AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 2001
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CITIZENS COMMUNICATIONS COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 06-0619596
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
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3 HIGH RIDGE PARK, STAMFORD, CONNECTICUT 06905 (203) 614-5600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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SCOTT N. SCHNEIDER
VICE CHAIRMAN OF THE BOARD AND
EXECUTIVE VICE PRESIDENT
CITIZENS COMMUNICATIONS COMPANY
3 HIGH RIDGE PARK
STAMFORD, CT 06905
TEL. NO. (203) 614-5600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
DAVID F. KROENLEIN, ESQ. CHRISTINE M. MARX, ESQ. VINCENT PAGANO, JR., ESQ.
WINSTON & STRAWN DUANE, MORRIS & HECKSCHER SIMPSON THACHER & BARTLETT
200 PARK AVENUE LLP 425 LEXINGTON AVENUE
NEW YORK, NY 10166 ONE RIVERFRONT PLAZA NEW YORK, NY 10017-3954
(212) 294-2645 NEWARK, NJ 07102 (212) 455-2000
(973) 424-2000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement as determined in
light of market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
PROPOSED
PROPOSED MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE AGGREGATE PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
Debt and Equity(1) $3,000,000,000(1) 100% (1) (2) $3,000,000,000 $750,000(2)
Total $3,000,000,000 100% (1) (2) $3,000,000,000 $750,000(3) (4)
(1) There are being registered under this registration statement such
indeterminate number of shares of common stock and preferred stock, warrants
and depositary shares of the Registrant and such indeterminate principal
amount of debt securities, which may be senior or subordinated, of the
Registrant as shall have an aggregate initial offering price not to exceed
$3,000,000,000. If any pay-in-kind debt securities or pay-in-kind preferred
stock are issued, then the securities registered shall include such
additional debt securities or shares of preferred stock such that the
aggregate initial public offering price of all securities issued pursuant to
this registration statement will not exceed $3,000,000,000. Any securities
registered under this registration statement may be sold separately or as
units with other securities registered under this registration statement.
There are also being registered under this registration statement such
indeterminate number of shares of common stock as may issued upon the
exchange or conversion of debt securities, preferred stock, warrants or
depositary shares.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(3) Calculated pursuant to Rule 457(o) under the Securities Act of 1933 and,
with respect to debt securities, reflects the principal amount of any such
securities issued at, or at a premium to, their principal amounts, and the
issue price rather than the principal amount of any debt securities issued
at an original issue discount.
(4) Pursuant to Rule 429 under the Securities Act of 1933, the prospectus
included herein is a combined prospectus which also relates to registration
statement No. 333-07047 and an additional $800,000,000 of securities
eligible to be sold under that registration statement shall be carried
forward to this registration statement. The registrant previously paid a fee
based on the rate applicable at the time the prior registration statement
was filed. The amount of the fee paid herewith has been calculated after
giving effect to the amount of securities being carried forward from this
prior registration statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED MARCH , 2001
CITIZENS COMMUNICATIONS COMPANY
$3,800,000,000
COMMON STOCK
PREFERRED STOCK
DEPOSITARY SHARES
DEBT SECURITIES
WARRANTS
Citizens Communications Company intends to offer from time to time common
stock, preferred stock, depositary shares, debt securities, and warrants to
purchase these types of securities. We may sell any combination of these
securities in one or more offerings up to a total dollar amount of
$3,800,000,000. We will provide specific terms of these securities in
supplements to this prospectus. You should read this prospectus and any
prospectus supplement carefully before you invest.
We may sell the securities directly or to or through underwriters or
dealers, and also to other purchasers or through agents. The names of any
underwriters or agents that are included in a sale of securities to you, and any
applicable commissions or discounts, will be stated in an accompanying
prospectus supplement.
Our common stock is quoted on the New York Stock Exchange under the symbol
"CZN." The closing price of our common stock on the New York Stock Exchange on
March 28, 2001 was $13.22. None of the other securities that we may offer under
this prospectus is currently publicly traded.
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SEE "RISK FACTORS" ON PAGE 4 FOR A DISCUSSION OF MATTERS
THAT YOU SHOULD CONSIDER BEFORE INVESTING IN THESE SECURITIES.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 2001
TABLE OF CONTENTS
PAGE
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About This Prospectus....................................... 3
Risk Factors................................................ 4
Forward-Looking Statements.................................. 8
Use of Proceeds............................................. 9
Ratio of Earnings to Fixed Charges.......................... 9
Citizens Communications Company............................. 10
Description of Debt Securities.............................. 24
Description of Capital Stock................................ 32
Description of Warrants..................................... 34
Description of Depositary Shares............................ 36
Plan of Distribution........................................ 39
Where You Can Find More Information......................... 39
Incorporation of Documents by Reference..................... 40
Validity of Securities...................................... 41
Experts..................................................... 41
2
ABOUT THIS PROSPECTUS
This document is called a prospectus and is part of a registration statement
that we filed with the Securities and Exchange Commission using a "shelf"
registration or continuous offering process. Under this shelf process, we may
from time to time sell any combination of the securities described in this
prospectus.
This prospectus provides you with a description of our business, certain
risk factors and a general description of the securities we may offer. Each time
we sell securities, we will provide a prospectus supplement containing specific
information about the terms of the securities being offered. That prospectus
supplement will include a detailed and current discussion of any risk factors or
other special considerations applicable to those securities. The prospectus
supplement may also add, update or change information in this prospectus. If
there is any inconsistency between the information in this prospectus and any
prospectus supplement together with additional information described under the
heading "Where You Can Find More Information," you should rely on the
information in that prospectus supplement.
You should rely on the information provided in this prospectus and in any
prospectus supplement, including the information incorporated by reference.
Neither we nor any underwriters or agents have authorized anyone to provide you
with different information. We are not offering the securities in any state
where the offer is prohibited. You should not assume that the information in
this prospectus, any prospectus supplement, or any document incorporated by
reference, is truthful or complete at any date other than the date mentioned on
the cover page of these documents.
3
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THESE RISK FACTORS TOGETHER WITH ALL OF THE
INFORMATION INCLUDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR IN ANY
PROSPECTUS SUPPLEMENT BEFORE YOU DECIDE TO PURCHASE SECURITIES OFFERED BY THIS
PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. IN ADDITION, YOU SHOULD NOTE THAT THE
PROSPECTUS SUPPLEMENT THAT WILL ACCOMPANY THIS PROSPECTUS MAY INCLUDE ADDITIONAL
RISK FACTORS THAT WILL SPECIFICALLY APPLY TO THE TYPE OF SECURITY THAT WE WILL
OFFER UNDER THE PROSPECTUS SUPPLEMENT OR THAT MAY OTHERWISE APPLY.
WE MAY BE UNABLE TO OBTAIN NEW FINANCING AND ANY NEW FINANCING WE DO OBTAIN
MAY BE ON UNFAVORABLE TERMS.
To date we have obtained financing through the issuance of public and
private debt and equity securities. We currently rely on our existing credit
facility for the financing of our pending acquisitions of telephone access lines
and exchanges. However, our $5.7 billion credit facility will terminate on
October 26, 2002 and we will need to replace it with long-term debt and equity
financing. We may not be able to obtain sufficient long term and equity
financing on favorable terms. Our ability to accomplish these financings is
subject to market conditions and our ability to maintain a favorable credit
rating and to secure commercially reasonable borrowing terms. For example, we
may only be able to obtain long-term financing which would contain provisions
requiring us to pay higher interest rates than we currently pay or onerous
covenants that could restrict our operating flexibility or adversely affect our
overall financial results.
WE WILL NEED TO OBTAIN NEW FINANCING TO REALIZE GROWTH THROUGH ADDITIONAL
ACQUISITIONS.
We expect to need additional financing if we enter into new agreements to
acquire additional telephone access lines and exchanges. Failure to obtain
suitable new financing could result in our inability to continue to respond to
and take advantage of future opportunities to expand our telecommunications
business through acquisitions, joint ventures or similar endeavors.
UNTIL WE DIVEST OUR PUBLIC UTILITIES SERVICES SEGMENTS WE WILL BE SUBJECT TO
THE RISKS OF THE PUBLIC UTILITIES BUSINESS.
We intend to divest our public utilities services segments in order to focus
on the telecommunications sector. However, we remain subject to continuing risks
of the public utilities business until we complete our divestitures on
acceptable terms. These risks include exposure to rapidly fluctuating prices for
gas and electricity in a regulated or partially regulated environment and
financial instability in the public utilities industry in certain states. For
example, in Arizona we are disputing what state regulators believe are excessive
power costs charged by our power supplier in the amount of $57 million through
December 31, 2000. We have deferred these costs in anticipation of recovering
certain amounts through renegotiation or through the regulatory process. In
Vermont, we belong to a Vermont utility consortium that purchases power from a
Canadian power generation facility. Two participants in the consortium,
representing an aggregate of 83% of the purchase commitment, have experienced
financial difficulties. If they default on these purchase commitments, we, as a
10% participant, and other members of the consortium will be obligated to
purchase the power on a pro rata basis. We will be exposed to any price
differential that we may incur between the price that we pay for the power and
the market price generally. In addition, the market for energy has become more
unstable recently, particularly in states such as California. Continued market
instability in California or in other jurisdictions may have an adverse effect
upon the energy market generally and our operations specifically.
4
WE MAY BE UNABLE TO SUCCESSFULLY DIVEST OUR PUBLIC UTILITIES SERVICES
SEGMENTS IN A TIMELY MANNER WHICH MAY ADVERSELY AFFECT OUR FINANCING PLANS.
A key component of our business strategy involves the divestiture of our
public utilities services segments. Failure to sell our public utilities
services segments on acceptable terms or to complete agreed sales within agreed
time periods may adversely affect our ability to obtain new financing on
acceptable terms, may adversely impact our ability to continue to expand our
telecommunications business internally and to meet competitive challenges. Sales
of our public utilities services segments require regulatory approval and in
some cases contain financing conditions. We cannot be sure that necessary
regulatory approvals or financing will be forthcoming prior to the expirations
of closing deadlines contained in sale agreements. Our proposed sales of our
Vermont and Arizona electric divisions have been terminated due to the failure
of the proposed purchaser to obtain financing. The California electricity
generation crisis has stretched the resources of California utility regulators
and may result in delays in approving the sale of our water and wastewater
assets. If we and the proposed purchasers fail to obtain the appropriate
regulatory approvals or the purchasers are unable to finance such transactions,
the planned sale of our public utilities services segments will not occur within
the anticipated time periods.
WE HAVE SUBSTANTIAL EXISTING INDEBTEDNESS AND WILL INCUR SUBSTANTIAL
ADDITIONAL OBLIGATIONS.
As of February 28, 2001, we had outstanding long-term indebtedness of
approximately $3.018 billion. This amount includes indebtedness of our
subsidiary, Electric Lightwave, Inc., or ELI, which we have guaranteed. We have
credit facilities of $6.35 billion of which $5.47 billion is currently available
to fund our currently contracted for acquisitions.
ELI, our 85% owned subsidiary, has borrowed $400 million under a revolving
line of credit with commercial banks which expires on November 21, 2002, has
issued $325 million in indebtedness that matures in 2005 and has entered into
leases for telecommunication facilities, including one with a final purchase
option due in April 2002 in the amount of $110 million. We have guaranteed all
of these obligations of ELI. We do not expect that ELI will have sufficient
resources from internally generated funds to make all of these required
payments. Therefore, ELI must rely upon the financial markets and us to
refinance all or a portion of this indebtedness. There can be no assurance that
ELI will be successful in refinancing this indebtedness. We have committed to
continue to finance ELI's cash requirements through a revolving credit facility
to ELI in the amount of $450 million with a final maturity date of 2005. As of
February 28, 2001, the principal amount outstanding under this $450 million
credit facility was $49 million.
We must use a portion of our future cash flow from operations to pay the
principal and interest on our indebtedness, which will reduce the funds
available for our operations, including capital investments and business
expenses. This could hinder our ability to adjust to changing market and
economic conditions. If we incur significant additional indebtedness, our credit
rating could be adversely affected. As a result, our borrowing costs could
increase and our access to capital may be adversely affected.
WE MAY BE UNABLE TO ACHIEVE IMPROVED OPERATING RESULTS FROM OUR NEWLY
ACQUIRED OPERATIONS AND EFFICIENTLY INTEGRATE THESE OPERATIONS INTO OUR EXISTING
BUSINESS.
Our growth strategy is premised, in part, on our ability to timely
consummate our pending telecommunications acquisitions and to improve operating
results in our existing and to-be-acquired telecommunications businesses through
the introduction of new communications products and services, expanding the
penetration of existing services and improving operating efficiencies. In order
to accomplish growth in profitability, we will need to increase the revenues
that we derive from each customer through enhanced products and services as well
as attract new customers while retaining our existing customer revenue base.
5
The rapid growth in the size of our telecommunications business though our
acquisitions and our ongoing transformation into a telecommunications company
poses challenges for us to monitor our operations, costs, regulatory compliance,
and service quality and maintain other necessary internal controls. If we are
not able to meet these challenges effectively our results of operations will be
harmed.
WE PLAN TO GROW BY ACQUIRING OTHER TELEPHONE ACCESS LINES AND EXCHANGES, BUT
WE MAY NOT BE A SUCCESSFUL BIDDER.
An element of our business strategy is to expand our existing operations
through acquisitions of additional telephone access lines and exchanges
primarily in rural areas and small to medium-sized town and cities, including
telephone access lines and exchanges contiguous with our existing access lines
and exchanges. Competition to acquire these assets is intense. Other potential
bidders may have greater financial resources than we do, and may be able to
structure transactions on a more favorable basis than we can. In addition, the
increasing interest in acquiring telephone access lines and exchanges in less
densely populated areas may result in an increase in the price ultimately paid
by the successful bidder. Therefore, even though we may submit a bid, we cannot
be sure that we will be successful in purchasing any available telephone access
lines and exchanges. In addition, the number of attractive target companies or
assets may dwindle and thus deprive us of the opportunity of growth through
acquisitions.
THE ACCESS CHARGE REVENUES WE RECEIVE MAY BE REDUCED AT ANY TIME.
