OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
BBN CORPORATION
AT
$29 NET PER SHARE
BY
GTE MASSACHUSETTS INCORPORATED
A WHOLLY OWNED SUBSIDIARY OF
GTE CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, JUNE 9, 1997, UNLESS EXTENDED.
THE BOARD OF DIRECTORS OF BBN CORPORATION (THE "COMPANY") HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER, DETERMINED THAT THE
OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS
OF THE COMPANY, AND UNANIMOUSLY RECOMMENDS ACCEPTANCE OF THE OFFER AND
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER BY THE
STOCKHOLDERS OF THE COMPANY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES OF
COMMON STOCK, $1.00 PAR VALUE PER SHARE (INCLUDING THE ASSOCIATED RIGHTS)
(COLLECTIVELY, THE "SHARES"), WHICH, WHEN ADDED TO THE SHARES THEN
BENEFICIALLY OWNED BY GTE CORPORATION ("PARENT") CONSTITUTES AT LEAST TWO-
THIRDS OF THE TOTAL NUMBER OF SHARES OUTSTANDING (THE "MINIMUM CONDITION").
THE MINIMUM CONDITION MAY BE WAIVED BY GTE MASSACHUSETTS INCORPORATED
("PURCHASER"). SEE SECTION 16.
----------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such holder's
Shares (as defined herein) should either (a) complete and sign the Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in
the Letter of Transmittal and mail or deliver it together with the
certificate(s) evidencing the tendered Shares and all other required documents
to the Depositary, or tender such Shares pursuant to the procedure for book-
entry transfer set forth in Section 3 of this Offer to Purchase or (b) request
such stockholder's broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for such stockholder. A stockholder whose
Shares are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact such broker, dealer, commercial bank,
trust company or other nominee if such stockholder desires to tender such
Shares.
Any stockholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available or who cannot comply with
the procedures for book-entry transfer on a timely basis may tender such
Shares by following the procedures for guaranteed delivery set forth in
Section 3 of this Offer to Purchase.
Questions and requests for assistance and for additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed
Delivery and other related materials may be directed to the Information Agent
or the Dealer Manager at their respective addresses and telephone numbers set
forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed
Delivery and the other tender offer materials may also be obtained from
brokers, dealers, commercial banks or trust companies.
----------------
The Dealer Managers for the Offer are:
XXXXXXX, XXXXX & CO.
----------------
The date of this Offer to Purchase is May 12, 1997
TABLE OF CONTENTS
PAGE
----
INTRODUCTION.............................................................. 3
1. Terms of the Offer.................................................... 5
2. Acceptance for Payment and Payment.................................... 6
3. Procedures for Tendering Shares....................................... 7
4. Withdrawal Rights..................................................... 9
5. Certain Tax Considerations............................................ 10
6. Price Range of Shares; Dividends...................................... 11
7. Certain Information Concerning the Company............................ 11
8. Certain Information Concerning Purchaser and Parent................... 15
9. Sources and Amounts of Funds.......................................... 17
10. Background of the Offer; Contacts with the Company.................... 18
11. The Offer and Merger; Merger Agreement; Stock Option Agreement........ 19
12. Purpose of the Offer and the Merger; Plans for the Company............ 33
13. Effect of the Offer on the Market for the Shares; Exchange Act
Registration; Margin Regulations...................................... 33
14. Dividends and Distributions........................................... 34
15. Extension of Tender Period; Amendment; Termination.................... 35
16. Conditions to the Offer............................................... 36
17. Certain Legal Matters; Regulatory Approvals........................... 37
18. Fees and Expenses..................................................... 40
19. Miscellaneous......................................................... 40
Schedule I Directors and Executive Officers of Parent and Purchaser
2
To the Holders of Common Stock of
BBN Corporation:
INTRODUCTION
GTE Massachusetts Incorporated, a Massachusetts corporation ("Purchaser")
and a wholly owned subsidiary of GTE Corporation, a New York corporation
("Parent"), hereby offers to purchase all outstanding shares of common stock,
$1.00 par value per share (the "Company Common Stock") and the associated
common stock purchase rights (the "Rights," and together with the Company
Common Stock, "Shares"), of BBN Corporation, a Massachusetts corporation (the
"Company"), at $29.00 per Share, net to the seller in cash (the "Offer
Price"), upon the terms and subject to the conditions set forth in this Offer
to Purchase and in the related Letter of Transmittal (which, as amended or
supplemented from time to time, together constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by Purchaser
pursuant to the Offer. Purchaser will pay all charges and expenses of Xxxxxxx,
Xxxxx & Co., which are acting as the Dealer Managers (in such capacity, the
"Dealer Manager"), The First National Bank of Boston (the "Depositary"), and
X.X. Xxxx & Co., Inc. (the "Information Agent"), incurred in connection with
the Offer in accordance with the terms of agreements entered into between
Purchaser and such persons. See Section 18. For purposes of this Offer to
Purchase, references to "Section" are references to a section of this Offer to
Purchaser, unless the context otherwise requires.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES
WHICH, WHEN ADDED TO THE SHARES THEN BENEFICIALLY OWNED BY PARENT, CONSTITUTES
AT LEAST TWO-THIRDS OF THE TOTAL NUMBER OF SHARES OUTSTANDING. THE MINIMUM
CONDITION MAY BE WAIVED BY PURCHASER. SEE SECTION 16.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of May 5, 1997 (the "Merger Agreement"), by and among the Company, Parent
and Purchaser. The Merger Agreement provides, among other things, that as
promptly as practicable following the completion of the Offer and the
satisfaction or waiver of certain conditions, including the purchase of Shares
pursuant to the Offer (sometimes referred to herein as the "consummation" of
the Offer) and the approval and adoption of the Merger Agreement by the
stockholders of the Company, if required by applicable law, Purchaser will be
merged with and into the Company (the "Merger"), with the Company as the
surviving corporation (the "Surviving Corporation"). In the Merger, each
issued and outstanding Share (other than Dissenting Shares (as hereinafter
defined)) not owned by Parent, Purchaser, the Company or any of their wholly
owned subsidiaries will be converted into and represent the right to receive
$29.00 in cash or any higher price that may be paid per Share in the Offer,
without interest (the "Merger Price"). See Section 11.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD" OR "BOARD OF DIRECTORS")
HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER,
DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS
OF THE STOCKHOLDERS OF THE COMPANY, AND UNANIMOUSLY RECOMMENDS ACCEPTANCE OF
THE OFFER AND APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER BY
THE STOCKHOLDERS OF THE COMPANY.
Xxxx. Xxxxx & Sons Incorporated (the "Company's Financial Advisor"),
financial advisor to the Company, has delivered to the Board a written opinion
dated May 6, 1997 to the effect that, as of such
3
date and based upon and subject to certain matters stated in such opinion, the
cash consideration to be received by the holders of Shares (other than Parent
and its affiliates) in the Offer and the Merger is fair to such holders from a
financial point of view. A copy of such opinion is included with the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-
9"), which is being mailed to stockholders concurrently herewith, and should
be read carefully in its entirety for a description of the assumptions made,
matters considered and limitations on the review undertaken by the Company's
Financial Advisor.
The Merger Agreement provides that in the event that Purchaser acquires at
least a majority of the Shares outstanding pursuant to the Offer, Parent shall
be entitled to designate for appointment or election to the Board, upon
written notice to the Company, such number of persons so that the designees of
Parent constitute the same percentage (but in no event less than a majority)
of the Board (rounded up to the next whole number) as the percentage of Shares
acquired pursuant to the Offer. Prior to the consummation of the Offer, the
Company will increase the size of the Board or obtain the resignation of such
number of directors as is necessary to enable such number of Parent designees
to be so elected. In the Merger Agreement, the Company, Parent and Purchaser
have agreed to use their respective reasonable best efforts to ensure that at
least two of the members of the Board shall, at all times prior to the
Effective Time (as defined in Section 11 hereof) be, Continuing Directors (as
defined below). Following the election or appointment of Purchaser's designees
as set forth above and prior to the Effective Time, any amendment of the
Merger Agreement or any amendment to the Articles of Organization or By-Laws
of the Company inconsistent with the Merger Agreement, any termination of the
Merger Agreement by the Company, any extension by the Company of the time for
the performance of any of the obligations or other acts of Parent or Purchaser
or any waiver of any of the Company's rights under the Merger Agreement will
require the concurrence of a majority of the Continuing Directors. For
purposes hereof, the term "Continuing Director" means (i) any member of the
Board as of the date of the Merger Agreement, (ii) any member of the Board who
is unaffiliated with, and not a designee or nominee of Parent or Purchaser, or
(iii) any successor of a Continuing Director who is (A) unaffiliated with, and
not a designee or nominee of, Parent or Purchaser, and (B) recommended to
succeed a Continuing Director by a majority of the Continuing Directors then
on the Board, and, in the case under clause (iii) who is not an employee of
the Company.
According to the Company, as of May 5, 1997, (i) 21,230,097 Shares were
validly issued and outstanding, (ii) 3,733,729 Shares would be issuable upon
exercise of outstanding Options (as defined in Section 11) (both vested and
unvested), (iii) 2,823,000 Shares would be issuable upon conversion of the
Company's 6% Convertible Subordinated Notes due 2012 (the "Subordinated
Notes"), (iv) under certain circumstances up to 120,000 Shares would be
issuable pursuant to the ESPP (as defined in Section 11) and (v) 4,225,000
Shares were reserved for issuance upon exercise of the Termination Option (as
defined in Section 11). Based upon the foregoing information and assuming (i)
none of the Options will be exercised for Shares and all such Options will
instead be cancelled or converted as provided in Section 11 hereof, (ii) no
Shares will be issued pursuant to the ESPP and instead all rights to acquire
Shares pursuant to the ESPP will be cancelled in exchange for a cash payment
as provided in Section 11 hereof, (iii) none of the Subordinated Notes will be
converted into Shares and (iv) none of the common stock purchase rights (the
"Rights") issued under the Rights Agreement dated as of June 23, 1988, between
the Company and The First National Bank of Boston, as Rights Agent (as
amended, the "Rights Agreement"), will be exercised for Shares, the Minimum
Condition would be satisfied if 14,153,398 Shares were validly tendered and
not withdrawn. Prior to the execution of the Merger Agreement, the Rights
Agreement was amended so that the transactions contemplated by the Merger
Agreement are exempt from certain provisions of the Rights Agreement.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
4
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer, Purchaser will
accept for payment and pay for all Shares which are validly tendered prior to
the Expiration Date and not withdrawn in accordance with Section 4. The term
"Expiration Date" means 12:00 midnight, New York City time, on Monday, June 9,
1997, unless and until Purchaser, subject to the terms of the Merger
Agreement, shall have extended the period of time during which the Offer is
open, in which event the term "Expiration Date" shall refer to the latest time
and date at which the Offer, as so extended by Purchaser, shall expire.
Pursuant to the Merger Agreement, and subject to the terms and conditions of
the Offer, if all of the Conditions (as defined in Section 16) are not
satisfied on the initial Expiration Date, and the Merger Agreement has not
been terminated in accordance with its terms, Purchaser shall extend (and re-
extend) the Offer to provide time to satisfy such Conditions through the Final
Termination Date. The "Final Termination Date" shall initially be August 15,
1997, provided, however, if Purchaser shall extend the Offer pursuant to the
provisions of the last sentence of this paragraph beyond August 15, 1997, the
Final Termination Date shall be November 15, 1997. From and after the Final
Termination Date, if all of the Conditions have not been satisfied on any
Expiration Date of the Offer and the Merger Agreement has not been terminated
in accordance with its terms, Purchaser may but shall not be obligated to
extend and re-extend the Offer to provide time to satisfy such Conditions. In
addition, whether or not the Conditions have been satisfied, Purchaser may
extend and re-extend the Offer, from time to time, but in no event beyond
November 15, 1997 if it believes such extension is advisable in order to
facilitate the orderly transition of the business of the Company and to
preserve and maintain the Company's business relationships. Parent and
Purchaser do not expect to utilize this right to extend the Offer. See Section
15.
Subject to the terms of the Merger Agreement, Purchaser expressly reserves
the right to amend the terms and conditions of the Offer in any respect by
giving oral or written notice of such amendment to the Depositary. Without the
consent of the Company, however, no amendment may be made which (x) decreases
the price per Share or changes the form of consideration payable in the Offer,
(y) decreases the number of Shares sought, or (z) imposes additional
conditions to the Offer or amends any other term of the Offer in any manner
adverse to the holders of Shares.
The Offer is subject to certain Conditions set forth in Section 16,
including satisfaction of the Minimum Condition and the expiration or
termination of any waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"). If any such Condition is
not satisfied prior to the expiration of the Offer, Purchaser may, subject to
the terms of the Merger Agreement, (i) terminate the Offer and return all
tendered Shares to tendering stockholders, (ii) extend the Offer and, subject
to withdrawal rights as set forth in Section 4, retain all such Shares until
the expiration of the Offer as so extended, (iii) waive such Condition and,
subject to any requirement to extend the period of time during which the Offer
is open, purchase all Shares validly tendered and not withdrawn by the
Expiration Date or (iv) delay acceptance for payment of (whether or not the
Shares have theretofore been accepted for payment), or payment for, any Shares
tendered and not withdrawn, subject to applicable law, until satisfaction or
waiver of the Conditions to the Offer. For a description of Purchaser's right
to extend the period of time during which the Offer is open, and to amend,
delay or terminate the Offer, see Section 15. Any extension, amendment or
termination will be followed as promptly as practicable by public announcement
thereof, the announcement in the case of an extension to be issued no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date in accordance with Rules 14d-4(c), 14d-
6(d) and 14e-1(d) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Without limiting the obligation of Purchaser under such rules
or the manner in which Purchaser may choose to make any public announcement,
Purchaser currently intends to make announcements by issuing a release to the
Dow Xxxxx News Service.
5
If Purchaser extends the Offer, or if Purchaser (whether before or after its
acceptance for payment of Shares) is delayed in its purchase of or payment for
Shares or is unable to pay for Shares pursuant to the Offer for any reason,
then, without prejudice to Purchaser's rights under the Offer, the Depositary
may retain tendered Shares on behalf of Purchaser, and such Shares may not be
withdrawn except to the extent tendering stockholders are entitled to
withdrawal rights as described in Section 4. However, the ability of Purchaser
to delay the payment for Shares which Purchaser has accepted for payment is
limited by Rule 14e-1(c) under the Exchange Act, which requires that a bidder
pay the consideration offered or return the securities deposited by or on
behalf of holders of securities promptly after the termination or withdrawal
of the Offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including the Minimum Condition), subject to the Merger Agreement, Purchaser
will disseminate additional tender offer materials and extend the Offer if and
to the extent required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act.
The minimum period during which the Offer must remain open following material
changes in the terms of the Offer or information concerning the Offer, other
than a change in price or a change in percentage of securities sought, will
depend upon the facts and circumstances, including the relative materiality of
the terms or information. With respect to a change in price or a change in
percentage of securities sought, a minimum ten business day period is required
to allow for adequate dissemination to stockholders and investor response. If,
prior to the Expiration Date, Purchaser should decide to increase the price
per Share being offered in the Offer, such increase will be applicable to all
stockholders whose Shares are accepted for payment pursuant to the Offer. As
used in this Offer to Purchase, "business day" means any day other than a
Saturday, Sunday or a federal holiday and consists of the time period from
12:01 AM through 12:00 midnight, New York City time, as computed in accordance
with Rule 14d-1 under the Exchange Act.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares and will be furnished
to brokers, banks and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms and subject to the terms of the Merger Agreement and the
Conditions of the Offer, Purchaser will accept for payment and pay for all
Shares validly tendered and not withdrawn prior to the Expiration Date as soon
as practicable after the Expiration Date. For a description of Purchaser's
right to terminate the Offer and not accept for payment or pay for Shares or
to delay acceptance for payment or payment for Shares, see Section 15.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment tendered Shares if, as and when Purchaser gives oral or written notice
to the Depositary of its acceptance of the tenders of such Shares. Payment for
Shares purchased pursuant to the Offer will be made by deposit of the purchase
price with the Depositary, which will act as agent for tendering stockholders
for the purpose of receiving payment from Purchaser and transmitting such
payments to tendering stockholders. In all cases, payment for Shares accepted
for payment pursuant to the Offer will be made only after timely receipt by
the Depositary of (i) certificates evidencing such Shares ("Stock
Certificates") or confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Shares into the Depositary's account at one of the
Book-Entry Transfer Facilities (as defined in Section 3), (ii) a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), or
in the case of a book-entry transfer, an Agent's Message (as defined in
Section 3) and (iii) any other required documents. For a description of the
procedure for tendering Shares pursuant to the Offer, see Section
6
3. Accordingly, payment may be made to tendering stockholders at different
times if delivery of the Shares and other required documents occur at
different times. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY PURCHASER ON
THE CONSIDERATION PAID FOR SHARES PURSUANT TO THE OFFER, REGARDLESS OF ANY
DELAY IN MAKING SUCH PAYMENT.
