the $50 stated amount per year from and after
the original issue date, payable quarterly in arrears. The quarterly payments
on the corporate units will consist of interest on the note or cash
distributions on the applicable ownership interest in the Treasury portfolio,
as applicable, payable at the rate of 6.25% of the stated amount per year, and
quarterly contract adjustment payments payable by us at the rate of 1.50% of
the stated amount per year, subject to our right to defer the payment of such
contract adjustment payments. The original issue discount
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rules that apply to contingent payment debt instruments should govern the
income inclusions with respect to the notes for United States federal income
tax purposes.
Holders who create treasury units will be entitled to receive quarterly
contract adjustment payments payable by us at the rate of 1.50% of the stated
amount per year, subject to our right to defer the payments of such contract
adjustment payments. In addition, original issue discount will accrue on the
Treasury securities.
Our obligations with respect to the contract adjustment payments will be
subordinate and junior in right of payment to our senior indebtedness. "Senior
indebtedness" with respect to the contract adjustment payments means
indebtedness of any kind provided the instrument under which such indebtedness
is incurred does not expressly provide otherwise. The notes will be our senior
unsecured obligations and will rank equal in right of payment with all of our
other senior unsecured obligations. See "Description of Debt Securities" in the
accompanying prospectus.
ABSENCE OF VOTING AND OTHER RIGHTS
Holders of purchase contracts forming part of the corporate units or the
treasury units, in their capacities as such holders, will have no voting or
other rights in respect of our common stock.
LISTING OF THE SECURITIES
The corporate units have been approved for listing on the NYSE under the
symbol "AYZ," subject to notice of official issuance. Unless and until
substitution has been made as described in "--Creating Treasury Units" or
"--Recreating Corporate Units," neither the note nor Treasury portfolio
component of a corporate unit, nor the Treasury security component of a
treasury unit, will trade separately from corporate units or treasury units.
The note or Treasury portfolio component will trade as a unit with the purchase
contract component of the corporate unit, and the Treasury security component
will trade as a unit with the purchase contract component of the treasury unit.
If treasury units or notes are separately traded to a sufficient extent
that the applicable exchange listing requirements are met, we may but need not
cause the treasury units or notes to be listed on the exchange on which the
corporate units are then listed.
MISCELLANEOUS
We or our affiliates may from time to time, to the extent permitted by
law, purchase any of the corporate units, treasury units or notes which are
then outstanding by tender, in the open market or by private agreement.
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DESCRIPTION OF THE PURCHASE CONTRACTS
The summary of the purchase contract agreement, purchase contracts,
pledge agreement, remarketing agreement, indenture and supplemental indenture
set forth below is not complete and is qualified in all respects by reference
to those agreements, forms of which have been, or will be, filed as exhibits to
a Form 8-K which is incorporated by reference in the registration statement of
which this prospectus forms a part.
PURCHASE OF COMMON STOCK
Each purchase contract underlying an equity unit will obligate the holder
of the purchase contract to purchase, and us to sell, on May 17, 2005, for an
amount in cash equal to $50, the stated amount of each equity unit, a number of
newly issued shares of our common stock equal to the "settlement rate." The
settlement rate will be calculated, subject to adjustment under the
circumstances described in "--Anti-Dilution Adjustments," as follows:
. if the applicable market value is equal to or greater than the
threshold appreciation price of $60.39 , which is approximately 22%
above the reference price of $49.50, the settlement rate will be .8280,
which is equal to the stated amount divided by the threshold
appreciation price. Accordingly, if, between the date of this
prospectus supplement and the period during which the applicable market
value is measured, the market price for our common stock increases to
an amount that is higher than the threshold appreciation price, the
aggregate market value of the shares of our common stock issued upon
settlement of each purchase contract will be higher than the stated
amount, assuming that the market price of our common stock is the same
as the applicable market value of our common stock. If the market price
is the same as the threshold appreciation price, the aggregate market
value of the shares will be equal to the stated amount, assuming that
the market value of our common stock on the date of settlement is the
same as the applicable market value of our common stock;
. if the applicable market value is less than the threshold appreciation
price but greater than the reference price, the settlement rate will be
equal to the stated amount divided by the applicable market value.
Accordingly, if the market price for our common stock increases between
the date of this prospectus supplement and the period during which the
applicable market value is measured, but the market price is less than
the threshold appreciation price, the aggregate market value of the
shares of our common stock issued upon settlement of each purchase
contract will be equal to the stated amount, assuming that the market
price of our common stock on the date of settlement is the same as the
applicable market value of our common stock; and
. if the applicable market value is less than or equal to the reference
price, the settlement rate will be 1.0101, which is equal to the stated
amount divided by the reference price. Accordingly, if the market price
for our common stock decreases between the date of this prospectus
supplement and the period during which the applicable market value is
measured, the aggregate market value of the shares of our common stock
issued upon settlement of each purchase contract will be less than the
stated amount, assuming that the market value is the same as the
applicable market value of our common stock. If the market price stays
the same, the aggregate market value of the shares of our common stock
will be equal to the stated amount, assuming that the market value is
the same as the applicable market value of our common stock.
"Applicable market value" means the average of the closing price per
share of our common stock on each of the 20 consecutive trading days ending on
the third trading day immediately preceding May 17, 2005 or, in the event of a
cash merger, ending on the third trading day immediately preceding the
consummation of the cash merger.
"Closing price" of our common stock on any date of determination means
the closing sale price (or, if no closing price is reported, the last reported
sale price) of our common stock on the NYSE on that date or, if our
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common stock is not listed for trading on the NYSE on any such date, as
reported in the composite transactions for the principal United States national
or regional securities exchange on which our common stock is so listed. If our
common stock is not so listed on a United States national or regional
securities exchange, the closing price means the last closing sale price of our
common stock as reported by the Nasdaq Stock Market, or, if our common stock is
not so reported, the last quoted bid price for our common stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization. If the bid price is not available, the closing price means the
market value of our common stock on the date of determination as determined by
a nationally recognized independent investment banking firm retained by us for
this purpose.
A "trading day" means a day on which our common stock is not suspended
from trading on any national or regional securities exchange or association or
over-the-counter market at the close of business and has traded at least once
on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of our
common stock.
We will not issue any fractional shares of our common stock pursuant to
the purchase contracts. In lieu of fractional shares otherwise issuable
(calculated on an aggregate basis) in respect of purchase contracts being
settled by a holder of corporate units or treasury units, the holder will be
entitled to receive an amount of cash equal to the fraction of a share times
the applicable market value.
On the business day immediately preceding May 17, 2005, unless:
. a holder of corporate units or treasury units has settled the purchase
contracts through the early delivery of cash to the purchase contract
agent in the manner described under "--Early Settlement;"
. a holder of corporate units or treasury units has settled the purchase
contracts early in the manner described under "--Early Settlement Upon
Cash Merger;"
. a holder of corporate units that include notes has settled the purchase
contracts with separate cash on the business day immediately preceding
May 17, 2005 pursuant to prior notice in the manner described under
"--Notice to Settle with Cash;"
. a holder of corporate units has had the notes related to the holder's
purchase contracts successfully remarketed on the third business day
immediately preceding May 17, 2005 if the notes were not successfully
remarketed on the third business day immediately preceding February 17,
2005 in the manner described herein; or
. an event described under "--Termination" below has occurred,
then
. in the case of corporate units, unless the Treasury portfolio has
replaced the notes as a component of the corporate units as the result
of a successful remarketing of the notes on the third business day
immediately preceding February 17, 2005 or a tax event redemption, we
will exercise our rights as a secured party to dispose of the notes in
accordance with applicable law, and
. in the case of treasury units or, in the event that the Treasury
portfolio has replaced the notes as a component of the corporate units
as the result of a successful remarketing of the notes on the third
business day immediately preceding February 17, 2005 or a tax event
redemption, in the case of corporate units, the principal amount of the
Treasury securities, or the appropriate applicable ownership interest
in the Treasury portfolio, as applicable, when paid at maturity, will
automatically be applied to satisfy in full the holder's obligation to
purchase shares of our common stock under the purchase contracts.
Shares of our common stock will then be issued and delivered to the
holder or the holder's designee, upon presentation and surrender of the
certificate evidencing the equity units and payment by the holder of any
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transfer or similar taxes payable in connection with the issuance of our common
stock to any person other than the holder.
Each holder of corporate units or treasury units, by acceptance of these
securities, will be deemed to have:
. irrevocably agreed to be bound by the terms and provisions of the
purchase contracts and the pledge agreement and to have agreed to
perform its obligations thereunder for so long as the holder remains a
holder of the equity units, and
. duly appointed the purchase contract agent as the holder's
attorney-in-fact to enter into and perform the purchase contracts and
pledge agreement on behalf of and in the name of the holder.
In addition, each beneficial owner of corporate units or treasury units,
by acceptance of this interest, will be deemed to have agreed to treat:
. itself as the owner of the related notes, the appropriate applicable
ownership interest in the Treasury portfolio or the Treasury
securities, as the case may be, and
. the notes as indebtedness for all tax purposes.
REMARKETING
Pursuant to the remarketing agreement and subject to the terms of the
supplemental remarketing agreement among the remarketing agent, the purchase
contract agent and us, unless a tax event redemption has occurred, the notes of
corporate unit holders will be remarketed on the third business day immediately
preceding February 17, 2005.
The remarketing agent will use its reasonable efforts to remarket these
notes at an aggregate price of approximately 100.5% of the Treasury portfolio
purchase price described below. The portion of the proceeds from the
remarketing equal to the Treasury portfolio purchase price will be applied to
purchase a Treasury portfolio consisting of:
. interest or principal strips of U.S. Treasury securities that mature on
or prior to May 15, 2005 in an aggregate amount equal to the principal
amount of the notes included in corporate units, and
. interest or principal strips of U.S. Treasury securities that mature on
or prior to May 15, 2005 in an aggregate amount equal to the aggregate
interest payment that would be due on that date on the principal amount
of the notes included in corporate units if the interest rate on the
notes was not reset as described in "Description of the Notes--Market
Rate Reset."
The Treasury portfolio will be substituted for the notes and will be pledged to
the collateral agent to secure the corporate unit holders' obligation to
purchase our common stock under the purchase contracts.
In addition, the remarketing agent may deduct, as a remarketing fee, an
amount not exceeding 25 basis points (.25%) of the Treasury portfolio purchase
price from any amount of the proceeds in excess of the Treasury portfolio
purchase price. The remarketing agent will then remit any remaining portion of
the proceeds for the benefit of the holders. Holders of corporate units whose
notes are remarketed will not otherwise be responsible for the payment of any
remarketing fee in connection with the remarketing.
As used in this context, "Treasury portfolio purchase price" means the
lowest aggregate price quoted by a primary U.S. government securities dealer in
New York City to the quotation agent on the third business day
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immediately preceding February 17, 2005 for the purchase of the Treasury
portfolio described above for settlement on February 17, 2005.
"Quotation agent" means Merrill Lynch Government Securities, Inc. or its
successor or any other primary U.S. government securities dealer in New York
City selected by us.
If (1) despite using its reasonable efforts, the remarketing agent cannot
remarket the notes, other than to us, at a price equal to or greater than 100%
of the Treasury portfolio purchase price, or (2) the remarketing has not
occurred because a condition precedent to the remarketing has not been
fulfilled, in each case resulting in a failed remarketing, the notes will
continue to be a component of corporate units, and another remarketing will be
attempted as described below.
If the remarketing of the notes on the third business day preceding
February 17, 2005 has resulted in a failed remarketing, and unless a tax event
redemption has occurred, the notes of corporate unit holders who have failed to
notify the purchase contract agent on or prior to the fifth business day
immediately preceding May 17, 2005 of their intention to settle the purchase
contracts with separate cash will be remarketed on the third business day
immediately preceding May 17, 2005.
The remarketing agent will then use its reasonable efforts to remarket
these notes at a price of approximately 100.5% of the aggregate principal
amount of the notes. The portion of the proceeds from this remarketing equal to
the aggregate principal amount of the notes will automatically be applied to
satisfy in full the corporate unit holders' obligations to purchase our common
stock.
In addition, the remarketing agent will deduct, as a remarketing fee, an
amount equal to 25 basis points (.25%) of the aggregate principal amount of the
remarketed notes from any amount of the proceeds in excess of the aggregate
principal amount of the remarketed notes. The remarketing agent will then remit
any remaining portion of the proceeds for the benefit of the holders. Holders
of corporate units whose notes are remarketed will not otherwise be responsible
for the payment of any remarketing fee in connection with the remarketing.
If (1) despite using its reasonable efforts, the remarketing agent cannot
remarket the notes, other than to us, at a price equal to or greater than 100%
of the aggregate principal amount of the notes, or (2) the remarketing has not
occurred because a condition precedent to the remarketing has not been
fulfilled, in each case resulting in a failed remarketing, we will exercise our
rights as a secured party to either dispose of, or obtain and extinguish, the
notes in accordance with applicable law and satisfy in full each holder's
obligation to purchase our common stock under the purchase contracts.
We will cause a notice of any failed remarketing to be published on the
second business day immediately preceding February 17, 2005 or May 17, 2005, as
applicable, by publication in a daily newspaper in the English language of
general circulation in New York City, which is expected to be THE WALL STREET
JOURNAL. In addition, we will request, not later than seven nor more than 15
calendar days prior to a remarketing date, that the depositary notify its
participants holding notes, corporate units and treasury units of the
remarketing, including, in the case of a second failed remarketing, the
procedures that must be followed if a note holder wishes to exercise its right
to put its note to us as described in this prospectus supplement. If required,
we will endeavor to ensure that a registration statement with regard to the
full amount of the notes to be remarketed will be effective in a form that will
enable the remarketing agent to rely on it in connection with the remarketing
process. It is currently anticipated that Merrill Lynch, Pierce, Fenner & Smith
Incorporated will be the remarketing agent.
EARLY SETTLEMENT
A holder of corporate units may settle the purchase contracts (unless a
tax event redemption has occurred) on or prior to the fifth business day
immediately preceding May 17, 2005 by presenting and
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surrendering the equity unit certificate evidencing those corporate units at
the offices of the purchase contract agent, provided that at such time, if so
required under the U.S. federal securities laws, there is in effect a
registration statement covering the shares of our common stock to be delivered
in respect of the purchase contracts being settled. The holder should also
present the form of "Election to Settle Early" on the reverse side of that
certificate completed and executed as indicated, accompanied by payment to us
in immediately available funds of an amount equal to the sum of (i) $50 times
the number of purchase contracts being settled plus (ii) if delivery is made
with respect to any purchase contracts during the period from the close of
business on any record date for any payment date to the opening of business on
such payment date, an amount equal to the contract adjustment payments payable
on such payment date with respect to such purchase contracts. However, if the
applicable ownership interest in the Treasury portfolio has become a component
of the corporate units as a result of a successful remarketing of the notes or
a tax event redemption prior to May 17, 2005, holders of those corporate units
may settle early only in integral multiples of 32,000 corporate units at any
time on or prior to the second business day immediately preceding May 17, 2005.
A holder of treasury units may settle the purchase contracts on or prior
to the fifth business day immediately preceding May 17, 2005 by presenting and
surrendering the equity unit certificate evidencing those treasury units at the
offices of the purchase contract agent, provided that at such time, if so
required under the U.S. federal securities laws, there is in effect a
registration statement covering the shares of our common stock to be delivered
in respect of the purchase contracts being settled. The holder should also
present the form of election to settle early on the reverse side of that
certificate completed and executed as indicated, accompanied by payment to us
in immediately available funds of an amount equal to $50 times the number of
purchase contracts being settled. Holders of treasury units may settle early
only in integral multiples of 20 treasury units.
We have agreed that, if required under U.S. federal securities laws, we
will use commercially reasonable efforts to (1) have in effect a registration
statement covering the shares of our common stock to be delivered in respect of
the purchase contracts being settled and (2) provide a prospectus in connection
therewith, in each case in a form that may be used in connection with the early
settlement.
So long as the equity units are evidenced by one or more global security
certificates deposited with the depositary, procedures for early settlement
will also be governed by standing arrangements between the depositary and the
purchase contract agent.
Upon early settlement of the purchase contracts related to any corporate
units or treasury units:
. except as described below in "--Early Settlement Upon Cash Merger," as
a holder of equity units, you will receive .8280 of a newly issued
share of our common stock per corporate units or treasury units,
accompanied by this prospectus supplement, as amended or stickered,
regardless of the market price of our common stock on the date of the
early settlement. The number of shares of our common stock will be
subject to adjustment under the circumstances described in
"--Anti-Dilution Adjustments" below,
. the notes, the applicable ownership interest in the Treasury portfolio
or the Treasury securities, as applicable, related to the corporate
units or treasury units will be transferred to the holder free and
clear of our security interest,
. your right to receive future contract adjustment payments, if any, will
terminate, and
. no adjustment will be made to you, or for you, on account of any
amounts accrued (including deferred amounts) in respect of contract
adjustment payments.
If the purchase contract agent receives an equity unit certificate,
accompanied by the completed "Election to Settle Early" form and the requisite
amount of immediately available funds, from you by 5:00 p.m., New York City
time, on a business day, that day will be considered the early settlement date.
If the purchase
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contract agent receives those documents after 5:00 p.m., New York City time, on
a business day or at any time on a day that is not a business day, the next
business day will be considered the early settlement date.
Upon early settlement of purchase contracts in the manner described
above, presentation and surrender of the equity unit certificate evidencing the
related corporate units or treasury units and payment of any transfer or
similar taxes payable by the holder in connection with the issuance of our
common stock to any person other than the holder of the corporate units or
treasury units, we will cause the shares of our common stock being purchased to
be issued, and the notes, the applicable ownership interest in the Treasury
portfolio or the Treasury securities, as the case may be, securing the purchase
contracts to be released from the pledge under the pledge agreement described
in "--Pledged Securities and Pledge Agreement" and transferred, within three
business days following the settlement date, to you or your designee.
NOTICE TO SETTLE WITH CASH
Unless the Treasury portfolio has replaced the notes as a component of
corporate units as a result of a successful remarketing of the notes or a tax
event redemption, a holder of corporate units may settle the purchase contract
with separate cash prior to 11:00 a.m., New York City time, on the business day
immediately preceding May 17, 2005. A holder of corporate units wishing to
settle the purchase contract with separate cash must notify the purchase
contract agent by presenting and surrendering the corporate unit certificate
evidencing the corporate units at the offices of the purchase contract agent
with the form of "Notice to Settle by Separate Cash" on the reverse side of the
certificate completed and executed as indicated on or prior to 5:00 p.m., New
York City time, on the fifth business day immediately preceding May 17, 2005.
If a holder who has given notice of its intention to settle the purchase
contract with separate cash fails to deliver the cash to the collateral agent
on the business day immediately preceding May 17, 2005, we will exercise our
right as a secured party to dispose of, in accordance with applicable law, the
related note to satisfy in full, from the disposition of the note, the holder's
obligation to purchase our common stock under the purchase contracts.
EARLY SETTLEMENT UPON CASH MERGER
If, prior to the settlement date, (i) we merge with or into another
entity, (ii) our common stock is converted, exchanged, reclassified or
cancelled in such merger, and (iii) at least 30% of the consideration received
by ALLTEL shareholders for our common stock in such merger consists of cash or
cash equivalents (which we refer to as a "cash merger"), then each holder of
equity units will have the right to accelerate and settle the purchase contract
at the settlement rate in effect immediately before the cash merger, provided
that at such time, if so required under U.S. federal securities laws, there is
in effect a registration statement covering any securities to be delivered in
respect of the purchase contracts being settled. We refer to this right as the
"merger early settlement right." We will provide each of the holders with a
notice of the consummation of cash merger within five business days after the
consummation thereof. The notice will specify, among other things, the early
settlement date, which shall be 10 business days after the date of the notice,
and the amount of the cash, securities and other consideration receivable by
the holder upon settlement.