A significant portion of our revenues comes or is derived from access
charges paid by interexchange carriers, or IXCs, for services we provide in
originating and terminating intrastate and interstate long-distance telephone
calls. The amount of access charge revenues we receive for these services is
regulated by the Federal Communications Commission, or FCC, and state regulatory
agencies. Recent rulings regarding access charges have lowered the amount of
revenue we receive from this source. Additional actions by these agencies could
further reduce the amount of access revenues we receive. In addition, a portion
of our access revenues is received from state and federal universal service
funds based upon the high cost of providing telephone service to certain rural
areas. In the future, there may be proposals by state or federal regulatory
agencies to eliminate or reduce these revenues. A material reduction in the
revenues we receive from these funds would adversely affect our financial
results.
WE FACE SUBSTANTIAL COMPETITION, WHICH COULD ADVERSELY AFFECT US.
The telecommunications industry is a competitive industry. The traditional
dividing lines between long distance, local, wireless, cable and internet
services are becoming increasingly blurred. Through mergers and various service
integration strategies, services providers are striving to provide integrated
solutions both within and across geographic markets. As a diversified full
service incumbent local exchange carrier, or ILEC, our competitors are
competitive local exchange carriers, or CLECs, and other providers (or potential
providers) of services, such as internet service providers, or ISPs, satellite
companies, neighboring ILECs and cable companies that may provide services
competitive with ours or services that we intend to introduce. We cannot assure
you that we will be able to compete effectively with these industry participants
in all of our operations.
In addition, wireless providers currently compete in territories of all of
our rural telephone exchange subsidiaries. Increased competition from these
wireless providers is expected. We cannot predict the effects of greater
competition from wireless providers.
We expect competition to intensify as a result of the entrance of new
competitors and the development of new technologies, products and services. We
cannot predict which of many possible future technologies, products or services
will be important to maintain our competitive position or what
6
expenditures will be required to develop and provide these technologies,
products or services. Our ability to compete successfully will depend on
marketing and on our ability to anticipate and respond to various competitive
factors affecting the industry, including a changing regulatory environment that
may affect our competitors and us differently, new services that may be
introduced, changes in consumer preferences, demographic trends, economic
conditions and discount pricing strategies by competitors.
ELI FACES SUBSTANTIAL COMPETITION FOR ITS TELECOMMUNICATIONS SERVICES FROM
LARGER COMPANIES.
ELI's competitors for telecommunications services are primarily large ILECs,
CLECS and interexchange carriers, or IXCs. As it is not an incumbent provider,
ELI's ability to succeed in the telecommunications services market depends to a
large extent on its ability to build tailored, value-added network services for
business customers and to maintain its customer base and develop additional
business customers in its core geographic areas in light of changing
technologies.
MANY OF OUR COMPETITORS HAVE SUPERIOR RESOURCES, WHICH MAY PLACE US AT A
COST AND PRICE DISADVANTAGE.
Many of our current and potential competitors have market presence,
engineering, technical and marketing capabilities and financial, personnel and
other resources substantially greater than ours. In addition, some of our
competitors can raise capital at a lower cost than we can. Consequently, some
competitors may be able to develop and expand their communications and network
infrastructures more quickly, adapt more swiftly to new or emerging technologies
and changes in customer requirements, take advantage of acquisition and other
opportunities more readily, and devote greater resources to the marketing and
sale of their products and services than we can. Also, the greater brand name
recognition of some competitors may require us to price our services at lower
levels in order to win business. Finally, the cost advantages of some
competitors may give them the ability to reduce their prices for an extended
period of time if they so choose.
OUR COMPANY AND INDUSTRY ARE HIGHLY REGULATED, IMPOSING SUBSTANTIAL
COMPLIANCE COSTS AND RESTRICTING OUR ABILITY TO COMPETE IN OUR TARGET MARKETS.
As an ILEC, we are subject to significant regulation from federal, state and
local authorities. This regulation restricts our ability to raise our rates,
especially in our basic services, and imposes substantial compliance costs on
us. Regulation restricts our ability to compete and, in some jurisdictions, it
may restrict our ability to expand our services. In addition, changes to the
regulations that govern us may have an adverse effect upon our business by
reducing the allowable fees that we may charge, imposing additional compliance
costs, or otherwise changing the nature of our operations and the competiton in
our industry.
IN THE FUTURE AS COMPETITION ENTERS OUR MARKETS, WE MAY BE UNABLE TO MEET
THE TECHNOLOGICAL NEEDS OR EXPECTATIONS OF OUR CUSTOMERS.
The technologies we use may become obsolete, which would limit our ability
to compete effectively. The telecommunications industry is subject to
significant changes in technology. If we do not replace or upgrade technology
and equipment that becomes obsolete, we will be unable to compete effectively
because we will not be able to meet the needs or expectations of our customers.
DETERIORATING ECONOMIC CONDITIONS COULD HARM OUR BUSINESS.
Demand for communications products and services may be adversely affected by
a downturn in the United States economy as well as changes in the global
economy. Key United States economic indicators have recently signaled a
softening of the United States economy. As a result, we may experience decreased
demand for our communications products and services. A decline in the demand for
and usage of communications products and services could have an adverse effect
on our results of operations and financial condition.
7
AS A HOLDING COMPANY WITH RESPECT TO TELECOMMUNICATIONS ASSETS, WE WILL
REQUIRE DIVIDENDS FROM SUBSIDIARIES TO MEET CASH REQUIREMENTS OR PAY DIVIDENDS.
Citizens Communications Company, or Citizens, conducts all its
telecommunications business operations through its subsidiaries and may arrange
for certain telecommunications assets to be held in special purpose legal
entities with separate financing. Accordingly, following the divestiture of our
public utilities services segments, Citizens' only source of cash to pay
dividends or make other distributions on its capital stock or to pay interest
and principal on its outstanding indebtedness will be distributions relating to
its ownership interest in its telecommunications subsidiaries and affiliates
from the net earnings and cash flow generated by such subsidiaries. We cannot be
sure that Citizens' telecommunications subsidiaries will generate sufficient
cash flow to pay or distribute such dividends or funds, or that applicable state
law and contractual restrictions, including negative covenants contained in any
debt instruments of such subsidiaries and affiliates, would permit such
dividends, distributions or payments.
FORWARD-LOOKING STATEMENTS
Our forward-looking statements are subject to a variety of factors that
could cause actual results to differ significantly from current beliefs.
Some statements and information contained in this prospectus and in the
documents incorporated by reference into this prospectus are not historical
facts, but are "forward-looking statements," as such term is defined in the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements can be identified by the use of forward-looking terminology such as
"believes," "expects," "plans," "may," "will," "would," "could," "should," or
"anticipates" or the negative of these words or other variations of these words
or other comparable words, or by discussions of strategy that involve risks and
uncertainties. Forward-looking statements may differ from actual future results
due to, but not limited to, those factors referenced under "Risk Factors" and/or
any of the following possibilities:
- changes in economic conditions;
- changes in the capital markets;
- changes in industry conditions;
- changes in our credit rating; and
- changes in accounting policies or practices adopted voluntarily or as
required by regulations or generally accepted accounting principles.
You should consider these important factors as well as those referenced
under "Risk Factors" in evaluating any statement in this prospectus or otherwise
made by us or on our behalf. We have no obligation to update or revise these
forward-looking statements.
8
USE OF PROCEEDS
Except as otherwise set forth in an accompanying prospectus supplement, we
plan to use substantially all of the net proceeds from the sale of any
securities sold by us, together with internally generated funds and possible
future borrowings, to refinance bank borrowings and other extensions of credit,
to expand our networks, service offerings and related infrastructure, to fund
working capital and pending as well as future acquisitions, to make further
investments in related telecommunications businesses as well as for general
corporate purposes. Until we use the proceeds of sales by us of any securities
covered by this prospectus or any prospectus supplement in this manner, we may
temporarily use them to make short-term investments or to reduce short-term
borrowings.
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows our consolidated ratio of earnings(1) to fixed
charges(2) and our consolidated ratio of earnings to combined fixed charges and
preferred dividends.
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1996 1997 1998 1999(3) 2000
-------- -------- -------- -------- --------
Consolidated ratio of earnings to fixed charges......... 3.22 .98 1.25 2.14 .64
Consolidated ratio of earnings to combined fixed charges
and preferred dividends............................... 3.44 .98 1.27 2.22 .62
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(1) Earnings consist of income (loss) before income taxes plus fixed charges.
(2) Fixed charges consist of interest charges, and an amount representing the
interest factor included in rentals (assumed to be one-third) and preference
security dividend requirements.
(3) In 1999, we recorded pre-tax non-operating gains of approximately
$221 million related to the sale of our investments in Centennial Cellular
Corp., Century Communications Corp. ("Century") and our interest in a cable
television joint venture with a subsidiary of Century. Excluding such
pre-tax non-operating gains, the ratio of earnings to fixed charges for 1999
is .67 and the ratio of earnings to combined fixed charges and preferred
dividends for 1999 is .69.
9
CITIZENS COMMUNICATIONS COMPANY
INTRODUCTION
We are a telecommunications-focused company providing wireline
communications services primarily to rural areas and small and medium-sized
towns and cities as an incumbent local exchange carrier, or ILEC. In addition,
we provide competitive local exchange carrier, or CLEC services, to business
customers and to other communications carriers in certain metropolitan areas in
the western United States through ELI, our 85% owned subsidiary. We also provide
public utility services including natural gas transmission and distribution,
electric transmission and distribution and water distribution and wastewater
treatment services to primarily rural and suburban customers throughout the
United States.
With more than 1.37 million telephone access lines in 17 states we were the
eighth largest local access wireline telephone provider in the United States as
of December 31, 2000. Upon consummation of acquisitions entered into throughout
2000, we expect to be the sixth largest ILEC in the United States (after Verizon
Communications Inc., Qwest Communications International Inc., SBC
Communications, Inc., BellSouth Corporation and Sprint Corporation) with over
three million telephone access lines in 27 states. In fiscal years 1999 and
2000, revenues from our ILEC services segment were $903 million and
$964 million, respectively, and our adjusted EBITDA (operating income plus
depreciation and amortization) was $327 million and $434 million, respectively.
In 1999, we announced plans to divest ourselves of our public utilities
services segments and acquire additional telephone access lines. Consistent with
this effort, we are presently engaged in the sale of or are seeking buyers for
our gas and electric utility services segments and have contracted to sell our
water and wastewater utility services segments. Pending such disposition we
continue to provide gas and electric utility services and water and wastewater
services.
We are incorporated in Delaware, and the address of our principal executive
offices is 3 High Ridge Park, Stamford, Connecticut 06905. Our telephone number
is (203) 614-5600.
TELECOMMUNICATIONS INDUSTRY OVERVIEW
The telecommunications industry involves the transmission of voice, data and
video communications from the point of origination to the point of termination.
The industry has been undergoing rapid change due to deregulation, the
construction of additional infrastructure and the introduction of new
technologies, which has resulted in increased competition and demand for
telecommunications services.
Local exchange carriers, or LECs, provide local, toll, access and resale
services, sell, install and maintain customer premises equipment and provide
directory services. In our primary markets we are the incumbent provider of
local exchange service. As a result, we are subject to greater regulation than
CLECs and other non-incumbent carriers.
ILECs establish their local market position because they are the primary
provider of wire access to users of services in their areas. With these
connections to customers, ILECs may provide local network services, network
access services, long distance and data services and other related services. The
basic "dial-tone" service is subject to substantial regulation, and the other
services are subject to various levels of regulation. ILECs compete with other
service providers through pricing, customer service, network quality and
valued-added services, with the ILECs having an initial advantage as the
existing provider of basic telephone services. We believe that we maintain this
advantage in a number of the markets in which we operate as an ILEC.
Currently, the five largest ILECs in the United States are Verizon, Qwest,
SBC, BellSouth and Sprint and each of them is substantially larger than we are.
The structure of the domestic telecommunications industry was strongly
influenced by a 1982 court decree that required the divestiture by AT&T of its
seven regional Bell operating companies, or RBOCs, and divided the country into
approximately 200 local access transport areas, or LATAs, that range in size
from
10
metropolitan areas to entire states. The original RBOCs were initially limited
to providing local telephone service, access to long distance carriers and
"in-region" long distance service (service within a LATA). The right to provide
inter-LATA service was initially ceded to AT&T and other long distance carriers,
as well as to LECs other than the RBOCs. However, under the Telecommunications
Act of 1996, the RBOCs are permitted to provide inter-LATA long distance
service, subject to certain conditions. We, as an ILEC, provide access to long
distance services for our ILEC services segment customers.
For each long distance call, the originating and terminating ILECs charge
the long distance carrier an access fee to carry the call across their local
networks. The long distance carrier charges the customer a fee for its
transmission of the call, a portion of which consists of the access fees charged
by the originating and terminating ILECs. To encourage the development of
competition in the long distance market, the ILECs are required to provide all
long distance carriers with access to local exchange service that is "equal in
type, quality and price" to that provided to AT&T. These "equal access" and
related provisions were intended to prevent preferential treatment of AT&T and
to require that the ILECs charge the same access fees to all long distance
carriers, regardless of their volume of traffic. We derive a significant portion
of our revenues from these access fees.
Continuing developments in multimedia applications are bringing new entrants
to the telecommunications market. Internet service providers and cable
television, satellite, entertainment and data transmission companies, for
instance, are potential customers for voice, data and video communications over
high bandwidth networks.
BUSINESS STRATEGY
Our objective is to continue our transformation into a telecommunications
provider. We focus our efforts in rural areas and small and medium-sized towns
where, we believe, our relatively larger size and lessened competition provide
us with a competitive advantage. We believe that our operations in these areas
will provide us with steady revenue flow and the opportunity of continued
growth. To reach our objective we intend to:
TARGET TELECOMMUNICATIONS NEEDS OF RURAL AREAS AND SMALL AND MEDIUM-SIZED
TOWNS AND CITIES.
Following the consummation of our pending acquisitions, we expect to be the
among the largest ILECs in the United States (the largest after Verizon, Qwest,
SBC, BellSouth and Sprint) and, we believe, the largest ILEC that focuses
primarily on serving rural areas and small and medium-sized towns and cities.
Apart from the RBOCs, smaller, often family-owned ILECs have traditionally
provided wireline telephone services in rural areas. As newer services such as
data services, the internet and digital subscriber networks have created a
catalyst for growth and consolidation in the telecommunications market, the
larger telecommunications companies appear to be focusing their efforts on
providing new services to urban markets and are in the process of divesting
parts of their rural telephone access lines and exchanges. Many smaller ILECs,
on the other hand, lack the resources to improve their networks to provide these
enhanced services to their consumers. We believe that, following the
consummation of our pending acquisitions, our position as the largest ILEC
focusing on rural and smaller markets will enable us to compete effectively
against larger competitors because of our market focus and against smaller
competitors because of our additional resources and economies of scale.