If Purchaser increases the consideration to be paid for Shares pursuant to
the Offer, Purchaser will pay such increased consideration for all Shares
purchased pursuant to the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates the right to purchase Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve Purchaser of its obligations under the Offer or prejudice the rights
of tendering stockholders to receive payment for Shares validly tendered and
accepted for payment.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if Stock Certificates are submitted for more Shares than are
tendered, Stock Certificates for Shares not purchased or tendered will be
returned (or, in the case of Shares tendered by book-entry transfer, such
Shares will be credited to an account maintained at one of the Book-Entry
Transfer Facilities (as defined in Section 3)), without expense to the
tendering stockholder, as promptly as practicable after the expiration or
termination of the Offer.
3. PROCEDURES FOR TENDERING SHARES
VALID TENDER. To tender Shares pursuant to the Offer, either (a) a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees or an Agent's Message (in the case of any
book-entry transfer), and any other documents required by the Letter of
Transmittal must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date
and either (i) the Stock Certificates evidencing such Shares to be tendered
must be received by the Depositary along with the Letter of Transmittal or
(ii) such Shares must be delivered to the Depositary pursuant to the
procedures for book-entry transfer described below and a Book-Entry
Confirmation must be received by the Depositary including an Agent's Message,
in each case prior to the Expiration Date, or (b) the tendering stockholder
must comply with the guaranteed delivery procedures described below. The term
"Agent's Message" means a message transmitted by a Book-Entry Transfer
Facility to and received by the Depositary and forming a part of a Book-Entry
Confirmation, which states that such Book-Entry Transfer Facility has received
an express acknowledgement from the participant in such Book-Entry Transfer
Facility tendering the Shares which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that Purchaser may enforce such
agreement against such participant.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at each of The Depository Trust Company and the Philadelphia
Depository Trust Company (collectively referred to as the "Book-Entry Transfer
Facilities") for purposes of the Offer within two business days after the date
of this Offer to Purchase, and any financial institution that is a participant
in the system of any Book-Entry Transfer Facility may make book-entry delivery
of Shares by causing a Book-Entry Transfer Facility to transfer such Shares
into the Depositary's account at a Book-Entry Transfer Facility in accordance
with the procedures of such Book-Entry Transfer Facility. However, although
delivery of Shares may be effected through book-entry transfer, the Letter of
Transmittal (or facsimile thereof) properly completed and duly executed,
together with any required signature guarantees and any other required
documents, must, in any case, be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the guaranteed delivery procedures described below must be
complied with. DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
7
SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a recognized member of a Medallion Signature Guarantee Program
or by any other "eligible guarantor institution" as defined in Rule 17Ad-15
under the Exchange Act (each of the foregoing, an "Eligible Institution").
Signatures on a Letter of Transmittal need not be guaranteed (a) if the Letter
of Transmittal is signed by the registered holder of the Shares tendered
therewith and such holder has not completed the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on the
Letter of Transmittal or (b) if such Shares are tendered for the account of an
Eligible Institution.
If a Stock Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Stock
Certificate not accepted for payment or not tendered is to be returned, to a
person other than the registered holder(s), then the Stock Certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the Stock
Certificate, with the signature(s) on such Stock Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Stock Certificates are not immediately
available or time will not permit all required documents to reach the
Depositary on or prior to the Expiration Date, or the procedure for book-entry
transfer cannot be completed on a timely basis, such Shares may nevertheless
be tendered if all the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received by
the Depositary prior to the Expiration Date as provided below; and
(iii) the Stock Certificates for such Shares, in proper form for transfer
(or a Book-Entry Confirmation), together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees (or in the case of a book-entry transfer, an Agent's
Message) and any other documents required by the Letter of Transmittal, are
received by the Depositary within three trading days after the date of
execution of the Notice of Guaranteed Delivery. A "trading day" is any day
on which the New York Stock Exchange (the "NYSE") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mailed to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS, INCLUDING THROUGH BOOK-ENTRY TRANSFER FACILITIES, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
BACK-UP FEDERAL INCOME TAX WITHHOLDING. Under the federal income tax laws,
the Depositary will be required to withhold 31% of the amount of any payments
made to certain stockholders pursuant to the Offer. In order to avoid such
backup withholding, each tendering stockholder must provide the Depositary
with such stockholder's correct taxpayer identification number and certify
that such stockholder is not subject to back-up federal income tax withholding
by completing the Substitute Form W-9 included in the Letter of Transmittal
(see Instruction 10 of the Letter of Transmittal) or by filing a Form W-9 with
the Depositary prior to any such payments. If the stockholder is a nonresident
alien or
8
foreign entity not subject to backup withholding, the stockholder must give
the Depositary a completed Form W-8 Certificate of Foreign Status prior to
receipt of any payments.
OTHER REQUIREMENTS. By executing a Letter of Transmittal as set forth above,
a tendering stockholder irrevocably appoints designees of Purchaser as the
stockholder's attorneys-in-fact and proxies, in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full
extent of the stockholder's rights with respect to the Shares tendered by the
stockholder and accepted for payment by Purchaser (and any and all other
Shares or other securities or property issued or issuable in respect of such
Shares on or after the date of the Merger Agreement). All such proxies and
powers of attorney shall be irrevocable and coupled with an interest in the
tendered Shares. Such appointment is effective only upon acceptance for
payment of the Shares by Purchaser. Upon such acceptance for payment, all
prior proxies and consents given by the stockholder with respect to such
Shares and other securities will, without further action, be revoked, and no
subsequent proxies may be given nor any subsequent written consent executed by
such stockholder (and, if given or executed, will not be deemed to be
effective) with respect thereto. The designees of Purchaser will, with respect
to the Shares and other securities, be empowered to exercise all voting and
other rights of such stockholder as they in their sole discretion may deem
proper at any annual, special or adjourned meeting of the Company's
stockholders, by written consent or otherwise. Purchaser reserves the right to
require that, in order for Shares to be deemed validly tendered, immediately
upon Purchaser's acceptance for payment of such Shares, Purchaser is able to
exercise full voting and other rights with respect to such Shares (including
voting at any meeting of stockholders then scheduled or acting by written
consent without a meeting).
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer, as well as the tendering stockholder's representation
and warranty that such stockholder has the full power and authority to tender
and assign the Shares tendered, as specified in the Letter of Transmittal.
Purchaser's acceptance for payment of Shares tendered pursuant to the Offer
will constitute a binding agreement between the tendering stockholder and
Purchaser upon the terms and subject to the conditions of the Offer.
DETERMINATION OF VALIDITY. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance for payment
of any tendered Shares will be determined by Purchaser in its sole discretion,
which determination shall be final and binding. Purchaser reserves the
absolute right to reject any or all tenders of any Shares determined by it not
to be in proper form or the acceptance for payment of, or payment for which
may, in the opinion of Purchaser's counsel, be unlawful. Purchaser also
reserves the absolute right to waive any defect or irregularity in any tender
of Shares. No tender of Shares will be deemed to have been properly made until
all defects and irregularities relating thereto have been cured or waived.
Purchaser's interpretation of the terms and conditions of the Offer in this
regard (including the Letter of Transmittal and the Instructions thereto) will
be final and binding. None of Purchaser, Parent, the Depositary, the Dealer
Manager, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or will incur
any liability for failure to give any such notification.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date. Thereafter, such tenders are irrevocable, except
that they may be withdrawn at any time after July 11, 1997 if they have not
previously been accepted for payment as provided in this Offer to Purchase.
To be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase.
9
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name
of the registered holder, if different from that of the person who tendered
such Shares. If Stock Certificates evidencing Shares to be withdrawn have been
delivered to the Depositary, a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution (except in the case of Shares tendered
by an Eligible Institution), must be submitted prior to the release of such
Shares. In addition, such notice must specify, in the case of Shares tendered
by delivery of Stock Certificates, the name of the registered holder (if
different from that of the tendering stockholder) and the serial numbers shown
on the particular Stock Certificates evidencing the Shares to be withdrawn,
or, in the case of Shares tendered by book-entry transfer, the name and number
of the account at one of the Book-Entry Transfer Facilities to be credited
with the withdrawn Shares.
Withdrawals may not be rescinded, and Shares withdrawn will thereafter be
deemed not validly tendered for purposes of the Offer. However, withdrawn
Shares may be retendered by again following one of the procedures described in
Section 3 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. None of Purchaser, Parent, the
Depositary, the Dealer Manager, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
5. CERTAIN TAX CONSIDERATIONS
The following summary addresses the material federal income tax consequences
to holders of Shares who sell their Shares in the Offer. The summary does not
address all aspects of federal income taxation that may be relevant to
particular holders of Shares and thus, for example, may not be applicable to
holders of Shares who are not citizens or residents of the United States, who
are employees and who acquired their Shares pursuant to the exercise of
compensatory stock options, or who are entities that are otherwise subject to
special tax treatment under the Internal Revenue Code of 1986, as amended (the
"Code") (such as insurance companies, tax-exempt entities and regulated
investment companies); nor does this summary address the effect of any
applicable foreign, state, local or other tax laws. The discussion assumes
that each holder of Shares holds such Shares as a capital asset within the
meaning of Section 1221 of the Code. The federal income tax discussion set
forth below is included for general information only and is based upon present
law. The precise tax consequences of the Offer (or the Merger) will depend on
the particular circumstances of the holder. STOCKHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO THE SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX CONSEQUENCES TO THEM OF THE PROPOSED TRANSACTION.
The receipt of cash for Shares pursuant to the Offer (or the Merger) will be
a taxable transaction for federal income tax purposes and may also be a
taxable transaction under applicable state, local or foreign tax laws. In
general, a stockholder who receives cash for Shares pursuant to the Offer (or
the Merger) will recognize gain or loss for federal income tax purposes equal
to the difference between the amount of cash received in exchange for the
Shares sold and such stockholder's adjusted tax basis in such Shares. Such
gain or loss will be capital gain or loss, and will be long-term capital gain
or loss if the holder has held the Shares for more than one year at the time
of sale. Gain or loss will be calculated separately for each block of Shares
tendered pursuant to the Offer.
Under current law, the maximum federal tax rate applicable to long-term
capital gains recognized by an individual is 28%, and the maximum federal tax
rate applicable to ordinary income (including dividends and short-term capital
gains recognized by individuals) is 39.6%. The maximum federal tax rate
applicable to all capital gains and ordinary income recognized by a
corporation is 35%. It is possible that legislation may be enacted that would
reduce the maximum federal tax rate applicable to
10
long-term capital gains, possibly with retroactive effect. It is not possible
to predict whether or in what form any such legislation may be enacted, or the
effective date of such legislation if enacted.
WITHHOLDING. Unless a stockholder complies with certain reporting and/or
certification procedures, or is an exempt recipient under applicable
provisions of the Code (and regulations promulgated thereunder), such
stockholder may be subject to a "backup" withholding tax of 31% with respect
to any payments received in the Offer, the Merger or as a result of the
exercise of the holder's dissenters' rights. Stockholders should contact their
brokers to ensure compliance with such procedures. Foreign stockholders should
consult with their tax advisors regarding U.S. withholding taxes in general.
DISSENTERS. A stockholder who does not sell Shares in the Offer or the
Merger and who exercises and perfects such stockholder's rights under the
Business Corporation Law of the Commonwealth of Massachusetts, as amended
("MBCL"), to demand fair value for such Shares will recognize capital gain or
loss (and may recognize an amount of interest income) attributable to any
payment received pursuant to the exercise of such rights based upon the
principles described above. See Section 17.
6. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are traded under the symbol "BBN" primarily on the NYSE and to a
lesser extent on the Boston, Cincinnati, Midwest, Pacific and Philadelphia
exchanges. The following table sets forth, for the fiscal quarters indicated,
the high and low sales prices per Share on the NYSE.
HIGH LOW
------- --------
Fiscal Year Ended June 30, 1995:
Quarter ended September 30, 1994....................... $18 3/4 $ 10
Quarter ended December 31, 1994........................ $20 7/8 $ 12 5/8
Quarter ended March 31, 1995........................... $22 1/4 $ 14 5/8
Quarter ended June 30, 1995............................ $30 $ 16 1/2
Fiscal Year Ended June 30, 1996:
Quarter ended September 30, 1995....................... $39 3/8 $ 27 1/4
Quarter ended December 31, 1995........................ $48 3/4 $ 28 1/4
Quarter ended March 31, 1996........................... $40 7/8 $ 24 1/8
Quarter ended June 30, 1996............................ $29 5/8 $ 20 1/4
Fiscal Year Ended June 30, 1997:
Quarter ended September 30, 1996....................... $22 1/4 $ 16 3/4
Quarter ended December 31, 1996........................ $24 3/8 $ 17
Quarter ended March 31, 1997........................... $27 1/2 $ 16 5/8
Quarter ended June 30, 1997 (through May 9, 1997)...... $28 7/8 $ 15 3/4
No cash dividends have been declared or paid on the Shares since June 30,
1992. The Merger Agreement prohibits the Company from declaring or paying any
dividends until the effectiveness of the Merger.
On April 7, 1997, approximately one month prior to the public announcement
of the execution of the Merger Agreement, the closing sale price on the NYSE
was $17 5/8. On May 5, 1997, the last full trading day prior to the
announcement of the terms of the Merger Agreement, the last reported sales
price per Share on the NYSE was $22 5/8. On May 9, 1997, the last full trading
day prior to the commencement of the Offer, the last reported sales price per
Share on the NYSE was $28 5/8. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT
MARKET QUOTATION FOR THE SHARES.
11
7. CERTAIN INFORMATION CONCERNING THE COMPANY.
The following information concerning the Company has been taken from or
based upon publicly available documents on file with the Securities and
Exchange Commission (the "SEC"), other publicly available information and
information provided by the Company. Although neither Purchaser nor Parent has
any knowledge that would indicate that such information is untrue, neither
Purchaser nor Parent takes any responsibility for, or makes any representation
with respect to, the accuracy or completeness of such information or for any
failure by the Company to disclose events that may have occurred and may
affect the significance or accuracy of any such information but which are
unknown to Purchaser or Parent.
GENERAL. The Company is a Massachusetts corporation with its principal
offices located at 000 XxxxxxxxxXxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000 and
is a leading provider of Internet and internetworking services and solutions
to businesses and other organizations, and a provider of contract research,
development, and consulting services to governmental and other organizations.
The Company operates through two principal business units: BBN Planet and BBN
Systems and Technologies. BBN Planet is responsible for the Company's Internet
offerings to business and other organizational customers, and includes the
Company's managed Internet access and value-added services and related network
operations and Internet dial-up access capabilities. BBN Systems and
Technologies focuses on providing networking solutions and contract research
and development, principally for the federal government, as well as creating
next generation technology for advanced Internet applications, and is
organized into three principal groups: Internetwork Technologies, Information
Systems and Technologies, and Physical Systems and Technologies. The Company's
commercial speech recognition activities are included in BBN Systems and
Technologies. The Company also has minority equity positions in a number of
ancillary ventures which in the aggregate are immaterial to the Company's
current financial condition.
AVAILABLE INFORMATION. The Company is subject to the information
requirements of the Exchange Act, and is required to file reports and other
information with the SEC relating to its business, financial condition and
other matters. Information, as of particular dates, concerning the Company's
directors and officers, their remuneration, options granted to them, the
principal holders of the Company's securities and any material interest of
such persons in transactions with the Company is required to be described in
periodic statements distributed to the Company's stockholders and filed with
the SEC. These reports, proxy statements, and other information, including the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996
(the "Company 10-K"), the Company's Quarterly Reports on Form 10-Q for the
quarters ended September 30, 1996, December 31, 1996 and March 31, 1997 (to be
filed on or before May 15, 1997) and the Schedule 14D-9, should be available
for inspection and copying at the SEC's principal office at 000 Xxxxx Xxxxxx,
X.X., Xxxxxxxxxx, X.X. 00000, and at the regional offices of the SEC located
at Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000. Copies
of this material may also be obtained by mail, upon payment of the SEC's
customary fees, from the SEC's principal office. Such material should also be
available for inspection at the offices of the NYSE, 00 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000. The SEC also maintains an Internet site on the world
wide web at xxxx://xxx.xxx.xxx that contains reports and other information.
A copy of this Offer to Purchase, and certain of the agreements referred to
herein, are attached to Purchaser's Tender Offer Statement on Schedule 14D-1,
dated May 12, 1997 (the "Schedule 14D-1"), which has been filed with the SEC.
The Schedule 14D-1 and the exhibits thereto, along with such other documents
as may be filed by Purchaser with the SEC, may be examined and copied from the
offices of the SEC in the manner set forth above.