To exercise the merger early settlement right, a holder must present and
surrender the equity unit certificates evidencing those corporate units or
treasury units to be settled at the offices of the purchase contract agent,
accompanied by payment to us in immediately available funds of an amount equal
to (a) $50 multiplied by (b) the number of purchase contracts being settled, no
later than 5:00 p.m., New York City time, on the business day immediately
preceding the early settlement date.
Upon early settlement of the purchase contracts so described above, we
will deliver to you on the early settlement date the kind and amount of
securities, cash or other property that you would have been entitled to receive
if you had settled the purchase contracts immediately before the cash merger at
the settlement rate in effect at such time. We will also cause the notes, the
applicable ownership interest in the Treasury portfolio or the Treasury
securities, as the case may be, securing the purchase contracts to be released
from the pledge under the pledge agreement and transferred to you.
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If you do not elect to exercise your merger early settlement right, your
equity units will remain outstanding and subject to settlement on the
settlement date. We have agreed that, if required under the U.S. federal
securities laws, we will use commercially reasonable efforts to (1) have in
effect a registration statement covering any securities to be delivered in
respect of the purchase contracts being settled and (2) provide a prospectus in
connection therewith, in each case in a form that may be used in connection
with the early settlement upon a cash merger.
CONTRACT ADJUSTMENT PAYMENTS
Contract adjustment payments in respect of corporate units and treasury
units will be fixed at a rate per year of 1.50% of the $50 stated amount per
purchase contract. Contract adjustment payments payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months. Contract
adjustment payments will accrue from May 6, 2002 and will be payable quarterly
in arrears on February 17, May 17, August 17 and November 17 of each year,
commencing August 17, 2002.
Contract adjustment payments will be payable to the holders of purchase
contracts as they appear on the books and records of the purchase contract
agent on the relevant record dates, which will be on the first day of the month
in which the relevant payment date falls. These distributions will be paid
through the purchase contract agent, who will hold amounts received in respect
of the contract adjustment payments for the benefit of the holders of the
purchase contracts relating to the equity units. Subject to any applicable laws
and regulations, each such payment will be made as described under
"--Book-Entry System."
If any date on which contract adjustment payments are to be made on the
purchase contracts related to the equity units is not a business day, then
payment of the contract adjustment payments payable on that date will be made
on the next succeeding day which is a business day, and no interest or payment
will be paid in respect of the delay. However, if that business day is in the
next succeeding calendar year, that payment will be made on the immediately
preceding business day, in each case with the same force and effect as if made
on that payment date. A business day means any day other than a Saturday,
Sunday or any other day on which banking institutions and trust companies in
New York City are permitted or required by any applicable law to close.
Our obligations with respect to contract adjustment payments will be
subordinated and junior in right of payment to our obligations under any of our
senior indebtedness.
Upon any payment or distribution of our assets to our creditors upon any
dissolution, winding up, liquidation or reorganization, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other similar
proceedings, the holders of all senior indebtedness shall first be entitled to
receive payment in full of all amounts due or to become due thereon, or payment
of such amounts shall have been provided for, before the holders of the equity
units shall be entitled to receive any contract adjustment payments with
respect to any equity units.
By reason of this subordination, in the event of our bankruptcy,
dissolution or reorganization, holders of senior indebtedness may receive more,
ratably, and holders of the equity units may receive less, ratably, than our
other creditors. Contract payment adjustments on the equity units are also
subordinated by operation of law to all indebtedness and other liabilities,
including trade payables, of our subsidiaries.
In addition, no payment of contract payment adjustments with respect to
any equity units may be made if:
. any payment default on any senior indebtedness has occurred and is
continuing beyond any applicable grace period; or
. any default other than a payment default with respect to senior
indebtedness occurs and is continuing that permits the acceleration of
the maturity thereof and the purchase contract agent receives a written
notice of such default from us or the holders of such senior
indebtedness.
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OPTION TO DEFER CONTRACT ADJUSTMENT PAYMENTS
We may, at our option and upon prior written notice to the holders of the
equity units and the purchase contract agent, defer the payment of contract
adjustment payments on the purchase contracts forming a part of the equity
units until no later than May 17, 2005. However, deferred contract adjustment
payments will accrue additional amounts at the rate of 7.75% per year (equal to
the rate on the notes plus the rate of contract adjustment payments on the
purchase contracts) until paid, compounded quarterly, to but excluding May 17,
2005. If the purchase contracts are terminated (upon the occurrence of certain
events of bankruptcy, insolvency or reorganization with respect to us), the
right to receive contract adjustment payments and deferred contract adjustment
payments will also terminate.
If we elect to defer the payment of the contract adjustment payments on
the purchase contracts until May 17, 2005, each holder of equity units will
receive on May 17, 2005 in respect of the deferred contract adjustment
payments, in lieu of a cash payment, a number of shares of our common stock
equal to (a) the aggregate amount of deferred contract adjustment payments
payable to the holder, divided by (b) the applicable market value.
We will not issue any fractional shares of our common stock with respect
to the payment of deferred contract adjustment payments on May 17, 2005. In
lieu of fractional shares otherwise issuable with respect to such payment of
deferred contract adjustment payments, the holder will be entitled to receive
an amount in cash equal to the fraction of a share times the applicable market
value described under "--Purchase of Common Stock."
If we exercise our option to defer the payment of contract adjustment
payments, then until the deferred contract adjustment payments have been paid,
we will not, and we will not permit any subsidiary of ours to, declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of our capital
stock other than:
. purchases, redemptions or acquisitions of shares of our capital stock
in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of employees, officers or
directors or a stock purchase or dividend reinvestment plan, or the
satisfaction by us of our obligations pursuant to any contract or
security outstanding on the date of such event,
. as a result of a reclassification of our capital stock or the exchange
or conversion of one class or series of our capital stock for another
class or series of the capital stock,
. the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of the capital stock
or the security being converted or exchanged,
. dividends or distributions in our capital stock (or rights to acquire
capital stock), or repurchases, redemptions or acquisitions of capital
stock in connection with the issuance or exchange of capital stock (or
securities convertible into or exchangeable for shares of our capital
stock),
. redemptions, exchanges or repurchases of any rights outstanding under a
shareholder rights plan or the declaration or payment thereunder of a
dividend or distribution of or with respect to rights in the future, or
. mandatory sinking fund payments with respect to any series of our
preferred stock provided that the aggregate stated value of all such
series outstanding at the time of any such payment does not exceed 5%
of the aggregate value of (1) the total principal amount of all bonds
or other securities representing secured indebtedness issued or assumed
by us and then outstanding and (2) our capital and surplus to be stated
on our books of account after giving effect to such payment; provided,
however, that any moneys deposited into any sinking fund and not in
violation of this provision may
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thereafter be applied to the purchase or redemption of such preferred
stock in accordance with the terms of such sinking fund without regard
to the foregoing restrictions.
ANTI-DILUTION ADJUSTMENTS
The formula for determining the settlement rate will be subject to
adjustment, without duplication, upon the occurrence of certain events,
including:
(a)the payment of dividends and other distributions of common stock on
our common stock;
(b)the issuance to all holders of common stock of rights, warrants or
options (other than any dividend reinvestment or share purchase
plans) entitling them, for a period of up to 45 days, to subscribe
for or purchase common stock at less than the current market price
thereof;
(c)subdivisions, splits and combinations of common stock;
(d)distributions to all holders of common stock of evidences of our
indebtedness, shares of capital stock, securities, cash or property
(excluding any dividend or distribution covered by paragraph (a) or
(b) above and any dividend or distribution paid exclusively in cash);
(e)distributions (other than regular quarterly cash dividends)
consisting exclusively of cash to all holders of common stock in an
aggregate amount that, together with (1) other all-cash distributions
(other than regular quarterly cash dividends) made within the
preceding 12 months and (2) any cash and the fair market value, as of
the expiration of the tender or exchange offer referred to below, of
consideration payable in respect of any tender or exchange offer
(other than consideration payable in respect of any odd-lot tender
offer) by us or any of our subsidiaries for common stock concluded
within the preceding 12 months, exceeds 5% of our aggregate market
capitalization ("aggregate market capitalization" being the product
of the current market price per share of our common stock multiplied
by the number of shares of common stock then outstanding) on the date
of the distribution; and
(f)the successful completion of a tender or exchange offer made by us or
any of our subsidiaries for common stock which involves an aggregate
consideration that, together with (1) any cash and the fair market
value of other consideration payable in respect of any tender or
exchange offer (other than consideration payable in respect of any
odd-lot tender offer) by us or any of our subsidiaries for the common
stock concluded within the preceding 12 months and (2) the aggregate
amount of any all-cash distributions (other than regular quarterly
cash dividends) to all holders of common stock made within the
preceding 12 months, exceeds 5% of our aggregate market
capitalization on the expiration of the tender or exchange offer.
The "current market price" per share of common stock on any day means the
average of the daily closing prices for the five consecutive trading days
selected by us commencing not more than 30 trading days before, and ending not
later than, the earlier of the day in question and the day before the "ex date"
with respect to the issuance or distribution requiring the computation. For
purposes of this paragraph, the term "ex date," when used with respect to any
issuance or distribution, shall mean the first date on which the common stock
trades regular way on the applicable exchange or in the applicable market
without the right to receive the issuance or distribution.
In the case of certain reclassifications, consolidations, mergers, sales
or transfers of assets or other transactions pursuant to which the common stock
is converted into the right to receive other securities, cash or property, each
purchase contract then outstanding would, without the consent of the holders of
the related corporate units or treasury units, as the case may be, become a
contract to purchase only the kind and amount of securities, cash and other
property receivable upon such reorganization event (except as otherwise
specifically provided, without any interest thereon and without any right to
dividends or distributions thereon which have a record date that is prior to
the purchase contract settlement date) which would have been received by the
holder
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of the related corporate units or treasury units immediately prior to the date
of consummation of such transaction if such holder had then settled such
purchase contract.
If at any time we make a distribution of property to our shareholders
which would be taxable to the shareholders as a dividend for United States
federal income tax purposes (i.e., distributions out of our current or
accumulated earnings and profits or evidences of indebtedness or assets, but
generally not stock dividends or rights to subscribe for capital stock) and,
pursuant to the settlement rate adjustment provisions of the purchase contract
agreement, the settlement rate is increased, this increase may give rise to a
taxable dividend to holders of equity units.
In addition, we may make increases in the settlement rate to avoid or
diminish any income tax to holders of our capital stock resulting from any
dividend or distribution of capital stock (or rights to acquire capital stock)
or from any event treated as such for income tax purposes or for any other
reasons.
Adjustments to the settlement rate will be calculated to the nearest
1/10,000th of a share. No adjustment in the settlement rate is required unless
the adjustment would require an increase or decrease of at least one percent in
the settlement rate. However, any adjustments which are not required to be made
because they would have required an increase or decrease of less than one
percent shall be carried forward and taken into account in any subsequent
adjustment.
We will be required, within ten business days following the adjustment of
the settlement rate, to provide written notice to the purchase contract agent
of the occurrence of the adjustment and a statement in reasonable detail
setting forth the method by which the adjustment to the settlement rate was
determined and setting forth the revised settlement rate.
Each adjustment to the settlement rate will result in a corresponding
adjustment to the number of shares of common stock issuable upon early
settlement of a purchase contract.
TERMINATION
The purchase contracts, and our rights and obligations and the rights and
obligations of the holders of the equity units under the purchase contracts,
including the right and obligation to purchase our common stock and the right
to receive accumulated contract adjustment payments or deferred contract
adjustment payments, will immediately and automatically terminate upon the
occurrence of certain events of bankruptcy, insolvency or reorganization with
respect to us.
Upon any termination, the collateral agent will release the notes, the
appropriate applicable ownership interest of the Treasury portfolio or the
Treasury securities, as the case may be, held by it to the purchase contract
agent for distribution to the holders. In the case of the Treasury portfolio or
the Treasury securities, this is subject to the purchase contract agent's
disposition of the relevant securities for cash, and the payment of this cash
to the holders, to the extent that the holders would otherwise have been
entitled to receive less than $1,000 principal amount at maturity of any such
security. Upon any termination, however, the release and distribution may be
subject to a delay. If we become the subject of a case under the U.S.
Bankruptcy Code, the delay may occur as a result of the automatic stay under
the Bankruptcy Code and continue until the automatic stay has been lifted. We
expect any such delay to be limited.
PLEDGED SECURITIES AND PLEDGE AGREEMENT
Pledged securities will be pledged to the collateral agent, for our
benefit, pursuant to the pledge agreement to secure the obligations of holders
of equity units to purchase our common stock under the purchase contracts. The
rights of holders of equity units to the pledged securities will be subject to
our security interest created by the pledge agreement.
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No holder of corporate units or treasury units will be permitted to
withdraw the pledged securities related to the corporate units or treasury
units from the pledge arrangement except:
. to substitute Treasury securities for the notes or the appropriate
applicable ownership interest in the Treasury portfolio, as the case
may be, as provided for under "Description of the Equity Units--
Creating Treasury Units,"
. to substitute notes or the appropriate applicable ownership interest in
the Treasury portfolio, as the case may be, for the Treasury
securities, as provided for under "Description of the Equity Units--
Recreating Corporate Units," or
. upon the termination or early settlement of the purchase contracts.
Subject to the security interest and the terms of the purchase contract
agreement and the pledge agreement, each holder of corporate units, unless the
Treasury portfolio has replaced the notes as a component of corporate units as
a result of a successful remarketing of the notes or a tax event redemption,
will be entitled through the purchase contract agent and the collateral agent
to all of the proportional rights and preferences of the related notes,
including distribution, voting, redemption, repayment and liquidation rights.
Each holder of treasury units and each holder of corporate units, if the
Treasury portfolio has replaced the notes as a component of corporate units as
a result of a successful remarketing of the notes or a tax event redemption,
will retain beneficial ownership of the related Treasury securities or the
appropriate applicable ownership interest of the Treasury portfolio, as
applicable, pledged in respect of the purchase contracts. We will have no
interest in the pledged securities other than our security interest.
Except as described in "Certain Provisions of the Purchase Contract
Agreement and the Pledge Agreement--General," the collateral agent will, upon
receipt, if any, of payments on the pledged securities, distribute the payments
to the purchase contract agent who will, in turn, distribute those payments to
the persons in whose names the related corporate units or treasury units are
registered at the close of business on the record date immediately preceding
the date of payment.
BOOK-ENTRY SYSTEM
The Depository Trust Company, which we refer to along with its successors
in this capacity as the "depositary," will act as securities depositary for the
equity units. The equity units will be issued only as fully-registered
securities registered in the name of Cede & Co., the depositary's nominee. One
or more fully-registered global security certificates, representing the total
aggregate number of equity units, will be issued and will be deposited with the
depositary and will bear a legend regarding the restrictions on exchanges and
registration of transfer referred to below.
The laws of some jurisdictions may require that some purchasers of
securities take physical delivery of securities in definitive form. These laws
may impair the ability to transfer beneficial interests in the equity units so
long as the equity units are represented by global security certificates.
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 Securities
Exchange Act of 1934. The depositary holds securities that its participants
deposit with the depositary. The depositary also facilitates the settlement
among participants of securities transactions, including transfers and pledges,
in deposited securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. The depositary is owned by a number of its direct participants
and by the NYSE, the American Stock Exchange, Inc., and the National
Association of
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Securities Dealers, Inc. Access to the depositary's system is also available to
others, including securities brokers and dealers, banks and trust companies
that clear transactions through or maintain a direct or indirect custodial
relationship with a direct participant either directly or indirectly. The rules
applicable to the depositary and its participants are on file with the SEC.
Although the depositary has agreed to the foregoing procedure in order to
facilitate transfer of interests in the global security certificates among
participants, the depositary is under no obligation to perform or continue to
perform these procedures and these procedures may be discontinued at any time.
We will not have any responsibility for the performance by the depositary or
its direct participants or indirect participants under the rules and procedures
governing the depositary.
If the depositary notifies us that it is unwilling or unable to continue
as a depositary for the global security certificates and no successor
depositary has been appointed within 90 days after this notice, or an event of
default under the purchase contract agreement or the indenture has occurred and
is continuing, certificates for the equity units will be printed and delivered
in exchange for beneficial interests in the global security certificates. Any
global note that is exchangeable pursuant to the preceding sentence shall be
exchangeable for equity unit certificates registered in the names directed by
the depositary. We expect that these instructions will be based upon directions
received by the depositary from its participants with respect to ownership of
beneficial interests in the global security certificates.
So long as the depositary or its nominee is the registered owner of the
global security certificates, the depositary or the nominee, as the case may
be, will be considered the sole owner and holder of the global security
certificates and all equity units represented by these certificates for all
purposes under the equity units and the purchase contract agreement. Except in
the limited circumstances referred to above, owners of beneficial interests in
global security certificates will not be entitled to have such global security
certificates or the equity units represented by these certificates registered
in their names, will not receive or be entitled to receive physical delivery of
equity unit certificates in exchange for beneficial interests in global
security certificates and will not be considered to be owners or holders of the
global security certificates or any equity units represented by these
certificates for any purpose under the equity units or the purchase contract
agreement.
All payments on the equity units represented by the global security
certificates and all transfers and deliveries of notes, Treasury portfolio,
Treasury securities and our common stock will be made to the depositary or its
nominee, as the case may be, as the holder of the securities.
Ownership of beneficial interests in the global security certificates
will be limited to participants or persons that may hold beneficial interests
through institutions that have accounts with the depositary or its nominee.
Ownership of beneficial interests in global security certificates will be shown
only on, and the transfer of those ownership interests will be effected only
through, records maintained by the depositary or its nominee, with respect to
participants' interests, or any participant, with respect to interests of
persons held by the participant on their behalf. Procedures for settlement of
purchase contracts on May 17, 2005 or upon early settlement will be governed by
arrangements among the depositary, participants and persons that may hold
beneficial interests through participants designed to permit settlement without
the physical movement of certificates. Payments, transfers, deliveries,
exchanges and other matters relating to beneficial interests in global security
certificates may be subject to various policies and procedures adopted by the
depositary from time to time. Neither we or any of our agents, nor the purchase
contract agent or any of its agents, will have any responsibility or liability
for any aspect of the depositary's or any participant's records relating to, or
for payments made on account of, beneficial interests in global security
certificates, or for maintaining, supervising or reviewing any of the
depositary's records or any participant's records relating to these beneficial
ownership interests.
The information in this section concerning the depositary and its
book-entry system has been obtained from sources that we believe to be
reliable, but we have not attempted to verify the accuracy of this information.
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CERTAIN PROVISIONS OF THE PURCHASE CONTRACT
AGREEMENT AND THE PLEDGE AGREEMENT
The summary of the purchase contract agreement and pledge agreement set
forth below is not complete and is qualified in all respects by reference to
those agreements, forms of which have been, or will be, filed as exhibits to a
Form 8-K which is incorporated by reference in the registration statement of
which this prospectus supplement forms a part.
GENERAL
Distributions on the equity units will be payable, purchase contracts
(and documents related to the equity units and purchase contracts) will be
settled and transfers of the equity units will be registrable at the office of
the purchase contract agent in the Borough of Manhattan, The City of New York.
In addition, if the equity units do not remain in book-entry form, payment of
distributions on the equity units may be made, at our option, by check mailed
to the address of the person entitled to payment as shown on the security
register.
Shares of our common stock will be delivered on May 17, 2005 (or earlier
upon early settlement), or, if the purchase contracts have terminated, the
pledged securities will be delivered potentially after a delay as a result of
the imposition of the automatic stay under the Bankruptcy Code (see
"Description of the Purchase Contracts--Termination"), in each case upon
presentation and surrender of the equity unit certificate at the office of the
purchase contract agent.