CONTINUE TO ACHIEVE ECONOMIES OF SCALE THROUGH CLUSTERING AND INCREASE
OPERATIONAL EFFICIENCIES.
We continually seek the advantages and efficiencies of operating large local
and regional telecommunications clusters. When we have completed our currently
planned acquisitions, approximately two-thirds of our customers will be located
in four states. In addition, a key part of our growth strategy is the
acquisition on an opportunistic basis of access lines and exchanges contiguous
to our existing network. Locally and regionally-clustered systems enable us to
reduce expenses through the consolidation of marketing and support functions and
to place more experienced managers at the
11
system level who are better equipped to meet the new competitive and regulatory
challenges of today's telecommunications industry. Local and regional clusters
will also increase the speed and effectiveness of our product and services
deployment, enhancing our ability to increase both customers and revenues.
INCREASE PENETRATION RATES OF THE SERVICES OFFERED TO OUR MARKETS.
We intend to increase the penetration of existing value-added services such
as second lines and enhanced services (call forwarding, conference calling,
caller identification, internet, voicemail and call waiting) to our ILEC
services segment including our current markets and to-be-acquired markets. At
present, the penetration rates for enhanced services in our ILEC services
segment in rural areas and small and medium-sized towns and cities are below
industry averages. We believe that increased sales of value-added and enhanced
services in existing ILEC markets will produce revenue with higher operating
margins due to the relatively low marginal operating costs necessary to offer
value-added and enhanced services in markets we already serve. We believe that
our ability to integrate value-added and enhanced services with our core ILEC
services will provide us with the opportunity to capture an increased percentage
of our customers' telecommunications expenditures.
RETAIN EXISTING CUSTOMERS AND ATTRACT NEW CUSTOMERS THROUGH THE INTRODUCTION
OF NEW TECHNOLOGY FOR OUR NETWORK.
Recent improvements in telecommunications technology as well as improvements
to our network will allow us to offer new services such as digital subscriber
network lines and other high-speed premium-priced data services to our existing
and future customer base. We have sought to ensure that our network employs
technologically current switching software and is positioned to support network
growth. For example, we are gradually deploying digital subscriber line, or DSL,
service in parts of our markets to provide broadband access where it is
economically feasible. We believe that technological improvements in our
existing and future markets will enable us to offer additional services for a
low marginal increased operating cost.
STRENGTHEN AND BUILD STRATEGIC PARTNERSHIPS WITH LOCAL GROUPS.
We intend to continue to strengthen and build our relationships with local
and community groups. Our relationships with such groups assist us in
determining the range of features and services that consumers in our markets
want. Much of our marketing and advertising efforts are directed to sponsoring
local events and activities rather than mass media advertising. We believe that
our local and community-based approach helps us build customer loyalty and brand
awareness in the areas we serve. In addition, we intend to leverage our assets
through strategic partnerships with appropriate partners.
DEVELOP OUR CLEC BUSINESS.
ELI is a CLEC that focuses on medium to large markets in the western United
States. We presently provide financial support to ELI. ELI's primary focus in
2001 is increasing new and existing customer usage of its installed asset base
in its seven major cities and surrounding areas by increasing the penetration of
existing on-net buildings and sales to customers that are connected to the
network. We intend to continue to grow ELI's business so that it can operate
profitably on a stand-alone basis.
DIVEST PUBLIC UTILITIES SERVICES BUSINESS AND ASSETS.
As part of our strategy to transform our business focus entirely to that of
a telecommunications services provider, we are in the process of monetizing our
utilities assets. We have entered into agreements to sell all of our water and
wastewater treatment businesses, our Louisiana natural gas business and our
Hawaii electric business and seek to dispose of the remainder of our public
utilities services business and assets. Successful implementation of this
divestiture program will allow us to focus on our core telecommunications
business while simultaneously providing us with an internal source for a portion
of the financing necessary for enlarging our telephone access line network.
12
TELECOMMUNICATIONS SERVICES
Our telecommunications services are principally ILEC services and also
include CLEC services delivered through ELI. As of December 31, 2000, we
operated ILECs in 17 states, serving in excess of 1.37 million access lines. Our
ILEC services segment is presently marketed under the Citizens name but we
intend to market these services under the Frontier name following the closing of
the Frontier acquisition. Our CLEC services segment is marketed under the
Electric Lightwave name and provides a variety of integrated telecommunications
products designed to meet the customer's total communications needs.
ILEC SERVICES
Our ILEC services segment accounted for $964 million, or 53.5%, of our
revenues in fiscal 2000. In fiscal 2000, approximately 56% of our revenues came
from federal and state universal service charges through the federal and local
governments and regulated access charges paid by long distance operators and
CLECs. Between 1990 and 2000 the population in our service areas grew overall by
approximately 6%. In 1999 and 2000 the number of telephone access lines in our
historic telephone systems increased by 4.8% and 4.0%, respectively.
Our ILEC services business is primarily with retail customers and, to a
lesser extent, business customers. Our ILEC services segment provides (i) local
network services, (ii) enhanced services, (iii) network access services,
(iv) long distance and data services and (v) directory services.
LOCAL NETWORK SERVICES. We provide telephone wireline access services in
our service areas primarily to residential customers. We are the incumbent
provider of basic telephone services in our service areas. Our present service
areas are generally less densely populated than what we understand to be the
primary service areas of the five largest ILECs.
ENHANCED SERVICES. We offer our ILEC customers the following enhanced
service features: call forwarding, conference calling, caller identification,
voicemail and call waiting. We recently introduced Citizens Select and Citizens
Select Plus as branded bundles of telecommunications services directed at our
retail customer base in a majority of our markets. These plans permit customers
to bundle their residential line with custom local area signaling services, or
CLASS, and custom calling features for a single flat rate. Citizens Select
allows customers to choose up to seven features with their residential line
while Citizens Select Plus allows customers to bundle with their residential
line as many features as desired plus voicemail. In connection with the pending
Frontier acquisition, we may rebrand some or all of these services.
NETWORK ACCESS SERVICES. We provide network access services to long
distance carriers and other customers in connection with the use of our
facilities to originate and terminate interstate and intrastate long distance
telephone calls. We provide originating and switched terminating services to
long distance carriers through switched services network. Such services are
generally offered on a month-to-month basis and the service is billed on a
minutes-of-use basis. Access charges to long distance carriers and other
customers are based on access rates filed with the FCC for interstate services
and with the respective state regulatory agency for intrastate services.
LONG DISTANCE AND DATA SERVICES. Long distance network service to and from
points outside of a telephone company's operating and data territories is
provided by interconnection with the facilities of interexchange carriers, or
IXCs. We believe that many customers prefer the convenience of obtaining their
long distance service through their local telephone company and receiving a
single bill.
We also offer data services including internet dial up service, digital
subscriber lines, frame relay and asynchronous transfer mode, or ATM, switching.
As part of our integration strategy, we offer a solution whereby other ILEC
companies resell our integrated services. We offer this integrated solution to
most of our customers.
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DIRECTORY SERVICES. Directory services involves the provision of
residential and business directories. We provide this service through a third
party contractor who pays us a percentage of its revenues realized from the
directories.
ILEC ASSET ACQUISITIONS
We continually evaluate the possibility of acquiring additional
telecommunications assets. Over the past few years, the number and size of
available telecommunications assets has increased substantially. Although our
primary focus will continue to be the acquisition of telephone access lines,
exchange and operators that are proximate to our existing systems or that serve
a customer base large enough for us to operate efficiently, we may also acquire
other telecommunications interests.
The following table sets forth certain information with respect to our
telephone access lines as of December 31, 2000 and the additional lines we
intend to acquire upon the expected closing of each of the referenced
acquisitions.
VERIZON(2) QWEST(2) FRONTIER(2)
STATE CITIZENS(1) ACQUISITION ACQUISITION ACQUISITION TOTAL
- ----- ----------- ----------- ----------- ----------- ---------
New York........................ 339,100 -- -- 698,200 1,037,300
Minnesota....................... 142,400 -- 187,100 129,600 459,100
Arizona......................... 163,000 8,600 171,500 -- 343,100
California...................... 145,600 55,100 -- -- 200,700
West Virginia................... 153,200 -- -- -- 153,200
Illinois........................ 112,200 -- -- 20,100 132,300
Iowa............................ -- -- 53,200 60,400 113,600
Tennessee....................... 102,500 -- -- -- 102,500
Nebraska........................ 62,200 -- 14,900 -- 77,100
Wisconsin....................... 27,800 -- -- 44,800 72,600
Idaho........................... 21,700 -- 33,900 -- 55,600
Colorado........................ -- -- 51,400 -- 51,400
Pennsylvania.................... 1,500 -- -- 42,900 44,400
Georgia......................... -- -- -- 29,000 29,000
Nevada.......................... 28,300 -- -- -- 28,300
Alabama......................... -- -- -- 27,700 27,700
Michigan........................ -- -- -- 27,200 27,200
Utah............................ 23,700 -- -- -- 23,700
Montana......................... 9,000 -- 11,900 -- 20,900
North Dakota.................... 17,000 -- -- -- 17,000
Oregon.......................... 15,100 -- -- -- 15,100
Washington...................... -- -- 10,000 -- 10,000
New Mexico...................... 6,900 -- -- -- 6,900
Mississippi..................... -- -- -- 6,500 6,500
Wyoming......................... -- -- 5,900 -- 5,900
Indiana......................... -- -- -- 5,700 5,700
Florida......................... -- -- -- 4,600 4,600
--------- ------ ------- --------- ---------
Total........................... 1,371,200 63,700 539,800 1,096,700 3,071,400
========= ====== ======= ========= =========
- ------------------------
(1) Represents existing telephone access lines owned by us plus telephone access
lines acquired through December 31, 2000 from Verizon (Nebraska, Minnesota
and Illinois) and Qwest (North Dakota).
(2) Represents telephone access lines in pending acquisitions as of
December 31, 2000.
We intend to fully integrate our acquisitions with existing core telephone
access line holdings by the end of the first half of 2002. We are acquiring
telephone access lines on a state-by-state basis from each of Verizon and Qwest.
As of December 31, 2000, we have acquired assets in several Verizon states,
including Nebraska (62,200 access lines), Minnesota (142,400 access lines),
Illinois/Wisconsin
14
(112,900 access lines), and one Qwest state, North Dakota (17,000 access lines).
We expect the Frontier acquisition to close as a single transaction during the
second half of 2001.
Unlike the Verizon and Qwest acquisitions, which consist of exchanges only,
the Frontier acquisition includes the operations, in addition to the assets, of
Frontier Corporation's ILEC businesses. Approximately one-half of the Frontier
access lines are in the Rochester, New York metropolitan area and will give us
substantially all of the wireline market share in Rochester. Rochester, New York
will be our sole metropolitan area telephone system at this time.
ILEC TECHNOLOGY
In 1999 we entered into a three-year agreement to outsource central office
engineering of our ILEC switching facilities. This agreement provides for
provisioning of current technology for our switching facilities, deploying the
latest switch software throughout our network, provisioning of switch capacity
to support network growth, integrating acquired properties onto a common network
platform and providing other project management and service support resources.
These improvements to our network will allow us to continue to offer enhanced
services and other high-speed data services to our existing and future customer
base.
In addition, as we upgrade and extend our physical plant and operations over
the next several years, the installation of digital switches and related
software will continue to be an important component of our business strategy, as
these features enhance our ability to offer additional services. We are in the
process of installing advanced digital switching platforms in parts of our
switching network. We expect to achieve cost reductions through the elimination
of duplicative services and procedures and the consolidation of administrative
functions. We believe that additional cost reductions may be obtainable from
advanced switching platforms and outside plant delivery systems. We intend to
pursue additional gains in productivity by investing in these technologies where
feasible and by reengineering customer service processes.
CLEC SERVICES
ELI provides a broad range of wireline communications products and services
to businesses in the western United States. ELI accounted for $241 million, or
13.4%, of our revenues in fiscal year 2000.
ELI's facilities-based network consists of optical fiber plus voice and data
switches. ELI has a national internet and data network with switches and routers
in key cities, linked by leased transport facilities. As of December 31, 2000,
ELI had 5,924 local and long-haul route miles of fiber-optic cable in service.
During 2000, ELI completed construction of its long-haul fiber optic Synchronous
Optical Network (SONET) network. ELI provides a full range of its services in
the following seven cities and their surrounding areas: Boise, Idaho; Portland,
Oregon; Salt Lake City, Utah; Spokane, Washington; Phoenix, Arizona; Sacramento,
California; and Seattle, Washington. This network spans more than 3,200 miles,
crosses seven states and is one of the largest OC-192 SONET systems in the
western United States. The network will include Dense Wave Division
Multiplexing, or DWDM, equipment and will support voice and data traffic at
speeds up to OC-192. DWDM is a technique for transmitting 16 or more different
light-wave frequencies at speeds up to OC-192 on a single fiber to increase
transmission capacity.
DESCRIPTION OF CLEC SERVICES BUSINESS
ELI offers switched service, including local dial tone, from eight Nortel
DMS 500 switches in the seven metropolitan areas that ELI serves. This permits
ELI to offer both voice and data services in these areas. ELI also has
transmission equipment collocated with switches of the relevant ILEC operators
at 55 locations.
15
ELI has broadband points of presence in the following cities: Atlanta,
Georgia; Austin, Texas; Chicago, Illinois; Cleveland, Ohio; Dallas, Texas;
Denver, Colorado; Houston, Texas; Las Vegas, Nevada; Los Angeles, California;
New York, New York; Philadelphia, Pennsylvania; San Diego, California; San
Francisco, California and Washington, D.C. This permits ELI to offer
high-capacity data services in these areas.
ELI has developed an internet backbone network that provides internet
connectivity in each of its markets, including presence at all major network
access points, and offers peering arrangements with other internet backbone
service providers. A peering arrangement is an agreement where internet backbone
service providers agree to allow each other direct access to internet data
contained on their networks. ELI's broadband network consists of frame relay
switches, ATM switches and network-to-network interfaces. ELI provides national
and international coverage to its customers through strategic relationships with
other communications providers.
ELI owns or leases broadband, long-haul fiber-optic network connections
between major cities in the western United States and within strategic markets
across the nation. ELI seeks to maximize utilization of its network facilities
and minimize network access costs and other interconnection costs.