12
CERTAIN FINANCIAL INFORMATION FOR THE COMPANY. The following table sets
forth certain summary consolidated financial information with respect to the
Company and its subsidiaries excerpted or derived from the audited financial
statements contained in the Company 10-K and the unaudited financial
information contained in the Company's Quarterly Reports on Form 10-Q for the
nine months ended March 31, 1996 and 1997 (to be filed on or before May 15,
1997). More comprehensive financial information is included in such reports
and other documents filed by the Company with the SEC, and the following
summary is qualified in its entirety by reference to such documents (which may
be inspected and obtained as described above), including the financial
statements and related notes contained therein. Neither Parent nor Purchaser
assumes any responsibility for the accuracy of the financial information set
forth below.
BBN CORPORATION
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED
MARCH 31 FISCAL YEAR
(UNAUDITED) ENDED JUNE 30
------------------ ----------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
INCOME STATEMENT DATA
Revenue.................. $254,145 $165,607 $234,339 $175,603 $160,711
Income (loss) from
continuing operations... (33,146) (38,653) (49,902) 67,102 (8,969)
Income (loss) from
discontinued operations
(net of taxes).......... 20,000 (7,029) (6,740) (2,258) 1,145
Net income (loss)........ (13,146) (45,682) (56,642) 64,844 (7,824)
BALANCE SHEET DATA (AT END OF
PERIOD)
Net current assets
(liabilities)............ 85,099 83,275 120,111 116,003 65,308
Total assets............. 272,107 177,836 249,337 203,964 122,712
Stockholders' equity..... 69,016 36,832 79,336 82,552 7,271
PER SHARE INFORMATION
Income (loss) per share:
Continuing operations... $ (1.54) $ (2.19) $ (2.80) $ 3.73 $ (0.55)
Discontinued operations. 0.93 (0.40) (0.38) (0.12) 0.07
-------- -------- -------- -------- --------
Net income (loss) per $ (0.61) $ (2.59) $ (3.18) $ 3.61 $ (0.48)
share................... ======== ======== ======== ======== ========
13
PROJECTED FINANCIAL INFORMATION. In connection with Xxxxxx's review of the
Company and in the course of the negotiations described in Section 10, the
Company and its representatives provided Parent with certain business and
financial information which Parent and Purchaser believe is not publicly
available. Following is a summary of the material forecast and financial model
information:
SUMMARY FINANCIAL OUTLOOK (AS OF FEBRUARY 7, 1997)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
FORECAST FINANCIAL MODEL
FISCAL YEAR FISCAL YEAR
ENDING JUNE 30, ENDING JUNE 30,
1997 1998
--------------- ---------------
INCOME STATEMENT DATA
Revenue
BBN Planet................................... $180.8 $345.1
BBN System & Technologies.................... 186.3 215.0
Eliminations of interdivisional sales between
business units.............................. (2.7) (3.8)
------ ------
$364.4 $556.3
------ ------
Loss from operations
Planet....................................... $(48.5) $(22.2)
System & Technologies........................ 5.8 10.0
Unallocated corporate expenses, net.......... (3.1) (4.1)
------ ------
$(45.8) $(16.3)
------ ------
Interest expense, net.......................... $ (0.2) $ (4.0)
------ ------
Net loss....................................... $(46.0) $(20.3)
====== ======
Net loss per share............................. $(2.15) $(0.94)
====== ======
According to the Company, the fiscal year 1998 financial model information
(i) reflects revenue from an Internet Services Agreement with AT&T Corp.
("AT&T"), but does not reflect the impact of certain material disagreements
between the Company and AT&T regarding the terms of such agreement and (ii)
assumes that the percentage of BBN Planet's revenue derived from the Company's
contract with America OnLine, Incorporated will be consistent with the
percentage of revenue derived from such contract reported for fiscal year
1997. The costs estimate was based on historical experience and the
achievement of certain operating efficiencies, as well as other estimates. The
model was prepared on a stand-alone basis and does not give effect to the
Offer or the Merger.
In reaching its decision to acquire the Company, Parent made certain
assumptions of its own with regard to revenues and operations of the Company's
businesses as a wholly-owned subsidiary, which assumptions are not reflected
in the above financial information.
FURTHER, THE COMPANY HAS ADVISED PARENT AND PURCHASER THAT THE FOREGOING
FORECAST AND FINANCIAL MODEL INFORMATION (THE "PROJECTIONS") WERE NOT PREPARED
WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED GUIDELINES
OF THE SEC OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS. THE PROJECTIONS ARE
INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE THEY WERE PROVIDED TO PARENT.
NONE OF PARENT, PURCHASER, THE COMPANY OR ANY OF THEIR RESPECTIVE ADVISORS OR
ANY OTHER PARTY WHO RECEIVED SUCH INFORMATION ASSUMES ANY RESPONSIBILITY FOR
THE VALIDITY, REASONABLENESS, ACCURACY OR COMPLETENESS OF THE PROJECTIONS.
ALTHOUGH PRESENTED WITH NUMERICAL SPECIFICITY, THE PROJECTIONS ARE BASED UPON
A VARIETY OF ASSUMPTIONS RELATING TO THE BUSINESSES OF THE COMPANY, INDUSTRY
PERFORMANCE, GENERAL BUSINESS AND ECONOMIC CONDITIONS
14
AND OTHER MATTERS, ALL OF WHICH MAY NOT BE REALIZED AND ARE SUBJECT TO
SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE
CONTROL OF THE COMPANY. THERE CAN BE NO ASSURANCE THAT THE PROJECTIONS SET
FORTH ABOVE WILL BE REALIZED, AND ACTUAL RESULTS MAY VARY MATERIALLY FROM
THOSE SHOWN. THE PROJECTIONS HAVE NOT BEEN EXAMINED OR COMPILED BY THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS. FOR THESE REASONS, AS WELL AS THE
BASES ON WHICH SUCH PROJECTIONS WERE COMPILED, THERE CAN BE NO ASSURANCE THAT
ACTUAL RESULTS WILL NOT DIFFER MATERIALLY FROM THOSE ESTIMATED. THE INCLUSION
OF SUCH PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT
PARENT, PURCHASER, THE COMPANY, ANY OF THEIR RESPECTIVE ADVISORS OR ANY OTHER
PARTY WHO RECEIVED SUCH INFORMATION CONSIDERS IT AN ACCURATE PREDICTION OF
FUTURE EVENTS. PARENT DID AN INDEPENDENT ASSESSMENT OF THE COMPANY'S VALUE AND
DID NOT RELY TO ANY MATERIAL DEGREE UPON THE FOREGOING PROJECTIONS. NONE OF
THE COMPANY, PARENT, PURCHASER OR ANY OTHER PARTY INTENDS PUBLICLY TO UPDATE
OR OTHERWISE PUBLICLY REVISE THE PROJECTIONS SET FORTH ABOVE EVEN IF
EXPERIENCE OR FUTURE CHANGES MAKE IT CLEAR THAT SUCH PROJECTIONS WILL NOT BE
REALIZED.
THE PROJECTIONS SET FORTH ABOVE CONSTITUTE FORWARD-LOOKING INFORMATION. FOR
A DISCUSSION OF FACTORS REGARDING SUCH FORWARD-LOOKING INFORMATION SEE "--
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION."
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION. For purposes of
the Private Securities Litigation Reform Act of 1995, Parent and Purchaser
identify the following important factors which could cause the Company's
actual results to differ materially from the foregoing projections:
(a) the development and expansion of the market for Internet access
services and products and of the networks which comprise the Internet;
(b) the Company's ability to continue and expand its business
relationships, including relationships with existing major customers;
(c) the capacity, reliability, cost and security of the Company's network
infrastructure;
(d) the Company's ability to finance expansion of its network;
(e) the Company's ability to develop or acquire the rights to price
competitive products and services;
(f) competition from larger competitors with more resources;
(g) the Company's ability to attract and retain highly qualified
management, technical, marketing and sales personnel;
(h) the Company's ability to manage growth;
(i) the Company's ability to improve its operating margins; and
(j) effects of the Offer and Xxxxxx.
With respect to the factor described in clause (b) above, Parent and
Purchaser note that the Company and AT&T have initiated the dispute resolution
procedures provided in the Internet Services Agreement between the two
companies in order to resolve material disagreements regarding the terms of
such agreement.
Many of the foregoing factors have been discussed in more detail in the
Company's prior filings with the SEC. The foregoing review of factors pursuant
to the Private Litigation Securities Reform Act of 1995 should not be
construed as exhaustive.
8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT.
GENERAL. Purchaser is a newly formed Massachusetts corporation and a wholly
owned subsidiary of Parent. To date, Purchaser has not conducted any business
other than in connection with the Offer. Until immediately prior to the time
Purchaser purchases Shares pursuant to the Offer, it is not anticipated that
Purchaser will have any significant assets or liabilities or engage in
activities other than those incident to its formation and capitalization and
the transactions contemplated by the Offer. Because Purchaser is a newly
formed corporation and has minimal assets and capitalization, no meaningful
financial information regarding Purchaser is available.
15
Parent is a New York corporation. Parent, together with its consolidated
subsidiaries, is one of the largest publicly held telecommunications companies
in the world. It is the largest U.S.-based local telephone company. Parent's
domestic and international operations serve 25.9 million access lines through
subsidiaries in the United States, Canada, and the Dominican Republic and an
affiliate in Venezuela. Parent is a leading mobile-cellular operator in the
United States, with the potential of serving 61.9 million cellular and
personal communications service customers. Outside the United States, Parent
operates mobile-cellular networks serving some 16.4 million POPs through
subsidiaries in Canada and the Dominican Republic and affiliates in Venezuela
and Argentina. Beginning in 1996, Parent became the first among its peers to
offer "one-stop shopping" for local, long-distance and Internet access
services. Parent is also a leader in government and defense communications
systems and equipment, aircraft-passenger telecommunications, directories and
telecommunications-based information services and systems. Parent also has
subsidiaries engaged in financing, insurance, leasing and other activities
offering financial and related services primarily to its operating companies.
One of these subsidiaries, GTE Service Corporation, furnishes, at cost,
advisory and consulting services related to administration, operations,
accounting methods and procedures, insurance, human resources, financing,
Federal and state taxes and other matters to operating companies of Parent.
Parent and its subsidiaries had approximately 102,000 employees at December
31, 1996.
The principal executive offices of Parent and Purchaser are located at Xxx
Xxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000. The name, citizenship, business
address, present principal occupation or employment, and material positions
held during the past five years of each of the directors and executive
officers of Purchaser and of Parent are set forth in Schedule I to this Offer
to Purchase.
Except as set forth in this Offer to Purchase, neither Parent nor Purchaser,
or, to the best knowledge of Parent or Purchaser, any of the persons listed on
Schedule I, has any contract, arrangement, understanding or relationship with
any other person with respect to any securities of the Company, including, but
not limited to, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any securities of the Company, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase, neither Parent nor Purchaser, or, to the best
knowledge of Parent or Purchaser, any of the persons listed on Schedule I, has
had, since July 1, 1993, any business relationships or transactions with the
Company or any of its executive officers, directors or affiliates that would
require reporting under the rules of the SEC. Except as set forth in this
Offer to Purchase, since July 1, 1993, there have been no contacts,
negotiations or transactions between Parent or Purchaser, or their respective
subsidiaries or, to the best knowledge of any of Parent or Purchaser, any of
the persons listed on Schedule I, and the Company or its affiliates,
concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, election of directors or a sale or other transfer
of a material amount of assets. Except, as set forth in this Offer to
Purchase, neither Parent nor Purchaser or, to the best knowledge of Parent or
Purchaser, any of the persons listed on Schedule I, or any majority-owned
subsidiary or associate of Parent or Purchaser or any person so listed
beneficially owns any Shares or has effected any transactions in the Shares in
the past 60 days. On November 16, 1995, the Company entered into a subcontract
to provide certain products and services to a subsidiary of Parent in
connection with the Mobile Subscriber Equipment Program awarded to such
subsidiary in 1985. The approximate value of the subcontract was $2.3 million.
16
CERTAIN FINANCIAL INFORMATION FOR PARENT. Set forth below is a summary of
certain consolidated financial and operating data relating to Parent and its
consolidated subsidiaries excerpted or derived from the information contained
in or incorporated by reference into Parent's Annual Report on Form 10-K for
the year ended December 31, 1996 filed with the SEC (the "Parent 10-K"). More
comprehensive financial information is included in or incorporated by
reference into the Parent 10-K and other documents filed by Parent with the
SEC, and the financial information summary set forth below is qualified in its
entirety by reference to the Parent 10-K and such other documents and all the
financial information and related notes contained therein.
GTE CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEAR
ENDED DECEMBER 31
------------------------
1996 1995 1994
------- ------- -------
RESULTS OF OPERATIONS
Revenues and sales.................................... $21,339 $19,957 $19,528
Operating income...................................... 5,488 5,056 4,752
Net income (loss)
Before extraordinary charges....................... 2,798 2,538 2,441
Consolidated....................................... 2,798 (2,144) 2,441
ASSETS AND CAPITAL (AT END OF PERIOD)
Consolidated assets................................... 38,422 37,019 42,500
Long-term debt and redeemable preferred stock......... 13,210 12,744 12,236
Shareholders' equity.................................. 7,336 6,871 10,483
Net cash from operations.............................. 5,899 5,033 4,740
PER SHARE
Earnings (loss) per common share
Before extraordinary charges....................... 2.89 2.62 2.55
Consolidated....................................... 2.89 (2.21) 2.55
AVAILABLE INFORMATION. Parent is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is required to
file periodic reports, proxy statements and other information with the SEC
relating to its business, financial condition and other matters. Information,
as of particular dates, concerning Xxxxxx's directors and officers, their
remuneration, stock options granted to them, the principal holders of Parent's
securities and any material interest of such persons in transactions with
Parent is required to be described in proxy statements distributed to Parent's
stockholders and filed with the SEC. Such reports, proxy statements and other
information should be available for inspection at the public reference
facilities maintained by the SEC at Room 1024, 000 Xxxxx Xxxxxx, X.X.,
Xxxxxxxxxx, X.X. 00000, and should also be available for inspection at the
SEC's regional offices located at Seven World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxx 00000. Copies of such materials may also be obtained by
mail, upon payment of the SEC's customary fees, by writing to its principal
office at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000. The information
should also be available for inspection at the NYSE, 00 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000.
9. SOURCES AND AMOUNTS OF FUNDS.
Purchaser estimates that the total amount of funds required to purchase
pursuant to the Offer the number of Shares that are outstanding, assuming that
no Options are exercised, no Subordinated
17
Notes are converted, no Shares are issued pursuant to the ESPP and no Rights
are exercised, and to pay fees and expenses related to the Offer and the
Merger will be approximately $620 million. If all In the Money Options (as
defined in Section 11) are exercised and tendered, the total funds needed
would increase by approximately $27,000,000, if all Shares issuable pursuant
to the ESPP (as defined in Section 11) are issued and tendered, the total
funds needed would increase by $2,450,000 and if all Subordinated Notes are
converted and tendered, the total funds needed would increase by $70,731,000.
Purchaser plans to obtain all funds needed for the Offer through a capital
contribution, which will be made by Parent to Purchaser at the time Shares
tendered pursuant to the Offer are accepted for payment. Parent intends to
obtain the funds necessary to make this capital contribution from internally
generated funds and short-term borrowings at market interest rates. Parent
does not expect to make any borrowings under any of its existing credit
agreements to obtain funds needed for the Offer and the Merger. The short-term
borrowings will be repaid by Parent from time to time from internally
generated funds or from the proceeds of other borrowings. No final decisions
have been made by Parent concerning the specific source of funds to be used
for purchase of the Shares. However, the Offer is not conditioned on obtaining
financing.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY
In July, 1996, a representative of the Company's Financial Advisor contacted
Xxxxxx X. Xxxxxxxx, Senior Vice President-Corporate Planning and Development
of Parent, regarding the possibility of a strategic opportunity involving
Parent and the Company. Thereafter, representatives of the Company had several
discussions with representatives of Parent regarding a variety of possible
strategic transactions between the Company and Parent.
On October 22, 1996, Xxxxxxx X. Xxx, Chairman and Chief Executive Officer of
Parent, and Xx. Xxxxxxxx met with Xxxxxx X. Xxxxxxxx, Chief Executive Officer
and President of the Company, and Xxxxx X. Xxxxxxxxxx, a director of the
Company and a former Senior Vice President of GTE International, Inc., an
affiliate of Parent, in Stamford, Connecticut. No firm proposals resulted from
this meeting. On November 26, 1996, Parent and the Company entered into a
mutual confidentiality agreement. Thereafter, Parent had several meetings with
various representatives of the Company to review the Company's business and
explore possible transactions.