If a holder of outstanding corporate units or treasury units fails to
present and surrender the equity units certificate evidencing the corporate
units or treasury units to the purchase contract agent on May 17, 2005, the
shares of our common stock issuable in settlement of the purchase contract will
be registered in the name of the purchase contract agent. The shares, together
with any distributions, will be held by the purchase contract agent as agent
for the benefit of the holder until the equity unit certificate is presented
and surrendered or the holder provides satisfactory evidence that the
certificate has been destroyed, lost or stolen, together with any indemnity
that may be required by the purchase contract agent and us.
If the purchase contracts have terminated prior to May 17, 2005, the
pledged securities have been transferred to the purchase contract agent for
distribution to the holders, and a holder fails to present and surrender the
equity unit certificate evidencing the holder's corporate units or treasury
units to the purchase contract agent, the pledged securities delivered to the
purchase contract agent and payments on the pledged securities will be held by
the purchase contract agent as agent for the benefit of the holder until the
equity unit certificate is presented or the holder provides the evidence and
indemnity described above.
The purchase contract agent will have no obligation to invest or to pay
interest on any amounts held by the purchase contract agent pending
distribution, as described above.
No service charge will be made for any registration of transfer or
exchange of the equity units, except for any tax or other governmental charge
that may be imposed in connection with a transfer or exchange.
MODIFICATION
The purchase contract agreement will contain provisions permitting us and
the purchase contract agent to modify the purchase contract agreement, without
the consent of the holders, for any of the following purposes:
. to evidence the succession of another person to our obligations,
. to add to the covenants for the benefit of holders,
. to evidence and provide for the acceptance of appointment of a
successor purchase contract agent,
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. to make provision with respect to the rights of holders pursuant to
adjustments in the settlement rate due to consolidations, mergers or
other reorganization events, or
. to cure any ambiguity, to correct or supplement any provisions that may
be inconsistent, or to make any other provisions with respect to such
matters or questions, provided that such action shall not adversely
affect the interest of the holders in any material respect.
The purchase contract agreement and the pledge agreement will contain
provisions permitting us and the purchase contract agent or collateral agent,
as the case may be, with the consent of the holders of not less than a majority
of the purchase contracts at the time outstanding, to modify the terms of the
purchase contracts, the purchase contract agreement and the pledge agreement.
However, no such modification may, without the consent of the holder of each
outstanding purchase contract affected by the modification,
. change any payment date,
. change the amount or type of pledged securities related to the purchase
contract,
. impair the right of the holder of any pledged securities to receive
distributions on the pledged securities or otherwise adversely affect
the holder's rights in or to the pledged securities,
. change the place or currency of payment or reduce any contract
adjustment payments or deferred contract adjustment payments,
. impair the right to institute suit for the enforcement of the purchase
contract, any contract adjustment payments or any deferred contract
adjustment payments,
. reduce the number of shares of common stock or the amount of any other
property purchasable under the purchase contract, increase the price to
purchase common stock or any other property upon settlement of the
purchase contract, change the purchase contract settlement date or the
right to early settlement or otherwise adversely affect the holder's
rights under the purchase contract, or
. reduce the above-stated percentage of outstanding purchase contracts
the consent of the holders of which is required for the modification or
amendment of the provisions of the purchase contracts, the purchase
contract agreement or the pledge agreement.
If any amendment or proposal referred to above would adversely affect
only the corporate units or the treasury units, then only the affected class of
holders will be entitled to vote on the amendment or proposal and the amendment
or proposal will not be effective except with the consent of the holders of not
less than a majority of the affected class, as applicable.
NO CONSENT TO ASSUMPTION
Each holder of corporate units or treasury units, by acceptance of these
securities, will under the terms of the purchase contract agreement and the
corporate units or treasury units, as applicable, be deemed expressly to have
withheld any consent to the assumption (i.e., affirmance) of the related
purchase contracts by us or our trustee if we become the subject of a case
under the Bankruptcy Code.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
We will covenant in the purchase contract agreement that we will not
merge or consolidate with or into any other entity or sell, assign, transfer,
lease or convey all or substantially all of our properties and assets to any
person or entity, unless (1) we are the continuing corporation or the successor
entity is a corporation organized and existing under the laws of the United
States of America or a U.S. State or the District of Columbia and the
corporation expressly assumes our obligations under the purchase contracts, the
notes, the purchase contract agreement, the pledge agreement, the indenture
(including any supplemental indenture) and the remarketing
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agreement and (2) we or the successor corporation is not, immediately after the
merger, consolidation, sale, assignment, transfer, lease or conveyance, in
default of our or its payment obligations under the purchase contracts, the
notes, the purchase contract agreement, the pledge agreement, the indenture
(including any supplemental indenture) and the remarketing agreement or in
material default in the performance of any of our or its other obligations
under these agreements.
TITLE
We, the purchase contract agent and the collateral agent may treat the
registered owner of any equity unit as the absolute owner of the equity unit
for the purpose of making payment and settling the related purchase contracts
and for all other purposes.
REPLACEMENT OF EQUITY UNIT CERTIFICATES
If physical certificates have been issued, any mutilated equity unit
certificate will be replaced by us at the expense of the holder upon surrender
of the certificate to the purchase contract agent. Equity unit certificates
that become destroyed, lost or stolen will be replaced by us at the expense of
the holder upon delivery to us and the purchase contract agent of evidence of
the destruction, loss or theft satisfactory to us and the purchase contract
agent. In the case of a destroyed, lost or stolen equity unit certificate, an
indemnity satisfactory to the purchase contract agent and us may be required at
the expense of the holder of the equity units evidenced by the certificate
before a replacement will be issued.
Notwithstanding the foregoing, we will not be obligated to issue any
corporate units or treasury units on or after the business day immediately
preceding May 17, 2005 (or after early settlement) or after the purchase
contracts have terminated. The purchase contract agreement will provide that,
in lieu of the delivery of a replacement equity unit certificate following May
17, 2005, the purchase contract agent, upon delivery of the evidence and
indemnity described above, will deliver the common stock issuable pursuant to
the purchase contracts included in the corporate units or treasury units
evidenced by the certificate, or, if the purchase contracts have terminated
prior to May 17, 2005, transfer the pledged securities included in the
corporate units or treasury units evidenced by the certificate.
GOVERNING LAW
The purchase contract agreement, the pledge agreement and the purchase
contracts will be governed by, and construed in accordance with, the laws of
the State of New York.
INFORMATION CONCERNING THE PURCHASE CONTRACT AGENT
J. P. Morgan Trust Company, National Association will be the purchase
contract agent. The purchase contract agent will act as the agent for the
holders of corporate units and treasury units from time to time. The purchase
contract agreement will not obligate the purchase contract agent to exercise
any discretionary actions in connection with a default under the terms of the
corporate units and treasury units or the purchase contract agreement.
The purchase contract agreement will contain provisions limiting the
liability of the purchase contract agent. The purchase contract agreement will
contain provisions under which the purchase contract agent may resign or be
replaced. This resignation or replacement would be effective upon the
appointment of a successor.
J. P. Morgan Trust Company, National Association maintains commercial
banking relationships with us.
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INFORMATION CONCERNING THE COLLATERAL AGENT
Wachovia Bank, National Association will be the collateral agent. The
collateral agent will act solely as our agent and will not assume any
obligation or relationship of agency or trust for or with any of the holders of
the corporate units and treasury units except for the obligations owed by a
pledgee of property to the owner of the property under the pledge agreement and
applicable law.
The pledge agreement will contain provisions limiting the liability of
the collateral agent. The pledge agreement will contain provisions under which
the collateral agent may resign or be replaced. This resignation or replacement
would be effective upon the appointment of a successor.
Wachovia Bank, National Association maintains commercial banking
relationships with us.
MISCELLANEOUS
The purchase contract agreement will provide that we will pay all fees
and expenses related to the offering of the equity units, the retention of the
collateral agent and the enforcement by the purchase contract agent of the
rights of the holders of the equity units.
However, holders who elect to substitute the related pledged securities,
thereby creating treasury units or recreating corporate units, will be
responsible for any fees or expenses payable in connection with the
substitution, as well as any commissions, fees or other expenses incurred in
acquiring the pledged securities to be substituted, and we will not be
responsible for any of the fees or expenses.
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DESCRIPTION OF THE NOTES
GENERAL
The notes are an issue of the debt securities described in the
accompanying prospectus. The notes will be issued as a separate series of
securities under an indenture dated January 1, 1987, and as supplemented by a
supplemental indenture to be entered into between us and J. P. Morgan Trust
Company, National Association, as trustee. The notes are limited to
$1,250,000,000 (or up to $1,437,500,000 if the underwriters exercise their
overallotment option in full) in aggregate principal amount. The notes will
mature on May 17, 2007. The notes may not be redeemed prior to their stated
maturity except as described below. The notes constitute senior debt securities
as described in the accompanying prospectus. In addition to the notes, we may
issue from time to time other series of senior debt securities under the
indenture. Such other series will be separate from and independent of the
notes. The following description of the terms of the notes supplements and
modifies the description of the general terms of the debt securities set forth
in the accompanying prospectus, which we request that you read. Reference in
this prospectus supplement to notes refers to 6.25% senior notes due May 17,
2007.
The notes will not be subject to a sinking fund provision. Unless a tax
event redemption has occurred prior to May 17, 2007, the entire principal
amount of the notes will mature and become due and payable, together with any
accrued and unpaid interest, on May 17, 2007. Except for a tax event
redemption, the notes will not be redeemable by us.
Notes forming a part of the corporate units will be issued in
certificated form, will be in denominations of $50 and integral multiples of
$50, without coupons, and may be transferred or exchanged, without service
charge but upon payment of any taxes or other governmental charges payable in
connection with the transfer or exchange, at the offices described below.
Payments on notes issued as a global security will be made to the depositary, a
successor depositary or, in the event that no depositary is used, to a paying
agent for the notes. Principal and interest with respect to certificated notes
will be payable, the transfer of the notes will be registrable and notes will
be exchangeable for notes of other denominations of a like aggregate principal
amount, at the office or agency maintained by us for this purpose in the
Borough of Manhattan, The City of New York. However, at our option, payment of
interest may be made by check mailed to the address of the holder entitled to
payment or by wire transfer to an account appropriately designated by the
holder entitled to payment. We will appoint J. P. Morgan Trust Company,
National Association as the initial paying agent, transfer agent and registrar
for the notes. We may at any time designate additional transfer agents and
paying agents with respect to the notes, and may remove any transfer agent,
paying agent or registrar for the notes. We will at all times be required to
maintain a paying agent and transfer agent for the notes in the Borough of
Manhattan, The City of New York.
Any monies deposited with the trustee or any paying agent, or held by us
in trust, for the payment of principal of or interest on any note and remaining
unclaimed for two years after such principal or interest has become due and
payable shall, at our request, be repaid to us or released from trust, as
applicable, and the holder of the note shall thereafter look, as a general
unsecured creditor, only to us for the payment thereof.
The indenture does not contain provisions that afford holders of the
notes protection in the event of a highly leveraged transaction or other
similar transaction involving us that may adversely affect the holders.
INTEREST
Each note shall bear interest initially at the rate of 6.25% per year
from the original issue date, payable quarterly in arrears on February 17, May
17, August 17 and November 17 of each year, each an "interest payment date,"
commencing August 17, 2002, to the person in whose name the note is registered
at the close of business on the first day of the month in which the interest
payment date falls. The original issue discount rules
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applicable to contingent payment debt instruments should govern the income
inclusions with respect to the notes for United States federal income tax
purposes.
The applicable interest rate on the notes will be reset on the third
business day immediately preceding February 17, 2005 to the reset rate
described below under "--Market Rate Reset," unless the remarketing of the
notes on that date fails. If the remarketing of the notes on that date fails,
the interest rate on the notes will not be reset at that time. However, in
these circumstances, the interest rate on the notes outstanding on and after
February 17, 2005 will be reset on the third business day immediately preceding
May 17, 2005 to the reset rate described below.
The amount of interest payable for any period will be computed on the
basis of a 360-day year consisting of twelve 30-day months. The amount of
interest payable for any period shorter than a full quarterly period for which
interest is computed will be computed on the basis of the actual number of days
elapsed in the 90-day period. If any date on which interest is payable on the
notes is not a business day, the payment of the interest payable on that date
will be made on the next succeeding day that is a business day, without any
interest or other payment in respect of the delay, except that, if the business
day is in the next succeeding calendar year, then the payment will be made on
the immediately preceding business day, in each case with the same force and
effect as if made on the scheduled payment date.
MARKET RATE RESET
The reset rate will be equal to the sum of the reset spread and the rate
of interest on the applicable benchmark Treasury in effect on the third
business day immediately preceding February 17, 2005 or May 17, 2005, as the
case may be, and will be determined by the reset agent. In the case of a reset
on the third business day immediately preceding February 17, 2005, the reset
rate will be the rate determined by the reset agent as the rate the notes
should bear in order for the notes included in corporate units to have an
approximate aggregate market value on the reset date of 100.5% of the Treasury
portfolio purchase price described under "Description of the Purchase
Contracts--Remarketing." In the case of a reset on the third business day
immediately preceding May 17, 2005, the reset rate will be the rate determined
by the reset agent as the rate the notes should bear in order for each note to
have an approximate market value of 100.5% of the principal amount of the note.
The reset rate will in no event exceed the maximum rate permitted by applicable
law.
The "applicable benchmark Treasury" means direct obligations of the
United States, as agreed upon by us and the reset agent (which may be
obligations traded on a when-issued basis only), having a maturity comparable
to the remaining term to maturity of the notes, which will be two years or two
and one-quarter years as applicable. The rate for the applicable benchmark
Treasury will be the bid side rate displayed at 10:00 a.m., New York City time,
on the third business day immediately preceding February 17, 2005 or May 17,
2005, as applicable, in the Telerate system (or if the Telerate system is no
longer available on that date or, in the opinion of the reset agent (after
consultation with us), no longer an appropriate system from which to obtain the
rate, such other nationally recognized quotation system as, in the opinion of
the reset agent (after consultation with us), is appropriate). If this rate is
not so displayed, the rate for the applicable benchmark Treasury will be, as
calculated by the reset agent, the yield to maturity for the applicable
benchmark Treasury, expressed as a bond equivalent on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis, and computed by
taking the arithmetic mean of the secondary market bid rates, as of 10:30 a.m.,
New York City time, on the third business day immediately preceding February
17, 2005 or May 17, 2005, as applicable, of three leading United States
government securities dealers selected by the reset agent (after consultation
with us) (which may include the reset agent or an affiliate thereof). It is
currently anticipated that Merrill Lynch, Pierce, Fenner & Smith Incorporated
will be the reset agent.
On the tenth business day immediately preceding February 17, 2005 or May
17, 2005, the applicable benchmark Treasury to be used to determine the reset
rate on the third business day prior to February 17, 2005 or May 17, 2005, as
applicable, will be selected, and the reset spread to be added to the rate on
the applicable
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benchmark Treasury in effect on the third business day immediately preceding
February 17, 2005 or May 17, 2005, as applicable, will be established by the
reset agent, and the reset spread and the applicable benchmark Treasury will be
announced by us (the "reset announcement date"). We will cause a notice of the
reset spread and the applicable benchmark Treasury to be published on the
business day following the reset announcement date by publication in a daily
newspaper in the English language of general circulation in New York City,
which is expected to be THE WALL STREET JOURNAL. We will request, not later
than seven nor more than 15 calendar days prior to the reset announcement date,
that the depositary notify its participants holding notes, corporate units or
treasury units of the reset announcement date and of the procedures that must
be followed if any owner of corporate units wishes to settle the related
purchase contract with cash on the business day immediately preceding May 17,
2005.
OPTIONAL REMARKETING
On or prior to the fifth business day immediately preceding February 17,
2005, in the case of the remarketing to be conducted on the third business day
preceding February 17, 2005, or May 17, 2005, in the case of the remarketing,
if any, to be conducted on the third business day preceding May 17, 2005, but
no earlier than the payment date immediately preceding February 17, 2005 or May
17, 2005, as applicable, holders of notes that are not components of corporate
units may elect to have their notes remarketed in the same manner as notes that
are components of corporate units by delivering their notes along with a notice
of this election to the collateral agent. The collateral agent will hold the
notes in an account separate from the collateral account in which the pledged
securities will be held. Holders of notes electing to have their notes
remarketed will also have the right to withdraw the election on or prior to the
fifth business day immediately preceding February 17, 2005 or May 17, 2005, as
applicable.
PUT OPTION UPON A FAILED REMARKETING
If the remarketing of the notes on the third business immediately
preceding May 17, 2005 has occurred and has resulted in a failed remarketing,
holders of notes following May 17, 2005 will have the right to put the notes to
us on June 30, 2005, upon at least three business days' prior notice, at a
price equal to the principal amount, plus accrued and unpaid interest, if any.
TAX EVENT REDEMPTION
If a tax event occurs and is continuing, we may, at our option, redeem
the notes in whole, but not in part, at any time at a price, which we refer to
as the redemption price, equal to, for each note, the redemption amount
described below plus accrued and unpaid interest, if any, to the date of
redemption. Installments of interest on notes which are due and payable on or
prior to a redemption date will be payable to the holders of the notes
registered as such at the close of business on the relevant record dates. If,
following the occurrence of a tax event, we exercise our option to redeem the
notes, the proceeds of the redemption will be payable in cash to the holders of
the notes. If the tax event redemption occurs prior to February 17, 2005, or if
the notes are not successfully remarketed on the third business day immediately
preceding February 17, 2005, prior to May 17, 2005, the redemption price for
the notes forming a part of the corporate units will be distributed to the
collateral agent, who in turn will purchase the Treasury portfolio described
below on behalf of the holders of corporate units and remit the remainder of
the redemption price, if any, to the purchase contract agent for payment to the
holders. The Treasury portfolio will be substituted for the notes and will be
pledged to the collateral agent to secure the corporate unit holders'
obligations to purchase our common stock under the purchase contracts.
"Tax event" means the receipt by us of an opinion of nationally
recognized independent tax counsel experienced in such matters to the effect
that there is more than an insubstantial risk that interest or original issue
discount on the notes would not be deductible, in whole or in part, by us for
United States federal income tax purposes as a result of any amendment to,
change in, or announced proposed change in, the laws, or any regulations
thereunder, of the United States or any political subdivision or taxing
authority thereof or therein
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affecting taxation, any amendment to or change in an interpretation or
application of any such laws or regulations by any legislative body, court,
governmental agency or regulatory authority or any interpretation or
pronouncement that provides for a position with respect to any such laws or
regulations that differs from the generally accepted position on the date of
this prospectus supplement, which amendment, change or proposed change is
effective or which interpretation or pronouncement is announced on or after the
date of this prospectus supplement.
The Treasury portfolio to be purchased on behalf of the holders of
corporate units will consist of interest or principal strips of U.S. Treasury
securities which mature on or prior to May 15, 2005 in an aggregate amount
equal to the aggregate principal amount of the notes included in corporate
units and with respect to each scheduled interest payment date on the notes
that occurs after the tax event redemption date and on or before May 17, 2005,
interest or principal strips of U.S. Treasury securities which mature on or
prior to that interest payment date in an aggregate amount equal to the
aggregate interest payment that would be due on the aggregate principal amount
of the notes on that date if the interest rate of the notes was not reset on
the applicable reset date.