In the development of its long-haul facilities, ELI has formed strategic
relationships with utility companies that enable it to use existing
rights-of-way and fiber-optic facilities, use the construction expertise and
local permitting experience of such companies and minimize its near-term cash
requirements. These relationships allow ELI to extend its network infrastructure
more quickly and economically.
In 1999, ELI entered into a fiber-swap agreement to exchange unused fiber on
its network for unused fiber on another carrier's network. This fiber-swap
agreement will provide ELI with a fiber route from Salt Lake City to Dallas,
routed through Denver.
REGULATORY ENVIRONMENT
ILEC SERVICES REGULATION
The Telecommunications Act of 1996, or the 1996 Act, dramatically changed
the landscape of the telecommunications industry. The main thrust of the 1996
Act was to open local telecommunications marketplaces to competition while
enhancing universal service. We expect the 1996 Act, subsequent state and
federal regulatory rulings and technological changes to lead to an overall
reduction in the level of regulation for the telecommunications industry.
Although the majority of our operations continues to be regulated extensively by
various state regulatory agencies (often called public service commissions) and
the FCC, we may experience reductions in the level of regulation for some of our
ILEC operations in the future. However, upon the anticipated closing of the
Frontier and Qwest acquisitions, certain of our systems may be subject to a
higher degree of scrutiny from the FCC and the applicable public service
commissions. In any event, we are currently unable to determine the ultimate
degree of reduction or increase in regulation in our operating territories.
The 1996 Act preempts state and local laws to the extent that they prevent
competitive entry into the provision of any communications service. Under the
1996 Act, however, states retain authority to impose requirements on carriers
necessary to preserve universal service, protect public safety and welfare,
ensure quality of service and protect consumers. States are also responsible for
mediating and arbitrating interconnection agreements between CLECs and ILECs if
voluntary negotiations fail.
In order to create an environment in which local competition is a practical
possibility, the 1996 Act imposes a number of access and interconnection
requirements on all local communications providers. All local carriers must
interconnect with other carriers, permit resale of their services, provide local
telephone number portability and dialing parity, provide access to poles, ducts,
conduits, and
16
rights-of-way, and complete calls originated by competing carriers under
reciprocal compensation or mutual termination arrangements.
Many of our properties continue to be regulated under a regime that sets
prices for a specific property based on its level of earnings. As a result of
recent legislation enabling regulators to reduce the level of regulation in
certain states and at the federal level, we have elected incentive regulation
plans under which prices are capped in return for the elimination or relaxation
of earnings oversight. Some states also allow us flexibility in price changes
for optional services and relaxed reporting requirements. The goal of these
incentive regulation plans is to provide incentives to improve efficiencies and
increase pricing flexibility for competitive services while ensuring that
customers receive reasonable rates for basic services that continue to be deemed
part of a monopoly while allowing us to continue to recover our costs in rates.
Approximately 87% of our ILEC services segment revenue is subject to
regulation including incentive regulation. Of this regulated revenue, the FCC
regulates approximately 33% of this revenue, while various state regulatory
agencies regulate approximately 54% of this revenue. We expect state lawmakers
to continue to review the statutes governing the level and type of regulation
for telecommunications services. Over the next few years, legislative and
regulatory actions are expected to provide opportunities to restructure rates,
introduce more flexible incentive regulation programs and possibly reduce the
overall level of regulation. While we still believe that such actions will
nonetheless allow us to recover our costs in revenues, we expect the election of
incentive regulation plans and the expected reduction in the overall level of
regulation to allow us to introduce new services more expeditiously than in the
past.
For interstate services regulated by the FCC, we have elected a form of
incentive regulation known as price caps. Under price caps, interstate access
rates are capped and adjusted annually by the difference between the level of
inflation and a productivity factor. Most recently the productivity factor was
set at 6.5%. Given the relatively low inflation rate in recent years, interstate
access rates have been adjusted downward annually. In May 2000, the FCC adopted
a revised methodology for regulating the interstate access rates of price cap
companies through May 2005. The new program, known as the Coalition for
Affordable Local and Long Distance Services, or CALLs plan, establishes a price
floor for interstate-switched access services and phases out many of the
subsidies in interstate access rates. Though the end-user charges and an
expanded universal service program will continue to benefit rural service
providers such as our ILEC services segment, we believe we will be able to
offset some of the reduction in interstate access rates. Annual adjustments
based on the difference between inflation and the 6.5% productivity factor will
continue for several years until the price floor for interstate switched access
services is reached.
We believe that the CALLs plan has potential benefits for us in the long
term. Although some of the required rate reductions are front loaded, the price
floor provides a degree of certainty that rate reductions will be curtailed in
the future. We were successful in negotiating a price floor that recognized the
unique cost characteristics of rural telecommunications providers as opposed to
being forced into a one size fits all program designed for larger companies.
Under the CALLs plan, for many of our properties, the price floor is higher than
the rate level that would have been required over time under the previous rate
programs. In addition, shifting revenue from interstate access services to end
user customers and universal service programs provides us more control over
future revenue as access customers seek alternatives to switched access
services.
In 1998, the FCC determined that the federal universal service fund, or USF,
for non-rural companies would be based on a forward-looking cost methodology,
but chartered a Rural Task Force, or RTF, to develop a recommendation for the
funding methodology for rural companies. Since many of our current properties
are classified as rural, our federal USF will be driven by the rural methodology
that is still under development. In October 2000, the RTF recommended the use of
embedded cost instead of forward-looking costs to determine the USF for rural
companies. In addition, the RTF
17
suggested the FCC should adjust the caps on the USF to recognize inflation and
allow rural companies the opportunity to recover some of the costs associated
with incremental investment.
The FCC has historically required an acquiring company to cap its federal
USF for acquired exchanges at the level of the selling company. Since the seller
often includes the acquired exchanges in a much larger USF study area, the
amount of USF is often negligible. In addition, the purchasing company is not
able to include its new investment in the USF calculation. The RTF concluded
that this cap might deter investment in acquired properties. In addition, the
FCC has historically capped certain corporate expenses. The RTF recommended this
expense cap be indexed to reflect inflation. In December 2000, the Federal/State
Universal Service Joint Board recommended that the FCC adopt the RTF
recommendations. Although the final FCC decision is still uncertain, if the FCC
agrees with the Joint Board, the combination of the embedded cost methodology
and some relief on the caps should provide rural providers like us with a more
stable source of USF money over the next few years.
Another goal of the 1996 Act was to remove implicit subsidies from the rates
charged by local telecommunications companies. The CALLs plan addressed this
requirement for interstate services. State legislatures and regulatory agencies
are beginning to reduce the implicit subsidies in intrastate rates. The most
common subsidies are in access rates that historically have been priced above
their costs to allow basic local rates to be priced below cost. Legislation has
been considered in several states to require regulators to eliminate these
subsidies and implement state universal service programs where necessary to
maintain reasonable basic local rates. However, not all the reductions in access
charges are fully offset. In Tennessee for example, as a result of such
legislation, we will be reducing intrastate access rates by $1 million per year
for three years beginning in 2001. We anticipate additional state legislative
and regulatory pressure to lower intrastate access rates in the near future.
However, regulators are cognizant of the potential impact on basic local rates
and are moving cautiously. Many states are embracing the need for state
universal service funds to ensure protection for customers while ensuring that
local telecommunications companies continue to have the incentive to recover in
rates their investment in their networks and new services.
State legislatures and regulators are also examining the provision of
telecommunications services to previously unserved areas. Since many unserved
areas are located in rural markets, we may be required to expand our service
territory into some of these areas. Given the start-up costs involved with
territory expansion, we expect legislatures and regulators to continue to move
cautiously and provide some means of recovery for the costs associated with
serving these new areas.
CLEC SERVICES REGULATION
The 1996 Act dramatically changed the national public policy framework for
telecommunications. A central focus of this sweeping policy reform was to open
local communications markets to competition. One result of the 1996 Act has been
the development of CLECs which compete for business with the existing carriers.
As a CLEC, ELI is subject to federal, state and local regulation. However, the
level of regulation is typically less than an ILEC. The FCC exercises
jurisdiction over all interstate communications services. State commissions
retain jurisdiction over all intrastate communications services. Local
governments may require ELI to obtain licenses or franchises regulating the use
of public rights-of-way necessary to install and operate its networks.
The FCC exercises regulatory jurisdiction over all facilities of, and
services offered by, communications common carriers to the extent those
facilities are used to provide, originate or terminate interstate
communications. The FCC has established different levels of regulation for
"dominant" carriers and "nondominant" carriers. The FCC regulates many of the
rates, charges and services of dominant carriers to a greater degree than those
of nondominant carriers. As a nondominant carrier, ELI may install and operate
facilities for domestic interstate communications without prior FCC
authorization. ELI is no longer required to maintain tariffs for domestic
interstate long distance services. As a provider of international long distance
services, ELI obtained FCC
18
operating authority and maintains an international tariff. However, the FCC is
also eliminating the requirement for international tariffs. ELI is also required
to submit certain periodic reports to the FCC and pay regulatory fees.
RBOCs had been barred from participating in the market for inter-LATA
services (which is primarily long-distance traffic) in their service territories
since the break up of the Bell System in 1984. The 1996 Act provides a mechanism
for an RBOC and/or any successors to enter in-region inter-LATA markets. Full
entry by the companies into inter-LATA markets will increase the level of
competition faced by our long distance services. Before an RBOC or its
successors can enter an inter-LATA market it must first meet specific criteria
set out by section 271 of the 1996 Act. These criteria are commonly referred to
as the "14 point checklist". The checklist is meant to ensure that these
companies have opened up their local markets to competition before they compete
in the long-distance markets in their regions. Verizon and SBC Communications
have both successfully filed inter-LATA applications with the FCC for some of
their states.
LOCAL GOVERNMENT AUTHORIZATIONS
ELI has various interconnection agreements in the states in which it
operates. These agreements govern reciprocal compensation relating to the
transport and termination of traffic between the ILEC's and ELI's networks. On
February 25, 1999, the FCC issued a Declaratory Ruling and Notice of Proposed
Rulemaking that categorized calls terminated to internet service providers, or
ISPs, as "largely" interstate in nature, which could have the effect of
precluding these calls from reciprocal compensation charges. However, the ruling
stated that the existing interconnection agreements and the state decisions that
have defined them bind ILECs. The FCC gave the states authority to interpret
existing interconnection agreements. Since this FCC order, five states in which
we operate, Oregon, Washington, California, Utah and Arizona, have ruled that
calls terminated to ISPs should be included in the calculation to determine
reciprocal compensation. However, the FCC is expected to readdress this issue in
2001.
Most state public service commissions require competitive communications
providers, such as ELI, to obtain operating authority prior to initiating
intrastate services. Most states also require the filing of tariffs or price
lists and customer-specific contracts. ELI is not currently subject to
rate-of-return or price regulation. However, ELI is subject to state-specific
quality of service, universal service, periodic reporting and other regulatory
requirements, although the extent of such requirements is generally less than
those applicable to ILECs.
COMPETITION
ILEC SERVICES COMPETITION
The 1996 Act and subsequent FCC interconnection decisions have established
the relationships between ILECs and CLECs and the mechanisms for competitive
market entry. Though carriers like us, who serve predominantly rural markets,
did receive a qualified exemption from some of the technical requirements
imposed upon all ILECs for interconnection arrangements, we did not receive an
exemption from interconnection or local exchange competition in general. The
exemption, known as the rural telephone company exemption, continues until a
bona fide request for interconnection is received from a CLEC and a state public
services commission with jurisdiction determines that discontinuance of the
exemption is warranted. The state commission must determine that discontinuing
the exemption will not adversely impact the availability of universal service in
the state nor impose an undue economic hardship on us, and that the requested
interconnection is technically feasible.
Though much of the initial competition in local telecommunications has been
in more densely populated urban areas, we have begun to experience competition
in some of our suburban and rural
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markets. These competitors mainly serve internet service providers and a few
large business customers, but competition for residential customers is present
in isolated areas.
Under the 1996 Act and subsequent FCC and state rules, CLECs can compete
using one or more of three mechanisms:
- Construction of its own local exchange facilities, in which case the
ILEC's sole obligation is interconnection for purposes of traffic
interchange.
- Purchase unbundled network elements, or UNEs, at cost from the ILEC and
assemble them into local exchange services and/or supplement the
facilities it already owns.
- Resale of the ILEC's retail services purchased at wholesale rates from the
ILEC.
Some competitors have taken advantage of an ILEC's requirement to pay the
CLEC reciprocal compensation for traffic delivered to the CLEC. The increase of
traffic over the Internet has provided CLECs with an immediate mechanism to
build traffic and reciprocal compensation revenues. In 2000, our ILECs paid
$1.9 million in reciprocal compensation. While our ILECs are reciprocal
compensation payors, ELI is a reciprocal compensation receiver. We expect the
spread of Digital Subscriber Line and other high speed network services that
give customers a dedicated link to the internet, as well as the rural nature of
our markets and expected actions by the FCC and the United States Congress to
limit the future growth of reciprocal compensation.
Beginning in late 1999, the FCC expanded the availability of UNEs by
requiring ILECs to offer subloop unbundling, expanded extended loops, or EELs,
and line sharing. Pursuant to this FCC decision, CLECs can purchase a portion of
the ILECs' loop facilities at cost-based rates as opposed to the entire loop.
EELs allow CLECs to purchase links to customer premises located outside the
exchange where the CLEC is physically located at cost-based rates. Line sharing
allows ILECs to purchase just the high frequency portion of the loop that
permits the CLEC to offer high-speed data services more profitably, but leave
the lower margin voice services for the same customer with the ILEC. In addition
to expanding the availability of UNEs, in August 2000 the FCC expanded
collocation requirements to include cageless collocation in ILEC facilities.
These FCC decisions increase the CLECs' opportunities to reach customers
economically thereby increasing their ability to compete.
Under the 1996 Act, the RBOCs and their successors were precluded from
competing in most long-distance markets until they satisfied the state
regulatory authority and the FCC that their markets had been sufficiently opened
to local exchange competition. Beginning in 1999, state regulators and the FCC
began to allow the RBOCs and their successors to enter the long-distance market
in some states. By the end of February 2001, RBOC long-distance entry was only
allowed in New York, Texas, Oklahoma and Kansas. However, we expect additional
states to follow suit in the near future. Since we currently offer long-distance
service in New York and other states, it is possible that the entry of the RBOCs
and their successors into this market could adversely impact our operations.