On January 20, 1997, Xxxxx X. Xxxxxxx, Vice President-Corporate Planning and
Development for GTE Service Corporation, an affiliate of Parent, and certain
other representatives of Parent met in Boston with Xxxxx Xxxxxx, a Vice
President of BBN Planet, and discussed, among other things, the Company's
strategic plans. Xx. Xxxxxxxx and Xx. Xxxxxxx met with Xx. Xxxxxx on March 5,
1997 and indicated Xxxxxx's interest in exploring an acquisition of the
Company. The parties also discussed the possibility of a significant minority
investment by Parent in the Company and the possibility of joint ownership in
the Company's network. Detailed discussions were scheduled and Xx. Xxxxxxxx
requested that Xx. Xxxxxx contact Parent if, as a result of other
opportunities available to the Company, Parent should move more quickly in its
review of a possible transaction.
On March 25, 1997, Xx. Xxxx X. Xxxxxx, President of Parent, met with Xx.
Xxxxxxxx in Dallas, Texas to review the status of discussions between the
parties and to discuss the data telecommunications market generally.
Subsequently, Xx. Xxxxxxxx telephoned Xx. Xxxxxx to advise him that a third
party had accelerated discussions regarding an acquisition of the Company and
had indicated that it would make a proposal shortly. Xx. Xxxxxx then agreed
that Xxxxxx would accelerate Xxxxxx's scheduled due diligence review.
Over the next two and one-half weeks, Parent continued its due diligence
review. On April 9, 1997, Xx. Xxxxxxxx, Xx. Xxxxxxx and other representatives
of Parent met with Xx. Xxxxxxxx, Xxxxx X. Xxxxxxxxxx, Chief Financial Officer
of the Company, and other representatives of the Company to discuss issues
related to a possible acquisition of the Company by Parent, including issues
related to retention and motivation of employees.
18
On April 11, 1997, Xxxxxx retained Xxxxxxx, Xxxxx & Co. ("Xxxxxxx Xxxxx") as
financial advisor in connection with a possible acquisition of the Company. On
April 26, 1997, Parent and the Company entered into the Confidentiality
Agreement referred to in Section 11, which included certain standstill and
employee solicitation provisions. From April 26, 1997 through April 29, 1997,
senior managers of Parent and the Company had various due diligence
discussions.
Early in the week of April 28, 1997, Parent delivered to the Company initial
drafts of a merger agreement that contemplated a cash tender offer by Parent
for all of the outstanding Shares of the Company, to be followed by a merger
of a subsidiary of Parent with and into the Company. No price was proposed in
the merger agreement.
On April 30, 1997, the Strategic Issues, Planning and Technology Committee
of Parent's Board of Directors met to review a possible acquisition by Parent
of the Company. The Committee agreed to recommend the acquisition to Parent's
Board of Directors.
On May 2, 1997, Xxxxxx's Board of Directors met to consider, among other
things, an acquisition of the Company. The Board approved the acquisition of
all of the Shares of the Company for cash within a determined price range,
subject to negotiation and execution of definitive agreements containing
provisions acceptable to Parent's executive officers. Xxxxxxx Xxxxx was
present at that meeting and delivered its oral opinion to Xxxxxx's Board of
Directors that the proposed acquisition of the Company for a price in the
determined range was fair from a financial point of view to Parent.
On Friday, May 2, 1997, Xx. Xxxxxx telephoned Xx. Xxxxxxxx and made a
proposal pursuant to which Parent, through a subsidiary, would acquire the
Company for a per Share cash price of $27.00, subject to negotiation of
mutually acceptable terms and conditions.
Following the meeting of the Company's Board of Directors on May 2, 1997,
representatives of the Company's Financial Advisor reported to Xxxxxxx Xxxxx
that Xxxxxx's proposal had not been accepted by the Company, but that the
Company was interested in pursuing discussions if Parent were willing to raise
its offer. In a conversation early on May 3, 1997, Xx. Xxxxxxxx confirmed to
Xx. Xxxxxx that Xxxxxx's proposal had not been accepted.
On May 4, 1997, Xx. Xxxxxx called Xx. Xxxxxxxx and after discussion,
increased Xxxxxx's offer to $29.00 per Share in cash, provided the terms of
the merger agreement, including terms regarding the payment of a termination
fee and the terms of a stock option agreement, exercisable at any time that a
termination fee would become payable, could be finalized to Parent's
satisfaction.
From May 3, 1997 through May 6, 1997, representatives of Parent and the
Company negotiated the final terms of the Merger Agreement and the other
definitive documents for the transaction.
On Tuesday, May 6, 1997, the Company's Board of Directors approved the
Merger Agreement. Thereafter, on May 6, the definitive agreements were
executed and delivered, and the transaction was publicly announced.
On Monday, May 12, 1997, Parent commenced the Offer.
To the extent any of the foregoing information described events to which
neither Parent nor Purchaser or their advisors were a party, it is based on
information provided by the Company.
11. THE OFFER AND MERGER; MERGER AGREEMENT; STOCK OPTION AGREEMENT.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement, a
copy of which is filed with the SEC as an exhibit to the Schedule 14D-1 and
which is incorporated herein by reference. The following summary is qualified
in its entirety by reference to the Merger Agreement.
19
THE OFFER. The Merger Agreement provides for the making of the Offer by
Purchaser. Subject to the Merger Agreement not having been terminated in
accordance with its terms, Purchaser has agreed to accept for payment and pay
for all the Shares validly tendered pursuant to the Offer prior to the
Expiration Date and not withdrawn, as promptly as practicable following the
Expiration Date. Pursuant to the Merger Agreement and subject to the
Conditions, if all of the Conditions are not satisfied on the initial
Expiration Date, and the Agreement has not been terminated in accordance with
its terms, Purchaser shall extend (and re-extend) the Offer to provide time to
satisfy such Conditions through the Final Termination Date. From and after the
Final Termination Date, if all of the Conditions have not been satisfied on
any Expiration Date of the Offer and the Merger Agreement has not been
terminated in accordance with its terms, Purchaser may but shall not be
obligated to extend and re-extend the Offer to provide time to satisfy such
Conditions. In addition, whether or not the Conditions have been satisfied,
Purchaser may extend and re-extend the Offer, from time to time, but in no
event beyond November 15, 1997, if it believes such extension is advisable in
order to facilitate the orderly transition of the business of the Company and
to preserve and maintain the Company's business relationships. Parent and
Purchaser do not expect to utilize this right to extend the Offer. See Section
15.
The obligation of Purchaser to accept for payment and pay for Shares
tendered pursuant to the Offer is subject to (i) the tender and non-withdrawal
of Shares which, when added to the Shares then beneficially owned by Parent,
constitutes two-thirds of the Shares outstanding and (ii) the satisfaction of
certain other Conditions described in Section 16. Subject to the terms of the
Merger Agreement, Purchaser reserves the right to amend the terms and
conditions of the Offer in any respect by giving oral or written notice of
such amendment to the Depositary. Purchaser has agreed that, without the
written consent of the Company, no amendment to the Offer may be made which
(i) decreases the price per Share or changes the form of consideration to be
paid in the Offer, (ii) decreases the number of Shares sought in the Offer, or
(iii) imposes additional conditions to the Offer other than those described in
Section 16 or amends any other term of the Offer in any manner adverse to
holders of Shares.
RECOMMENDATION. In the Merger Agreement, the Company states that the Board
has unanimously (i) determined that the Offer and the Merger are fair to and
in the best interests of the stockholders of the Company and (ii) resolved to
recommend acceptance of the Offer and approval and adoption of the Merger
Agreement and the Merger by the stockholders of the Company.
THE MERGER. The Merger Agreement provides that, as soon as practicable
following the purchase of Shares pursuant to the Offer, and the satisfaction
or waiver of the other conditions to the Merger, or on such other date as the
parties thereto may agree (such agreement to require the approval of the
majority of the Continuing Directors, if at that time there shall be any
Continuing Directors), Purchaser will be merged with and into the Company. The
Merger shall become effective by filing with the Secretary of State of
Massachusetts articles of merger (the "Articles of Merger") in accordance with
the relevant provisions of the MBCL at such time (the time the Merger becomes
effective being the "Effective Time").
At the Effective Time, (i) each Share issued and outstanding immediately
prior to the Effective Time (other than Shares described in clause (ii) below)
will be converted into the right to receive $29.00 in cash, or any higher
price paid per Share in the Offer, without interest thereon (the "Merger
Price"); (ii) (a) each Share held in the treasury of the Company or held by
any wholly owned subsidiary of the Company and each Share held by Parent or
any wholly owned subsidiary of Parent immediately prior to the Effective Time
will be cancelled and retired and cease to exist; (b) each Share held by any
holder who has perfected any dissenters' rights under the MBCL, as applicable
(the "Dissenting Shares"), will not be converted into or be exchangeable for
the right to receive the Merger Price; and (iii) each share of common stock of
Purchaser issued and outstanding immediately prior to the Effective Time will
be converted into and exchangeable for one share of common stock of the
Surviving Corporation.
The Merger Agreement provides that the Articles of Organization and By-laws
of the Company as in effect at the Effective Time (including such amendments
to the Articles of Organization as are
20
effected by the Articles of Merger) will be the Articles of Organization and
By-laws of the Surviving Corporation until amended in accordance with
applicable law. The Merger Agreement also provides that (i) the directors of
Purchaser at the Effective Time will be the initial directors of the Surviving
Corporation, (ii) the officers of the Company at the Effective Time will be
the initial officers of the Surviving Corporation, and (iii) the initial
officers and directors of the Surviving Corporation will hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualify in the manner provided in the Articles of Organization and By-laws
of the Surviving Corporation, or as otherwise provided by applicable law.
TREATMENT OF OPTIONS AND CERTAIN OTHER STOCK PURCHASE RIGHTS. In the Merger
Agreement, the Company has agreed, with certain exceptions, that it will not
grant to any non-employees, including non-employee members of the Board of
Directors ("Directors"), and former employees (collectively "Non-Employees"),
or to any current employees any options to purchase Shares, stock appreciation
rights, restricted stock, restricted stock units or any other real or phantom
stock or stock equivalents on or after the date of this Agreement. Options to
acquire Shares which were outstanding as of the date of the Merger Agreement
and which were granted to employees or Non-Employees under any stock option
plan, program or similar arrangement of the Company or any of its subsidiaries
("Options"), other than Options which constitute Restricted Stock (as defined
below) and Options under the ESPP (as defined below) are treated in the Merger
Agreement as follows:
(i) Each current employee as of the date of the Merger Agreement whose
annual base salary is $80,000 or more ("Key Employee") and who is holding
Options which have an exercise price ("Exercise Price") less than the Offer
Price ("In the Money Options") and which are vested as of the date on which
the consummation of the Offer occurs (the "Closing Date") may make an
irrevocable election on a grant by grant basis to be effective immediately
following the Closing Date to receive in exchange for cancellation of each
such vested In the Money Option either (A) a credit to an individual
deferred compensation book account equal to the excess of the Offer Price
over the Exercise Price of such In the Money Option times the number of
Shares subject to such In the Money Option, such deferred compensation book
account to have the terms described below, or (B) an option to purchase a
number of shares of Parent common stock (a "Parent Option") equal to 150%
of the number of Shares subject to the Key Employee's In the Money Option;
provided that (x) the Parent Option received in the exchange will be fully
vested and have the same expiration date as the vested In the Money Option
exchanged therefor, (y) the Exercise Price of the Parent Option is equal to
the Fair Market Value (as defined below), and (z) the Parent Option is
governed by the provisions of the GTE Corporation 1997 Long-Term Incentive
Plan ("LTIP") and by applicable LTIP award agreements. For purposes of the
relevant portions of the Merger Agreement, the deferred compensation book
account is denominated in Parent phantom stock units, and dividend
equivalent payments will be credited to such deferred compensation book
account at such time and in such manner as dividends are paid on Parent
common stock. Before the third anniversary of the Closing Date, no
distribution may be made in respect of the deferred compensation book
account to a Key Employee who is employed by Parent or an affiliate of
Parent. The dividend equivalent payments on the deferred compensation book
account are subject to forfeiture in the event the Key Employee is not
employed by Parent or an affiliate of Parent on any date that precedes the
third anniversary of the Closing Date. Parent will determine administrative
procedures and provisions with regard to the deferred compensation book
account. In the event a Key Employee does not make such an irrevocable
election before the Closing Date, the Key Employee will be deemed to have
irrevocably elected the deferred compensation book account credit as
described in clause (A) of the first sentence of this paragraph (i), and
all In the Money Options will be canceled. "Fair Market Value" means the
average of the high and low sales price of the Parent common stock on the
composite tape of the New York Stock Exchange issues as of the Closing
Date, or, in the event that no trading occurs on such day, then the
applicable value will be determined on the last preceding day on which
trading took place.
21
(ii) Each current employee whose annual base salary as of the date of the
Merger Agreement is less than $80,000 ("Employee") who is holding In the
Money Options which are vested as of the Closing Date may make an
irrevocable election on a grant by grant basis to be effective immediately
following the Closing Date to receive in exchange for cancellation of each
such vested In the Money Option either (A) a cash payment equal, for each
such In the Money Option, to the excess of the Offer Price of a Share over
the Exercise Price of such In the Money Option times the number of Shares
subject to such In the Money Option, or (B) a Parent Option to purchase a
number of shares of Parent common stock equal to 150% of the number of
Shares subject to the Employee's In the Money Option; provided that (x) the
Parent Option received in the exchange will be fully vested and have the
same expiration date as the vested In the Money Option exchanged therefor,
(y) the Exercise Price of the Parent Option will equal the Fair Market
Value, and (z) the Parent Option will be governed by the provisions of the
LTIP and by applicable LTIP award agreements. In the event an Employee does
not make such election before the Closing Date, the Employee will be deemed
to have irrevocably elected the cash payment described in clause (A) of the
preceding sentence, and all In the Money Options will be canceled.
(iii) Options of Key Employees or Employees which have an Exercise Price
equal to or in excess of the Offer Price ("Under-Water Options"),
regardless of whether such Under-Water Options are vested as of the Closing
Date, will immediately following the Closing Date be canceled and exchanged
for Parent Options to purchase a number of shares of Parent common stock
equal to 100% of the number of Shares subject to the Key Employee's or
Employee's Under-Water Options, provided that (x) the Parent Options
received in the exchange will have the same vesting schedule and expiration
date as the Under-Water Options exchanged therefor, (y) the Exercise Price
of the Parent Options will equal the Fair Market Value, and (z) the Parent
Options will be governed by the provisions of the LTIP and by applicable
LTIP award agreements. Notwithstanding the foregoing, if, on or after the
date of the Merger Agreement, a Key Employee exercises vested In the Money
Options that, on the date of the Merger Agreement, represent 50% or more of
the dollar value of the Key Employee's vested In the Money Options, all of
such Key Employee's Under-Water Options will be canceled immediately, the
exchange provisions of this paragraph (iii) will not apply to such Key
Employee, and such Key Employee will receive the sum of one dollar ($1.00)
as good and valuable consideration for all of such Key Employee's Under-
Water Options. For purposes of the immediately preceding sentence, the
dollar value of a vested In the Money Option will be equal to the excess of
the Offer Price over the Exercise Price of such In the Money Option times
the number of Shares subject to the vested In the Money Option.
(iv) In the Money Options of individuals who are Non-Employees as of the
date of the Merger Agreement, including Directors, which are vested as of
the Closing Date will, immediately following the Closing Date, be canceled
and exchanged for a cash payment equal, for each vested In the Money
Option, to the excess of the Offer Price of a Share over the Exercise Price
of such In the Money Option times the number of Shares subject to such In
the Money Option. All other Options of Non-Employees, including Directors,
will be canceled immediately as of the Closing Date and each such Non-
Employee will receive the sum of one dollar ($1.00) as good and valuable
consideration for all such Options.
(v) With respect to In the Money Options of Key Employees, Employees and
Non-Employees, including Directors, the Board of Directors or an
appropriate committee thereof, will provide for the full and immediate
vesting of such In the Money Options as of the Closing Date. Except as
provided in the immediately preceding sentence on or after the date of the
Merger Agreement, the Board of Directors will not make any other changes to
the terms and conditions of any outstanding Options, stock appreciation
rights, restricted stock, restricted stock units or any other real or
phantom stock or stock equivalents.
Pursuant to the Merger Agreement, on the Closing Date, employees of the
Company who hold Shares subject to a risk of forfeiture within the meaning of
Section 83(a) of the Code, or Options with
22
an exercise price of zero dollars ($0.00) ("Restricted Stock") will receive in
exchange for such Restricted Stock a right to receive a number of Parent
phantom stock units pursuant to a phantom stock plan ("Phantom Stock Units")
determined by dividing (A) the product of (i) the number of shares of
Restricted Stock held by such employee on the Closing Date, and (ii) the Offer
Price, by (B) the Fair Market Value. Such Phantom Stock Units will be credited
with dividend equivalent units at such time and in such manner as dividends
are normally paid on Parent common stock, and the Phantom Stock Units and
dividend equivalent units will be subject to the same vesting schedule as the
Restricted Stock which was exchanged for the Phantom Stock Units. Upon the
Phantom Stock Units vesting, the employee will receive payment of the vested
amounts in cash (less applicable withholding taxes). Parent will determine
administrative procedures and provisions with regard to Phantom Stock Units.