Solely for purposes of determining the Treasury portfolio purchase price
in the case of a tax event redemption date that occurs after a successful
remarketing of the notes, "Treasury portfolio" shall mean a portfolio of
zero-coupon U.S. Treasury securities consisting of principal or interest strips
of U.S. Treasury securities which mature on or prior to May 15, 2005 in an
aggregate amount equal to the aggregate principal amount of the notes
outstanding on the tax event redemption date with respect to each scheduled
interest payment date on the notes that occurs after the tax event redemption
date, and interest or principal strips of U.S. Treasury securities which mature
on or prior to that interest payment date in an aggregate amount equal to the
aggregate interest payment that would be due on aggregate principal amount of
the notes outstanding on the tax event redemption date.
"Redemption amount" means (1) in the case of a tax event redemption
occurring prior to February 17, 2005, or prior to May 17, 2005 if the
remarketing of the notes on the third business day preceding February 17, 2005
resulted in a failed remarketing, for each note the product of (a) the
principal amount of the note and (b) a fraction whose (i) numerator is the
Treasury portfolio purchase price and whose (ii) denominator is the aggregate
principal amount of notes included in corporate units, and (2) in the case of a
tax event redemption date occurring on or after February 17, 2005, or May 17,
2005 if the remarketing of the notes on the third business day preceding
February 17, 2005 resulted in a failed remarketing, for each note the product
of (a) the principal amount of the note and (b) a fraction whose (i) numerator
is the Treasury portfolio purchase price and (ii) whose denominator is the
aggregate principal amount of the notes outstanding on the tax event redemption
date.
"Treasury portfolio purchase price" means the lowest aggregate price
quoted by a primary U.S. government securities dealer in New York City to the
quotation agent on the third business day immediately preceding the tax event
redemption date for the purchase of the Treasury portfolio for settlement on
the tax event redemption date.
"Quotation agent" means Merrill Lynch Government Securities, Inc. or its
successor or any other primary U.S. government securities dealer in New York
City selected by us.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each registered holder of notes to
be redeemed at its registered address. Unless we default in payment of the
redemption price, on and after the redemption date interest shall cease to
accrue on the notes. In the event any notes are called for redemption, neither
we nor the debt trustee will be required to register the transfer of or
exchange the notes to be redeemed.
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BOOK-ENTRY AND SETTLEMENT
Notes which are released from the pledge following substitution or early
settlement will be issued in the form of one or more global certificates, which
we refer to as global securities, registered in the name of the depositary or
its nominee. Except under the limited circumstances described below or except
upon recreation of corporate units, notes represented by the global securities
will not be exchangeable for, and will not otherwise be issuable as, notes in
certificated form. The global securities described above may not be transferred
except by the depositary to a nominee of the depositary or by a nominee of the
depositary to the depositary or another nominee of the depositary or to a
successor depositary or its nominee.
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of the securities in certificated form. These
laws may impair the ability to transfer beneficial interests in such a global
security.
Except as provided below, owners of beneficial interests in such a global
security will not be entitled to receive physical delivery of notes in
certificated form and will not be considered the holders (as defined in the
indenture) thereof for any purpose under the indenture, and no global security
representing notes shall be exchangeable, except for another global security of
like denomination and tenor to be registered in the name of the depositary or
its nominee or a successor depositary or its nominee. Accordingly, each
beneficial owner must rely on the procedures of the depositary or if such
person is not a participant, on the procedures of the participant through which
such person owns its interest to exercise any rights of a holder under the
indenture.
If:
. the depositary notifies us that it is unwilling or unable to continue
as a depositary for the global security certificates and no successor
depositary has been appointed within 90 days after this notice, or
. the depositary at any time ceases to be a clearing agency registered
under the Securities Exchange Act at which time the depositary is
required to be so registered to act as the depositary and no
successor depositary has been appointed within 90 days after we learn
that the depositary has ceased to be so registered, or
. we determine, in our sole discretion, that we will no longer have
debt securities represented by global securities or permit any of the
global security certificates to be exchangeable or an event of
default under the indenture has occurred and is continuing,
certificates for the notes will be printed and delivered in exchange for
beneficial interests in the global security certificates. Any global note that
is exchangeable pursuant to the preceding sentence shall be exchangeable for
note certificates registered in the names directed by the depositary. We expect
that these instructions will be based upon directions received by the
depositary from its participants with respect to ownership of beneficial
interests in the global security certificates.
GOVERNING LAW
The supplemental indenture will specify that the notes covered by this
prospectus supplement will be governed by, and construed in accordance with,
the laws of the State of New York.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain of the material United States
federal income tax consequences of the purchase, ownership and disposition of
the equity units, notes, Treasury securities, the Treasury portfolio and common
stock acquired under a purchase contract. This summary deals only with equity
units, notes, Treasury securities, the Treasury portfolio and common stock that
are held as capital assets by holders that purchase equity units upon original
issuance at their issue price. This summary does not address all of the tax
consequences that may be relevant to holders in light of their particular
circumstances, such as holders that may be subject to special tax treatment
such as banks, insurance companies, broker dealers, tax-exempt organizations,
holders that hold equity units, notes or common stock as part of a straddle,
hedge, conversion transaction or other integrated investment and U.S. holders
(as defined below) whose functional currency is not the U.S. dollar. In
addition, this summary does not address any aspects of state, local or foreign
tax laws. This summary is based on the United States federal income tax laws,
regulations, rulings and decisions in effect as of the date hereof, all of
which are subject to change or differing interpretations, possibly on a
retroactive basis. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR AS
TO THE PARTICULAR TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF THE
EQUITY UNITS, NOTES, TREASURY SECURITIES, THE TREASURY PORTFOLIO OR COMMON
STOCK, INCLUDING THE APPLICATION AND EFFECT OF UNITED STATES FEDERAL, STATE,
LOCAL AND FOREIGN TAX LAWS.
No statutory, administrative or judicial authority directly addresses the
treatment of equity units or instruments similar to equity units for United
States federal income tax purposes. As a result, no assurance can be given that
the Internal Revenue Service will agree with the tax consequences described
herein.
U.S. HOLDERS
The following summary is addressed to U.S. holders. For purposes of this
summary, "U.S. holder" means:
. a person who is a citizen or resident of the United States;
. a corporation or partnership created or organized in or under the laws
of the United States or any state thereof 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) a court within the United States is able to exercise
primary supervision over the administration of such trust and one or
more United States persons have the authority to control all
substantial decisions of the trust or (b) such trust has in effect a
valid election to be treated as a domestic trust for United States
federal income tax purposes.
If a partnership holds equity units, notes, Treasury securities, the
Treasury portfolio or common stock, the tax treatment of a partner will
generally depend upon the status of the partner and the activities of the
partnership.
EQUITY UNITS
ALLOCATION OF PURCHASE PRICE. A holder's acquisition of a corporate unit
will be treated as an acquisition of a unit consisting of the note and the
purchase contract that constitute such corporate unit. The purchase price of
each corporate unit will be allocated between the two components in proportion
to their respective fair market values at the time of purchase. Such allocation
will establish the holder's initial tax basis in the note and the purchase
contract. We will report the fair market value of each note as $50 and the fair
market value of each purchase contract as $0. This position will be binding
upon each holder (but not on the Internal Revenue Service) unless such holder
explicitly discloses a contrary position on a statement attached to such
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holder's timely filed United States federal income tax return for the taxable
year in which a corporate unit is acquired. Thus, absent such disclosure, a
holder should allocate the purchase price for a corporate unit in accordance
with the foregoing. The remainder of this discussion assumes that this
allocation of purchase price will be respected for United States federal income
tax purposes.
OWNERSHIP OF NOTES OR TREASURY SECURITIES. A holder will be treated as
owning the notes or Treasury securities constituting a part of the corporate
units or treasury units, respectively, for United States federal income tax
purposes. We and, by acquiring equity units, each holder agree to treat the
notes or Treasury securities constituting a part of the equity units as owned
by such holder for all tax purposes, and the remainder of this summary assumes
such treatment. The United States federal income tax consequences of owning the
notes or Treasury securities are discussed below (see "--Notes" and "--Treasury
Securities").
SALES, EXCHANGES OR OTHER TAXABLE DISPOSITIONS OF EQUITY UNITS. Upon a
sale, exchange or other taxable disposition of an equity unit, a holder will be
treated as having sold, exchanged or disposed of the purchase contract and the
notes, the Treasury portfolio or the Treasury securities that constitute such
equity units and will generally recognize gain or loss equal to the difference
between the portion of the proceeds to such holder allocable to the purchase
contract and the notes, the Treasury portfolio or Treasury securities, as the
case may be, and such holder's respective adjusted tax basis in the purchase
contract and the notes, the Treasury portfolio or Treasury securities, except
to the extent such holder is treated as receiving an amount with respect to
accrued acquisition discount on the Treasury portfolio or Treasury securities,
which amount will be treated as ordinary income, or to the extent such holder
is treated as receiving an amount with respect to accrued contract adjustment
payments or deferred contract adjustment payments, which may be treated as
ordinary income, in each case, to the extent not previously included in income.
In the case of the purchase contract, the Treasury portfolio and Treasury
securities, such gain or loss will generally be capital gain or loss, and such
gain or loss will generally be long-term capital gain or loss if the holder
held such equity units for more than one year at the time of such disposition.
Long-term capital gains of individuals are eligible for reduced rates of
taxation. The deductibility of capital losses is subject to limitations.
If the disposition of an equity unit occurs when the purchase contract
has negative value, the holder should be considered to have received additional
consideration for the notes, the Treasury portfolio or Treasury securities, as
the case may be, in an amount equal to such negative value and to have paid
such amount to be released from the holder's obligation under the purchase
contract. If such deemed additional consideration with respect to a note
results in income, such income should be ordinary and may not be offset by a
loss realized with respect to the purchase contract. The rules that govern the
determination of the character of gain or loss on the disposition of the notes
are summarized under "Notes--Sales, Exchanges or Other Taxable Dispositions of
Notes."
In determining gain or loss, payments to a holder of contract adjustment
payments or deferred contract adjustment payments that have not previously been
included in the income of such holder should either reduce such holder's
adjusted tax basis in the purchase contract or result in an increase in the
amount realized on the disposition of the purchase contract. Any contract
adjustment payments or deferred contract adjustment payments included in a
holder's income but not paid should increase such holder's adjusted tax basis
in the purchase contract (see "--Purchase Contracts--Contract Adjustment
Payments and Deferred Contract Adjustment Payments" below).
NOTES
CLASSIFICATION OF THE NOTES. In connection with the issuance of the
notes, Kutak Rock LLP will deliver an opinion that, under current law, and
based on certain representations, facts and assumptions set forth in such
opinion, the notes will be classified as indebtedness for United States federal
income tax purposes. We and, by acquiring corporate units, each holder agree to
treat the notes as our indebtedness for all tax purposes.
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ORIGINAL ISSUE DISCOUNT. Because of the manner in which the interest
rate on the notes is reset, the notes should be classified as contingent
payment debt instruments subject to the "noncontingent bond method" for
accruing original issue discount, as set forth in the applicable Treasury
regulations. We intend to treat the notes as such, and the remainder of this
discussion assumes that the notes will be so treated for United States federal
income tax purposes. As discussed more fully below, the effects of applying
such method will be (1) to require each holder, regardless of its usual method
of tax accounting, to use an accrual method with respect to the notes, (2) for
all accrual periods until February 17, 2005, to require each holder to accrue
interest income in excess of interest payments actually received and (3)
generally to result in ordinary, rather than capital, treatment of any gain or
loss on the sale, exchange or other taxable disposition of the notes. See
"--Sales, Exchanges or Other Taxable Dispositions of Notes."
A holder of notes will accrue original issue discount on a constant yield
to maturity basis based on the "comparable yield" of the notes. The comparable
yield of the notes will generally be the rate at which we would issue a fixed
rate debt instrument with terms and conditions similar to the notes. We have
determined that the comparable yield is 7.15% (compounded quarterly) and the
projected payments for the notes per $50 of principal amount are $.88 on August
17, 2002, $.78 for each subsequent quarter ending on or prior to February 17,
2005, and $1.06 for each quarter ending after February 17, 2005. We have also
determined that the projected payment for the notes, per $50 of principal
amount, at the maturity date is $51.06 (which includes the stated principal
amount of the notes as well as the final projected interest payment).
If after February 17, 2005, the remaining amounts of principal and
interest payable on the notes differ from the payments set forth on the
foregoing projected payment schedule, negative or positive adjustments
reflecting such difference should generally be taken into account by a holder
as adjustments to interest income in a reasonable manner over the period to
which they relate. We expect to account for any such difference with respect to
a period as an adjustment for that period.
Holders are generally bound by the comparable yield and projected payment
schedule provided by us unless either is unreasonable. A holder that uses its
own comparable yield and projected payment schedule must explicitly disclose
this fact and the reason that it has used its own comparable yield and
projected payment schedule. In general, this disclosure must be made on a
statement attached to the timely filed United States federal income tax return
of the holder for the taxable year that includes the date of its acquisition of
the note.
The foregoing comparable yield and projected payment schedule are
supplied solely for computing income under the noncontingent bond method for
United States federal income tax purposes and do not constitute a projection or
representation as to the amounts that a holder of notes or corporate units will
actually receive.
ADJUSTMENT TO TAX BASIS IN NOTES. A holder's tax basis in a note will be
increased by the amount of original issue discount included in income with
respect to the note and decreased by the amount of projected payments with
respect to the notes through the computation date.
SALES, EXCHANGES OR OTHER TAXABLE DISPOSITIONS OF NOTES. A holder will
recognize gain or loss on a disposition of a note (including a redemption for
cash or upon the remarketing thereof) in an amount equal to the difference
between the amount realized by the holder on the disposition of the note and
the holder's adjusted tax basis in such note. Selling expenses incurred by a
holder, including the remarketing fee, will reduce the amount of gain or
increase the amount of loss recognized by such holder upon a disposition of a
note. Gain recognized on the disposition of a note prior to the purchase
contract settlement date will be treated as ordinary interest income. Loss
recognized on the disposition of a note prior to the purchase contract
settlement date will be treated as ordinary loss to the extent of such holder's
prior inclusions of original issue discount on the note and as capital loss
thereafter. In general, gain recognized on the disposition of a note on or
after the purchase contract settlement date will be ordinary interest income to
the extent attributable to the excess, if any, of the total remaining principal
and interest payments due on the note over the total remaining payments set
forth on the
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projected payment schedule for the note. Any gain recognized in excess of such
amount and any loss recognized on such a disposition will generally be treated
as a capital gain or loss. Long-term capital gains of individuals are eligible
for reduced rates of taxation. The deductibility of capital losses is subject
to limitations.
TREASURY SECURITIES
ORIGINAL ISSUE DISCOUNT. A holder of treasury units will be required to
treat its ownership interest in the Treasury securities comprising a treasury
unit as an interest in a bond that was originally issued on the date such
holder acquired the Treasury securities and that has original issue discount
equal to the excess of the amount payable at maturity of such Treasury
securities over the purchase price thereof. A holder will be required to
include such original issue discount in income on a constant yield to maturity
basis over the period between the purchase date of the Treasury securities and
the maturity date of the Treasury securities, regardless of such holder's
method of tax accounting and in advance of the receipt of cash attributable to
such original issue discount. Amounts of original issue discount included in a
holder's gross income will increase such holder's adjusted tax basis in the
Treasury securities.
SALES, EXCHANGES OR OTHER TAXABLE DISPOSITIONS OF TREASURY
SECURITIES. As discussed below, in the event that a holder obtains the release
of Treasury securities by delivering notes to the collateral agent, the holder
will generally not recognize gain or loss upon such substitution. The holder
will recognize gain or loss on a subsequent disposition of the Treasury
securities in an amount equal to the difference between the amount realized by
the holder on such disposition and the holder's adjusted tax basis in the
Treasury securities, except to the extent such holder is treated as receiving
an amount with respect to accrued acquisition discount on the Treasury
securities, which amount will be treated as ordinary income. Such gain or loss
will generally be capital gain or loss and will generally be long-term capital
gain or loss if the holder held such Treasury securities for more than one year
at the time of the disposition. Long-term capital gains of individuals are
eligible for reduced rates of taxation. The deductibility of capital losses is
subject to limitations.
PURCHASE CONTRACTS
CONTRACT ADJUSTMENT PAYMENTS AND DEFERRED CONTRACT ADJUSTMENT
PAYMENTS. There is no direct authority that addresses the treatment, under
current law, of contract adjustment payments or deferred contract adjustment
payments, and such treatment is, therefore, unclear. Contract adjustment
payments and deferred contract adjustment payments may constitute taxable
income to a holder of equity units when received or accrued, in accordance with
the holder's regular method of tax accounting. To the extent we are required to
file information returns with respect to contract adjustment payments or
deferred contract adjustment payments, we intend to report such payments as
taxable income to each holder. Holders should consult their tax advisors
concerning the treatment of contract adjustment payments and deferred contract
adjustment payments, including the possibility that any contract adjustment
payment or deferred contract adjustment payment may be treated as a loan,
purchase price adjustment, rebate or payment analogous to an option premium,
rather than being includible in income on a current basis. The treatment of
contract adjustment payments and deferred contract adjustment payments could
affect a holder's adjusted tax basis in a purchase contract or common stock
received under a purchase contract or the amount realized by a holder upon the
sale or disposition of an equity unit or the termination of a purchase
contract. See "Equity Units --Sales, Exchanges or Other Taxable Dispositions of
Equity Units," "--Acquisition of Common Stock Under a Purchase Contract" and
"--Termination of Purchase Contract."
ACQUISITION OF COMMON STOCK UNDER A PURCHASE CONTRACT. A holder of an
equity unit will generally not recognize gain or loss on the purchase of common
stock under a purchase contract, including upon an early settlement, except
with respect to any cash paid in lieu of a fractional share of common stock.
Subject to the following discussion, a holder's aggregate initial tax basis in
the common stock received under a purchase contract should generally equal the
purchase price paid for such common stock plus such holder's adjusted tax basis
in the purchase contract, if any, less the portion of such purchase price and
adjusted tax basis allocable to a fractional share. Payments of contract
adjustment payments or deferred contract adjustment payments that have been
received
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in cash by a holder but not included in income by such holder should reduce
such holder's adjusted tax basis in the purchase contract or the common stock
to be received thereunder (see "--Contract Adjustment Payments and Deferred
Contract Adjustment Payments" above). The holding period for common stock
received under a purchase contract will commence on the date following the
acquisition of such common stock.
OWNERSHIP OF COMMON STOCK ACQUIRED UNDER THE PURCHASE CONTRACT. Any
distribution on common stock that we pay out of our current or accumulated
earnings and profits (as determined for United States federal income tax
purposes) will constitute a dividend and will be includible in income by a
holder when received. Any such dividend will be eligible for the dividends
received deduction if received by an otherwise qualifying corporate holder that
meets the holding period and other requirements for the dividends received
deduction. Upon a disposition of common stock, a holder will generally
recognize capital gain or loss equal to the difference between the amount
realized and such holder's adjusted tax basis in the common stock. Such capital
gain or loss will generally be long-term capital gain or loss if the holder
held such common stock for more than one year at the time of such disposition.
Long-term capital gains of individuals are eligible for reduced rates of
taxation. The deductibility of capital losses is subject to limitations.
TERMINATION OF PURCHASE CONTRACT. If a purchase contract terminates, a
holder of an equity unit will recognize gain or loss equal to the difference
between the amount realized, if any, upon such termination and such holder's
adjusted tax basis, if any, in the purchase contract at the time of such
termination. Any contract adjustment payments or deferred contract adjustment
payments received by a holder but not previously included in income by such
holder should either reduce such holder's adjusted tax basis in the purchase
contract or increase the amount realized on the termination of the purchase
contract. Any contract adjustment payments or deferred contract adjustment
payments included in a holder's income but not received should increase such
holder's adjusted tax basis in the purchase contract. Gain or loss recognized
will generally be capital gain or loss and will generally be long-term capital
gain or loss if the holder held such purchase contract for more than one year
at the time of such termination. Long-term capital gains of individuals are
eligible for reduced rates of taxation. The deductibility of capital losses is
subject to limitations. A holder will not recognize gain or loss on the receipt
of such holder's proportionate share of the notes, Treasury securities or the
Treasury portfolio upon termination of the purchase contract and will have the
same adjusted tax basis and holding period in such notes, Treasury securities
or the Treasury portfolio as before such termination.