Though much of the initial competition in local telecommunications has been
in more densely populated urban areas, we have begun to experience competition
in some of our suburban and rural markets.
As of December 31, 2000, we had entered into 88 interconnection agreements.
These agreements allow CLECs to connect with some of our ILEC networks and
compete in our ILEC markets. In addition, in some markets, our ILEC services
provide reciprocal compensation payments and local number portability. These
competitors are mainly serving large business customers and internet service
providers. Competition for residential customers is present in isolated areas.
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CLEC SERVICES COMPETITION
ELI faces significant competition from ILECs in each of its facilities-based
markets. Principal ILEC competitors include Qwest, SBC and Verizon.
Facility and non-facility based CLEC competitors in ELI's markets include,
among others: AT&T Local Services, Time Warner Telecom, MCI WorldCom and XO
Communications. In each of the markets in which ELI operates, at least one other
CLEC, and in some cases several other CLECs, offer many of the same local
communications services that ELI provides, generally at similar prices.
Potential and actual new market entrants in the local communications
services business include RBOCs and their successors entering new geographic
markets, IXCs, cable television companies, electric utilities, international
carriers, satellite carriers, teleports, microwave carriers, wireless telephone
system operators and private networks built by large end users. In addition, the
current trend of business combinations and alliances in the communications
industry, including mergers between RBOCs and their successors, may increase
competition for ELI. With the passage of the 1996 Act and the entry of RBOCs and
their successors into the long distance market, IXCs may be motivated to
construct their own local facilities or otherwise acquire the right to use local
facilities and/or resell the local services of ELI's competitors.
Competition for network services is based on price, quality, network
reliability, customer service, service features and responsiveness to the
customer's needs. As a point of differentiation from the ILECs, ELI's
fiber-optic networks provide both diverse access routing and redundant
electronics, design features not widely deployed within the ILEC's networks.
ELI's competitors for high-speed data services include major IXCs, other
CLECs and various providers of niche services (such as internet access
providers, router management services and systems integrators). The
interconnectivity of ELI's markets may create additional competitive advantages
over other data service providers that must obtain local access from the ILEC or
another CLEC in each market or that cannot obtain intercity transport rates on
terms as favorable as those available to ELI.
The market for internet access and related services in the United States is
extremely competitive, with barriers to entry related to capital costs,
bandwidth capacity and internal provisioning and operations processes. We expect
that competition will intensify as existing services and network providers and
new entrants compete for customers. In addition, new enhanced internet services
such as managed router service and web hosting are constantly under development
in the market, and we expect additional innovation in this market by a range of
competitors. ELI's current and future competitors include communications
companies, including the RBOCs and their successors, IXCs, CLECs and cable
television companies, and other internet access providers.
Many of these competitors have greater market presence and greater
financial, technical, marketing and human resources, more extensive
infrastructure and stronger customer and strategic relationships than are
available to us.
PUBLIC UTILITIES SERVICES
We have historically provided public utilities services including natural
gas transmission and distribution, electric transmission and distribution and
water distribution and wastewater treatment services to primarily rural and
suburban customers throughout the United States. In May 1998, we announced a
plan of divestiture for our public utilities services properties. In 1999, we
initially accounted for the planned divestiture of our public utilities services
segments as discontinued operations. Since we have not yet entered into
agreements to sell our entire gas and electric segments, we reclassified all our
gas and electric assets and their related liabilities in the second half of 2000
as "net assets held for sale." As a result, our discontinued operations only
reflect the assets and related liabilities of the water and wastewater
businesses.
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NATURAL GAS
Our natural gas segment provides natural gas transmission and distribution
services in Louisiana, Arizona and Colorado, as well as synthetic natural gas
and propane service in Hawaii to 473,500 primarily residential customers. Our
natural gas segment accounted for $375 million, or 20.8%, of our revenues in
fiscal year 2000.
Natural gas services and/or rates charged are subject to the jurisdiction of
federal and state regulatory agencies, except for the non-regulated propane
rates charged to customers in Hawaii. We purchase the gas supply we need (except
for our production of synthetic natural gas in Hawaii). We believe our natural
gas supply is adequate to meet current demands and to provide for additional
sales to new customers. The natural gas industry is subject to seasonal demand
(except in Hawaii) with the peak demand occurring during the heating season of
November 1 through March 31. Our natural gas segment experiences third-party
competition from fuel oil, propane and other gas suppliers for most of our large
consumption customers (of which there are few) and from electric suppliers for
all of our customer base. The competitive position of gas at any given time
depends primarily on the relative prices of gas and these other energy sources.
ELECTRIC
Our electric segment provides electric transmission and distribution
services in Arizona, Hawaii and Vermont to 123,500 primarily residential
customers. Our electric segment accounted for $223 million, or 12.4%, of our
revenues in fiscal year 2000.
Electric services and/or rates charged are subject to the jurisdiction of
federal and state regulatory agencies. We purchase approximately 81% of the
electric energy needed to provide services to our customers. We believe our
supply is adequate to meet current demands and to provide for additional sales
to new customers. The majority of our generating facilities are on Kauai,
Hawaii. We also have generating facilities in Arizona and Vermont, which are
used mainly for back-up power supply. Generally, our electric segment does not
experience material seasonal fluctuations.
The electric utility industry in the United States is undergoing fundamental
changes. For many years electric utilities have been vertically integrated
entities with the responsibility for the generation, transmission and
distribution of electric power in a franchise territory. In return for monopoly
status, electric utilities have been subject to comprehensive regulation at the
state and federal level. The industry is now shifting toward electric customers
being able to choose their energy provider much like telephone customers are
able to choose their long distance provider. Generally, this involves splitting
apart the generation and transmission of power from the remainder of the
business, and having generators compete with one another in the sale of power
directly to retail customers. The interconnected regional transmission grids
will be operated independently, continuing as a federally regulated monopoly.
Local transmission and distribution facilities would continue as state-regulated
monopolies. This change in the industry is in various stages of development
around the United States. The pace and degree of regulation vary from state to
state.
During the past year power supply costs have increased substantially,
forcing distribution companies to incur higher costs to operate their electric
businesses. As a result, companies have employed several varied tactics to try
to control or offset these costs. These tactics include renegotiating prices
with power suppliers and attempting to pass increased power costs on to
customers through automatic adjustment mechanisms or rate proceedings.
Regulators have resisted these efforts in an attempt to avoid a sudden, steep
increase in electric rates, known as "rate shock." Pending final resolution of
these issues, we will, where appropriate, seek authority to defer these costs in
hopes of being allowed to recover them in the future. In addition, distribution
companies have disputed past charges from their power suppliers. In Arizona we
are currently disputing the amount of what we believe are excessive power costs
charged by our power supplier, which, through December 31, 2000, total
approximately $57 million.
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Our Vermont Electric Division is a member of the Vermont Joint Owners, a
consortium of 14 Vermont utilities that has entered into a purchase power
agreement with a Canadian power generation facility. The agreement provides for
up to 450 MW of power and associated energy to be delivered to Vermont, in
varying amounts, between 1990 and 2020. If any member of the consortium defaults
on its share of power under the agreement, the remaining members of the
consortium are required by "step-up" provisions of the agreement to assume
responsibility for a defaulting member's share on a pro-rata basis. Currently
the agreement's pricing exceeds market levels, and the Vermont Public Service
Board has been unwilling to allow all members of the consortium full recovery
through rates of power costs associated with the contract. The Vermont Board's
decision has put two members of the consortium in a precarious financial
condition. If the Vermont Board persists in its refusal and thereby forces one
or more members of the consortium into bankruptcy, the resulting default of
those members' obligations under the Hydro-Quebec agreement could shift
significant additional cost burdens to our Vermont electric division.
On February 15, 2000, we announced that we had agreed to sell our electric
segment. Our Arizona and Vermont electric divisions were under contract to be
sold, but the parties terminated the agreement on March 7, 2001 due to the
failure of the proposed purchaser to raise the required financing and obtain the
required regulatory approval necessary to meet its obligations under the
contract for sale. We intend to pursue the disposition of the Vermont and
Arizona electric divisions with alternative buyers.
In August 2000, the Hawaii Public Utility Commission, or HPUC, denied the
application requesting approval of the purchase of our Kauai electric division
by the Kauai Island Electric Co-Op for $270 million in cash including the
assumption of certain liabilities. We are considering a variety of options,
including the filing of a request for reconsideration of the decision or the
filing of a new application.
In Kauai, historically, we received approximately 13% of our power from a
third-party provider. As of January 2001, this third-party provider will no
longer provide power due to the closure of their sugar operations. In order to
avoid power outages, we have completed negotiations with a new-third party
provider for a new purchase power agreement. This agreement is subject to
approval by the HPUC. Current forecasts report that Kauai will require
additional electrical generating capacity in 2002. As a result, we have entered
into a 25-year purchase power agreement with Kauai Power Partners, an
independent power producer, to provide firm power by July 2002. This agreement
was recently approved by the HPUC.
WATER AND WASTEWATER
Through subsidiaries, we provide water distribution, wholesale water
transmission, wastewater treatment, public works consulting and marketing and
billing services to approximately 322,200 primarily residential customers in,
Arizona, Illinois, California, Pennsylvania, Ohio, and Indiana.
On October 18, 1999, we announced the agreement to sell our water and
wastewater segment to American Water Works, Inc. for $745 million in cash and
$90 million of assumed debt. This transaction is expected to close in the second
half of 2001 following the receipt of regulatory approvals.
PROPERTIES
Our principal offices are located in leased premises in Stamford,
Connecticut.
The operations support office for our ILEC segment is located in Plano,
Texas. This owned facility accommodates approximately 1,100 employees and has
the acreage necessary for phased expansion up to 750,000 square feet. In
addition, our ILEC segment leases and owns office space in various markets
throughout the United States.
The operations support office for our CLEC segment is located in Vancouver,
Washington. This owned building is fully occupied. In addition, our CLEC segment
leases local office space in various
23
markets throughout the United States, and also maintains a warehouse facility in
Portland, Oregon. Our CLEC segment also leases network hub and network equipment
installation sites in various locations throughout the areas in which it
provides services.
Our ILEC and CLEC services segments own telephone properties which include:
connecting lines between customers' premises and the central offices; central
office switching equipment; fiber-optic and microwave radio facilities,
buildings and land; and customer premise equipment. The connecting lines,
including aerial and underground cable, conduit, poles, wires and microwave
equipment, are located on public streets and highways or on privately owned
land. We have permission to use these lands pursuant to local governmental
consent or lease, permit, franchise, easement or other agreement.
Our public utilities services segments are administered locally in the
principal states in which they operate. Pending the sale of our public utilities
services segments, we own gas production, transmission and distribution
facilities; electric generation, transmission and distribution facilities; water
production, treatment, storage, transmission and distribution facilities; and
wastewater treatment, transmission, collection and discharge facilities.
DESCRIPTION OF DEBT SECURITIES
The following is a summary of the general terms of the debt securities. We
will file a prospectus supplement that may contain additional terms when we
issue debt securities. The terms presented here, together with the terms in a
related prospectus supplement, which could be different from the terms described
below, will be a description of the material terms of the debt securities. You
should also read the indenture governing the applicable class of our debt
securities. We have filed two forms of indentures, one each for senior debt
securities and for subordinated debt securities, with the Securities and
Exchange Commission, or SEC, as exhibits to the registration statement of which
this prospectus is a part. All capitalized terms have the meanings specified in
the indentures. The terms and provisions of the debt securities below will most
likely be modified by the documents that set forth the specific terms of the
debt securities issued.
We may issue, from time to time, debt securities, in one or more series,
that will consist of either our senior debt or our subordinated debt. Each
series of debt securities we offer will be issued under an indenture between us
and a trustee. Debt securities, whether senior or subordinated, may be issued as
convertible debt securities or exchangeable debt securities. Unless otherwise
provided for in the applicable prospectus supplement, the indenture governing
our subordinated debt securities will be substantially similar to the indenture
governing our senior debt securities other than as to subordination terms.
GENERAL TERMS OF THE INDENTURES
The indentures do not limit the amount of debt securities that we may issue.
Each indenture provides that we may issue debt securities up to the principal
amount that we may authorize and may be in any currency or currency unit that we
may designate. The terms of the indentures do not contain any covenants or other
provisions designed to give holders of any debt securities protection against
changes in our operations, financial condition or transactions involving us, but
these types of provisions may be included in the documents that set forth the
specific terms of the debt securities. We may issue the debt securities issued
under either indenture as "discount securities," which means they may be sold at
a discount below their stated principal amount. These debt securities, as well
as other debt securities that are not issued at a discount, may, for United
States federal income tax purposes, be treated as if they were issued with
"original issue discount" because of interest payment and other characteristics.
Special United States federal income tax considerations applicable to debt
securities issued with original issue discount will be described in more detail
in any applicable prospectus supplement.
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The applicable prospectus supplement for a series of debt securities that we
issue will describe, among other things, the following terms of the offered debt
securities:
- the title;
- any limit on the aggregate principal amount;
- whether issued in fully registered form without coupons or in a form
registered as to principal only with coupons or in bearer form with
coupons;
- whether issued in the form of one or more global securities and whether
all or a portion of the principal amount of the debt securities is
represented by a global security;
- the price or prices at which the debt securities will be issued;
- the date or dates on which principal is payable;
- the place or places where and the manner in which principal, premium or
interest will be payable and the place or places where the debt securities
may be presented for transfer and, if applicable, conversion or exchange;
- interest rates, and the dates from which interest, if any, will accrue,
and the dates when interest is payable and the maturity;
- the right, if any, to extend the interest payment periods and the duration
of the extensions;
- our rights or obligations to redeem or purchase the debt securities;
- any sinking fund provisions;
- conversion or exchange provisions, if any, including conversion or
exchange prices or rates and adjustments to conversion or exchange prices
or rates;
- the currency or currencies of payment of principal or interest;
- the terms applicable to any debt securities issued at a discount from
their stated principal amount;
- the terms, if any, under which any debt securities will rank junior to any
of our other debt;
- if the amount of payments of principal or interest is to be determined by
reference to an index or formula, or based on a coin or currency other
than that in which the debt securities are stated to be payable, the
manner in which these amounts are determined and the calculation agent, if
any, with respect thereto;
- if other than the entire principal amount of the debt securities when
issued, the portion of the principal amount payable upon acceleration of
maturity as a result of a default on our obligations;
- if applicable, covenants affording holders of debt protection against
changes in our operations, financial condition or transactions involving
us; and
- any other specific terms of any debt securities.