The Merger Agreement also provides that immediately following the Closing
Date, Restricted Stock purchased by certain Key Employees and Directors
pursuant to the Company's 1996 Restricted Stock Plan will no longer be subject
to a risk of forfeiture within the meaning of Section 83(a) of the Code and
will be tendered to Purchaser in exchange for cash equal to the Offer Price
times the number of Shares so tendered. At the Closing Date, Company stock
units in the deferred compensation account of each Director who participates
in the Company's Deferred Compensation Plan for Directors (the "DCP") will be
converted into a number of Phantom Stock Units determined by dividing (A) the
product of (i) the number of Company stock units credited to the Director's
deferred compensation account under the DCP as of the Closing Date, and (ii)
the Offer Price, by (B) the Fair Market Value. Such Phantom Stock Units will
be credited with dividend equivalent units at such time and in such manner as
dividends are paid on Parent common stock. A cash payment equal to the Phantom
Stock Units will be made to the Directors as soon as practicable after January
1, 1998. Parent will determine administrative procedures and provisions with
regard to the Phantom Stock Units.
The Merger Agreement also provides that, prior to the Closing Date, the
Board of Directors, or an appropriate committee thereof, will cause written
notice of the Merger Agreement to be given to persons holding "options" (as
defined in the Company's Employee Stock Purchase Plan (the "ESPP")) to
purchase Shares ("Purchase Rights") under the ESPP. The Merger Agreement
provides that immediately following the Closing Date, all Purchase Rights will
be accelerated as if the Closing Date was the last day of the "option period"
(as defined in the ESPP), such Purchase Rights will be automatically canceled
and terminated on such day and the contributions to the ESPP during such
option period will be refunded to the holder of the Purchase Right (the
"Refund Amount"), and each holder of a Purchase Right will be entitled to
receive as soon as practicable thereafter from the Company in consideration
for such cancellation an amount in cash (less applicable withholding taxes,
but without interest) equal to (a) the product of (i) the number of Shares
(and fractions thereof) subject to such Purchase Right of such holder as of
the Closing Date, multiplied by (ii) the Offer Price, less (b) the Refund
Amount of such holder. The foregoing is subject to the right of an ESPP
participant to terminate the participant's payroll deduction authorization
under the ESPP and to cancel the participant's option and withdraw from the
ESPP at any time prior to the Closing Date.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains certain
representations and warranties of the parties including representations by the
Company as to organization, capitalization, authority relative to the Merger
Agreement, no defaults, consents and approvals, financial statements and SEC
reports, absence of certain changes concerning the Company's business,
litigation and compliance with law, environmental matters, governmental
authorizations, offer documents, brokers, employee agreements and benefits,
receipt of a fairness opinion, material agreements, title to properties and
encumbrances thereon, intellectual property, tax matters, interested party
transactions, governmental contracts and takeover statutes.
CERTAIN AGREEMENTS REGARDING THE BOARD. The Merger Agreement provides that
in the event that Purchaser acquires at least a majority of the Shares
outstanding pursuant to the Offer, Parent
23
shall be entitled to designate for appointment or election to the Board, upon
written notice to the Company, such number of persons so that the designees of
Parent constitute the same percentage (but in no event less than a majority)
of the Board (rounded up to the next whole number) as the percentage of Shares
acquired pursuant to the Offer. Prior to the consummation of the Offer, the
Company will increase the size of the Board or obtain the resignation of such
number of directors as is necessary to enable such number of Parent designees
to be so elected. In the Merger Agreement, the Company, Parent and Purchaser
have agreed to use their respective reasonable best efforts to ensure that at
least two of the members of the Board shall, at all times prior to the
Effective Time be, Continuing Directors.
Following the election or appointment of Purchaser's designees as set forth
above and prior to the Effective Time, any amendment of the Merger Agreement
or any amendment to the Articles of Organization or By-Laws of the Company
inconsistent with the Merger Agreement, any termination of the Merger
Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of Parent or Purchaser or
any waiver of any of the Company's rights under the Merger Agreement will
require the concurrence of a majority of the Continuing Directors.
INTERIM OPERATIONS OF THE COMPANY. Except as contemplated by the Merger
Agreement, the Company has covenanted and agreed that, during the period from
the date of the Merger Agreement to the Effective Time, the Company and its
subsidiaries will each conduct its operations according to its ordinary course
of business, consistent with past practice, and will use its reasonable best
efforts to preserve intact its business organization, to keep available the
services of its officers and employees and to maintain satisfactory
relationships with all persons and entities with which the Company has
significant business relations. Without limiting the generality of the
foregoing, the Company has agreed that, except as otherwise provided in the
Merger Agreement, prior to the Effective Date, neither Company nor any of its
subsidiaries will, without the prior consent of Purchaser:
(i) amend or propose to amend its Articles of Organization or Bylaws (or
comparable governing instruments); (ii) authorize for issuance, issue,
grant, sell, pledge, dispose of or propose to issue, grant, sell, pledge or
dispose of any shares of, or any options, warrants, commitments,
subscriptions or rights of any kind to acquire or sell any shares of, the
capital stock or other securities of the Company or any of its subsidiaries
including any securities convertible into or exchangeable for shares of
stock of any class of the Company or any of its subsidiaries, or enter into
any agreement, understanding or arrangement with respect to the purchase or
voting of shares of its capital stock, except for the issuance of Shares
pursuant to the exercise of Options or the conversion of the Subordinated
Notes outstanding on the date of the Merger Agreement, in accordance with
their present terms, and issuances of up to 120,000 Shares and options
under the ESPP to employees in the ordinary course of business; (iii)
split, combine or reclassify any shares of its capital stock, make any
other changes in its capital structure, or declare, pay or set aside any
dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, other than dividends
or distributions to the Company or a subsidiary wholly owned by the
Company, or redeem, purchase or otherwise acquire or offer to acquire any
shares of its capital stock or other securities, except for the repurchase
of shares of common stock from employees, consultants or directors of the
Company upon termination of their relationship with the Company in
accordance with existing contractual rights or obligations of repurchase;
(iv) (A) except for debt (including, but not limited to, obligations in
respect of capital leases) not in excess of $7,000,000 per month or
$30,000,000 in the aggregate for all entities combined, create, incur or
assume any short-term debt, long-term debt or obligations in respect of
capital leases, (B) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, indirectly, contingently or otherwise)
for the obligations of any person or entity, except for obligations of the
Company or any wholly owned subsidiary of the Company in the ordinary
course of business consistent with past practice, (C) make any capital
expenditures other
24
than in the ordinary course in amounts not to exceed $7,000,000 per month
or $30,000,000 in the aggregate, (D) or make any loans, advances or capital
contributions to, or investments in, any other person or entity (other than
customary relocation loans to employees made in the ordinary course of
business consistent with past practice), or (E) acquire the stock or
substantially all the assets of, or merge or consolidate with, any other
person or entity; (v) sell, transfer, mortgage, pledge or otherwise dispose
of, or encumber, or agree to sell, transfer, mortgage, pledge or otherwise
dispose of or encumber, any material assets or properties, real, personal
or mixed (except for (A) sales of assets in the ordinary course of business
and in a manner consistent with past practice, (B) disposition of obsolete
or worthless assets and (C) encumbrances on assets to secure purchase money
financings of equipment and capital improvements); (vi) (A) increase the
compensation of any of its or their directors, officers or key employees,
except pursuant to the terms of agreements or plans currently in effect,
(B) pay or agree to pay any pension, retirement or other employee benefit
provided in any existing plan, agreement or arrangement to any director,
officer or key employee except in the ordinary course and consistent with
past practice, (C) commit, other than pursuant to any existing collective
bargaining agreement, to any additional pension, profit sharing, bonus,
extra compensation, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance pay,
retirement or other employee benefit plan, agreement or arrangement, or to
any employment or consulting agreement with or for the benefit of any
director, officer or key employee, whether past or present, (D) amend, in
any material respect, any such plan, agreement or arrangement, or (E) enter
into, adopt or amend any employee benefit plans or employment or severance
agreement, or (except for normal increases in the ordinary and usual course
of business for employees with annual base cash compensation of less than
$80,000) increase in any manner the compensation of any employees; (vii)
settle or compromise any claims or litigation involving payments by the
Company or any of its subsidiaries of more than $250,000 in any single
instance or related instances, or that otherwise are material; (viii) make
any tax election or permit any insurance policy naming it as a beneficiary
or a loss payable payee to be canceled or terminated, except in the
ordinary and usual course of business consistent with past practices; (ix)
enter into any license with respect to intellectual property unless such
license is non-exclusive and entered into in the ordinary course consistent
with past practice or in accordance with existing contracts or other
agreements; (x) take any action or omit to take any action, which action or
omission would result in a breach of any of the covenants, representations
and warranties of the Company set forth in the Merger Agreement; (xi) enter
into any lease or amend any lease of real property other than in the
ordinary course of business consistent with past practice; (xii) change any
accounting practices, other than in the ordinary course and consistent with
past practice; (xiii) fail to use reasonable business efforts to keep in
full force and effect insurance comparable in amount and scope of coverage
to insurance now carried by it; (xiv) fail to pay all accounts payable and
other obligations, when they become due and payable, in the ordinary course
of business consistent with past practice and with the provisions of the
Merger Agreement, except if the same are contested in good faith, and, in
the case of the failure to pay any material accounts payable or other
obligations which are contested in good faith, only after consultation with
Purchaser; (xv) fail to comply in all material respects with all laws
applicable to it or any of its properties, assets or business and maintain
in full force and effect all permits necessary for, or otherwise material
to, such business; or (xvi) agree, commit or arrange to do the foregoing.
NO SOLICITATION. In the Merger Agreement, the Company agreed that the
Company and its subsidiaries will not and they will cause each of their
respective officers, directors, employees, investment bankers, attorneys and
other agents not to (i) initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any Acquisition Proposal (as
defined below), (ii) except as described below, engage in negotiations or
discussions with, or furnish any information or data to any third party
relating to an Acquisition Proposal, (iii) except as described below, enter
into any agreement with respect to any Acquisition Proposal or approve or
resolve to approve any Acquisition Proposal or
25
(iv) except as described below, participate in any discussions regarding, or
take any other action to facilitate any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to any
Acquisition Proposal (other than the transactions contemplated by the Merger
Agreement). Notwithstanding the foregoing, in response to any unsolicited
Acquisition Proposal, the Company may (at any time prior to the consummation
of the Offer) furnish information concerning its business, properties or
assets to the person or group (a "Potential Acquiror") that was an unsolicited
Acquisition Proposal and participate in negotiations with the Potential
Acquiror if (x) the Board is advised by one or more of its independent
financial advisors that such Potential Acquiror has the financial wherewithal
to consummate without undue delay the transaction contemplated by the
Potential Acquiror's Acquisition Proposal, (y) the Board reasonably
determines, after receiving advice from the Company's financial advisor, that
such Potential Acquiror has submitted an Acquisition Proposal that involves
consideration to the Company's stockholders that is superior to the Offer and
the Merger, and (z) based upon advice of counsel to such effect, the Board
determines in good faith that it is necessary to so furnish information and/or
negotiate in order to comply with its fiduciary duty to stockholders of the
Company. In the event the Company determines to provide any information as
described above or receives any offer of the type referred above, it has
agreed in the Merger Agreement to (x) promptly inform Parent as to the fact
that such an offer has been received and/or information is to be provided, (y)
promptly provide Parent with a copy of any written offer or other materials
received by Company, its subsidiaries or their respective representatives in
connection therewith, and (z) if such offer is not in writing, promptly
furnish to Parent in writing the identity of the recipient of such information
and/or the proponent of such offer and the terms thereof. The Company has
agreed that any non-public information furnished to a Potential Acquiror will
be pursuant to a confidentiality agreement with confidential information and
no solicitation/no hire provisions substantially similar to those set forth in
the Confidentiality Agreement dated April 26, 1997 between the Company and
Parent set forth as an exhibit to the Schedule 14D-1. The Company has agreed
to keep Parent fully informed of the status and details, including amendments
or proposed amendments to any such Acquisition Proposal.
The Board has agreed in the Merger Agreement that it will not (x) withdraw
or modify or propose to withdraw or modify, in any manner adverse to Parent,
the approval or recommendation of the Board of the Merger Agreement, the Offer
or the Merger or (y) approve or recommend, or propose to approve or recommend,
any Acquisition Proposal unless, in each case, in connection with a Superior
Offer (as defined below), the Board determines in good faith, based on advice
of outside legal counsel, that it is necessary to do so in order to comply
with the Board's fiduciary duties under applicable law.
For purposes of the Merger Agreement, "Acquisition Proposal" means any bona
fide proposal, whether in writing or otherwise, made by a third party to
acquire beneficial ownership (as defined under Rule 13(d) of the Exchange Act)
of all or a material portion of the assets of the Company or any of its
subsidiaries, or any material equity interest in the Company pursuant to a
merger, consolidation or other business combination, sale of shares of capital
stock, sale of assets, tender offer or exchange offer or similar transaction
involving either the Company or any of its subsidiaries, including any single
or multi-step transaction or series of related transactions which is
structured to permit such third party to acquire beneficial ownership of any
material portion of the assets of, or any material equity interest in, the
Company and its subsidiaries. For purposes of the Merger Agreement, the term
"Superior Offer" means a bona fide offer to acquire, directly or indirectly,
for consideration consisting of cash and/or securities, two-thirds or more of
the Shares then outstanding or all or substantially all the assets of the
Company, and otherwise on terms which the Board determines in its good faith
reasonable judgment to be more favorable to the Company's stockholders than
the Offer and the Merger (based on advice of the Company's independent
financial advisor that the value of the consideration provided for in such
proposal is superior to the value of the consideration provided for in the
Offer and the Merger), for which financing, to the extent required, is then
committed or which, in the good faith reasonable judgment of the Board, based
on advice from the Company's independent financial advisor, is
26
reasonably capable of being financed by such third party and for which the
Board determines, in its good faith reasonable judgment, that such proposed
transaction is reasonably likely to be consummated without undue delay.
ACTIONS REGARDING THE RIGHTS. Prior to the execution of the Merger
Agreement, the Company, in accordance with the terms and provisions of the
Rights Agreement, amended the Rights Agreement so that the transactions
relating to and contemplated by the Merger Agreement are exempted from certain
provisions of the Rights Agreement and a "Common Stock Event" thereunder will
not occur as a result of such transactions. In the Merger Agreement the
Company has agreed that it will, with the consent of Parent, continue to take
all actions necessary to cause the transactions contemplated by the Merger
Agreement to remain exempted from such provisions of the Rights Agreement,
including, if desirable, entering into further amendments to the Rights
Agreement or causing the rights issued under the Rights Agreement to be
extinguished, canceled or redeemed.
MISCELLANEOUS UNDERTAKINGS. Pursuant to the Merger Agreement, if required by
applicable law in order to consummate the Merger, the Company, acting through
the Board, will, in accordance with applicable law, its Articles of
Organization and its By-laws, as soon as practicable: (i) duly call, give
notice of, convene and hold a special meeting of its stockholders as soon as
practicable following the consummation of the Offer for the purpose of
considering and taking action on the Merger Agreement (the "Stockholders'
Meeting"); (ii) subject to its fiduciary duties under applicable laws as
advised as to legal matters by counsel, include in the proxy statement or
information statement prepared by the Company for distribution to stockholders
of the Company in advance of the Stockholders' Meeting in accordance with
Regulation 14A or Regulation 14C promulgated under the Exchange Act (the
"Proxy Statement") the recommendation of the Board referred to above; and
(iii) use its reasonable efforts to (A) obtain and furnish the information
required to be included by it in the Proxy Statement, and, after consultation
with Parent, respond promptly to any comments made by the SEC with respect to
the Proxy Statement and any preliminary version thereof and cause the Proxy
Statement to be mailed to its stockholders following the consummation of the
Offer and (B) obtain the necessary approvals of the Merger Agreement and the
Merger by its stockholders. Parent will provide the Company with the
information concerning Parent and Purchaser required to be included in the
Proxy Statement and will vote, or cause to be voted, all Shares owned by it or
its subsidiaries in favor of approval and adoption of the Merger Agreement and
the transactions contemplated thereby.
Pursuant to the Merger Agreement, each of Parent, Purchaser and the Company
have agreed to use their reasonable best efforts to obtain any permits
necessary for the consummation of the transactions contemplated by the Merger
Agreement, provided that the Company has agreed not to, without the consent of
Parent (which consent will not be unreasonably withheld), agree to any
amendment to any material instrument or agreement to which it is a party.