ADJUSTMENT TO SETTLEMENT RATE. A holder of equity units might be treated
as receiving a constructive dividend distribution from us if (1) the settlement
rate is adjusted and as a result of such adjustment the proportionate interest
of holders of equity units in our assets or earnings and profits is increased
and (2) the adjustment is not made pursuant to a bona fide, reasonable
anti-dilution formula. An adjustment in the settlement rate would not be
considered made pursuant to such a formula if the adjustment were made to
compensate a holder for certain taxable distributions with respect to the
common stock. Thus, under certain circumstances, an increase in the settlement
rate might give rise to a taxable dividend to a holder even though such holder
would not receive any cash related thereto.
SUBSTITUTION OF TREASURY SECURITIES TO CREATE OR RECREATE TREASURY UNITS
A holder of a corporate unit that delivers Treasury securities to the
collateral agent in substitution for notes or the Treasury portfolio will
generally not recognize gain or loss upon the delivery of such Treasury
securities or the release of the notes or the Treasury portfolio to such
holder. Such holder will continue to take into account items of income or
deduction otherwise includible or deductible, respectively, by such holder with
respect to such Treasury securities and notes or the Treasury portfolio, and
such holder's adjusted tax bases in the Treasury securities, the notes or the
Treasury portfolio and the purchase contract will not be affected by such
delivery and release.
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SUBSTITUTION OF NOTES TO RECREATE CORPORATE UNITS
A holder of a treasury unit that delivers notes to the collateral agent
in substitution for Treasury securities will generally not recognize gain or
loss upon the delivery of such notes or the release of the Treasury securities
to the holder. Such holder will continue to take into account items of income
or deduction otherwise includible or deductible, respectively, by such holder
with respect to such Treasury securities and notes, and such holder's adjusted
tax bases in the Treasury securities, the notes and the purchase contract will
not be affected by such delivery and release.
REMARKETING AND TAX EVENT REDEMPTION OF NOTES
A remarketing or tax event redemption will be a taxable event for holders
of notes which will have the United States federal income tax consequences
described under "Notes --Sales, Exchanges or Other Taxable Dispositions of
Notes."
OWNERSHIP OF TREASURY PORTFOLIO. We and, by acquiring equity units, each
holder agree to treat such holder as the owner, for United States federal
income tax purposes, of the applicable ownership interest of the Treasury
portfolio constituting a part of the corporate units beneficially owned by such
holder in the event of a remarketing of the notes on the third business day
preceding February 17, 2005 or a tax event redemption prior to the purchase
contract settlement date. Each holder will include in income any amount earned
on such pro rata portion of the Treasury portfolio for all tax purposes. The
remainder of this summary assumes that holders of corporate units will be
treated as the owners of the applicable ownership interest of the Treasury
portfolio that constitutes a part of such corporate units for United States
federal income tax purposes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT. Following a remarketing of
the notes on the third business day preceding February 17, 2005 or a tax event
redemption prior to the purchase contract settlement date, a holder of
corporate units will be required to treat its pro rata portion of each Treasury
security in the Treasury portfolio as a bond that was originally issued on the
date the collateral agent acquired the relevant Treasury securities and that
has original issue discount (or, in the case of short-term Treasury securities,
as defined below, acquisition discount) equal to the holder's pro rata portion
of the excess of the amounts payable on such Treasury securities over the value
of the Treasury securities at the time the collateral agent acquired them on
behalf of holders of corporate units. A holder, whether on the cash or accrual
method of tax accounting, will be required to include original issue discount
(other than acquisition discount on short-term Treasury securities, as defined
below) in income for United States federal income tax purposes as it accrues on
a constant yield to maturity basis. The amount of such excess will constitute
only a portion of the total amounts payable in respect of the Treasury
portfolio. Consequently, a portion of each scheduled payment to holders will be
treated as a return of such holders' investment in the Treasury portfolio and
will not be considered current income for United States federal income tax
purposes.
In the case of any Treasury security with a maturity of one year or less
from the date of its issue (a "short-term Treasury security"), in general, only
accrual basis holders will be required to include acquisition discount in
income as it accrues. Unless such accrual basis holder elects to accrue the
acquisition discount on a short-term Treasury security on a constant yield to
maturity basis, such acquisition discount will be accrued on a straight-line
basis. A holder that obtains the release of its applicable ownership interest
of the Treasury portfolio and subsequently disposes of such interest will
recognize ordinary income on such disposition to the extent of any gain
realized that does not exceed an amount equal to the ratable share of the
acquisition discount on the Treasury securities not previously included in
income.
TAX BASIS OF THE TREASURY PORTFOLIO. A holder's initial tax basis in
such holder's applicable ownership interest of the Treasury portfolio will
equal such holder's pro rata portion of the amount paid by the collateral agent
for the Treasury portfolio. A holder's adjusted tax basis in the Treasury
portfolio will be increased by the amount of original issue discount or
acquisition discount included in income with respect thereto and decreased by
the amount of cash received with respect to the Treasury portfolio.
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BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
Unless a holder is an exempt recipient, such as a corporation, interest,
original issue discount, contract adjustment payments or deferred contract
adjustment payments, and dividends received on, and proceeds received from the
sale of, equity units, notes, purchase contracts, Treasury securities, the
Treasury portfolio, or common stock, may be subject to information reporting
and may also be subject to United States federal backup withholding tax
(currently 30%) if such holder fails to supply an accurate taxpayer
identification number or otherwise fails to comply with applicable United
States information reporting or certification requirements.
Any amounts withheld under the backup withholding rules will be allowed
as a credit against a holder's United States federal income tax liability
provided the required information is furnished to the Internal Revenue Service.
NON-U.S. HOLDERS
The following summary is addressed to non-U.S. holders. A non-U.S. holder
is a holder that is not a U.S. holder as defined under "--U.S. Holders."
Special rules may apply if such non-U.S. holder is a "controlled foreign
corporation," "passive foreign investment company" or "foreign personal holding
company" and is subject to special treatment under the Internal Revenue Code. A
non-U.S. holder that falls within any of the foregoing categories should
consult its tax advisor to determine the United States federal, state, local
and foreign tax consequences that may be relevant to it.
UNITED STATES FEDERAL WITHHOLDING TAX
United States federal withholding tax will not apply to any payment of
principal or interest (including original issue discount and acquisition
discount) on the notes, the Treasury securities or the Treasury portfolio
provided that:
. the non-U.S. holder does not actually (or constructively) own 10% or
more of the total combined voting power of all classes of our voting
stock within the meaning of the Internal Revenue Code and the Treasury
regulations;
. the non-U.S. holder is not a bank whose receipt of interest on the
notes is described in section 881(c)(3)(A) of the Internal Revenue Code;
. the non-U.S. holder is not a controlled foreign corporation that is
related to us through stock ownership; and
. (a) the non-U.S. holder provides its name, address and certain other
information on an Internal Revenue Service Form W-8BEN (or a suitable
substitute form), and certifies, under penalties of perjury, that it is
not a United States person or (b) the non-U.S. holder holds its notes,
Treasury securities or Treasury portfolio through certain foreign
intermediaries or certain foreign partnerships and certain
certification requirements are satisfied.
We will generally withhold tax at a rate of 30% on the dividends, if any,
paid on the shares of common stock acquired under the purchase contract and on
any contract adjustment payments or deferred contract adjustment payments made
with respect to a purchase contract. If a tax treaty applies, a non-U.S. holder
may be eligible for a reduced rate of withholding. Similarly, contract
adjustment payments, deferred contract adjustment payments or dividends that
are effectively connected with the conduct of a trade or business by a non-U.S.
holder within the United States (and, where a tax treaty applies, are also
attributable to a United States permanent establishment maintained by the
non-U.S. holder) are not subject to the withholding tax, but instead are
subject to United States federal income tax, as described below. In order to
claim any such exemption or reduction in the 30% withholding tax, a non-U.S.
holder should provide a properly executed Internal Revenue Service Form W-8BEN
(or suitable substitute form) claiming a reduction of or an exemption from
withholding under an
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applicable tax treaty or a properly executed Internal Revenue Service Form
W-8ECI (or a suitable substitute form) stating that such payments are not
subject to withholding tax because they are effectively connected with the
non-U.S. holder's conduct of a trade or business in the United States.
In general, United States federal withholding tax will not apply to any
gain or income realized by a non-U.S. holder on the sale, exchange or other
disposition of the equity units, notes, purchase contracts, Treasury
securities, Treasury portfolio or common stock acquired under the purchase
contracts.
UNITED STATES FEDERAL INCOME TAX
If a non-U.S. holder is engaged in a trade or business in the United
States (and, if a tax treaty applies, if the non-U.S. holder maintains a
permanent establishment within the United States) and interest (including
original issue discount and acquisition discount) on the notes, the Treasury
securities and the Treasury portfolio, dividends on the common stock and, to
the extent they constitute taxable income, contract adjustment payments and
deferred contract adjustment payments made with respect to the purchase
contracts are effectively connected with the conduct of that trade or business
(and, if a tax treaty applies, that permanent establishment), such non-U.S.
holder will be subject to United States federal income tax (but not withholding
tax), on the interest, original issue discount, acquisition discount,
dividends, contract adjustment payments and deferred contract adjustment
payments on a net income basis in the same manner as if such non-U.S. holder
were a U.S. holder. In addition, a non-U.S. holder that is a foreign
corporation may be subject to a 30% (or, if a tax treaty applies, such lower
rate as provided) branch profits tax.
Any gain or income realized on the disposition of an equity unit, a
purchase contract, a note, a Treasury security, the Treasury portfolio or
common stock acquired under the purchase contract generally will not be subject
to United States federal income tax unless:
. that gain or income is effectively connected with the non-U.S. holder's
conduct of a trade or business in the United States;
. the non-U.S. holder is an individual who is present in the United
States for 183 days or more in the taxable year of the disposition and
certain other conditions are met; or
. in the case of purchase contracts or common stock, we are or have been
a "U.S. real property holding corporation" for United States federal
income tax purposes.
We do not believe that we are currently a "U.S. real property holding
corporation" for United States federal income tax purposes, and we believe it
is unlikely that we will become one, although there can be no assurance that
this will be the case. In any event, if we were to become a U.S. real property
holding corporation, so long as our common stock continued to be regularly
traded on an established securities market, (1) a holder would generally not be
subject to U.S. federal income tax on the disposition of a purchase contract
(that is a component of an equity unit) if on the day such holder acquired the
purchase contract, the purchase contract such holder acquired had a fair market
value less than the fair market value of five percent of our common stock or of
the outstanding purchase contracts and (2) a holder would generally not be
subject to U.S. federal income tax on the disposition of our common stock if
such holder held (at all times during the shorter of the five-year period
preceding the date of disposition or such holder's holding period) less than
five percent of the total outstanding shares of our common stock.
BACKUP WITHHOLDING TAX
In general, no backup withholding will be required with respect to
payments we make with respect to the equity units or the notes if a non-U.S.
holder has provided us with an Internal Revenue Service Form W-8BEN (or a
suitable substitute form) and we do not have actual knowledge or reason to know
that a holder is a United States person. In addition, no backup withholding
will be required regarding the sale of equity units,
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notes, Treasury securities, the Treasury portfolio or common stock acquired
under the purchase contracts even if made within the United States or conducted
through certain United States financial intermediaries if the payor receives an
Internal Revenue Service Form W-8BEN (or a suitable substitute form) and does
not have actual knowledge or reason to know that the holder is a United States
person or the holder can otherwise establish an exemption.
Any amounts withheld under the backup withholding rules will be allowed
as a credit against a holder's United States federal income tax liability
provided that the required information is furnished to the Internal Revenue
Service.
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UNDERWRITING
We intend to offer the corporate units through the underwriters named
below. Subject to the terms and conditions in an underwriting agreement between
us and the underwriters, we have agreed to sell to the underwriters, and the
underwriters have agreed to purchase from us, the number of corporate units set
forth opposite their names below.
NUMBER OF
UNDERWRITER CORPORATE UNITS
----------- ---------------
Banc of America Securities LLC....... 7,500,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................ 7,500,000
Salomon Smith Barney Inc............. 7,500,000
First Union Securities, Inc.......... 1,300,000
Banc One Capital Markets, Inc........ 300,000
McDonald Investments Inc............. 300,000
Stephens Inc......................... 300,000
SunTrust Capital Markets, Inc........ 300,000
----------
Total....................... 25,000,000
==========
The underwriters have agreed to purchase all of the corporate units sold
pursuant to the underwriting agreement if any of the corporate units are
purchased. If an underwriter defaults, the underwriting agreement provides that
the purchase commitments of the nondefaulting underwriters may be increased or
the underwriting agreement may be terminated.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make with respect to those
liabilities.
The underwriters are offering the corporate units, subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of legal
matters by their counsel, including the validity of the corporate units, and
other conditions contained in the underwriting agreement, such as the receipt
by the underwriters of officers' certificates and legal opinions. The
underwriters reserve the right to withdraw, cancel or modify offers to the
public and to reject orders in whole or in part.
COMMISSIONS AND DISCOUNTS
The underwriters have advised us that they propose initially to offer the
corporate units to the public at the public offering price on the cover page of
this prospectus supplement and to dealers at that price less a concession not
in excess of $1.50 per corporate unit. The underwriters may allow, and the
dealers may reallow, a discount not in excess of $.10 per corporate unit to
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The expenses of the offering, not including the underwriting discount,
are estimated to be $500,000 and are payable by us.
The following table shows the per unit and total public offering price,
underwriting discount to be paid by us to the underwriters and proceeds before
expenses to us. The information is presented assuming either no exercise or
full exercise by the underwriters of the overallotment option.
S-65
PER CORPORATE UNIT WITHOUT OPTION WITH OPTION
------------------ -------------- -----------
Public offering price............... $50.00 $1,250,000,000 $1,437,500,000
Underwriting discount............... $1.50 $37,500,000 $43,125,000
Proceeds, before expenses, to ALLTEL $48.50 $1,212,500,000 $1,394,375,000
The underwriters do not intend to confirm sales of corporate units to
accounts over which they exercise discretionary authority.
OVERALLOTMENT OPTION
We have granted an option to the underwriters to purchase up to an
additional 3,750,000 corporate units at the public offering price less the
underwriting discount. The underwriters may exercise this option until 13 days
after the closing of this offering in order to cover any overallotments. If the
underwriters exercise this option, each will be obligated, subject to
conditions contained in the underwriting agreement, to purchase approximately
the same percentage of additional corporate units as the number set forth next
to the underwriter's name in the preceding table bears to the total number of
corporate units set forth next to the names of all underwriters in the
preceding table.
NO SALE OF SIMILAR SECURITIES
We and each of our directors and executive officers have agreed, with
some exceptions, not to directly or indirectly, without the prior written
consent of the representatives of the underwriters, for a period of 90 days
after the date of this prospectus supplement:
. offer, pledge, sell or contract to sell any equity units, purchase
contracts, common stock or any similar securities or any security
convertible into such securities,
. sell any option or contract to purchase any equity units, purchase
contracts, common stock or any similar securities or any security
convertible into such securities,
. purchase any option or contract to sell any equity units, purchase
contracts, common stock or any similar securities or any security
convertible into such securities,
. grant any option, right or warrant for the sale of any equity units,
purchase contracts, common stock or any similar securities or any
security convertible into such securities,
. file (or, in the case of our directors and executive officers, request
that we file) a registration statement, for any equity units, purchase
contracts, common stock or any similar securities or any security
convertible into such securities,
. lend or otherwise dispose of or transfer any equity units, purchase
contracts, common stock or any similar securities or any security
convertible into such securities, or
. enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of equity units, purchase
contracts, common stock or any similar securities or any security
convertible into such securities.
Notwithstanding the above, we may, without the consent of the
representatives of the underwriters:
. issue and sell the corporate units offered by this prospectus
supplement,
. issue the common stock issuable upon settlement of a stock purchase
contract,
. issue the common stock issuable upon exercise of the preferred stock
outstanding on the date hereof,
. issue shares of capital stock under our rights plan in effect on the
date of hereof,
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. issue restricted stock, grant options or issue and sell capital stock
upon the exercise of outstanding stock options or otherwise under any
employee or director benefit plan,
. issuances of common stock or securities convertible or exchangeable
into common stock in connection with acquisitions or mergers or in
connection with strategic or significant investments provided that in
each case the recipient of such common stock or securities convertible
or exchangeable into common stock agrees to be bound by the
restrictions described above for the remainder of the 90 day period, and
. issuances of common stock or securities convertible or exchangeable
into common stock up to an aggregate principal amount of $100,000,000.
Our directors and executive officers may, without the consent of the
representatives of the underwriters:
. make bona fide gifts of shares so long as the donees agree to be bound
by the lock-up agreements,
. make transfers to family trusts, custodianships, family limited
partnerships, or similar entities so long as the trustees, custodians,
partnerships or entities agree to be bound by the lock-up agreements,
. make pledges of shares for the benefit of non-affiliated lenders,
. make sales or transfers of shares pursuant to pre-existing contracts,
instructions or plans, and
. transfer or sell up to 25,000 shares of our common stock for each
director and up to 50,000 shares of our common stock for each executive
officer.
NEW YORK STOCK EXCHANGE LISTING
The corporate units are a new issue of securities with no established
trading market. The corporate units have been approved for listing on the NYSE,
subject to notice of official issuance. We have been advised by Merrill Lynch,
Pierce, Fenner & Smith Incorporated that it intends to make a market in the
securities, but it is not obligated to do so and may discontinue market-making
at any time without notice. We can provide no assurance as to the liquidity of,
or any trading market for, the securities.
This prospectus supplement, as amended or supplemented, may be used by
the remarketing agent for remarketing.
PRICE STABILIZATION AND SHORT POSITIONS
Until the distribution of the corporate units offered hereby is
completed, SEC rules may limit the underwriters and selling group members from
bidding for or purchasing the corporate units or shares of our common stock.
However, the underwriters may engage in transactions that stabilize the price
of the corporate units or our common stock, such as bids or purchases that peg,
fix or maintain the price of the corporate units or our common stock.
In connection with the offering, the underwriters may make short sales of
our corporate units. Short sales involve the sale by the underwriters, at the
time of the offering, of a greater number of corporate units than it is
required to purchase in the offering. Covered short sales are sales made in an
amount not greater than the overallotment option. The underwriters may close
out any covered short position by either exercising the overallotment option or
purchasing corporate units in the open market. In determining the source of
corporate units to close out the covered short position, the underwriters will
consider, among other things, the price of corporate units available for
purchase in the open market as compared to the price at which they may purchase
the corporate units through the overallotment option. Naked short sales are
sales in excess of the overallotment option. The underwriters must close out
any naked short position by purchasing corporate units in the open market. A
naked short position is more likely to be created if the underwriters are
concerned that there may be
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downward pressure on the price of the corporate units or our common stock in
the open market after pricing that could adversely affect investors who
purchase in the offering. Similar to other purchase transactions, purchases by
the underwriters to cover syndicate short positions may have the effect of
raising or maintaining the market price of the corporate units and our common
stock or preventing or retarding a decline in the market price of the corporate
units and our common stock. As a result, the prices of the corporate units and
our common stock may be higher than they would otherwise be in the absence of
these transactions.