The applicable prospectus supplement will present United States federal income
tax considerations for holders of any debt securities and the securities
exchange or quotation system on which any debt securities are listed or quoted.
25
SENIOR DEBT SECURITIES
Senior debt securities will be issued under the senior indenture. Payment of
the principal of, premium, if any, and interest on senior debt securities will
rank on a parity with all of our other unsecured and unsubordinated debt.
SUBORDINATED DEBT SECURITIES
Subordinated debt securities will be issued under the subordinated
indenture. Payment of the principal of, premium, if any, and interest on
subordinated debt securities will be subordinated and junior in right of payment
to the prior payment in full of all of our senior debt. We will state in the
applicable prospectus supplement relating to any subordinated debt securities
the subordination terms of the securities as well as the aggregate amount of
outstanding indebtedness, as of the most recent practicable date, that by its
terms would be senior to the subordinated debt securities. We will also state in
the prospectus supplement limitations, if any, on issuance of additional senior
indebtedness.
CONVERSION OR EXCHANGE RIGHTS
Debt securities may be convertible into or exchangeable for shares of our
equity securities or equity securities of our subsidiaries or affiliates. The
terms and conditions of conversion or exchange will be stated in the applicable
prospectus supplement. The terms will include, among others, the following:
- the conversion or exchange price;
- the conversion or exchange period;
- provisions regarding the convertibility or exchangeability of the debt
securities, including who may convert or exchange;
- events requiring adjustment to the conversion or exchange price;
- provisions affecting conversion or exchange in the event of our redemption
of the debt securities; and
- any anti-dilution provisions, if applicable.
EVENTS OF DEFAULT
Unless otherwise provided for in the applicable prospectus supplement, the
term "Event of Default," when used in either indenture, unless otherwise
indicated, means any of the following:
- failure to pay interest for 60 days after the date payment is due and
payable; provided that if we extend an interest payment period in
accordance with the terms of the debt securities, the extension will not
be a failure to pay interest;
- failure to pay principal or premium, if any, on any debt security when
due, either at maturity, upon any redemption, by declaration or otherwise;
- failure to make sinking fund payments when due;
- failure to perform other covenants for 90 days after notice that
performance was required;
- events in bankruptcy, insolvency or reorganization of our company; or
26
- any other Event of Default provided in the applicable resolution of our
Board or supplemental indenture under which we issue a series of debt
securities.
An Event of Default for a particular series of debt securities does not
necessarily constitute an Event of Default for any other series of debt
securities issued under an indenture. If an Event of Default relating to the
payment of interest, principal or any sinking fund installment involving any
series of debt securities has occurred and is continuing, the trustee or the
holders of not less than 25% in aggregate principal amount of the debt
securities of each affected series may declare the entire principal of all the
debt securities of that series to be due and payable immediately.
If an Event of Default relating to the performance of other covenants occurs
and is continuing for a period of 60 days after notice of that event, or if any
other Event of Default occurs and is continuing involving all of the series of
senior debt securities, then the trustee or the holders of not less than 25% in
aggregate principal amount of all of the series of senior debt securities may
declare the entire principal amount of all of the series of senior debt
securities due and payable immediately.
Similarly, if an Event of Default relating to the performance of other
covenants occurs and is continuing for a period of 60 days after notice of that
event, or if any other Event of Default occurs and is continuing involving all
of the series of subordinated securities, then the trustee or the holders of not
less than 25% in aggregate principal amount of all of the series of subordinated
securities may declare the entire principal amount of all of the series of
subordinated securities due and payable immediately.
If, however, the Event of Default relating to the performance of other
covenants or any other Event of Default that has occurred and is continuing is
for less than all of the series of senior debt securities or subordinated
securities, as the case may be, then, the trustee or the holders of not less
than 25% in aggregate principal amount of each affected series of the senior
debt securities or the subordinated securities, as the case may be, may declare
the entire principal amount of all debt securities of the affected series due
and payable immediately. The holders of not less than a majority, or any
applicable supermajority, in aggregate principal amount of the debt securities
of a series may, after satisfying conditions, rescind and annul any of the
above-described declarations and consequences involving the series.
If an Event of Default relating to events in bankruptcy, insolvency or
reorganization of our company occurs and is continuing, then the principal
amount of all of the debt securities outstanding, and any accrued interest, will
automatically become due and payable immediately, without any declaration or
other act by the trustee or any holder.
The indentures impose limitations on suits brought by holders of debt
securities against us. Except for actions for payment of overdue principal or
interest, no holder of debt securities of any series may institute any action
against us under the relevant indenture unless:
- the holder has previously given to the trustee written notice of default
and continuance of such default;
- the holders of at least 25% in principal amount of the outstanding debt
securities of the affected series have requested that the trustee
institute the action;
- the requesting holders have offered the trustee reasonable indemnity for
expenses and liabilities that may be incurred by bringing the action;
- the trustee has not instituted the action within 60 days of the request;
and
- the trustee has not received inconsistent direction by the holders of a
majority in principal amount of the outstanding debt securities of the
series.
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We will be required to file annually with each trustee a certificate, signed
by an officer of our company, stating whether or not the officer knows of any
default by us in the performance, observance or fulfillment of any condition or
covenant of the relevant indenture.
REGISTERED GLOBAL SECURITIES
We may issue the debt securities of a series in whole or in part in the form
of one or more fully registered global securities. We will deposit any
registered global securities with a depositary or with a nominee for a
depositary identified in the applicable prospectus supplement and registered in
the name of the depositary or nominee. In that case, we will issue one or more
registered global securities denominated in an amount equal to the aggregate
principal amount of all of the debt securities of the series to be issued and
represented by the registered global security or securities.
Unless and until it is exchanged in whole or in part for debt securities in
definitive registered form, a registered global security may not be transferred
except as a whole:
- by the depositary for such registered global security to its nominee;
- by a nominee of the depositary to the depositary or another nominee of the
depositary; or
- by the depositary or its nominee to a successor of the depositary or a
nominee of the successor.
The prospectus supplement relating to a series of debt securities will
describe the specific terms of the depositary arrangement involving any portion
of the series represented by a registered global security.
We anticipate that the following provisions will apply to all depositary
arrangements for debt securities:
- ownership of beneficial interests in a registered global security will be
limited to persons that have accounts with the depositary for such
registered global security, these persons being referred to as
"participants," or persons that may hold interests through participants;
- upon the issuance of a registered global security, the depositary for the
registered global security will credit, on its book-entry registration and
transfer system, the participants' accounts with the respective principal
amounts of the debt securities represented by the registered global
security beneficially owned by the participants;
- any dealers, underwriters, or agents participating in the distribution of
the debt securities will designate the accounts to be credited; and
- ownership of beneficial interest in such registered global security will
be shown on, and the transfer of such ownership interest will be effected
only through, records maintained by the depositary for such registered
global security for interests of participants, and on the records of
participants for interests of persons holding through participants.
The laws of some states may require that specified purchasers of securities
take physical delivery of the securities in definitive form. These laws may
limit the ability of those persons to own, transfer or pledge beneficial
interests in registered global securities.
So long as the depositary for a registered global security, or its nominee,
is the registered owner of such registered global security, the depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the debt securities represented by the registered global security for all
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purposes under the relevant indenture. Except as stated below, owners of
beneficial interests in a registered global security:
- will not be entitled to have the debt securities represented by a
registered global security registered in their names;
- will not receive or be entitled to receive physical delivery of the debt
securities in the definitive form; and
- will not be considered the owners or holders of the debt securities under
the relevant indenture.
Accordingly, each person owning a beneficial interest in a registered global
security must rely on the procedures of the depositary for the registered global
security and, if the person is not a participant, on the procedures of a
participant through which the person owns its interest, to exercise any rights
of a holder under the relevant indenture.
We understand that under existing industry practices, if we request any
action of holders or if an owner of a beneficial interest in a registered global
security desires to give or take any action that a holder is entitled to give or
take under the relevant indenture, the depositary for the registered global
security would authorize the participants holding the relevant beneficial
interests to give or take the action, and the participants would authorize
beneficial owners owning through the participants to give or take the action or
would otherwise act upon the instructions of beneficial owners holding through
them.
We will make payments of principal and premium, if any, and interest, if
any, on debt securities represented by a registered global security registered
in the name of a depositary or its nominee to the depositary or its nominee, as
the case may be, as the registered owners of the registered global security.
None of our company, the trustee or any other agent of our company or the
trustee will be responsible or liable for any aspect of the records relating to,
or payments made on account of, beneficial ownership interests in the registered
global security or for maintaining, supervising or reviewing any records
relating to the beneficial ownership interests.
We expect that the depositary for any debt securities represented by a
registered global security, upon receipt of any payments of principal and
premium, if any, and interest, if any, in respect of the registered global
security, will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the registered
global security as shown on the records of the depositary. We also expect that
standing customer instructions and customary practices will govern payments by
participants to owners of beneficial interests in the registered global security
held through the participants, as is now the case with the securities held for
the accounts of customers in bearer form or registered in "street name." We also
expect that any of these payments will be the responsibility of the
participants.
If the depositary for any debt securities represented by a registered global
security is at any time unwilling or unable to continue as depositary or stops
being a clearing agency registered under the Securities Exchange Act of 1934, we
will appoint an eligible successor depositary. If we fail to appoint an eligible
successor depositary within 90 days, we will issue the debt securities in
definitive form in exchange for the registered global security. In addition, we
may at any time and in our sole discretion decide not to have any of the debt
securities of a series represented by one or more registered global securities.
In that event, we will issue debt securities of the series in a definitive form
in exchange for all of the registered global securities representing the debt
securities. The trustee will register any debt securities issued in definitive
form in exchange for a registered global security in the name or names as the
depositary, based upon instructions from its participants, shall instruct the
trustee.
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We may also issue bearer debt securities of a series in the form of one or
more global securities, referred to as "bearer global securities." We will
deposit these securities with a common depositary for Euroclear System and
Clearstream Banking, or with a nominee for the depositary identified in the
prospectus supplement relating to the series. The prospectus supplement relating
to a series of debt securities represented by a bearer global security will
describe the applicable terms and procedures. These will include the specific
terms of the depositary arrangement and any specific procedures for the issuance
of debt securities in definitive form in exchange for a bearer global security,
in proportion to the series represented by a bearer global security.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
We can discharge or defease our obligations under either indenture or both
indentures as stated below or as provided in the applicable prospectus
supplement.
Unless otherwise provided in the applicable prospectus supplement, we may
discharge obligations to holders of any series of debt securities that have not
already been delivered to the relevant trustee for cancellation and that have
either become due and payable or are by their terms to become due and payable,
or are scheduled for redemption, within one year. We may effect a discharge by
irrevocably depositing with the trustee cash or United States government
obligations, as trust funds, in an amount certified to be enough to pay when
due, whether at maturity, upon redemption or otherwise, the principal of,
premium, if any, and interest on the debt securities and any mandatory sinking
fund payments.
Unless otherwise provided in the applicable prospectus supplement, we may
also discharge any and all of our obligations to holders of any series of debt
securities at any time, referred to as "defeasance." We may also be released
from the obligations imposed by any covenants of any outstanding series of debt
securities and provisions of the relevant indenture, and we may omit to comply
with those covenants without creating an event of default under the relevant
indenture, referred to as "covenant defeasance." We may effect defeasance and
covenant defeasance only if, among other things:
- we irrevocably deposit with the trustee cash or United States government
obligations, as trust funds, in an amount certified to be enough to pay at
maturity, or upon redemption, the principal, premium, if any, and interest
on all outstanding debt securities of the series;
- we deliver to the trustee an opinion of counsel from a nationally
recognized law firm to the effect that (i) in the case of covenant
defeasance, the holders of the series of debt securities will not
recognize income, gain or loss for United States federal income tax
purposes as a result of such defeasance, and will be subject to tax in the
same manner and at the same times as if no covenant defeasance had
occurred and (ii) in the case of defeasance, either we have received from,
or there has been published by, the Internal Revenue Service a ruling or
there has been a change in applicable United States federal income tax
law, and based thereon, the holders of the series of debt securities will
not recognize income, gain or loss for United States federal income tax
purposes as a result of such defeasance, and will be subject to tax in the
same manner as if no defeasance had occurred; and
- in the case of subordinated debt securities, no event or condition shall
exist that, based on the subordination provisions applicable to the
series, would prevent us from making payments of principal of, premium, if
any, and interest on any of the applicable subordinated debt securities at
the date of the irrevocable deposit referred to above or at any time
during the period ending on the 91st day after the deposit date.
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Although we may discharge or decrease our obligations under an indenture as
described in the two preceding paragraphs, we may not avoid, among other things,
our duty to register the transfer or exchange of any series of debt securities,
to replace any temporary, mutilated, destroyed, lost or stolen series of debt
securities or to maintain an office or agency in respect of any series of debt
securities.
MODIFICATION OF THE INDENTURES
Except as provided in the applicable prospectus supplement, each indenture
provides that we and the trustee may enter into supplemental indentures without
the consent of the holders of debt securities to:
- secure any debt securities;
- evidence the assumption by a successor corporation of our obligations;
- add covenants for the protection of the holders of debt securities;
- cure any ambiguity or correct any inconsistency in the relevant indenture;
- establish the forms or terms of debt securities of any series; and
- evidence and provide for the acceptance of appointment by a successor
trustee.
The indentures also provide that we and the trustee may, with the consent of
the holders of not less than a majority in aggregate principal amount of debt
securities of all series of senior debt securities or of subordinated
securities, as the case may be, then outstanding and affected, voting as one
class, add any provisions to, or change in any manner, eliminate or modify in
any way the provisions of, the relevant indenture or modify in any manner the
rights of the holders of the debt securities. We and the trustee may not,
however, without the consent of the holder of each outstanding debt security
affected thereby:
- extend the final maturity of any debt security;
- reduce the principal amount or premium, if any;
- reduce the rate or extend the time of payment of interest;
- reduce any amount payable on redemption;
- change the currency in which the principal, unless otherwise provided for
a series, premium, if any, or interest is payable;
- reduce the amount of the principal of any debt security issued with an
original issue discount that is payable upon acceleration or provable in
bankruptcy;
- impair the right to institute suit for the enforcement of any payment on
any debt security when due; or
- reduce the percentage of holders of debt securities of any series whose
consent is required for any modification of the relevant indenture.