Parent, Purchaser and the Company have also agreed to cooperate with one
another (i) in promptly determining whether any filings are required to be
made or permits are required to be obtained under any law or otherwise
(including from other parties to material contracts) in connection with the
consummation of the Offer and the Merger and (ii) in promptly making any such
filings, furnishing information required in connection therewith and seeking
timely to obtain any such permits. Each party has further agreed to use its
reasonable best efforts promptly to take, or cause to be taken, all actions
and promptly to do, or cause to be done, all things necessary, proper or
advisable under applicable laws to consummate and make effective the
transactions contemplated by the Merger Agreement; provided that no party
shall be required to proffer such party's willingness to accept any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) providing for divestiture of its assets or businesses which amount
to 7.5% or more of the Company's assets or earning power. The Company has also
agreed to take all actions reasonably requested by Parent to ensure the
orderly transition of the business of the Company and to preserve and maintain
the Company's business relationships. The Company has further agreed that upon
request it will assist Purchaser in any challenge of the applicability to the
Offer or the Merger of any state antitakeover statute.
27
INDEMNIFICATION. In the Merger Agreement, Xxxxxx agrees that from and after
the consummation of the Offer, it will cause the Company, and from and after
the Effective Time it will cause the Surviving Corporation, to indemnify,
defend and hold harmless the present and former officers and directors of the
Company and its subsidiaries (each an "Indemnified Party"), against all
losses, claims, damages or liabilities arising out of actions or omissions in
their capacity as a director or officer of the Company or a subsidiary
occurring on or prior to the consummation of the Offer to the maximum extent
permitted or required under the MBCL and the Company's Bylaws in effect on the
date of the Merger Agreement, including provisions with respect to advances of
expenses incurred in the defense of any action or suit, provided that any
determination required to be made with respect to whether an Indemnified
Party's conduct complies with the standards set forth under the MBCL and the
Company's Bylaws shall be made by independent legal counsel selected in good
faith by the Surviving Corporation. Parent further agreed in the Merger
Agreement that from and after consummation of the Offer it will cause the
Company or the Surviving Corporation to advance litigation costs reasonably
incurred by any Indemnified Party provided that such party undertakes to repay
amounts so advanced if it is ultimately determined that indemnification for
such expenses is not authorized under the Merger Agreement or otherwise.
Pursuant to the Merger Agreement, Parent agreed that from and after
consummation of the Offer it will cause the Company and from and after the
Effective Time it will cause the Surviving Corporation to maintain the
Company's existing directors' and officers' liability insurance ("D&O
Insurance") in full force and effect without reduction of coverage for a
period of three years after the Effective Time; provided that the Surviving
Corporation will not be required to pay an annual premium therefor in excess
of 200% of the last annual premium paid prior to the date of the Merger
Agreement (the "Current Premium"); and, provided, further, that if the
existing D&O Insurance expires, is terminated or cancelled during the 3-year
period, the Surviving Corporation will use reasonable efforts to obtain as
much D&O Insurance as can be obtained for the remainder of such period for a
premium on an annualized basis not in excess of 200% of the Current Premium.
The Company will maintain, through the Effective Time, the Company's existing
D&O Insurance in full force and effect without reduction of coverage.
The Merger Agreement also provides that if the Surviving Corporation or any
of its successors or assigns (i) consolidates with or merges into any other
person or entity and shall not be the continuing or surviving corporation or
entity of such consolidation or merger and the continuing or surviving entity
does not assume the indemnification obligations of the Surviving Corporation,
or (ii) transfers all or substantially all of its properties and assets to any
person or entity, then, and in each such case, proper provision will be made
so that the successors and assigns of the Surviving Corporation assume the
indemnification obligations of the Surviving Corporation.
CONDITIONS TO MERGER. Pursuant to the Merger Agreement, the respective
obligations of each of Parent, Purchaser and the Company to consummate the
Merger are subject to the satisfaction at or prior to the Effective Time of
the following conditions: (a) the Merger Agreement shall have been adopted by
the affirmative vote of the stockholders of the Company by the requisite vote
in accordance with applicable law, if required by applicable law; and (b) the
consummation of the Merger shall not be precluded by any order, decree, ruling
or injunction of a court of competent jurisdiction and there shall not have
been any action taken or statute, rule or regulation enacted, promulgated or
deemed applicable to the Merger by any governmental entity that makes
consummation of the Merger illegal.
Unless Purchaser has accepted for payment and paid for Shares validly
tendered pursuant to the Offer, the obligations of the Company to effect the
Merger are further subject to the satisfaction at or prior to the Effective
Time of the following conditions: (a) each of Parent and Purchaser having
performed in all material respects its obligations under the Merger Agreement
required to be performed by it at or prior to the Effective Time; (b) the
representations and warranties of Parent and Purchaser contained in the Merger
Agreement being true and correct in all material respects on the date as of
28
which made and on the Effective Time as though made on and as of such time;
and (c) Parent and Purchaser having delivered to the Company a certificate
with respect thereto.
Unless Purchaser has accepted for payment and paid for Shares validly
tendered pursuant to the Offer, the obligations of Parent and Purchaser to
effect the Merger are further subject to the satisfaction at or prior to the
Effective Time of the following conditions: (a) the Company having performed
in all material respects each of its obligations under the Merger Agreement
required to be performed by it at or prior to the Effective Time; (b) the
representations and warranties of the Company contained in the Merger
Agreement being true and correct in all material respects on the date as of
which made and on the Effective Time as if made at and as such time; (c) there
not having occurred after the completion of the Offer any material adverse
change in the business of the Company and its subsidiaries taken as a whole,
except for such changes that are caused by the Company's compliance with the
terms of the Merger Agreement and the Offer or that are contemplated by the
Merger Agreement; (d) no governmental or other action or proceeding having
been commenced after completion of the Offer that (i) in the opinion of
Parent's or Purchaser's counsel is more likely than not to be successful, and
(ii) either (A) seeks an injunction, a restraining order or any other Order
seeking to prohibit, restrain, invalidate or set aside consummation of the
Merger or (B) if successful, would have a Material Adverse Effect (as defined
below); and (e) the Company having delivered to Parent and Purchaser a
certificate with respect thereto.
TERMINATION. Pursuant to Section 8.1 of the Merger Agreement, the Merger
Agreement may be terminated and the Merger may be abandoned at any time
(whether before or after approval of the Merger by the stockholders of the
Company) prior to the Effective Time: (a) by mutual written consent of each of
Parent and the Company; (b) by either Parent and Purchaser or the Company, (1)
if the Shares have not been purchased pursuant to the Offer on or prior to the
Final Termination Date; provided, however, that such termination right will
not be available to any party whose failure to fulfill any obligation under
the Merger Agreement has been the cause of, or resulted in, the failure of
Purchaser to purchase the Shares pursuant to the Offer on or prior to such
date; or (2) if any governmental authority has issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other action
the parties will use their respective reasonable best efforts to lift), in
each case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement or prohibiting Parent or
Purchaser from acquiring or holding or exercising rights of ownership of the
Shares except such prohibitions which would not reasonably be expected to have
a Material Adverse Effect or prevent the consummation of the Offer prior to
the Final Termination Date, and such order, decree, ruling or other action
shall have become final and non-appealable; (c) by the Company, (1) if, prior
to the purchase of Shares pursuant to the Offer the Board of Directors has
withdrawn, or modified or changed in a manner adverse to Parent or Purchaser
its approval or recommendation of the Offer, the Merger Agreement or the
Merger (or the Board of Directors resolves to do any of the foregoing) as a
result of a Superior Offer, and if concurrently with such termination the
Termination Fee (as defined hereinafter) is paid to Parent, (2) if Parent or
Purchaser has terminated the Offer, or the Offer has expired, without
Purchaser purchasing any Shares pursuant thereto; provided that the Company
will not have such right to terminate the Merger Agreement if the Company's
failure to fulfill any obligation under the Merger Agreement has been the
cause of, or resulted in, the termination of the Offer or the failure of
Purchaser to purchase any Shares pursuant to the Offer, (3) if due to an
occurrence that if occurring after the commencement of the Offer would result
in a failure to satisfy any of the conditions of the Offer, Parent, Purchaser
or any of their affiliates shall have failed to commence the Offer on or prior
to five business days following the date of the initial public announcement of
the Offer; provided that the Company will not have such right to terminate the
Merger Agreement if the Company's failure to fulfill any obligation under the
Merger Agreement has been the cause of, or resulted in, the failure of Parent,
Purchaser or any affiliate to commence the Offer, or (4) prior to the purchase
of Shares pursuant to the Offer, (A) if any representation or warranty of
Parent and Purchaser set forth in the Merger Agreement shall be untrue in any
material respect
29
when made, or (B) upon a breach in any material respect of any covenant or
agreement on the part of Parent or Purchaser set forth in the Merger
Agreement, in each case where such misrepresentation or breach would result in
a failure to satisfy any of the Conditions of the Offer; provided that the
Company shall not have such right to terminate the Merger Agreement if any
such breach is curable by Parent or Purchaser through the exercise of its
reasonable best efforts prior to the Final Termination Date and for so long as
Parent or Purchaser continues to exercise such reasonable best efforts; or (d)
by Parent and Purchaser, (1) if, prior to the purchase of the Shares pursuant
to the Offer, the Board of Directors shall have (A) withdrawn, modified or
changed in a manner adverse to Parent or Purchaser its approval or
recommendation of the Offer, the Merger Agreement or the Merger, or (B)
recommended an Acquisition Proposal or shall have executed an agreement in
principle or definitive agreement relating to an Acquisition Proposal or
similar business combination with a person or entity other than Parent,
Purchaser or their affiliates (or the Board of Directors resolves to do any of
the foregoing); (2) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
Conditions of the Offer, Parent, Purchaser or any of their affiliates shall
have failed to commence the Offer on or prior to five business days following
the date of the initial public announcement of the Offer; provided that
neither Parent nor Purchaser shall have such right to terminate the Merger
Agreement if the failure of Purchaser or Parent to fulfill any obligation
under the Merger Agreement has been the cause of, or resulted in, the failure
of Parent, Purchaser or any affiliate to commence the Offer; (3) prior to the
purchase of Shares pursuant to the Offer, (A) if any representation or
warranty of the Company set forth in the Merger Agreement shall be untrue in
any material respect when made or (B) upon a breach in any material respect of
any covenant or agreement on the part of the Company set forth in the Merger
Agreement, in each case where such misrepresentation or breach would cause the
Conditions of the Offer not to be met; provided that neither Parent nor
Purchaser shall have such right to terminate the Merger Agreement if any such
breach is curable by the Company through the exercise of its reasonable best
efforts prior to the Final Termination Date and for so long as the Company
continues to exercise such reasonable best efforts; (4) if any person or group
shall have become the beneficial owner of 20% or more of the outstanding
Shares; or (5) if the Company shall have failed to file its Schedule 14D-9
with the SEC within 10 business days of the commencement of the Offer. As used
in the Merger Agreement, the term "Material Adverse Effect" means any change,
effect, matter or circumstances that has or would reasonably be expected to
have a material adverse effect on the business, assets or properties
(including intangible assets or properties), liabilities, results of
operations or financial condition of the Company and its subsidiaries taken as
a whole, other than any such changes, effects or circumstances (i)
specifically referred to in the Disclosure Schedule delivered by the Company
to Parent, (ii) generally affecting the United States economy or (iii)
resulting from both (x) the proposed acquisition of Company and (y) the fact
that the acquiror is Parent.
Pursuant to the Merger Agreement, in the event of the termination of the
Merger Agreement in accordance with its terms, the Merger Agreement shall
forthwith become null void and have no effect, without any liability on the
part of any party thereto or its affiliates, directors, officers or
stockholders, other than the provisions of the Merger Agreement relating to
fees and expenses (including the Termination Fee), the Termination Option (as
defined below), governing law and confidentiality of information.
Notwithstanding the foregoing, no party will be relieved from liability that
it may have for willful breach of the Merger Agreement.
TERMINATION FEE AND TERMINATION OPTION. The Company has agreed to pay to
Parent by wire transfer $13.5 million (the "Termination Fee"), upon demand, if
(i) the Company terminates the Merger Agreement pursuant to Section 8.1(c)(i)
thereof (which generally relates to a change in the Board's recommendation
adverse to Parent as a result of a Superior Offer), in which case the
Termination Fee must be paid simultaneously with such termination, (ii) Parent
or Purchaser terminates the Merger Agreement pursuant to Section 8.1(d)(i)
thereof (which generally relates to a change in the Board's recommendation
adverse to Parent or an agreement relating to an Acquisition Proposal with a
third
30
party), or (iii) the Merger Agreement is terminated for any reason (other than
as a result of (x) the failure of Parent or Purchaser to fulfill any material
obligation under the Merger Agreement, (y) the applicable waiting period under
the HSR Act not having expired or been terminated on or prior to the Final
Termination Date or (z) the failure of certain Conditions of the Offer to be
satisfied or waived by Parent on or prior to the Final Termination Date), at
any time after an Acquisition Proposal has been made and within nine months
after such a termination, the Company completes either (x) a merger,
consolidation or other business combination between the Company or a
subsidiary of the Company and any other person or entity (other than Parent,
Purchaser or an affiliate of Parent) or (y) the sale of 30% or more (in voting
power) of the voting securities of the Company or of 30% or more (in market
value) of the assets of the Company and its subsidiaries, on a consolidated
basis.
Concurrently with the execution of the Merger Agreement the Company issued
to Parent the Termination Option to purchase 4,225,000 Shares at a price per
Share equal to $29.00 pursuant to the Stock Option Agreement dated as of May
5, 1997 between the Company and Parent (the "Stock Option Agreement"). Such
option becomes exercisable by Parent when a Termination Fee is payable to
Parent. For a summary of the Stock Option Agreement see "--Stock Option
Agreement."
AMENDMENT. The Merger Agreement may be amended by action taken by the
Company, Parent and Purchaser provided that after the date of adoption of the
Merger Agreement by the stockholders of the Company (if stockholder approval
of the Merger is required by applicable law), no amendment shall be made which
decreases the cash price per Share or that in any other way adversely affects
the rights of the Company's stockholders (other than termination of the Merger
Agreement) without the approval of such stockholders. The Merger Agreement may
not be amended except by an instrument in writing signed on behalf of the
parties or party intended to be bound thereby.
FEES AND EXPENSES. Except as specifically provided in the Merger Agreement,
each party bears its own respective expenses incurred in connection with the
Merger Agreement, the Offer and the Merger, including the preparation,
execution and performance of the Merger Agreement and the transactions
contemplated thereby, and all fees and expenses of investment bankers,
finders, brokers, agents, representatives, counsel and accountants.
STOCK OPTION AGREEMENT
The following is a summary of certain provisions of the Stock Option
Agreement, a copy of which is filed as an exhibit to the Schedule 14D-1 and
which is incorporated herein by reference. The following summary is qualified
in its entirety by reference to the Stock Option Agreement.
GRANT OF OPTION. Pursuant to the Stock Option Agreement, the Company granted
to Parent an irrevocable option (the "Termination Option") to purchase, under
certain circumstances, up to 4,225,000 (subject to adjustment as set forth
therein) Shares (the "Option Shares") at a purchase price of $29.00 (subject
to adjustment as set forth therein) per Option Share (the "Purchase Price").
In the event of any change in the Shares by reason of a stock dividend, split-
up, merger, recapitalization, combination, exchange of shares, distribution of
assets, or similar transaction, the type and number of shares or securities
subject to the Termination Option, and the Purchase Price thereof, will be
adjusted appropriately, and proper provision will be made in the agreements
governing such transaction, so that Parent will receive upon exercise of the
Termination Option the number and class of shares or other securities or
property that Parent would have received in respect of the Shares (after
giving effect to such event) if the Termination Option had been exercised
immediately prior to such event or the record date therefor, as applicable.
Subject to the terms of the Stock Option Agreement, upon any issuance of
common stock by the Company (other than as referred to in the preceding
sentence) the number of Shares subject to the Termination Option will be
adjusted so that, after such issuance, it equals 19.9% of the number of Shares
then issued and outstanding, without giving effect to any shares subject to or
issued pursuant to the Termination Option, and the Purchase Price thereof will
be adjusted appropriately.