Neither we nor the underwriters make any representation or prediction as
to the direction or magnitude of any effect that the transactions described
above may have on the price of the corporate units or our common stock. In
addition, neither we nor the underwriters make any representation that the
underwriters will engage in these transactions or that these transactions, once
commenced, will not be discontinued without notice.
ELECTRONIC PROSPECTUS
A prospectus in electronic format may be made available on the website
maintained by one or more of the underwriters participating in this offering.
The underwriters may allocate a number of shares for sale to their online
brokerage account holders. Internet distributions will be allocated by the
underwriters that will make internet distributions on the same basis as other
allocations. Merrill Lynch, Pierce, Fenner & Smith Incorporated will be
facilitating distribution for this offering to certain of its internet
subscription customers. Merrill Lynch, Pierce, Fenner & Smith Incorporated
intends to allocate a limited number of shares for sale to its online brokerage
customers. An electronic prospectus supplement is available on the internet
website maintained by Merrill Lynch, Pierce, Fenner & Smith Incorporated. Other
than the prospectus supplement in electronic format, the information on the
Merrill Lynch website is not intended to be part of this prospectus supplement.
OTHER RELATIONSHIPS
In the ordinary course of business, the underwriters and their affiliates
have provided financial advisory, investment banking and general financing and
banking services to us and certain of our affiliates for customary fees.
Affiliates of the underwriters are lenders under our existing multi-year
revolving credit facility, have provided the commitments under a senior bridge
facility and are currently in discussions with us to provide commitments for a
364-day revolving credit facility.
Stephens Inc., an affiliate of Stephens Group, Inc., is an underwriter in
this offering. As of February 25, 2002, Stephens Group, Inc. beneficially owned
16,300,144 shares of our common stock. Warren Stephens, an executive officer of
Stephens Inc., is a member of the board of directors of ALLTEL.
First Union Securities, Inc., one of the underwriters, is an indirect,
wholly owned subsidiary of Wachovia Corporation. Wachovia Corporation conducts
its investment banking, institutional, and capital markets businesses through
its various bank, broker-dealer and nonbank subsidiaries (including First Union
Securities, Inc.) under the trade name of Wachovia Securities. Any references
to Wachovia Securities in this prospectus supplement, however, do not include
Wachovia Securities, Inc., member NASD/SIPC and a separate broker-dealer
subsidiary of Wachovia Corporation and an affiliate of First Union Securities,
Inc., which may or may not be participating as a selling dealer in the
distribution of the securities offered by this prospectus supplement.
LEGAL MATTERS
Certain legal matters with respect to the offering of the securities will
be passed on for us by Kutak Rock LLP, Little Rock, Arkansas, and for the
underwriters by Shearman & Sterling, New York, New York. At April 30, 2002, the
attorneys of Kutak Rock LLP who are or may be participating in the matters
contemplated by this prospectus supplement, beneficially owned a total of 4,652
of our common stock.
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PROSPECTUS
ALLTEL CORPORATION
[LOGO] Alltel Corporation
DEBT SECURITIES
COMMON STOCK
PREFERRED STOCK
WARRANTS
DEPOSITARY SHARES
STOCK PURCHASE CONTRACTS
EQUITY UNITS
This prospectus provides you with a general description of securities in
an aggregate amount not to exceed $5,000,000,000 that we may offer from time to
time. These securities include debt securities, common stock, preferred stock,
warrants, depositary shares, stock purchase contracts and equity units. Each
time we sell securities, we will provide a prospectus supplement that will
contain specific information about the terms of the sale and that may add to or
update the information in this prospectus. You should read this prospectus and
the accompanying prospectus supplement carefully before you invest.
ALLTEL common stock, is listed on the New York Stock Exchange and Pacific
Stock Exchange under the symbol "AT." 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.
We may offer the securities in amounts, at prices and on terms determined
by market conditions at the time of offering. We may sell the securities
through agents we select or through underwriters and dealers we select. If we
use agents, underwriters or dealers to sell the securities, we will name them
and describe their compensation in a prospectus supplement.
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus or any supplement is accurate as
of any date other than the date of this prospectus or of such supplement.
This Prospectus is dated April 10, 2002.
TABLE OF CONTENTS
PAGE
----
About this Prospectus......................................................................... 1
Where You Can Find More Information........................................................... 1
Special Note Regarding Forward-Looking Information............................................ 2
ALLTEL Corporation............................................................................ 3
Use of Proceeds............................................................................... 4
Ratio of Earnings to Fixed Charges and to Combined Fixed Charges and Preferred Stock Dividends 4
Description of Debt Securities................................................................ 6
Description of Capital Stock.................................................................. 12
Description of Warrants....................................................................... 16
Description of Depositary Shares.............................................................. 17
Description of Stock Purchase Contracts and Equity Units...................................... 19
Plan of Distribution.......................................................................... 20
Legal Opinions................................................................................ 21
Experts....................................................................................... 21
(i)
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the SEC using a "shelf" registration process. Under this shelf process, we may
sell any combination of the following securities:
. debt securities,
. common stock,
. preferred stock,
. warrants,
. depositary shares,
. stock purchase contracts, and
. equity units,
in one or more offerings up to a total dollar amount of $5,000,000,000. This
prospectus provides you with a general description of the securities we may
sell. Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
prospectus supplement also may add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with additional information described under the caption
"Where You Can Find More Information." We may only use this prospectus to sell
securities if it is accompanied by a prospectus supplement.
References in this prospectus to the terms "we," "us," "the company," or
"ALLTEL" mean ALLTEL Corporation, unless we state otherwise or the context
indicates otherwise.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information with
the SEC. You may read and copy documents at the SEC's public reference room
located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC
at 1-800-SEC-0330 for information about the operation of the public reference
room. You may also read our SEC filings, including the complete registration
statement and all of the exhibits to it, through the SEC's web site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" information filed with
them, which means that we can disclose important information to you by
referring you directly to those documents. The information incorporated by
reference is considered to be part of this prospectus. In addition, information
we file with the SEC in the future will automatically update and supersede
information contained and incorporated by reference in this prospectus and the
accompanying prospectus supplement. We incorporate by reference the documents
listed below and any future filings made with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"),
prior to the termination of this offering:
. ALLTEL's Annual Report on Form 10-K for the year ended December 31,
2001;
. ALLTEL's Current Report on Form 8-K dated March 19, 2002;
. The description of ALLTEL common stock contained in ALLTEL's
Registration Statement on Form 8-A (File No. 1-4996) filed February
9, 1987; and
. The description of the Rights Agreement (discussed below under the
caption "Description of Equity Securities") contained in ALLTEL's
Registration Statement on Form 8-A (File No. 1-4996) filed February
4, 1997.
1
We will provide free copies of any of these documents, if you write or
telephone us at:
Investor Relations
One Allied Drive
Little Rock, Arkansas 72202
Telephone (501) 905-8999
We have filed this prospectus as part of a registration statement on Form
S-3 with the SEC. The registration statement contains exhibits and other
information that are not contained in this prospectus. Descriptions in this
prospectus of the provisions of documents filed as exhibits to the registration
statement or otherwise filed with the SEC are only summaries of the documents'
material terms. If you want a complete description of the content of the
documents, you should obtain the documents yourself by following the procedures
described above.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This prospectus includes and incorporates by reference forward-looking
statements within the meaning of the securities laws. All statements that are
not historical facts are "forward-looking statements." The words "estimate,"
"project," "intend," "expect," "believe," "anticipate," "plans," "continues,"
"may, "will," "would," "should," "could," "potential" and similar expressions
identify forward-looking statements. These forward-looking statements include
statements regarding the expected financial position, business, financing
plans, business prospects, revenues, working capital, liquidity, capital needs,
interest costs and income, relating to ALLTEL.
These forward-looking statements involve known and unknown risks,
uncertainties and other factors that could cause our actual future results to
be materially different from historical results or from any future results
expressed or implied by such forward-looking statements. These forward-looking
statements are based on estimates, projections, beliefs and assumptions and do
not guarantee the future or our expressed beliefs. Important factors that could
cause actual results to differ materially from the results expressed or implied
by the forward-looking statements include, but are not limited to:
. the effects of intense competition in the markets and businesses in
which we operate;
. the costs and business risks associated with providing new services
or entering new markets;
. unexpected changes in demand for our products or services;
. the effects of mergers and consolidations within the
telecommunications industry;
. our ability to achieve projected synergies and financial results
expected from pending or completed acquisitions;
. rapid and significant changes in technology and the substantial
capital requirements associated with meeting the existing and future
technological requirements of our business;
. the effects of ongoing changes in the regulation of the
telecommunications industry;
. unexpected results of litigation filed against us;
. the effects of more general factors such as changes in interest
rates, in general market or economic conditions or in legislation,
regulation or public policy; and
. those factors listed in any applicable prospectus supplement under
the caption "Risk Factors."
Forward-looking statements speak only as of the date they are made, and
we disclaim any obligation to update or revise any forward-looking statement
based on the occurrence of future events, the receipt of new information or
otherwise.
2
ALLTEL CORPORATION
ALLTEL Corporation is a customer-focused information technology company
that provides communications and information services. ALLTEL conducts its
operations primarily through subsidiaries that provide wireless and wireline
local, long-distance, network access and Internet services, wide-area paging
service and information processing management services and advanced application
software. Telecommunications products are warehoused and sold by ALLTEL's
distribution subsidiary. Another subsidiary publishes telephone directories for
affiliates and other independent telephone companies. The company is
incorporated in Delaware. ALLTEL's principal executive offices are located at
One Allied Drive, Little Rock, Arkansas 72202, and our telephone number is
(501) 905-8000. ALLTEL's website is located at www.alltel.com. Information on
our website does not form part of this prospectus.
3
USE OF PROCEEDS
We intend to use the net proceeds from the sale of these securities for
general corporate purposes which may include refinancing existing debt,
financing acquisitions, capital expenditures or other working capital
requirements. Further details relating to the uses of the net proceeds of any
such offering will be set forth in the applicable prospectus supplement.
RATIOS OF EARNINGS TO FIXED CHARGES AND TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratios of earnings to fixed charges
and to combined fixed charges and preferred stock dividends for ALLTEL, which
includes our subsidiaries on a consolidated basis.
For the purpose of calculating the ratios,
(1) earnings include:
. income before taxes and adjustments for minority interest in
consolidated subsidiaries; plus
. income from equity investments, fixed charges, and distributed income
of equity investments; less
. amounts for capitalized interest and the minority interest in pretax
income of subsidiaries that have not incurred fixed charges; and
(2) fixed charges include:
. interest on all debt;
. amortization of debt issuance costs; and
. the interest component of operating rents.
For purposes of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends, preferred stock dividends include the
amount of pre-tax earnings required to pay the dividends on outstanding
preferred stock.
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
2001 2000 1999 1998 1997
---- ----- ---- ---- ----
Ratio of earnings to fixed charges............................. 5.92(1) 10.01(2) 4.81(3) 4.17(4) 4.30(5)
Ratio of earnings to combined fixed charges and preferred stock
dividends.................................................... 5.92(1) 10.00(2) 4.79(3) 4.14(4) 4.28(5)
--------
(1)Income before taxes for 2001 included pretax gains totaling $360.5 million
and consisted of a $347.8 million pretax gain from the sale of PCS licenses,
a pretax gain of $9.5 million from the dissolution of a wireless partnership
and a pretax gain of $3.2 million from the sale of certain investments.
Income before taxes also included pretax charges totaling $95.1 million
consisting of termination fees of $2.9 million incurred in connection with
the early retirement of long-term debt, charges of $77.1 million incurred in
connection with the restructuring of the Company's operations and
write-downs of $15.1 million in the carrying value of cell site equipment.
Excluding these items, the ratio of earnings to fixed charges and the ratio
of earnings to combined fixed charges and preferred stock dividends both
would have been 5.16 for 2001.
(2)Income before taxes for 2000 included pretax gains totaling $1,943.5 million
and consisted of a pretax gain of $1,345.5 million from the exchange of
wireless properties with Bell Atlantic and GTE, a pretax gain of $36.0
million from the sale of certain PCS assets and a pretax gain of $562.0
million from the sale of
4
investments, principally consisting of WorldCom common stock. Income before
taxes also included pretax charges totaling $51.9 million consisting of a
$15.0 million write-down of an investment, integration and other charges of
$25.4 million incurred in connection with the acquisition of wireless assets
and certain restructuring activities of the Company's information services
business and a $11.5 million charge incurred in connection with a litigation
settlement. Excluding these items, the ratio of earnings to fixed charges
would have been 4.85 for 2000 and the ratio of earnings to combined fixed
charges and preferred stock dividends would have been 4.84 for 2000.
(3)Income before taxes for 1999 included a pretax gain of $43.1 million from
the sale of WorldCom common stock. Income before taxes also included a
pretax charge of $90.5 million in connection with the closing of the
Company's mergers with Aliant Communications Inc., Liberty Cellular Inc.,
Advanced Information Resources Limited, and Southern Data Systems and with
certain loss contingencies and other restructuring activities. Excluding
these items, the ratio of earnings to fixed charges would have been 4.95 for
1999 and the ratio of earnings to combined fixed charges and preferred stock
dividends would have been 4.93 for 1999.
(4)Income before taxes for 1998 included a pretax gain of $296.2 million,
principally from the sale of WorldCom common stock. Income before taxes also
included pretax charges totaling $310.5 million consisting of merger and
integration expenses of $252.0 million incurred in connection with the
closing of the Company's merger with 360 Communications Company, a
write-down of $55.0 million resulting from changes in a customer care and
billing contract with a major customer and termination fees of $3.5 million
incurred due to the early retirement of long-term debt. Excluding these
items, the ratio of earnings to fixed charges would have been 4.21 for 1998
and the ratio of earnings to combined fixed charges and preferred stock
dividends would have been 4.18 for 1998.
(5)Income before taxes for 1997 included pretax gains of $209.6 million,
principally from the sale of WorldCom common stock and the Company's
healthcare operations. Income before taxes also included a pretax write-down
of $16.9 million to reflect the fair value less cost to sell the Company's
wire and cable operations. Excluding these items, the ratio of earnings to
fixed charges would have been 3.69 for 1997 and the ratio of earnings to
combined fixed charges and preferred stock dividends would have been 3.66
for 1997.
5
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions
of the debt securities to which any prospectus supplement may relate. A
prospectus supplement will describe the particular terms and provisions of, and
the extent to which the general terms and provisions described below may apply
to, a series of debt securities.
ALLTEL will issue the debt securities under an indenture as supplemented
and amended from time to time between ALLTEL and J. P. Morgan Trust Company,
National Association, which acts as trustee. The indenture and its associated
documents contain the full legal text of the matters described in this section.
Because this section is a summary, it does not describe every aspect of the
securities, and it is subject to and qualified in its entirety by reference to
all of the provisions of the indenture, including the definition of certain
terms used in the indenture. We include references in parentheses to certain
sections of the indenture.
GENERAL
The indenture:
. does not limit the amount of debt securities that we may issue;
. allows us to issue debt securities in one or more series;
. does not require us to issue all of the debt securities of a series
at the same time; and
. allows us to reopen a series to issue additional debt securities
without the consent of the debt security holders of such series.
Each series of debt securities will constitute unsecured and
unsubordinated indebtedness of ALLTEL and will rank on an equal basis with
ALLTEL's other unsecured and unsubordinated indebtedness. Any secured
indebtedness of ALLTEL will rank ahead of the debt securities. Also, we conduct
operations primarily through our subsidiaries and substantially all of our
consolidated assets are held by our subsidiaries. Accordingly, our cash flow
and our ability to meet our obligations under the debt securities will be
largely dependent on the earnings of our subsidiaries and the distribution or
other payment of these earnings to us in the form of dividends or loans or
advances and repayment of loans and advances from us. Our subsidiaries are
separate and distinct legal entities and have no obligation to pay the amounts
which will be due on our debt securities, or to make any funds available for
payment of amounts which will be due on our debt securities. Because we are a
holding company, our obligations under our debt securities will be effectively
subordinated to all existing and future liabilities of our subsidiaries.
Therefore, our rights, and the rights of our creditors, including the rights of
the holders of the debt securities to participate in any distribution of assets
of any of our subsidiaries, when such subsidiary is liquidated or reorganized,
is subject to the prior claims of the subsidiary's creditors. To the extent
that we may be a creditor with recognized claims against our subsidiaries, our
claims will still be effectively subordinated to any security interest in, or
mortgages or other liens on, the assets of the subsidiary that are senior to us.
You should refer to the prospectus supplement for the terms of the
particular series of debt securities that we are offering, including:
. the title of the debt securities of the series;
. the principal amount of the debt securities being offered and any
limit upon the aggregate principal amount;
. the date or dates on which the principal will be payable;
. the price or prices at which the debt securities will be issued;
6
. the fixed or variable rate or rates of the debt securities, or manner
of calculation, if any, at which the debt securities of the series
will bear interest, the date or dates from which any such interest
will accrue and on which such interest will be payable, and, with
respect to securities of the series in registered form, the record
date for the interest payable on any interest payment date;
. whether the amount of payments of principal of, and any premium or
make-whole amount, which is the amount in addition to principal and
interest that is required to be paid to the holder of a debt security
as a result of any optional redemption or accelerated payment of such
debt security, or interest on, the debt securities may be determined
according to an index, formula or other method and how such amounts
will be determined;
. the date or dates on which, and the place or places where the
principal of the debt securities will be payable;
. any redemption, repurchase, sinking fund, or analogous provisions;
. if other than the principal amount thereof, the portion of the
principal amount that will be payable upon declaration of
acceleration of the maturity thereof;
. whether we will issue debt securities of the series in registered or
bearer form, or both;
. the terms upon which a holder may exchange bearer securities for
securities in registered form and vice versa;
. whether we will issue debt securities in the form of one or more
"global securities" through the book-entry system of The Depository
Trust Company, New York, New York;
. whether and under what circumstances ALLTEL will pay additional
amounts on the debt securities of the series held by a person who is
not a U.S. person in respect of taxes or similar charges withheld or
deducted and, if so, whether ALLTEL will have the option to redeem
such securities rather than pay such additional amounts;
. the denominations of the debt securities, if other than $1,000 or an
integral multiple of $1,000;
. whether the debt securities will be convertible into or exchangeable
for any other securities and the terms and conditions upon which a
conversion or exchange may occur, including the initial conversion or
exchange price or rate, the conversion or exchange period and any
other additional provisions;
. the currency in which we will make payments to the holder and, if a
foreign currency, the manner of conversion from United States dollars;
. the applicability, if any, of covenant defeasance provisions
described in this prospectus or in the indenture; and
. any additional provisions or other special terms not inconsistent
with the provisions of the indenture, including any terms that may be
required by or advisable under United States law or regulations or
advisable in connection with the marketing of debt securities of such
series.
To the extent not described in this prospectus, principal and interest,
if any, will be payable, and the debt securities of a particular series will be
transferable, in the manner described in the prospectus supplement relating to
such series.
Debt securities of any series may be issued as registered securities or
bearer securities, or both. In this prospectus and the prospectus supplement we
refer to the person in whose name a registered security is registered and the
bearer of a bearer security as a "holder." A registered security is a security
registered in the name of the holder in the records of the registrar. A global
security is a registered security representing the debt of the series
registered in the name of a depositary. Unless otherwise provided in the
applicable prospectus supplement, we
7
will issue each series of debt securities in the form of one or more global
securities that will be deposited with, or on behalf of, The Depository Trust
Company, as depositary. We will not offer, sell, resell, or deliver bearer
securities to U.S. persons in connection with their original issuance.
If appropriate, the prospectus supplement will describe federal income
tax consequences applicable to a series of debt securities.
GLOBAL SECURITIES
The debt securities of a series may be issued in whole or in part in the
form of one or more global securities that will be deposited with, or on behalf
of, a depositary identified in the prospectus supplement relating to such
series. Global securities, if any, are expected to be deposited with The
Depository Trust Company, as depositary. ALLTEL may issue global securities in
either registered or bearer form and in either temporary or permanent form.