CONCERNING THE TRUSTEE
The indentures provide that there may be more than one trustee under the
relevant indenture, each for one or more series of debt securities. If there are
different trustees for different series of debt securities under an indenture,
each trustee will be a trustee under the relevant indenture separate and apart
from the trust administered by any other trustee under the same indenture or any
other
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indenture. Except as otherwise indicated in this prospectus or any prospectus
supplement, any action permitted to be taken by a trustee may be taken by such
trustee only on the one or more series of debt securities for which it is the
trustee under the relevant indenture. Any trustee under the relevant indenture
may resign or be removed from one or more series of debt securities. All
payments of principal of, premium, if any, and interest on, and all
registration, transfer, exchange, authentication and delivery of, the debt
securities of a series will be effected by the relevant trustee for such series
at an office designated by such trustee in New York, New York.
If any trustee becomes a creditor of our company, each indenture places
limitations on the right of the trustee to obtain payment of claims or to
realize on property received in respect of any such claim as security otherwise.
Any trustee may engage in other transactions. If it acquires any conflicting
interest relating to any duties concerning the debt securities, however, it must
eliminate the conflict or resign as trustee.
The holders of a majority in aggregate principal amount of any series of
debt securities then outstanding will have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy available to
the relevant trustee concerning the applicable series of debt securities,
provided that the direction:
- would not conflict with any rule of law or with the relevant indenture;
- would not be unduly prejudicial to the rights of another holder of the
debt securities; and
- would not involve any trustee in personal liability.
The indentures provide that in case an Event of Default shall occur, not be
cured and be known to any trustee, the relevant trustee must use the same degree
of care as a prudent person would use in the conduct of his or her own affairs
in the exercise of the trustee's power. No trustee will be under any obligation
to exercise any of its rights or powers under an indenture at the request of any
of the holders of the debt securities, unless the holders shall have offered to
the trustee security and indemnity satisfactory to that trustee.
NO INDIVIDUAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS OR DIRECTORS
The indentures provide that no incorporator and no past, present or future
shareholder, officer or director of our company or any successor corporation in
their capacity as such shall have any individual liability for any of our
obligations, covenants or agreements under the debt securities or the relevant
indenture.
GOVERNING LAW
The indentures and the debt securities will be governed by, and construed in
accordance with, the laws of the State of New York.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 600,000,000 shares of common stock,
par value $.25 per share, and 50,000,000 shares of preferred stock, par value
$.01 per share. As of February 28, 2001, there were 266,372,768 shares of common
stock outstanding, and no shares of preferred stock outstanding.
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COMMON STOCK
VOTING RIGHTS
The holders of common stock are entitled to one vote per share and are
entitled to vote upon all matters that come before the stockholders, including
the election of directors.
Only those holders of our common stock that, as of any relevant date, would
be entitled to elect a director at the next annual meeting of stockholders, may
remove a director. Our directors may be removed, with or without cause.
Vacancies in a directorship may be filled by:
- the majority of directors then in office, except in vacancies resulting
from the removal of directors by stockholders; or
- the vote of the holders of the common stock, as of the date such vacancy
is filled, entitled to elect such director at the next annual meeting of
stockholders.
DIVIDENDS
Holders of common stock are entitled to receive dividends at the same rate
if, as and when such dividends are declared by our board out of assets legally
available therefor after payment of dividends required to be paid on shares of
outstanding preferred stock. We may not make any dividend or distribution to any
holder of common stock unless simultaneously with such dividend or distribution
we make the same dividend or distribution with respect to each outstanding share
of common stock.
LIQUIDATION
In the event of our liquidation, after payment of our debts and other
liabilities and after making provision for the holders of preferred stock, if
any, our remaining assets will be distributable ratably among the holders of
common stock.
OTHER PROVISIONS
The holders of our common stock are not entitled to preemptive rights. All
outstanding shares of common stock are, and all shares of common stock offered
hereby when issued will be upon payment therefor, validly issued, fully paid and
nonassessable.
PREFERRED STOCK
Our board of directors has the authority, without any further action by our
stockholders to issue from time to time shares of preferred stock in one or more
series and to fix the designations, preferences, rights, qualifications,
limitations and restrictions thereof, including voting rights, dividend rights,
dividend rates, conversion rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series. The
issuance of preferred stock with voting rights could have an adverse effect on
the voting power of holders of common stock by increasing the number of
outstanding shares having voting rights. In addition, if our board of directors
authorizes preferred stock with conversion rights, the number of shares of
common stock outstanding could potentially be increased up to the authorized
amount. The issuance of preferred stock could decrease the amount of earnings
and assets available for distribution to holders of common stock. Any such
issuance could also have the effect of delaying, deterring or preventing a
change in control of us and may adversely affect the rights of holders of our
common stock.
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GENERAL
CERTIFICATE OF INCORPORATION AND BYLAWS
Stockholders' rights and related matters are governed by the Delaware
General Corporation Law and our certificate of incorporation and by-laws. The
terms of our restated certificate of incorporation and our by-laws are more
detailed than the general information provided in connection with the
description of our capital stock or otherwise in this prospectus. Therefore, you
should carefully consider the actual provisions of these documents.
LIMITATION OF DIRECTORS' LIABILITY
Our certificate of incorporation provides that none of our directors will be
personally liable to us or our stockholders for monetary damages for breach of
fiduciary duty as a director except for liability:
- for any breach of the director's duty of loyalty to us or our
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
The effect of these provisions will be to eliminate our rights and our
stockholders' rights (through stockholders' derivatives suits on our behalf) to
recover monetary damages against a director for breach of fiduciary duty as a
director (including breaches resulting from grossly negligent behavior), except
in the situations described above. These provisions will not limit the liability
of directors under federal securities laws and will not affect the availability
of equitable remedies such as an injunction or rescission based upon a
director's breach of his or her duty of care.
TRANSFER AGENT
The Transfer Agent and Registrar for our common stock is the Illinois Stock
Transfer Company.
DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of debt securities, preferred stock
or common stock. Warrants may be issued independently or together with debt
securities, preferred stock or common stock offered by any prospectus supplement
and may be attached to or separate from any such offered securities. Each series
of warrants will be issued under a separate warrant agreement to be entered into
between us 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 assume any
obligation or relationship of agency or trust for or with any holders or
beneficial owners of warrants. The following summary of certain provisions of
the warrants does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the provisions of the warrant agreement that will
be filed with the SEC in connection with the offering of such warrants.
DEBT WARRANT
The prospectus supplement relating to a particular issue of debt warrants
will describe the terms of the debt warrants, including the following:
- the title of the debt warrants;
- the offering price for the debt warrants, if any;
- the aggregate number of the debt warrants;
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- the designation and terms of the debt securities purchasable upon exercise
of the debt warrants;
- if applicable, the designation and terms of the debt securities with which
the debt warrants are issued and the number of such debt warrants issued
with each debt security;
- if applicable, the date from and after which the debt warrants and any
debt securities issued therewith will be separately transferable;
- the principal amount of debt securities purchasable upon exercise of a
debt warrant and the price at which the principal amount of debt
securities may be purchased upon exercise (which price may be payable in
cash, securities, or other property);
- the date on which the right to exercise the debt warrants shall commence
and the date on which the right shall expire;
- if applicable, the minimum or maximum amount of the debt warrants that may
be exercised at any one time;
- whether the debt warrants represented by the debt warrant certificates or
debt securities that may be issued upon exercise of the debt warrants will
be issued in registered or bearer form;
- information with respect 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;
- the antidilution provisions of the debt warrants, if any;
- the redemption or call provisions, if any, applicable to such debt
warrants; and
- any additional terms of the debt warrants, including terms, procedures,
and limitations relating to the exchange and exercise of the debt
warrants.
STOCK WARRANTS
The prospectus supplement relating to any particular issue of preferred
stock warrants or common stock warrants will describe the terms of the 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 common stock or preferred stock
purchasable upon exercise of the warrants;
- if applicable, the designation and terms of the offered securities with
which the warrants are issued and the number of the warrants issued with
each such offered security;
- if applicable, the date from and after which the warrants and any offered
securities issued with them will be separately transferable;
- the number of shares of common stock or preferred stock purchasable upon
exercise of a warrant and the price at which the shares may be purchased
upon exercise;
- the date on which the right to exercise the warrants shall commence and
the date on which the right shall expire;
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- if applicable, the minimum or maximum amount of the warrants that may be
exercised at any one time;
- 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;
- the antidilution provisions of the warrants, if any;
- the redemption or call provisions, if any, applicable to such warrants;
and
- any additional terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
DESCRIPTION OF DEPOSITARY SHARES
The following information outlines some of the provisions of the deposit
agreement, the depositary shares and the depositary receipts. This information
may not be complete in all respects and is qualified entirely by reference to
the relevant deposit agreement and depositary receipts with respect to the
depositary shares relating to any particular series of preferred stock. The
specific terms of any series of depositary shares will be described in the
relevant prospectus supplement. If so described in the prospectus supplement,
the terms of that series of depositary shares may differ and supersede some or
all of the terms presented below.
GENERAL
We may elect to offer fractional interests in shares of preferred stock
instead of whole shares of preferred stock. If so, we will allow a depositary to
issue depositary shares to the public, each of which will represent a fractional
interest in a share of the relevant series of preferred stock, as described in
the relevant prospectus supplement, of a share of preferred stock.
The shares of the preferred stock underlying any depositary shares will be
deposited under a separate deposit agreement between us and a bank or trust
company acting as depositary with respect to that series. The depositary will
have its principal office in the United States and have a combined capital and
surplus of at least $50,000,000. The relevant prospectus supplement relating to
a series of depositary shares will mention the name and address of the
depositary. Under the relevant deposit agreement, each owner of a depositary
share will be entitled, in proportion to its fractional interest in a share of
the preferred stock underlying that depositary share, to all the rights and
preferences of that preferred stock, including dividend, voting, redemption,
conversion, exchange and liquidation rights.
Depositary shares will be evidenced by one or more depositary receipts
issued under the relevant deposit agreement.
Pending the preparation of definitive engraved depositary receipts, a
depositary may, upon our order, issue temporary depositary receipts
substantially identical to and entitling their holders to all the rights
pertaining to the definitive depositary receipts, but not in definitive form.
Definitive depositary receipts will be prepared without unreasonable delay,
and the temporary depositary receipts will be exchangeable for definitive
depositary receipts at our expense.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all cash dividends or other cash
distributions in respect of the preferred stock to the record depositary
shareholders based on the number of the depositary shares owned by that holder
on the relevant record date. The depositary will distribute only that amount
which can be distributed without attributing to any depositary shareholders a
fraction of one cent, and
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any balance not so distributed will be added to and treated as part of the next
sum received by the depositary for distribution to the depositary shareholders
of record.
If there is a distribution other than in cash, the depositary will
distribute property to the depositary shareholders of record on a pro rata
basis, unless the depositary determines that it is not feasible to make that
distribution. In that case, the depositary may, with our consultation, adopt a
method it deems equitable and practicable for making that distribution,
including any sale of property and the distribution of the net proceeds from
that sale to the concerned holders.
Each deposit agreement will also contain provisions relating to the manner
in which any subscription or similar rights we offer to preferred stockholders
of the relevant series will be made available to depositary shareholders.
WITHDRAWAL OF STOCK
Upon surrender of depositary receipts at the depositary's office, the holder
of the relevant depositary shares will be entitled to the number of whole shares
of the related series of preferred stock and any money or other property those
depositary shares represent. Depositary shareholders will be entitled to receive
whole shares of the related preferred stock series on the basis described in the
relevant prospectus supplement, but holders of those whole preferred stock
shares will not afterward be entitled to receive depositary shares in exchange
for their shares. If the depositary receipts the holder delivers evidence a
depositary share number exceeding the whole share number of the related
preferred stock series to be withdrawn, the depositary will deliver to that
holder a new depositary receipt evidencing the excess depositary share number.
REDEMPTION; LIQUIDATION
The terms on which the depositary shares relating to the preferred stock of
any series may be redeemed, and any amounts distributable upon our liquidation,
dissolution or winding up, will be described in the relevant prospectus
supplement.
CONVERSION
The depositary shares, as such, are not convertible or exchangeable into our
common stock or any of our other securities or property. Nevertheless, the
prospectus supplement relating to an offering of depositary shares may provide
that the holders of depositary receipts may surrender their depositary receipts
to the depositary with written instructions to the depositary to instruct us to
cause the conversion or exchange of the preferred stock represented by these
depositary shares.
VOTING
Upon receiving notice of any meeting at which preferred stockholders of any
series of preferred stock underlying the depositary shares are entitled to vote,
the depositary will mail the information contained in that notice to the
depositary shareholders of record relating to that series of preferred stock.
Each depositary shareholder on the record date will be entitled to instruct the
depositary on how to vote the shares of preferred stock underlying that holder's
depositary shares. The depositary will vote the preferred stock shares
underlying those depositary shares according to those instructions, and we will
take actions we deem necessary to enable the depositary to do so. If the
depositary does not receive specific instructions from the depositary
shareholders relating to that series of preferred stock, it will abstain from
voting those preferred stock shares, unless otherwise mentioned in the relevant
prospectus supplement.
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AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The depositary receipt form evidencing the depositary shares and the
relevant deposit agreement may be amended by us and the depositary. However, any
amendment that significantly affects the rights of the depositary shareholders
will not be effective unless a majority of the outstanding depositary
shareholders approve that amendment. We or the depositary may terminate a
deposit agreement only if:
- we have redeemed or reacquired all outstanding depositary shares relating
to the deposit agreement;
- all preferred stock of the relevant series has been withdrawn;
- there has been a final distribution in respect of the relevant series of
preferred stock in connection with our liquidation, dissolution or winding
up and that distribution has been made to the relevant depositary
shareholders;
- all outstanding depository shares have been converted into or exchanged
for other securities; or
- upon determination by Citizens to terminate the deposit agreement.
CHARGES OF DEPOSITARY
We will pay all charges of each depositary in connection with the initial
deposit and any redemption of the preferred stock. Depositary shareholders will
be required to pay any other transfer and other taxes and governmental charges
and any other charges expressly provided in the deposit agreement to be for
their accounts.
Each depositary will forward to the relevant depositary shareholders all
reports and communications that we are required to furnish to our preferred
stockholders.