31
EXERCISE OF TERMINATION OPTION. Parent may exercise the Termination Option,
with respect to all or any part of the Option Shares at any one time, subject
to the other provisions described in the next sentence, after the occurrence
of any event as a result of which Parent is entitled to receive the
Termination Fee pursuant to Section 8.2(b) of the Merger Agreement (a
"Purchase Event"). Notwithstanding anything to the contrary contained in the
Stock Option Agreement, any exercise of the Termination Option and purchase of
Option Shares is subject to the obtaining or making of any consents,
approvals, orders, notifications or authorizations, the failure of which to
have obtained or made would have the effect of making the issuance of Option
Shares illegal. In the event purchase of the Option Shares is subject to any
such restriction if the Termination Option is otherwise exercisable Parent may
purchase the number of Option Shares that Parent is then permitted to acquire
under the applicable laws and regulations, and if Parent thereafter obtains
the regulatory approvals to acquire the remaining balance of the Option
Shares, then Parent shall be entitled to acquire such remaining balance. The
Company has agreed to use its reasonable best efforts to assist Parent in
seeking any necessary regulatory approvals.
CASH-OUT RIGHT. In the event (i) Parent receives official notice that a
regulatory approval required for the purchase of any Option Shares will not be
issued or granted, (ii) such regulatory approval has not been issued or
granted within six months of the date of the notice exercising the Termination
Option, or (iii) Parent in its sole discretion shall so elect, Parent may
exercise its Cash-Out Right pursuant to the Stock Option Agreement with
respect to the Option Shares for which such regulatory approval will not be
issued or granted or has not been issued or granted.
TERMINATION. The Termination Option will terminate and be of no further
force and effect upon the earliest to occur of (A) the Effective Time, (B)
nine months after the first occurrence of a Purchase Event described in
clauses (i) or (ii) of Section 8.2(b) of the Merger Agreement, (C) termination
of the Merger Agreement in accordance with its terms prior to the occurrence
of a Purchase Event, unless, in the case of clause (C), Parent has, or upon
the occurrence of certain events would have, the right to receive the
Termination Fee under clause (iii) of Section 8.2(b) of the Merger Agreement
following such termination, in which case the Termination Option will not
terminate until the later of (x) six months following the time such
Termination Fee becomes payable and (y) the expiration of the period in which
Parent has or may have such right to receive the Termination Fee, and (D) when
the aggregate amount paid by the Company under the "cash out" provision of the
Stock Option Agreement and in connection with the Termination Fee equals or
exceeds $21,231,000. Notwithstanding the termination of the Termination
Option, Parent will be entitled to purchase the Option Shares if it has
exercised the Termination Option in accordance with the terms of the Stock
Option Agreement prior to the termination of the Termination Option, and the
termination of the Termination Option will not affect any rights under the
Stock Option Agreement which by their terms do not terminate or expire prior
to or as of such termination.
OTHER. Pursuant to the Stock Option Agreement, the Company makes certain
representations and warranties to Parent with respect to the authorization and
issuance of the Option Shares and certain other representations and
warranties. Further, Parent may also require the Company to cause the Shares
or other securities to be issued upon exercise of the Termination Option to be
registered under the Securities Act, to qualify such shares or other
securities under any applicable state securities laws and to promptly file an
application to list such shares or other securities on the NYSE (and any such
other national securities exchange or national securities quotation system).
CONFIDENTIALITY AGREEMENT
The following is a summary of certain provisions of the Confidentiality
Agreement, dated as of April 26, 1997, between Parent and the Company (the
"Confidentiality Agreement"). This summary is qualified in its entirety by
reference to the Confidentiality Agreement which is incorporated herein by
reference and a copy of which has been filed with the SEC as an exhibit to the
Schedule 14D-1. The Confidentiality Agreement contains customary provisions
pursuant to which, among other matters,
32
Parent agreed to keep confidential all nonpublic, confidential or proprietary
information furnished to it by the Company relating to the Company, subject to
certain exceptions (the "Confidential Information"), and to use the
Confidential Information solely for the purpose of evaluating a possible
transaction involving the Company and Parent.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
The purpose of the Offer and the Merger is for Purchaser to acquire the
entire equity interest in the Company. Unless the Minimum Condition is waived,
consummation of the Offer will provide Purchaser with at least a two-thirds
equity interest in the Company. The Merger will allow Purchaser to acquire all
outstanding Shares not tendered and purchased pursuant to the Offer. The
acquisition of the entire equity interest in the Company has been structured
as a cash tender offer and a cash merger in order to provide a prompt and
orderly transfer of ownership of the Company from the public stockholders of
the Company to Parent. The purchase of Shares pursuant to the Offer will
increase the likelihood that the Merger will be consummated.
Parent has announced its strategy of being a national provider of a full
bundle of communications services--voice, video and data. Parent plans to
offer customers end to end managed network solutions and a superior high speed
network that is affordable, reliable and secure. By acquiring the Company,
Parent will acquire significant expertise and value-added services to
supplement its data initiatives. After consummation of the Offer, Parent and
Purchaser plan to assess various aspects of the Company's business and
operations to identify how best to maximize the Company's strengths in
implementing Parent's long-term strategy.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE ACT
REGISTRATION; MARGIN REGULATIONS
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and may reduce the number of
holders of Shares, which could adversely affect the liquidity and market value
of the remaining Shares held by stockholders other than Purchaser. Purchaser
cannot predict whether the reduction in the number of Shares that might
otherwise trade publicly would have an adverse or beneficial effect on the
market price for or marketability of the Shares or whether it would cause
future market prices to be greater or less than the Offer Price.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the NYSE for continued listing
and may, therefore, be delisted from such exchange. According to the NYSE's
published guidelines, the NYSE could consider delisting the Shares if, among
other things, the number of publicly held Shares (excluding Shares held by
officers, directors, their immediate families and other concentrated holdings
of 10% or more) were less than 600,000, there were less than 1,200 holders of
at least 100 Shares or the aggregate market value of the publicly held Shares
was less than $5 million. If, as a result of the purchase of Shares pursuant
to the Offer, the Shares no longer meet the requirements of the NYSE for
continued listing and the listing of Shares on such exchanges is discontinued,
the market for the Shares could be adversely affected.
If the NYSE were to delist the Shares, it is possible that the Shares would
trade on another securities exchange or in the over-the-counter market and
that price quotations for the Shares would be reported by such exchange or
through Nasdaq or other sources. The extent of the public market for the
Shares and the availability of such quotations would, however, depend upon
such factors as the number of holders and/or the aggregate market value of the
publicly held Shares at such time, the interest in maintaining a market in the
Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act and other factors.
33
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. Depending upon factors similar
to those described above regarding listing and market quotations, it is
possible that, following the Offer, the Shares would no longer constitute
"margin securities" for the purposes of the margin regulations of the Federal
Reserve Board and therefore could no longer be used as collateral for loans
made by brokers.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the SEC if the Shares are neither listed on a national securities
exchange nor held by 300 or more holders of record. Termination of
registration of the Shares under the Exchange Act would substantially reduce
the information required to be furnished by the Company to its stockholders
and to the SEC and would make certain provisions of the Exchange Act no longer
applicable to the Company, such as the short-swing profit recovery provisions
of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy
statement pursuant to Section 14(a) of the Exchange Act in connection with
stockholders' meetings and the related requirement of furnishing an annual
report to stockholders and the requirements of Rule 13e-3 under the Exchange
Act with respect to "going private" transactions. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 or 144A promulgated
under the Securities Act may be impaired or eliminated. It is the current
intention of Parent to deregister the Shares after consummation of the Offer
if the requirements for termination of registration are met.
14. DIVIDENDS AND DISTRIBUTIONS.
If, on or after the date of the Merger Agreement, the Company should (a)
split, combine or otherwise change the Shares or its capitalization, (b)
acquire or otherwise cause a reduction in the number of outstanding Shares or
other securities or (c) issue or sell additional Shares (other than as
specifically permitted by the terms of the Merger Agreement), shares of any
other class of capital stock, other voting securities or any securities
convertible into or exchangeable for, or rights, warrants or options,
conditional or otherwise, to acquire, any of the foregoing, then, without
prejudice to Purchaser's rights under Sections 1 and 16, Purchaser, in its
sole discretion, may make such adjustments as it deems appropriate in the
Offer Price and other terms of the Offer, including, without limitation, the
number or type of securities offered to be purchased.
If, on or after the date of the Merger Agreement, the Company should declare
or pay any dividend on the Shares or make any distribution (including, without
limitation, cash dividends, the issuance of additional Shares pursuant to a
stock dividend or stock split, the issuance of other securities or the
issuance of rights for the purchase of any securities) with respect to the
Shares, payable or distributable to stockholders of record on a date prior to
the transfer of the Shares purchased pursuant to the Offer to Purchase or its
nominee or transferee on the Company's stock transfer records, then, without
prejudice to Purchaser's rights under Sections 1 and 16, (a) the Offer Price
may, in the sole discretion of Purchaser, be reduced by the amount of any such
cash dividend or cash distribution and (b) the whole of any such noncash
dividend, distribution or issuance to be received by the tendering
stockholders will (i) be received and held by the tendering stockholders for
the account of Purchaser and will be required to be promptly remitted and
transferred by each tendering stockholder to the Depositary for the account of
Purchaser, accompanied by appropriate documentation of transfer, or (ii) at
the direction of Purchaser, be exercised for the benefit of Purchaser, in
which case the proceeds of such exercise will promptly be remitted to
Purchaser. Pending such remittance and subject to applicable law, Purchaser
will be entitled to all rights and privileges as owner of any such dividend,
distribution or right and may withhold the entire purchase price for Shares
tendered in the Offer or deduct from the purchase price the amount or value
thereof, as determined by Purchaser in its sole discretion.
34
Section 6.3 of the Merger Agreement prohibits the Company from taking any of
the foregoing actions without the prior consent of Parent.
15. EXTENSION OF TENDER PERIOD; AMENDMENT; TERMINATION.
Purchaser expressly reserves the right, in its sole discretion, at any time
or from time to time, regardless of whether or not any of the Conditions set
forth at Section 16 will have occurred or will have been determined by
Purchaser to have occurred, subject to the terms of the Merger Agreement and
the applicable rules of the SEC, to amend the terms and conditions of the
Offer in any respect by giving oral or written notice of such amendment to the
Depositary provided that without the consent of the Company, no amendment may
be made which (i) decreases the price per Share or changes the form of
consideration payable in the Offer, (ii) decreases the number of Shares sought
in the Offer, or (iii) imposes additional conditions to the Offer or amends
any other term of the Offer in any manner adverse to the holders of the
Shares. In the Merger Agreement, Parent and Purchaser have agreed that if all
of the Conditions set forth in Section 16 are not satisfied on the initial
Expiration Date of the Offer, and if the Merger Agreement has not been
terminated in accordance with its terms, Purchaser shall extend (and re-
extend) the Offer to provide time to satisfy such Conditions, through the
Final Termination Date. From and after the Final Termination Date, if all of
the Conditions have not been satisfied on any Expiration Date of the Offer and
the Merger Agreement has not been terminated in accordance with its terms,
Purchaser may but shall not be obligated to extend and re-extend the Offer to
provide time to satisfy such Conditions. In addition, whether or not the
Conditions have been satisfied, Purchaser may extend and re-extend the Offer,
from time to time, but in no event beyond November 15, 1997, if it believes
such extension is advisable in order to facilitate the orderly transition of
the business of the Company and to preserve and maintain the Company's
business relationships. The foregoing right to extend, among other things,
permits Parent to delay the consummation of the Offer if necessary or
desirable to permit it to deal with business arrangements between the Company
and third parties which could be terminated in the event of a change in
control of the Company. WorldCom, Inc. ("WorldCom"), which is party to two
such terminable arrangements with the Company, has agreed not to terminate
such agreements as a result of the consummation of the Offer and the Merger.
WorldCom has also entered into a letter agreement with Parent with respect to
its existing and anticipated business relationships with Parent. Under that
letter agreement (i) WorldCom has certain rights, following the consummation
of the Offer, to terminate its arrangements with the Company if amendments to
existing agreements between it and Parent are not successfully concluded and
(ii) Parent has certain rights to terminate any such amendments if WorldCom
interferes with the consummation of the Offer. In light of the foregoing,
Parent does not expect to utilize its right to extend the Offer beyond the
date on which all Conditions are satisfied.
Purchaser also reserves the right, in its sole discretion, subject to the
terms of the Merger Agreement, in the event any of the Conditions specified in
Section 16 will not have been satisfied and so long as Shares have not
theretofore been accepted for payment, to delay (except as otherwise required
by applicable law) acceptance for payment of or payment for Shares or to
terminate the Offer and not accept for payment or pay for Shares.
If Purchaser extends the Offer, or if Purchaser (whether before or after its
acceptance for payment of Shares) is delayed in its purchase of or payment for
Shares or is unable to pay for Shares pursuant to the Offer for any reason,
then, without prejudice to Purchaser's rights under the Offer, the Depositary
may retain tendered Shares on behalf of Purchaser, and such Shares may not be
withdrawn except to the extent tendering stockholders are entitled to
withdrawal rights as described in Section 4. However, the ability of Purchaser
to delay the payment for Shares which Purchaser has accepted for payment is
limited by Rule 14e-1(c) under the Exchange Act, which requires that a bidder
pay the consideration offered or return the securities deposited by or on
behalf of holders of securities promptly after the termination or withdrawal
of such bidder's offer.
35
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer (including the Minimum Condition), Purchaser
will disseminate additional tender offer materials and extend the Offer to the
extent required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The
minimum period during which the Offer must remain open following material
changes in the terms of the Offer or information concerning the Offer, other
than a change in price or a change in percentage of securities sought, will
depend upon the facts and circumstances, including the relative materiality of
the terms or information. With respect to a change in price or a change in
percentage of securities sought, a minimum ten business day period is
generally required to allow for adequate dissemination to stockholders and
investor response. If prior to the Expiration Date, Purchaser should decide to
increase the price per Share being offered in the Offer, such increase will be
applicable to all stockholders whose Shares are accepted for payment pursuant
to the Offer.
16. CONDITIONS TO THE OFFER.
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including without limitation, Rule 14e-1(c) under the
Exchange Act (relating to Purchaser's obligation to pay for or return Shares
promptly after termination or withdrawal of the Offer), pay for, or may delay
the acceptance for payment of or payment for, any tendered shares, or may, in
its sole discretion, terminate or amend the Offer as to any Shares not then
paid for, if (i) any applicable waiting period under the HSR Act shall not
have expired or been terminated, (ii) the number of Shares validly tendered
and not withdrawn when added to the Shares then beneficially owned by Parent
does not constitute two-thirds of the Shares then outstanding; or (iii) on or
after the date of the Merger Agreement and at or before the time of payment
for the Shares, any of the following events shall occur and be continuing:
(a) there shall have occurred and be continuing (1) any general
suspension of trading in, or limitation on prices for, securities on the
NYSE, (2) the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States (whether or not
mandatory), (3) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States and having had or being reasonably likely to have a Material
Adverse Effect or would restrain, prohibit or delay beyond the Final
Termination Date the consummation of the Offer, (4) any limitation or
proposed limitation (whether or not mandatory) by any Governmental Entity,
or any other event, that materially adversely affects generally the
extension of credit by banks or other financial institutions, (5) from the
date of the Merger Agreement through the date of termination or expiration
of the Offer, a decline of at least 25% in the Standard & Poor's 500 Index
or (6) in the case of any of the situations described in clauses (1)
through (5) inclusive, existing at the date of the Merger Agreement, a
material acceleration, escalation or worsening thereof;
(b) (i) the representations and warranties of the Company set forth in
the Merger Agreement shall not have been true and correct in any material
respect on the date of the Merger Agreement or (ii) the representations and
warranties of the Company set forth in the Merger Agreement shall not be
true and correct in any respect as of the scheduled expiration date (as
such date may be extended) of the Offer as though made on or as of such
date or the Company shall have breached or failed in any respect to perform
or comply with any obligation, agreement or covenant required by the Merger
Agreement to be performed or complied with by it except, in each case with
respect to clause (ii), (x) for changes specifically permitted by the
Merger Agreement and (y) (A) for those representations and warranties that
address matters only as of a particular date which are true and correct as
of such date or (B) where the failure of representations and warranties
(without giving effect to any limitation based on "materiality," "Material
Adverse Effect" or words of similar effect set forth therein) to be true
and correct, or the performance or compliance with such obligations,
agreements or covenants, would not in the aggregate reasonably be expected
to have a Material Adverse Effect;
36
(c) there shall be any action or proceeding commenced by or before, or
threatened in writing by, any Governmental Entity, which has a reasonable
likelihood of success and which, if decided adversely to the Company, would
have a Material Adverse Effect or would restrain, prohibit or delay beyond
the Final Termination Date the consummation of the Offer and if decided
adversely to Parent, would have the effect of (i) making the purchase of,
or payment for, some or all of the Shares pursuant to the Offer or the
Merger or otherwise illegal, or resulting in a material delay in the
ability of Parent or Purchaser to accept for payment or pay for some or all
of the Shares, (ii) compelling Parent or Purchaser to dispose of or hold
separately all or any material portion of the Company's or Parent's
business or assets, (iii)making illegal, or otherwise directly or
indirectly restraining or prohibiting or imposing material financial
burdens, penalties or, fines or requiring the payment of material damages
in connection with the making of, the Offer, the acceptance for payment of,
payment for, or ownership, directly or indirectly, of some of or all the
Shares by Parent or Purchaser, the consummation of the Offer or the Merger,
(iv) otherwise preventing consummation of the Offer or the Merger, or (v)
imposing limitations on the ability of Parent or Purchaser effectively (A)
to acquire, hold or operate the business of the Company and its
subsidiaries taken as a whole or (B) to exercise full rights of ownership
of the Shares acquired by it, including, but not limited to, the right to
vote the Shares purchased by it on all matters properly presented to the
stockholders of the Company, which, in either case, would effect a material
diminution in the value of the Company or the Shares;
(d) there shall been any law, rule or regulation enacted, promulgated,
entered or deemed applicable to the Offer or the Merger Agreement or any
other action shall have been taken or threatened in writing, by any
Governmental Entity on or after the date of the Offer that would reasonably
be expected to, directly or indirectly, result in any of the consequences
referred to in clauses (i) through (v) of paragraph (c) above;
(e) the Board of Directors of the Company shall have publicly (including
by amendment of its Schedule 14D-9) withdrawn or adversely modified its
recommendation of acceptance of the Offer;
(f) since the date of the Merger Agreement, there shall have occurred any
event or events that, singly or in the aggregate, have had or would
reasonably be expected to have a Material Adverse Effect; or
(g) the Merger Agreement shall have been terminated in accordance with
its terms, or Parent or Purchaser shall have reached an agreement or
understanding in writing with the Company providing for termination or
amendment of the Offer;
which, in any such case, and regardless of the circumstances (including any
action or inaction by Parent or Purchaser) giving rise to any such conditions,
makes it in the sole discretion of Parent inadvisable to proceed with the
Offer and/or with such acceptance for payment of or payment for the Shares.