Unless the applicable prospectus supplement provides otherwise, the following
provisions will apply to depositary arrangements.
Once a global security is issued, the depositary for such global security
or its nominee will credit on its book-entry registration and transfer system
the respective principal amounts of the individual debt securities represented
by such global security to the accounts of participants that have accounts with
such depositary. Such accounts shall be designated by the underwriters, dealers
or agents with respect to such debt securities or by ALLTEL if the debt
securities are offered directly. Ownership of beneficial interests in such
global security will be limited to participants with the depositary or persons
that may hold interests through those participants.
Ownership of beneficial interests in any global security will be shown
on, and the transfer of that ownership will be effected only through, records
maintained by the depositary or its nominee (with respect to beneficial
interests of participants with the depositary) and records of participants
(with respect to beneficial interests of persons who hold through participants
with the depositary). Neither ALLTEL nor the trustee will have any
responsibility or liability for any aspect of the records of the depositary or
its nominee or for maintaining, supervising or reviewing any records of the
depositary or its nominee or records of participants relating to beneficial
ownership interests in the debt securities. The laws of some states require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such laws, as well as limits on participation in the
depositary's book-entry system, may impair the ability to own, pledge or
transfer beneficial interest in a global security.
So long as the depositary for a global security or its nominee is the
registered owner of such global security, the depositary or its nominee, as the
case may be, will be considered the sole owner or holder of the debt securities
represented by the global security for all purposes under the indenture.
Accordingly, except as described in the applicable prospectus supplement,
owners of beneficial interest in a global security will not be entitled to have
any of the individual debt securities represented by such global security
registered in their names, will not receive or be entitled to receive physical
delivery of any such debt securities in definitive form and will not be
considered the owners or holders thereof under the indenture. Each person
owning a beneficial interest in a global security must rely on the procedures
of the depositary or its nominee and, if such person is not a participant with
the depositary, on the procedures of the participant through which such person
owns its interests, to exercise any rights of a holder under the indenture.
Payments of principal of, and any premium (or make-whole amount) and
interest on, individual debt securities represented by a global security
registered in the name of a depositary or its nominee will be made to or at the
direction of the depositary or its nominee, as the case may be, as the
registered owner of the global security under the indenture. ALLTEL expects
that the depositary for a series of debt securities, or its nominee, upon
receipt of any payment of principal, premium or interest, will immediately
credit the accounts of relevant participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant global security as shown on the records of the depositary or its
nominee. ALLTEL also expects that
8
payments by participants to owners of beneficial interests in such global
security held through such participants will be governed by standing
instructions and customary practices, as is the case with securities held for
the account of customers in bearer form or registered in street name, and will
be the responsibility of such participants. Neither ALLTEL nor the trustee have
or will have any responsibility or liability for the payment of such amounts to
beneficial owners of debt securities including principal, any premium (or
make-whole amount) or interest.
If the depositary for any debt securities is at any time unwilling,
unable or ineligible to continue as depositary and ALLTEL does not appoint a
successor depositary within 90 days, ALLTEL will issue individual debt
securities in exchange for the global security representing such debt
securities. In addition, ALLTEL may at any time and in its sole discretion,
subject to any limitations described in the prospectus supplement relating to
such debt securities, determine not to have any of such debt securities
represented by one or more global securities and in such event will issue
individual debt securities in exchange for the global security or securities
representing such debt securities.
LIEN ON ASSETS
If at any time ALLTEL subjects any part of its property to a lien, ALLTEL
will provide equal and proportionate security to the debt securities.
Exceptions to this covenant include the creation, extension, renewal or
refunding of purchase-money mortgages or liens, or other liens to which any
property or asset acquired by ALLTEL is subject as of the date of its
acquisition by ALLTEL, and the making of any deposit or pledge to secure public
or statutory obligations.
Nothing contained in the indenture prevents an affiliate of ALLTEL,
including any or all subsidiaries of ALLTEL holding substantially all the
assets of ALLTEL and its consolidated subsidiaries, from mortgaging, pledging,
or subjecting to any lien any property or assets, whether or not acquired by
such person from ALLTEL. (Section 4.02.) Except as described in this section,
the indenture does not contain any covenants or other provisions which would
afford holders protection in the event of a highly leveraged transaction
involving ALLTEL.
AMENDMENT AND WAIVER
Subject to certain exceptions, ALLTEL and the trustee may amend or
supplement the indenture or the debt securities with the consent of the holders
of a majority in principal amount of the outstanding debt securities of each
series affected by the amendment or supplement, with each series voting as a
class. The trustee may waive compliance with any provision with the consent of
the holders of a majority in principal amount of the outstanding debt
securities of each series affected by such waiver, with each series voting as a
class. Without the consent of each holder affected, any such amendment or
waiver may not:
. reduce the amount of debt securities whose holders must consent to an
amendment or waiver;
. change the rate of or change the time of payment of interest on any
debt security;
. change the principal of or change the fixed maturity of any debt
security;
. waive a default in the payment of the principal of or interest on any
debt security;
. make any security payable in money other than that stated in the debt
security;
. reduce any premium payable upon redemption of any debt security; or
. impair the right to institute suit for the enforcement of any payment
on or with respect to any debt security. (Section 9.02.)
ALLTEL and the trustee may amend or supplement the indenture without the
consent of any holder to:
. cure any ambiguity, defect, or inconsistency in the indenture or in
the debt securities of any series;
9
. provide for the assumption of all the obligations of ALLTEL under the
securities and the indenture by any corporation in connection with a
merger, consolidation, transfer, or lease of ALLTEL's property and
assets substantially as an entirety, as provided for in the indenture;
. secure the debt securities;
. provide for uncertificated securities in addition to or in place of
certificated debt securities;
. make any change that does not adversely affect the rights of any
holder;
. provide for the issuance of, and establish the form and terms and
conditions of, a series of debt securities or to establish the form
of any certifications required to be furnished pursuant to the terms
of the indenture or any series of securities; or
. add to rights of holders. (Section 9.01.)
CONSOLIDATION, MERGER AND CONVEYANCES
ALLTEL may not consolidate with or merge into, or transfer or lease its
property and assets substantially as an entity to another entity unless:
. the successor entity is a U.S. corporation and assumes all of
ALLTEL's obligations under the debt securities and the indenture; and
. after giving effect to the transaction, no default under the
indenture shall have occurred and be continuing.
If ALLTEL completes a transaction as described in the previous sentence
(other than a lease), ALLTEL's obligations under the securities and the
indenture terminate after the transaction is completed. (Section 5.01.)
DEPOSIT OF MONEY OR GOVERNMENT OBLIGATIONS TO PAY SECURITIES
ALLTEL has the right to terminate certain of its obligations under the
debt securities and the indenture with respect to the debt securities of any
series or any installment of principal of or interest on that series if ALLTEL:
. irrevocably deposits with the trustee, in trust for the benefit of
the holders of that series or portions thereof, money or non-callable
obligations of the United States of America sufficient to pay, when
due, principal of and interest on the debt securities with respect to
which a deposit is made to maturity; or redemption or such
installment of principal or interest, as the case may be; and
. all other conditions set forth in the securities of that series are
met.
In such event, however, ALLTEL's obligation to pay the principal of and
interest on the debt securities shall survive until the securities are no
longer outstanding. (Section 8.01; Section 4.01.)
EVENTS OF DEFAULT
Holders will have special rights if an event of default occurs and is not
cured. The following events are defined in the indenture as events of default:
. default in the payment of interest for 90 days;
. default in the payment of the principal of any security of such
series;
. failure by ALLTEL for 90 days following sufficient notice to comply
with any of its other agreements in the debt securities of such
series or in the indenture; and
. certain events of bankruptcy or insolvency. (Section 6.01.)
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If an event of default occurs with respect to the debt securities of any
series and is continuing, the trustee or the holders of at least 25% in
principal amount of all of the outstanding debt securities of that series may
declare the principal to be due and payable. Upon such declaration, such
principal and all accrued interest thereon shall be due and payable
immediately. (Section 6.02.)
Subject to the provisions in the indenture for the indemnification of the
trustee, the holders of at least a majority in aggregate principal amount of
the outstanding debt securities of each series affected may direct the time,
method and place of conducting any proceeding for any remedy available to the
trustee or exercising any trust or power conferred on the trustee. The trustee
may refuse to follow any such direction that conflicts with law or the
indenture, that is unduly prejudicial to the rights of holders of that series
or that would subject the trustee to personal liability. (Section 6.05.)
A holder may pursue a remedy with respect to the indenture or the debt
securities of any series only if:
. such holder has previously given to the trustee written notice of a
continuing event of default with respect to the debt securities of
such series;
. the holders of at least 25% in aggregate principal amount of
outstanding debt securities of such series shall have made written
request to the trustee to pursue the remedy;
. such holder or holders have offered to the trustee indemnity
reasonably satisfactory to the trustee against any loss, liability or
expense to be, or which may be, incurred by the trustee in pursuing
the remedy;
. the trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
. during such 60-day period, the holders of a majority in aggregate
principal amount of the outstanding securities of such series have
not given the trustee a direction that is inconsistent with such
written request.
A holder may not use the indenture to prejudice the rights of another
holder or to obtain a preference or priority over such other holder. (Section
6.06.).
The trustee may refuse to perform any duty or exercise any right or power
unless it receives indemnity satisfactory to it against any loss, liability or
expense. (Section 7.01(f).) The trustee may withhold from holders notice of any
continuing default, except a default in payment of principal or interest, if it
determines that withholding notice is in their interests. (Section 7.05.)
EXCHANGE OF SECURITIES
A holder of registered debt securities may exchange them for an equal
aggregate principal amount of registered debt securities. (Section 2.08(a).)
To the extent permitted by the terms of a series of debt securities
authorized to be issued in registered form and unregistered form, a holder of
unregistered debt securities may exchange them for an equal aggregate principal
amount of registered or unregistered debt securities. (Section 2.08(b).) A
holder may not exchange registered debt securities for unregistered debt
securities until ALLTEL has notified the trustee and the registrar that, as a
result of such exchange, ALLTEL will not suffer adverse consequences under
United States laws and regulations.
Any exchange of debt securities will be for debt securities of the same
series and date of maturity in such authorized denominations as the holder may
request. Securities must be surrendered for exchange at the agency ALLTEL
maintains for such purpose and all other requirements of such agent must be
fulfilled.
CONCERNING THE TRUSTEE
ALLTEL maintains banking relationships in the ordinary course of business
with the trustee.
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DESCRIPTION OF CAPITAL STOCK
The following summary is qualified in its entirety by the Delaware
General Corporation Law, the Amended and Restated Certificate of Incorporation
of ALLTEL, as amended (the "ALLTEL Certificate") and ALLTEL's Rights Agreement
(described below). The ALLTEL Certificate and Rights Agreement are included as
exhibits to ALLTEL's Annual Report on Form 10-K on file with the SEC. See
"Where You Can Find More Information."
GENERAL
The authorized capital stock of ALLTEL consists of 1,000,000,000 shares
of ALLTEL common stock, par value $1 per share, 50,000,000 shares of voting
cumulative preferred stock, par value $25 per share (the "ALLTEL Voting
Preferred Stock") and 50,000,000 shares of cumulative non-voting preferred
stock, no par value (the "ALLTEL Non-Voting Preferred Stock").
ALLTEL COMMON STOCK AND RELATED RIGHTS
The holders of the ALLTEL common stock have one vote per share on matters
submitted to a vote of shareholders. Such holders vote as a class together with
the holders of ALLTEL Voting Preferred Stock. All shares of ALLTEL common stock
will participate equally in the distribution of property remaining after
payment of liquidation preferences on preferred stock and after satisfaction of
all other claims, on liquidation, dissolution or winding up of the affairs of
ALLTEL. Such shares will also equally participate in all dividends declared by
the ALLTEL board. The outstanding shares of ALLTEL common stock are fully paid
and non-assessable. The ALLTEL common stock has no preemptive rights, no
cumulative voting rights and no redemption, sinking fund or conversion
provisions. At February 25, 2002, there were 310,854,020 shares of ALLTEL
common stock issued and outstanding.
The ALLTEL bylaws provide for a classified board consisting of three
classes of directors with each class being elected for a term of three years.
The number of directors in each class may be fixed or changed from time to time
by either (i) a majority of stockholders represented and entitled to vote at a
meeting called for the purpose of electing directors or (ii) the affirmative
vote of the majority of directors then in office.
ALLTEL is party to a Rights Agreement (the "Rights Agreement"), dated
January 30, 1997 (the "Dividend Declaration Date") pursuant to which ALLTEL's
board declared a dividend of one right ("Right") for each share of ALLTEL
common stock outstanding on February 9, 1997 (the "Record Date") and for each
share of ALLTEL common stock issued between the Record Date and the
Distribution Date (defined below). Each holder of a Right may purchase from
ALLTEL, upon the occurrence of certain events, 1/1000 of a share of ALLTEL's
Series K Cumulative Voting Preferred Stock, par value $25 per share (the
"Series K Stock") at a price of $100.00 per 1/1000 of a share (the "Purchase
Price"). The number of Rights per share of ALLTEL common stock, the number of
shares of Series K Stock for which each Right is exercisable and the Purchase
Price are subject to adjustment as described below.
The certificates for the ALLTEL common stock evidence the Rights. A
separate certificate for each Right will be issued on the close of business on
the tenth business day after the earliest to occur of the following two events
(the earlier of such dates being called the "Distribution Date"):
(1) the public announcement that any person (other than
ALLTEL, any subsidiary of ALLTEL or any employee benefit plan of
ALLTEL) together with its affiliates and associates (an "Acquiring
Person"), beneficially owns 15% or more of ALLTEL common stock; or
(2) the close of business on the tenth business day after
any person commences a tender or exchange offer if upon completion
that person would beneficially own 15% or more of ALLTEL common
stock.
12
The Rights Agreement provides that, until the Distribution Date, the Rights
will only be transferred with the ALLTEL common stock. The Rights are not
exercisable until the Distribution Date and will expire at the close of
business on January 31, 2007 ("Final Expiration Date"), unless earlier redeemed
by ALLTEL as described below.
If an Acquiring Person acquires 15% or more of ALLTEL common stock (the
"Stock Acquisition Date") then each holder of a Right shall have the right to
purchase at the then current Purchase Price and in lieu of Series K Stock,
shares of ALLTEL common stock having a value equal to two times the Purchase
Price. If an Acquiring Person acquires 15% or more of ALLTEL common stock
pursuant to a tender offer or an exchange offer at a price and on terms
determined by at least a majority of the Rights Agreement Continuing Directors
(defined below) to be in the best interest of ALLTEL and its shareholders (a
"Qualifying Offer"), then Rights holders shall not be entitled to exercise the
Rights. The term "Rights Agreement Continuing Director" means: (a) any member
of the ALLTEL board who is not an Acquiring Person or an affiliate or associate
of such person, and who was a member of the ALLTEL board prior to the date of
the Rights Agreement or (b) any person who subsequently becomes a member of the
ALLTEL board if the member's election to the ALLTEL board is recommended or
approved by a majority of the Rights Agreement Continuing Directors.
Except for certain transactions involving a Qualifying Offer, if
following the Stock Acquisition Date either:
(a) ALLTEL engages in a merger or other business combination
transaction in which ALLTEL does not survive,
(b) ALLTEL engages in a merger or other business combination
transaction with another person in which ALLTEL survives, but in
which ALLTEL common stock is changed or exchanged, or
(c) 50% or more of ALLTEL's assets, cash flow or earning
power is sold or transferred,
the Rights Agreement provides that each holder of a Right will thereafter have
the right to purchase at the then current Purchase Price, common stock of the
acquiring company having a value equal to two times the Purchase Price.
The Purchase Price payable, and the number of shares of Series K Stock or
other securities or property issuable, on exercise of the Rights, are subject
to adjustment from time to time to prevent dilution following stock dividends,
subdivisions, combinations, reclassifications, warrant or right grants or
distributions. Also, if prior to the Distribution Date ALLTEL declares a
dividend on, subdivides or combines into a smaller number the outstanding
shares of ALLTEL common stock, then the number of Rights associated with each
share of ALLTEL common stock shall be proportionately adjusted in such a manner
that the total number of outstanding Rights is unchanged.
Until the close of business on the tenth business day following the Stock
Acquisition Date, the ALLTEL board of directors by majority vote may redeem and
terminate the Rights at a price of $0.01 per Right (the "Right Redemption
Price"). ALLTEL may, at its option, pay the Right Redemption Price in cash,
ALLTEL common stock, or any other form of consideration deemed appropriate by
the ALLTEL Board.
Until a Right is exercised, a Right holder has no rights as a shareholder
of ALLTEL, including, the right to vote or to receive dividends and such Rights
have no dilutive effect on the earnings of ALLTEL.
Prior to the Distribution Date, ALLTEL may amend the Rights Agreement
without the approval of Rights holders. Following the Distribution Date, ALLTEL
may amend the Rights Agreement without the approval of Rights holders to:
(a) cure any ambiguity;
(b) correct or supplement any defective or inconsistent
provision;
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(c) shorten or lengthen any required time period; or
(d) change any provisions in the Rights Agreement in any
manner which does not adversely affect the interests of the Rights
holders (other than an Acquiring Person).
However, the Rights Agreement may not be amended to lengthen a time period
relating to when the Rights may be redeemed if the Rights are not then
redeemable, or to lengthen any other time period unless such lengthening is for
the purpose of protecting the Rights holders. Additionally, after the
Distribution Date ALLTEL may not make any amendment to the Rights Agreement
that changes the Rights Redemption Price, the Final Expiration Date, the
Purchase Price or the number of 1/1000 of a share of Series K Stock for which
a Right is exercisable.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or a group that attempts to acquire ALLTEL
without conditioning the offer on: (a) the Rights being redeemed; (b) a
substantial number of Rights being acquired; or (c) being deemed a Qualifying
Offer under the Rights Agreement. However, the Rights should not interfere with
any merger or business combination in connection with a Qualifying Offer or
that is approved by ALLTEL.
DELAWARE ANTI-TAKEOVER STATUTE
Section 203 of the Delaware General Corporation Law restricts business
combinations with certain interested shareholders (defined under the Delaware
General Corporation Law to include persons who beneficially own or acquire 15%
or more of a Delaware corporation's voting stock, with the exception of any
person who owned and has continued to own shares in excess of the 15%
limitation since December 23, 1987, hereinafter a "Section 203 Interested
Shareholder"). Section 203, which applies to ALLTEL, prohibits business
combination transactions between a publicly held Delaware corporation and any
Section 203 Interested Shareholder for a period of three years after the date
on which the Section 203 Interested Shareholder became an interested
shareholder, unless (a) prior to that date the corporation's board of directors
approved either the proposed business combination or the transaction which
resulted in the Section 203 Interested Shareholder becoming an interested
shareholder, (b) upon consummation of the transaction which resulted in the
Section 203 Interested Shareholder becoming an interested shareholder, the
Section 203 Interested Shareholder owned at least 85% of the voting stock of
the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares owned
(i) by persons who are directors and also officers and (ii) by employee stock
plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer, or (c) on or subsequent to such date the business
combination is approved by the corporation's board of directors and authorized
at an annual or special meeting of shareholders, and not by written consent, by
the affirmative vote of at least two-thirds of the outstanding voting stock
which is not owned by the Section 203 Interested Shareholder.