Neither any depositary nor Citizens will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under any deposit agreement. The obligations of each depositary
under any deposit agreement will be limited to performance in good faith of
their duties under that agreement, and they will not be obligated to prosecute
or defend any legal proceeding in respect of any depositary shares or preferred
stock unless they are provided with satisfactory indemnity. They may rely upon
written advice of counsel or accountants, or information provided by persons
presenting preferred stock for deposit, depositary shareholders or other persons
believed to be competent, and on documents believed to be genuine.
TITLE
We, each depositary and any of their agents may treat the registered owner
of any depositary share as the absolute owner of that share, whether or not any
payment for that depositary share is overdue and despite any notice to the
contrary, for any purpose. See "Legal Ownership of Securities."
RESIGNATION AND REMOVAL OF DEPOSITARY
A depositary may resign at any time by delivering to us notice of its
election to resign, and we may remove a depositary, and resignation or removal
will take effect upon the appointment of a successor depositary and its
acceptance of appointment.
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PLAN OF DISTRIBUTION
We may sell securities directly to purchasers, through agents, to dealers,
to underwriters or in any combination of these ways. Agents or dealers may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933 and
any discounts or commissions received by them from us and any profit on the
resale of securities by them may be considered underwriting discounts and
commissions under the Securities Act of 1933. Any such underwriter or agent will
be identified, and any such compensation received from us will be described in
the prospectus supplement relating to those securities.
We may directly solicit offers to purchase securities or designate agents to
do so. Any agent will be named, and any commissions payable by us to such agent
(or the method by which such commissions can be determined) will be set forth,
in the applicable prospectus supplement. If we use underwriters or dealers in a
sale, the securities will be acquired by the underwriters or dealers for their
own account. The underwriters or dealers may resell the securities from time to
time in one or more transactions, including negotiated transactions at a fixed
public offering price or at varying prices determined at the time of sale. The
securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more of
such firms. Unless otherwise indicated in the applicable prospectus supplement,
the obligations of the underwriters to purchase all the securities of the series
offered will be subject to customary conditions and the underwriters will be
obligated to purchase all the securities of the series offered if any are
purchased. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
We may authorize underwriters, dealers and agents to solicit offers by
institutional investors to purchase offered securities under contracts providing
for payment and delivery on a future date specified in the prospectus
supplement. The prospectus supplement will also describe the public offering
price for the securities and the commission payable for solicitation of these
delayed delivery contracts. Delayed delivery contracts will contain definite
fixed price and quantity terms. The obligations of a purchaser under these
delayed delivery contracts will be subject to only two conditions:
- that the institution's purchase of the securities at the time of delivery
of the securities is not prohibited under the law of any jurisdiction to
which the institution is subject; and
- that we shall have sold to the underwriters the total principal amount of
the offered securities, less the principal amount covered by the delayed
delivery contracts.
We may have agreements with agents, dealers and underwriters to indemnify
them against specified liabilities, including liabilities under the Securities
Act of 1933, or to contribute to payments they may be required to make in
respect of these liabilities. Agents, dealers or underwriters may engage in
transactions with or perform services for us in the ordinary course of business.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934 and, in accordance therewith, file reports and other information
with the SEC. You may read and copy any document we file at the SEC's public
reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at its regional offices located at 500 West Madison
Street, 14th Floor, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such material can also be obtained by
mail from the Public Reference Section of the Commission, at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at the
prescribed rates. Please call the SEC at 1-800-SEC-0330 for more information on
their public reference rooms and their copy charges, as well as the SEC's Public
Reference Section's charges for mailing copies of the documents we have filed.
The SEC maintains a website at http://www.sec.gov that contains
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reports, proxy and information statements and other information on a delayed
basis regarding registrants, including us, that file electronically with the
SEC.
Our common stock is listed on the New York Stock Exchange and any reports,
proxy and information statements and other information we file with the SEC may
also be inspected and copied at the offices of the New York Stock Exchange,
Inc., located at 20 Broad Street, New York, New York 10005.
INCORPORATION OF DOCUMENTS BY REFERENCE
Some of the information that you may want to consider in deciding whether to
invest in any of our securities is not included in this prospectus, but rather
is incorporated by reference to specific reports that we have filed with the
SEC. This allows us to disclose important information to you by referring you to
those documents rather than repeating them in full in this prospectus. The
information incorporated by reference in this prospectus contains important
business and financial information. In addition, information that we file with
the SEC after the date of this prospectus automatically updates and supersedes
the information contained in this prospectus and incorporated filings. We have
previously filed the following documents with the SEC (File No. 001-11001) and
are incorporating them by reference into this prospectus:
- Annual Report on Form 10-K of Citizens Communications Company for the year
ended December 31, 2000 and filed with the SEC on March 9, 2001;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on March 29, 2001, including the audited financial statements of
selected US WEST exchanges and the Frontier ILEC businesses as of
December 31, 1999 and 1998 and for each of the years in the three-year
period ended December 31, 1999 and the unaudited financial statements for
the nine months ended September 30, 2000 and 1999 and pro forma financial
information;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on March 8, 2001, including our press release announcing fourth
quarter results and including our financial and operating data tables;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on February 13, 2001, including financial statements of the GTE
combined entities as of September 30, 2000 and for the nine months ended
September 30, 2000 and 1999 and financial statements of Contel of
Minnesota, Inc. for the eight months ended August 31, 2000 and 1999, and
pro forma financial information; and
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on November 14, 2000, including the audited financial statements
of the GTE combined entities and Contel of Minnesota, Inc. as of
December 31, 1999 and 1998 and for each of the years in the three-year
period ended December 31, 1999 and for the six months ended June 30, 2000
and 1999 and pro forma financial information.
We also incorporate by reference all documents subsequently filed by us
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
after the date of this prospectus until our offering is completed.
We will provide you, upon written or oral request, with a copy of any of
these documents, at no cost. You should direct your request, either in writing
or by telephone, to
Citizens Communications Company
3 High Ridge Park, Stamford, Connecticut 06905
Attn.: Office of the Secretary
Telephone 203-614-5600.
40
VALIDITY OF SECURITIES
The validity of the securities offered hereby will be passed upon by
Winston & Strawn, 200 Park Avenue, New York, New York, counsel for the Company.
EXPERTS
Our consolidated financial statements as of December 31, 2000 and 1999, and
for each of the years in the three-year period ended December 31, 2000,
incorporated by reference in this prospectus from our Annual Report on
Form 10-K, have been so incorporated by reference in reliance upon the report of
KPMG LLP, independent public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The financial statements of the GTE combined entities as of December 31,
1999 and 1998 and for each of the years in the three-year period ended
December 31, 1999, incorporated by reference in this prospectus from our Current
Report on Form 8-K filed November 14, 2000, have been so incorporated by
reference in reliance upon the report of KPMG LLP, independent public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The financial statements of Contel of Minnesota, Inc. incorporated by
reference in this prospectus and elsewhere in the registration statement to the
extent and for the periods indicated in their reports dated January 27, 2000 and
January 28, 1999 have been audited by Arthur Andersen LLP, independent public
accountants, and are included herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said reports.
The special purpose financial statements of the selected, assets,
liabilities and parent's equity of Qwest Communications International Inc.'s
(formerly US WEST, Inc.) selected Qwest exchanges (formerly selected US WEST
exchanges) as of December 31, 1999 and 1998 and the related statements of
revenue and expenses and cash flows for each of the three years in the period
ended December 31, 1999, incorporated by reference in this prospectus from our
Current Report on Form 8-K filed on March 29, 2001, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are so incorporated by reference in reliance upon the
report of said firm, incorporated by reference herein, and upon the authority of
said firm as experts in accounting and auditing.
The combined financial statements of the Frontier ILEC businesses as of
December 31, 1999 and for the nine-month period ended September 30, 1999 and the
three-month period ended December 31, 1999, incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Anderson LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
The combined financial statements of the Frontier ILEC businesses as of
December 31, 1997 and 1998 and for each of the years in the two-year period
ended December 31, 1998, incorporated by reference in this prospectus from our
Current Report on Form 8-K filed March 29, 2001, have been so incorporated by
reference in reliance upon the report of PricewaterhouseCoopers LLP, independent
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
41
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
DESCRIPTION AMOUNT(1)
- ----------- ----------
Securities and Exchange Commission filing fee............... $ 750,000
Printing and engraving...................................... $ 50,000
Legal Services.............................................. $ 200,000
Accounting Services......................................... $1,500,000
Blue Sky Fees............................................... $ 15,000
Miscellaneous............................................... $ 50,000
----------
Total(1).................................................. $2,565,000
==========
- ------------------------
(1) All fees are estimated except for the Securities and Exchange Commission
filing fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Citizens Communications Company is incorporated under the Delaware General
Corporation Law and is empowered by Section 145 of such law to indemnify
officers and directors against certain expenses, liabilities and payments,
including liabilities arising under the Securities Act of 1933, as therein
provided. In addition, by-laws 24 and 24A of Citizens Communication Company and
a resolution adopted by our board of directors in connection with the issuance
of the securities provide for indemnification of specified persons, including
our officers and directors for liabilities, including those arising under said
Act, as provided in said by-laws and resolution. Generally, by-laws 24 and 24A
of our by-laws provide that, to the fullest extent permitted by applicable law,
we shall indemnify and hold harmless, among others, any of our officers or
directors or any other entity for which he or she is acting at our request, from
and against any loss, damage or claim incurred by such person by reason of any
act or omission performed or omitted by such person in good faith on our behalf.
Such by-laws, generally speaking, also provides that, to the fullest extent
permitted by applicable law, expenses (including legal fees) incurred by a
person in defending against any such liability shall be advanced by us subject
to specified conditions. Citizens Communications Company's Certificate of
Incorporation further provides that no director shall be liable to us or our
stockholders for monetary damages for breach of fiduciary duty as a director,
with stated exceptions.
We also maintain insurance providing coverage for us and our subsidiaries
against obligations incurred as a result of indemnification of our officers and
directors. The coverage also insures the officers and directors for a liability
against which they may not be indemnified by us or our subsidiaries but excludes
specified dishonest acts.
ITEM 16. EXHIBITS.
An Exhibit Index, containing a list of all exhibits to this registration
statement commences on page II-5.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-1
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of a prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be an initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act of 1939 in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
such Act.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Stamford and State of Connecticut on the 30th day of
March, 2001.
CITIZENS COMMUNICATIONS COMPANY
By: /s/ SCOTT N. SCHNEIDER
-----------------------------------------
Name: Scott N. Schneider
Title: Vice Chairman of the Board and
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Scott N. Schneider, as such person's true and
lawful attorney-in-fact and agent, with full power of substitution and
revocation, for such person and in such person's name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same with all
exhibits thereto, and the other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and things
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, or his substitute, may lawfully do or cause to
be done by virtue hereof.
SIGNATURE TITLE DATE
--------- ----- ----
Chairman of the Board,
/s/ LEONARD TOW Chief Executive Officer
------------------------------------------- (principal executive March 30, 2001
(Leonard Tow) officer), and Director
/s/ RUDY J. GRAF Vice Chairman of the Board,
------------------------------------------- Chief Operating Officer, March 30, 2001
(Rudy J. Graf) President and Director
/s/ SCOTT N. SCHNEIDER Vice Chairman of the Board,
------------------------------------------- Executive Vice President March 30, 2001
(Scott N. Schneider) and Director
/s/ DONALD B. ARMOUR Vice President, Finance and
------------------------------------------- Treasurer (principal March 30, 2001
(Donald B. Armour) financial officer)
II-3
SIGNATURE TITLE DATE
--------- ----- ----
Vice President and Chief
/s/ ROBERT J. LARSON Accounting Officer
------------------------------------------- (principal accounting March 30, 2001
(Robert J. Larson) officer)
/s/ NORMAN I. BOTWINIK
------------------------------------------- Director March 30, 2001
(Norman I. Botwinik)
/s/ AARON I. FLEISCHMAN
------------------------------------------- Director March 30, 2001
(Aaron I. Fleischman)
/s/ STANLEY HARFENIST
------------------------------------------- Director March 30, 2001
(Stanley Harfenist)
------------------------------------------- Director March , 2001
(Andrew N. Heine)
/s/ JOHN L. SCHROEDER
------------------------------------------- Director March 30, 2001
(John L. Schroeder)
/s/ ROBERT D. SIFF
------------------------------------------- Director March 30, 2001
(Robert D. Siff)
/s/ ROBERT A. STANGER
------------------------------------------- Director March 30, 2001
(Robert A. Stanger)
------------------------------------------- Director March , 2001
(Charles H. Symington, Jr.)
------------------------------------------- Director March , 2001
(Edwin Tornberg)
------------------------------------------- Director March , 2001
(Claire L. Tow)
II-4
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- --------------------- ------------------------------------------------------------
1.1 Registrant's Restated Certificate of Incorporation, as
restated May 19, 2000 (incorporated by reference to Exhibit
3-200.1 of the Registrant's Quarterly Report on Form 10-Q
(Commission File No. 001-11001), for the six months ended
June 30, 2000)
1.2 Registrant's By-laws, as amended to date (incorporated by
reference to Exhibit 3-200.2 of the Registrant's Annual
Report on Form 10-Q (Commission File No. 001-11001), for the
nine months ended September 30, 2000)
1.3 Form of Equity Securities Underwriting Agreement*
1.4 Form of Debt Securities Underwriting Agreement*
4.1 Form of Indenture for Senior Debt Securities*
4.2 Form of Indenture for Subordinated Debt Securities*
4.3 Form of Warrant Agreement*
5.1 Opinion of Winston & Strawn*
12.1 Statement of computation of ratio of earnings to fixed
charges*
23.1 Consent of Winston & Strawn (included in the opinion filed
as Exhibit 5.1 to this Registration Statement)*
23.2 Consent of KPMG LLP, independent public accountants
23.3 Consent of KPMG LLP, independent public accountants
23.4 Consent of Arthur Andersen LLP, independent public
accountants
23.5 Consent of Arthur Andersen LLP, independent public
accountants
23.6 Consent of Arthur Andersen LLP, independent public
accountants
23.7 Consent of PricewaterhouseCoopers LLP, independent
accountants
24.1 Power of Attorney from officers and directors (included in
the signature pages hereto)
25.1 Statement of Eligibility and Qualification on Form T-1 of
Senior Trustee under the Trust Indenture Act of 1939, as
amended*
25.2 Statement of Eligibility and Qualification on Form T-1 of
Subordinated Trustee under the Trust Indenture Act of 1939,
as amended*
- ------------------------
* To be filed by amendment
II-5