FAIR PRICE PROVISIONS
In addition to the provisions of Section 203, the ALLTEL Certificate
contains certain "fair price" provisions which impose further conditions on the
consummation of business combination transactions ("Section 203 Business
Combinations"). The ALLTEL Certificate requires the holders of at least 85% of
the voting power of the outstanding shares of any class of stock of ALLTEL
entitled to vote generally in the election of directors to approve all Section
203 Business Combinations involving ALLTEL and a Section 203 Interested
Shareholder unless: (a) after becoming a Section 203 Interested Shareholder,
such person shall (i) have taken steps to ensure the ALLTEL Continuing
Directors (as defined below) maintain representation on the ALLTEL board
proportionate to the stockholdings of the holders of ALLTEL voting stock not
affiliated with the Section 203 Interested Shareholder, (ii) the Section 203
Interested Shareholder shall not have acquired newly issued securities from
ALLTEL (except in certain limited circumstances) and (iii) the Section 203
Interested Shareholder shall not have acquired any additional outstanding
voting stock, or securities convertible into voting stock, except as part
14
of the transaction that resulted in the Section 203 Interested Shareholder
becoming an interested shareholder; and (b) certain minimum price and other
procedural requirements are met in connection with the proposed transaction
with the Section 203 Interested Shareholder.
The term "ALLTEL Continuing Directors" is defined as any person who was a
member of the ALLTEL board and elected by shareholders prior to the time when
the Section 203 Interested Shareholder acquired in excess of 5% of the voting
stock of ALLTEL, or any person recommended to succeed a ALLTEL Continuing
Director by a majority of the ALLTEL Continuing Directors. Although neither
Section 203, nor the ALLTEL fair price provision or ALLTEL Certificate, would
preclude the holders of a controlling interest from exercising control over
ALLTEL and would not prevent a hostile acquisition of control of ALLTEL, such
provisions may have the effect of discouraging or making more difficult a
hostile acquisition of control.
RIGHTS OF APPRAISAL
Under the Delaware General Corporation Law, shareholders may exercise a
right to dissent from certain corporate actions and obtain payment of the fair
value of their shares. This remedy is an exclusive remedy, except where the
corporate action involves fraud or illegality. The Delaware General Corporation
Law provides appraisal rights only in certain mergers or consolidations and not
(unless the certificate of incorporation of a corporation so provides, which
the ALLTEL Certificate does not) for a sale or transfer of all or substantially
all of a corporation's assets or an amendment to its certificate of
incorporation. Moreover, the Delaware General Corporation Law does not provide
appraisal rights in connection with a merger or consolidation (unless the
certificate of incorporation so provides, which the ALLTEL Certificate does
not) to the holders of shares of a constituent corporation listed on a national
securities exchange (or designated as a national market system security by the
National Association of Securities Dealers, Inc.) or held of record by more
than 2,000 shareholders, unless the applicable agreement of merger or
consolidation requires the holders of such shares to receive, in exchange for
such shares, any property other than shares of stock of the resulting or
surviving corporation, shares of stock of any other corporation listed on a
national securities exchange (or designated as described above) or held of
record by more than 2,000 holders, cash in lieu of any fractional shares or any
combination of the foregoing. In addition, the Delaware General Corporation Law
denies appraisal rights if the shareholders of the surviving corporation in a
merger did not have to vote to approve the merger.
ALLTEL PREFERRED STOCK
The Board of Directors of ALLTEL may issue (without obtaining shareholder
approval) shares of preferred stock in such series as it deems appropriate. As
of February 25, 2002, there were no shares of ALLTEL Voting Preferred Stock and
a total of 60,843 shares of ALLTEL Non-Voting Preferred Stock issued and
outstanding. ALLTEL has reserved 500,000 shares of Series K Stock for future
issuance under the Rights Agreement discussed above.
Prior to the issuance of shares of any series of preferred stock, the
ALLTEL Board is required by the Delaware General Corporation Law and the ALLTEL
Certificate to fix, for each series, the designations, powers and preferences
and the relative, participating, optional or other special rights of the shares
of each series and any qualifications, limitations and restrictions thereof, as
are permitted by Delaware Law. Investors should refer to the prospectus
supplement relating to the offering of a series of preferred stock for the
specific terms of that series, including:
. the distinctive serial designation and the number of shares
constituting such series;
. the dividend rates or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if
so, from which date or dates, the payment and record date or dates
for dividends, and the participating and other rights, if any, with
respect to dividends;
. the voting powers, full or limited, if any, of the shares of such
series;
15
. whether the shares of such series shall be redeemable and, if so, the
price or prices at which, and the terms and conditions on which, such
shares may be redeemed;
. the amount or amounts payable upon the shares of such series and any
preferences applicable thereto in the event of voluntary or
involuntary liquidation, dissolution or winding up of the company;
. whether the shares of such series shall be entitled to the benefit of
a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and if so entitled, the amount of such
fund and the manner of its application, including the price or prices
at which such shares may be redeemed or purchased through the
application of such fund;
. whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any
other series of the same or any other class or classes of stock of
ALLTEL or a subsidiary and, if so convertible or exchangeable, the
conversion price or prices, the rate or rates of exchange, and the
adjustments thereof, if any, at which such conversion or exchange may
be made, and any other terms and conditions of such conversion or
exchange;
. the price or other consideration for which the shares of such series
shall be issued;
. whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of
undesignated preferred stock (or series thereof) and whether such
shares may be reissued as shares of the same or any other class or
series of stock; and
. such other powers, preferences, rights, qualifications, limitations
and restrictions thereof as the board of directors may deem advisable.
TRANSFER AND RIGHTS AGENT, REGISTRAR
First Union National Bank serves as the registrar and transfer and rights
agent for the common stock.
STOCK EXCHANGE LISTING
Our common stock is listed on the New York Stock Exchange and the Pacific
Stock Exchange. The trading symbol for our common stock on these exchanges is
"AT."
DESCRIPTION OF WARRANTS
ALLTEL may issue warrants for the purchase of debt securities, preferred
stock or common stock. Warrants may be issued independently or together with
other securities and may be attached to or separate from any offered
securities. Each series of warrants will be issued under a separate warrant
agreement to be entered into between ALLTEL and a bank or trust company, as
warrant agent. The warrant agent will act solely as our agent in connection
with the warrants and will not have any obligation or relationship of agency or
trust for or with any holders or beneficial owners of warrants. A copy of the
warrant agreement will be filed with the SEC in connection with the offering of
warrants.
The prospectus supplement relating to a particular issue of warrants to
issue securities will describe the terms of those warrants, including the
following:
. the title of the warrants;
. the offering price for the warrants, if any;
. the aggregate number of the warrants;
. the designation and terms of the securities purchasable upon exercise
of the warrants;
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. if applicable, the designation and terms of the securities that the
warrants are issued with and the number of warrants issued with each
security;
. if applicable, the date from and after which the warrants and any
securities issued with them will be separately transferable;
. the number or amount of securities that may be purchased upon
exercise of a warrant and the price at which the securities may be
purchased upon exercise;
. the dates on which the right to exercise the warrants will commence
and expire;
. if applicable, the minimum or maximum amount of the warrants that may
be exercised at any one time;
. whether the warrants represented by the warrant certificates or
securities that may be issued upon exercise of the warrants will be
issued in registered or bearer form;
. information relating to book-entry procedures, if any;
. the currency or currency units in which the offering price, if any,
and the exercise price are payable;
. if applicable, a discussion of material United States federal income
tax considerations;
. anti-dilution provisions of the warrants, if any;
. redemption, repurchase or analogous provisions, if any, applicable to
the warrants; and
. any additional terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
Each warrant will entitle the holder of the warrant to purchase at the
exercise price set forth in the applicable prospectus supplement the principal
amount of debt securities or shares of preferred stock or common stock being
offered. Holders may exercise warrants at any time up to the close of business
on the expiration date set forth in the applicable prospectus supplement. After
the close of business on the expiration date, unexercised warrants are void.
Holders may exercise warrants as set forth in the prospectus supplement
relating to the warrants being offered.
Until you exercise your warrants to purchase ALLTEL debt securities,
preferred stock, or common stock, you will not have any rights as a holder of
our debt securities, preferred stock, or common stock, as the case may be, by
virtue of your ownership of warrants.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
ALLTEL may offer fractional shares of preferred stock, rather than full
shares of preferred stock. If we do so, we may issue receipts for depositary
shares that each represent a fraction of a share of a particular series of
preferred stock. The prospectus supplement will indicate that fraction. The
shares of preferred stock represented by depositary shares will be deposited
under a depositary agreement between ALLTEL and a bank or trust company that
meets certain requirements and is selected by us (the "Bank Depositary"). Each
owner of a depositary share will be entitled to all the rights and preferences
of the preferred stock represented by the depositary share. The depositary
shares will be evidenced by depositary receipts issued pursuant to the
depositary agreement. Depositary receipts will be distributed to those persons
purchasing the fractional shares of preferred stock in accordance with the
terms of the offering.
We have summarized some common provisions of a depositary agreement and
the related depositary receipts. The forms of the depositary agreement and the
depositary receipts relating to any particular issue of depositary shares will
be filed with the SEC each time we issue depositary shares, and you should read
those documents for provisions that may be important to you.
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DIVIDENDS AND OTHER DISTRIBUTIONS
If ALLTEL pays a cash distribution or dividend on a series of preferred
stock represented by depositary shares, the Bank Depositary will distribute
such dividends to the record holders of such depositary shares. If the
distributions are in property other than cash, the Bank Depositary will
distribute the property to the record holders of the depositary shares.
However, if the Bank Depositary determines that it is not feasible to make the
distribution of property, the Bank Depositary may, with our approval, sell such
property and distribute the net proceeds from such sale to the record holders
of the depositary shares.
REDEMPTION OF DEPOSITARY SHARES
If ALLTEL redeems a series of preferred stock represented by depositary
shares, the Bank Depositary will redeem the depositary shares from the proceeds
received by the Bank Depositary in connection with the redemption. The
redemption price per depositary share will equal the applicable fraction of the
redemption price per share of the preferred stock. If fewer than all the
depositary shares are redeemed, the depositary shares to be redeemed will be
selected by lot or pro rata as the Bank Depositary may determine.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the
preferred stock represented by depositary shares are entitled to vote, the Bank
Depositary will mail the notice to the record holders of the depositary shares
relating to such preferred stock. Each record holder of these depositary shares
on the record date (which will be the same date as the record date for the
preferred stock) may instruct the Bank Depositary as to how to vote the
preferred stock represented by such holder's depositary shares. The Bank
Depositary will endeavor, insofar as practicable, to vote the amount of the
preferred stock represented by such depositary shares in accordance with such
instructions, and ALLTEL will take all action which the Bank Depositary deems
necessary in order to enable the Bank Depositary to do so. The Bank Depositary
will abstain from voting shares of the preferred stock to the extent it does
not receive specific instructions from the holders of depositary shares
representing such preferred stock.
CONVERSION OR EXCHANGE OF PREFERRED STOCK
If the deposited preferred stock is convertible into or exchangeable for
other securities, the depositary shares, as such, will not be convertible into
or exchangeable for such other securities. Rather, any holder of the depositary
shares may surrender the related depositary receipts, together with any amounts
payable by the holder in connection with the conversion or the exchange, to the
depositary with written instructions to cause conversion or exchange of the
preferred stock represented by the depositary shares into or for such other
securities. If only some of the depositary shares are to be converted or
exchanged, a new depositary receipt or receipts will be issued for any
depositary share not converted or exchanged.
AMENDMENT AND TERMINATION OF THE DEPOSITARY AGREEMENT
The form of depositary receipt evidencing the depositary shares and any
provision of the depositary agreement may be amended by agreement between the
Bank Depositary and ALLTEL. However, any amendment that materially and
adversely alters the rights of the holders of depositary shares will not be
effective unless such amendment has been approved by the holders of at least a
majority of the depositary shares then outstanding. The depositary agreement
may be terminated by the Bank Depositary or ALLTEL only if: (1) all outstanding
depositary shares have been redeemed; or (2) there has been a final
distribution in respect of the preferred stock in connection with any
liquidation, dissolution or winding up of ALLTEL and such distribution has been
distributed to the holders of depositary receipts.
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CHARGES OF BANK DEPOSITARY
ALLTEL will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. We will also
pay charges of the Bank Depositary in connection with the initial deposit of
the preferred stock and any redemption of the preferred stock. Holders of
depositary receipts will pay other transfer and other taxes and governmental
charges and any other charges, including a fee for the withdrawal of shares of
preferred stock upon surrender of depositary receipts, as are expressly
provided in the depositary agreement to be for their accounts.
WITHDRAWAL OF PREFERRED STOCK
Except as may be provided otherwise in the applicable prospectus
supplement, upon surrender of depositary receipts at the principal office of
the Bank Depositary, subject to the terms of the depositary agreement, the
owner of the depositary shares may demand delivery of the number of whole
shares of preferred stock and all money and other property, if any, represented
by those depositary shares. Partial shares of preferred stock will not be
issued. If the depositary receipts delivered by the holder evidence a number of
depositary shares in excess of the number of depositary shares representing the
number of whole shares of preferred stock to be withdrawn, the Bank Depositary
will deliver to such holder at the same time a new depositary receipt
evidencing the excess number of depositary shares. Holders of preferred stock
thus withdrawn may not thereafter deposit those shares under the depositary
agreement or receive depositary receipts evidencing depositary shares therefor.
MISCELLANEOUS
The Bank Depositary will forward to holders of depositary receipts all
reports and communications from ALLTEL that are delivered to the Bank
Depositary and that we are required to furnish to the holders of the preferred
stock. Neither the Bank Depositary nor ALLTEL will be liable if we are
prevented or delayed by law or any circumstance beyond our control in
performing our obligations under the depositary agreement. The obligations of
the Bank Depositary and ALLTEL under the depositary agreement will be limited
to performance in good faith of our duties thereunder, and we will not be
obligated to prosecute or defend any legal proceeding in respect of any
depositary shares or preferred stock unless satisfactory indemnity is
furnished. ALLTEL may rely upon written advice of counsel or accountants, or
upon information provided by persons presenting preferred stock for deposit,
holders of depositary receipts or other persons believed to be competent and on
documents believed to be genuine.
RESIGNATION AND REMOVAL OF BANK DEPOSITARY
The Bank Depositary may resign at any time by delivering to ALLTEL notice
of its election to do so, and we may at any time remove the Bank Depositary.
Any such resignation or removal will take effect upon the appointment of a
successor Bank Depositary and its acceptance of such appointment. The successor
Bank Depositary must be appointed within 60 days after delivery of the notice
of resignation or removal and must be a bank or trust company meeting the
requirements of the depositary agreement.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND EQUITY UNITS
We may issue stock purchase contracts, including contracts obligating
holders to purchase from us, and obligating us to sell to the holders, a
specified number of shares of common stock, or other securities at a future
date or dates. We may fix the price and number of securities subject to the
stock purchase contracts at the time we issue the stock purchase contracts or
we may provide that the price and number of securities will be determined
pursuant to a formula set forth in the stock purchase contracts. The stock
purchase contracts may be issued separately or as part of units consisting of a
stock purchase contract and debt securities or debt obligations
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of third parties, including U.S. treasury securities, securing the obligations
of the holders of the units to purchase the securities under the stock purchase
contracts. We refer to these units as equity units. The stock purchase
contracts may require holders to secure their obligations under the stock
purchase contracts in a specified manner. The stock purchase contracts also may
require us to make periodic payments to the holders of the equity units or vice
versa, and those payments may be unsecured or refunded on some basis.
The applicable prospectus supplement will describe the terms of the stock
purchase contracts or equity units offered by that prospectus supplement. The
description in the prospectus supplement will not necessarily be complete, and
reference will be made to the stock purchase contracts or equity units, and, if
applicable, collateral or depositary arrangements, relating to the stock
purchase contracts or equity units, which will be filed with the SEC each time
we issue stock purchase contracts or equity units. Material United States
federal income tax considerations applicable to the equity units and the stock
purchase contracts will also be discussed in the applicable prospectus
supplement. If we issue any stock purchase contracts or equity units, we will
file or incorporate the form of stock purchase contract and equity unit as
exhibits to the registration statement and you should read these documents for
provisions that may be important to you. You can obtain copies of any form of
stock purchase contract and equity unit by following the directions described
under the caption "Where You Can Find More Information."
PLAN OF DISTRIBUTION
We may sell the securities to or through underwriters. We also may sell
the securities directly to other purchasers or through agents. Only
underwriters named in the prospectus supplement are deemed to be underwriters
in connection with the securities.
The distribution of the securities may be effected from time to time in
one or more transactions at:
. a fixed price or prices, which may be changed;
. market prices prevailing at the time of sale;
. prices related to such prevailing market prices; or
. negotiated prices.
In connection with the sale of the securities, underwriters may receive
compensation from ALLTEL or from purchasers of the securities for whom they may
act as agents in the form of discounts, concessions, or commissions.
Underwriters and agents that participate in the distribution of the securities
may be deemed to be underwriters, and any discounts or commissions received by
them and any profit on the resale of the securities by them may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933. We
will identify any such underwriter or agent, and describe any such
compensation, in the prospectus supplement.
Under agreements which may be entered into by ALLTEL, underwriters and
agents who participate in the distribution of the securities may be entitled to
indemnification by ALLTEL against certain liabilities, including liabilities
under the Securities Act of 1933, or to contribution with respect to payments
which the underwriters or agents may be required to make in respect thereof.
Offered securities may also be offered and sold, if so indicated in the
applicable prospectus supplement, in connection with a remarketing upon their
purchase in accordance with a redemption or repayment pursuant to their terms,
or otherwise, by one or more remarketing firms, acting as principals for their
own accounts or as agents for us. Any remarketing firm will be identified and
the terms of its agreements, if any, with us and its compensation will be
described in the applicable prospectus supplement.
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Unless otherwise indicated in the prospectus supplement, we do not intend
to list any of the securities on a national securities exchange, other than
common stock. In the event the securities are not listed on a national
securities exchange, certain broker-dealers may make a market in the
securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. No assurance can be given that any
broker-dealer will make a market in the securities or as to the liquidity of
the trading market for the securities, whether or not the securities are listed
on a national securities exchange. The prospectus supplement with respect to
the securities will state, if known, whether or not any broker-dealer intends
to make a market in the securities. If no such determination has been made, the
prospectus supplement will so state.
We will set forth the place and time of delivery for the securities in
the prospectus supplement.
LEGAL OPINIONS
Kutak Rock LLP, Little Rock, Arkansas, will pass upon legal matters for
ALLTEL in connection with the issuance and sale of the securities. The
attorneys of Kutak Rock LLP who are or may be participating in the matters
contemplated by this registration statement beneficially owned as of March 28,
2002, a total of 4,652 shares of ALLTEL common stock.
EXPERTS
The audited consolidated financial statements and related financial
statement schedule, which are included in ALLTEL's 2001 Annual Report on Form
10-K for the year ended December 31, 2001 and incorporated by reference in this
prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports dated January 21, 2002, and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports. Reference is made to
the January 21, 2002 report on the consolidated financial statements, which
includes an explanatory paragraph with respect to the change in the method of
accounting for computing and amortizing unrecognized actuarial gains and losses
related to a subsidiary's defined benefit pension plan, effective January 1,
2001, and the change in the method of accounting for certain communications
revenues, effective January 1, 2000, as discussed in Note 2 to the consolidated
financial statements.
21
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25,000,000 EQUITY UNITS
(INITIALLY CONSISTING OF 25,000,000 CORPORATE UNITS)
[LOGO] Alltel Corporation
ALLTEL CORPORATION
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PROSPECTUS SUPPLEMENT
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BANC OF AMERICA SECURITIES LLC
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
WACHOVIA SECURITIES
BANC ONE CAPITAL MARKETS, INC.
MCDONALD INVESTMENTS INC.
STEPHENS INC.
SUNTRUST ROBINSON HUMPHREY
APRIL 30, 2002
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