The foregoing conditions (the "Conditions") are for the sole benefit of
Parent and Purchaser and may be asserted by Parent or Purchaser regardless of
the circumstances giving rise to any such Condition and may be waived by
Parent or Purchaser, in whole or in part, at any time and from time to time,
in the sole discretion of Parent or Purchaser. The failure by Parent or
Purchaser at any time to exercise any of the foregoing rights will not be
deemed a waiver of any right and each right will be deemed an ongoing right
which may be asserted at any time and from time to time.
17. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
GENERAL. Except as described in this Section 17, based upon a review of
publicly available filings by the Company with the SEC and other publicly
available information concerning the Company, neither Parent nor Purchaser is
aware of any license or regulatory permit that appears to be material to the
business of the Company and its subsidiaries, taken as a whole, that might be
adversely
37
affected by the acquisition of Shares by Purchaser or Parent pursuant to the
Offer, the Merger or otherwise or, except as set forth below, of any approval
or other action by any governmental, administrative or regulatory agency or
authority, domestic or foreign, that would be required prior to the
acquisition of Shares by Purchaser pursuant to the Offer, the Merger or
otherwise. Should any such approval or other action be required, Purchaser and
Parent currently contemplate that it will be sought. While Purchaser does not
currently intend to delay the acceptance for payment of Shares tendered
pursuant to the Offer pending the outcome of any such matter, there can be no
assurance that any such approval or other action, if needed, would be obtained
or would be obtained without substantial conditions or that adverse
consequences might not result to the Company's business or that certain parts
of the business of the Company or Parent might not have to be disposed of in
the event that such approvals were not obtained or any other actions were not
taken. Purchaser's obligation under the Offer to accept for payment and pay
for Shares is subject to certain conditions, including conditions relating to
certain of the legal matters discussed in this Section 17. See Section 16.
THE MERGER; DISSENTERS' RIGHTS. Under Chapter 156B of the MBCL, the
affirmative vote of the holders of at least two-thirds of the outstanding
Shares entitled to vote, including the Shares owned by Parent and its
affiliates (including Purchaser) would be required to adopt the Merger. No
dissenters' or appraisal rights are available in connection with the Offer.
However, if the Merger is consummated, stockholders of the Company may have
certain rights under Massachusetts law to dissent and demand appraisal of, and
payment in cash of the fair value of, their Shares (the "Dissenting Shares").
Such rights, if the statutory procedures were complied with, could lead to a
judicial determination of the fair value (excluding any element of value
arising from the accomplishment or expectation of the Merger) required to be
paid in cash to such dissenting holders for their Shares. Any such judicial
determination of the fair value of Shares could be based upon considerations
other than or in addition to the price paid in the Offer and the market value
of the Shares, including asset values and the investment value of the Shares.
The value so determined could be more or less than the purchase price per
Share pursuant to the Offer or the consideration per Share to be paid in the
Merger. The foregoing summary of rights of dissenting stockholders does not
purport to be a complete statement of the procedures to be followed by
stockholders desiring to exercise dissenters' rights. The preservation and
exercise of dissenters' rights are conditioned upon strict adherence with
Massachusetts law.
In addition, the Merger will have to comply with other applicable procedural
and substantive requirements of Massachusetts law, including any duties to
minority stockholders imposed upon a controlling or, if applicable, majority
stockholder.
The SEC has adopted Rule 13e-3 under the Exchange Act, which is applicable
to certain "going private" transactions and which may under certain
circumstances be applicable to the Merger or another business combination
following the purchase of Shares pursuant to the Offer in which Purchaser
seeks to acquire the remaining Shares not held by it. Xxxxxxxxx believes,
however, that if the Merger is consummated within one year of its purchase of
Shares pursuant to the Offer, Rule 13e-3 will not be applicable to the Merger.
Purchaser believes that if the Merger is not consummated within one year of
its purchase of Shares pursuant to the Offer, Rule 13e-3 will be applicable to
the Merger. Rule 13e-3 requires, among other things, that certain financial
information concerning the Company and certain information relating to the
fairness of the proposed transaction and the consideration offered to minority
stockholders in such transaction be filed with the SEC and disclosed to
stockholders prior to consummation of the transaction.
STATE TAKEOVER STATUTES. A number of states, including Massachusetts, have
adopted "takeover" statutes that purport to apply to attempts to acquire
corporations that are incorporated in such states, or whose business
operations have substantial economic effects in such states, or which have
substantial assets, security holders, employees, principal executive offices
or principal places of business in such states.
38
In Xxxxx x. MITE Corporation, the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover Act,
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However, in CTS Corp. v. Dynamics
Corp. of America, addressing Indiana's Control Share Acquisition Act, the
Supreme Court held that a state may, as a matter of corporate law and, in
particular, those laws concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without prior approval of the remaining stockholders, provided
that such laws were applicable under certain conditions, in particular, that
the corporation has a substantial number of stockholders in the state and is
incorporated there.
The Company conducts business in a number of states throughout the United
States, some of which have enacted "takeover" statutes. Purchaser does not
know whether any of these statutes will, by their terms, apply to the Offer,
and has not complied with any such statutes. To the extent that certain
provisions of these statutes purport to apply to the Offer, Purchaser believes
that there are reasonable bases for contesting such statutes. If any person
should seek to apply any state takeover statute, Purchaser would take such
action as then appears desirable, which action may include challenging the
validity or applicability of any such statute in appropriate court
proceedings. If it is asserted that one or more takeover statutes apply to the
Offer, and it is not determined by an appropriate court that such statute or
statutes do not apply or are invalid as applied to the Offer, Purchaser might
be required to file certain information with, or receive approvals from, the
relevant state authorities, and Purchaser might be unable to purchase or pay
for Shares tendered pursuant to the Offer, or be delayed in continuing or
consummating the Offer. In such case, Purchaser may not be obligated to accept
for payment or pay for Shares tendered. See Section 15.
ANTITRUST. Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Shares under the Offer may be consummated following the
expiration of a 15-calendar day waiting period following the filing by Parent
of a Notification and Report Form with respect to the Offer, unless Xxxxxx
receives a request for additional information or documentary material from the
Antitrust Division of the Department of Justice (the "Antitrust Division") or
the Federal Trade Commission (the "FTC") or unless early termination of the
waiting period is granted. If, within the initial 15-calendar day waiting
period, either the Antitrust Division or the FTC requests additional
information or material from Parent concerning the Offer, the waiting period
will be extended and would expire at 11:59 p.m., New York City time, on the
tenth calendar day after the date of substantial compliance by Parent with
such request. Only one extension of the waiting period pursuant to a request
for additional information is authorized by the HSR Act. Thereafter, such
waiting period may be extended only by court order or with the consent of
Parent. In practice, complying with a request for additional information or
material can take a significant amount of time.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as Purchaser's acquisition of the
Shares pursuant to the Offer and the Merger Agreement. At any time before or
after Purchaser's acquisition of Shares, the Antitrust Division or the FTC
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the acquisition
of Shares pursuant to the Offer or otherwise or seeking divestiture of Shares
acquired by Purchaser or divestiture of substantial assets of Parent or its
subsidiaries. Private parties and state attorneys general may also bring legal
action under the antitrust laws in certain circumstances. Based upon an
examination of publicly available information relating to the business in
which Parent and the Company are engaged, Parent and Purchaser believe that
the acquisition of Shares by Purchaser will not violate the antitrust laws.
Nevertheless, there can be no assurance that a challenge to the Offer or other
acquisition of Shares by Purchaser on antitrust grounds will not be made or,
if such challenge is made, of the result. See Section 16 for certain
conditions to the Offer, including conditions with respect to litigation and
certain governmental actions.
39
FEDERAL RESERVE BOARD REGULATIONS. The margin regulations promulgated by the
Federal Reserve Board place restrictions on the amount of credit that may be
extended for the purpose of purchasing margin stock (including the Shares) if
such credit is secured directly or indirectly by margin stock. Purchaser and
Parent believe that the financing of the acquisition of the Shares will not be
subject to the margin regulations.
18. FEES AND EXPENSES
Purchaser and Parent have retained Xxxxxxx Xxxxx to act as the Dealer
Manager and to provide certain financial advisory services in connection with
the proposed acquisition of the Company. In connection with such services
Parent has agreed to pay Xxxxxxx Xxxxx a fee of up to $4 million. Parent will
also reimburse Xxxxxxx Xxxxx for certain reasonable out-of-pocket expenses,
including reasonable attorneys' fees. Parent will also indemnify Xxxxxxx Xxxxx
against certain liabilities and expenses in connection with the Offer,
including certain liabilities under the federal securities laws. Purchaser and
Parent have retained X.X. Xxxx & Co., Inc. to act as the Information Agent and
The First National Bank of Boston to serve as the Depositary in connection
with the Offer. The Information Agent and the Depositary each will receive
reasonable and customary compensation for their services, be reimbursed for
certain reasonable out-of-pocket expenses and be indemnified against certain
liabilities and expenses in connection therewith, including certain
liabilities and expenses under the federal securities laws.
Neither Purchaser nor Parent will pay any fees or commissions to any broker
or dealer or other person or entity (other than as described in the preceding
paragraph) in connection with the solicitation of tenders of Shares pursuant
to the Offer. Brokers, dealers, banks and trust companies will be reimbursed
by Purchaser upon request for customary mailing and handling expenses incurred
by them in forwarding material to their customers.
19. MISCELLANEOUS
Purchaser is not aware of any jurisdiction in which the making of the Offer
is not in compliance with applicable law. If Purchaser becomes aware of any
jurisdiction in which the making of the Offer would not be in compliance with
applicable law, Purchaser will make a good faith effort to comply with any
such law. If, after such good faith effort, Purchaser cannot comply with any
such law, the Offer will not be made to (nor will tenders be accepted from or
on behalf of) the holders of Shares residing in such jurisdiction. In those
jurisdictions whose securities or blue sky laws require the Offer to be made
by a licensed broker or dealer, the Offer is being made on behalf of Purchaser
by one or more registered brokers or dealers which are licensed under the laws
of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE
OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Purchaser and Parent have filed with the SEC the Tender Offer Statement on
Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, together with
exhibits, furnishing certain additional information with respect to the Offer,
and may file amendments thereto. Such Schedule 14D-1 and any amendments
thereto, including exhibits, should be available for inspection and copies
should be obtainable in the manner set forth in Section 8 (except that such
material will not be available at the regional offices of the SEC).
GTE Massachusetts Incorporated
May 12, 1997
40
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
The name, business address, present principal occupation or employment and
five-year employment history of each director and executive officer of Parent
and certain other information are set forth below. The address of each
director and officer is GTE Corporation (for purposes of this Schedule I,
"Parent" or "GTE"), One Stamford Forum, Stamford, Connecticut 06904. Unless
otherwise indicated, each occupation set forth below an individual's name
refers to employment with Parent. All directors and executive officers listed
below are citizens of the United States. Unless otherwise indicated, each such
person has held his or her present occupation as set forth below, or has been
an executive officer of Parent, or the organization indicated, for the past
five years.
DIRECTORS OF PARENT
XXXXXXX X. XXX, 57 DIRECTOR SINCE 1989
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Chairman and Chief Executive Officer. Xx. Xxx joined GTE in 1983 as Senior
Vice President-- Finance and in 1986 he was named Senior Vice President--
Finance and Planning. He was elected President and Chief Operating Officer,
effective January 1, 1989, and became Chairman and Chief Executive Officer in
1992. Prior to joining GTE, he held various financial and management positions
in the steel, transportation and entertainment industries. Xx. Xxx is a
Director of United Technologies Corporation, USX Corporation and The Procter &
Xxxxxx Company. He is a member of the Business Roundtable, a Trustee of the
Board of Trustees of Cornell University, a Trustee of the National Planning
Association, a member of the New American Realities Committee of the National
Planning Association, a member of The Conference Board, Harvard Business
School's Board of Directors of the Associates, and a Director of the Stamford
Hospital Foundation. Xx. Xxx is a Personal Trustee of the GTE Foundation and a
member of the Strategic Issues, Planning and Technology Committee of GTE.
XXXX X. XXXXXX, 53 DIRECTOR SINCE 1992
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President. Xx. Xxxxxx served as Vice Chairman of the Board of Directors from
October 1993 until June 1995 and President of GTE Telephone Operations Group
from January 1989 until June 1995. Since joining GTE in 1970, Xx. Xxxxxx
served in a number of positions of increasing responsibility throughout the
GTE system. Xx. Xxxxxx serves on the Board of Directors of Xxxxxxxx Soup
Company, New York Life Insurance Company and the Dallas Symphony Orchestra. He
is a Trustee of The Dallas Museum of Art and a member of the Dallas Opera
Executive Board. Xx. Xxxxxx is also a Personal Trustee of the GTE Foundation.
XXXXXXX X. XXXXX, 52 DIRECTOR SINCE 1989
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Vice Chairman of the Board and President--International. Xx. Xxxxx was
elected Vice Chairman in October 1993 and President--International in June
1995. Prior to that, he was Managing Partner of the New York office of the law
firm of O'Melveny & Xxxxx and Co-chair of the firm's International Practice
Group. Xx. Xxxxx joined the firm in 1969 and became a partner in 1977. He is a
Director of BC Telecom Inc., BC TEL, Compania Anonima Nacional Telefonos de
Venezuela (CANTV), Travelers Group and VenWorld. Xx. Xxxxx is a member of the
Board of Trustees of Carnegie Hall, the Board of Directors of the China
America Society, the Xxxx'x Advisory Council of Dartmouth College, the US-
Canada Private Sector Advisory Council of the Inter-American Development
Board, the Business Committee of the Board of Trustees of the Museum of Modern
Art, the Council on Foreign Relations, and a Personal Trustee of the GTE
Foundation.
XXXXX X. XXXXX, 67 DIRECTOR SINCE 1984
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Chairman of the Executive Committee and Director of The Procter & Xxxxxx
Company. Xx. Xxxxx was Chairman of the Board and Chief Executive Officer from
January 1990 until July 1995. Xx. Xxxxx had served as Vice Chairman of the
Board of The Procter & Xxxxxx Company and President of
I-1
Procter & Xxxxxx International since 1984. Prior to that, he was an Executive
Vice President since 1980 and had served as Group Vice President for European
operations. Xx. Xxxxx is a Director of Teradyne, Inc., Delta Air Lines, Inc.,
American Express Company, Barilla S.p.A. and a member of the Business Council.
Xx. Xxxxx is Chairman of the Strategic Issues, Planning and Technology
Committee and a member of the Nominating Committee and the Pension Trust
Coordinating Committee of GTE.
XXXXX X. XXXXXX, 61 DIRECTOR SINCE 1976
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Chairman of The Interlake Steamship Co. and Vice Chairman of Mormac Marine
Group, Inc. and the Xxxxx Towing Company. Xx. Xxxxxx is also a Director and a
principal owner of Xxxxxxxx Xxxxxxxxxx, Inc., a producer of aggregate products
for the construction and railroad industries. Xx. Xxxxxx was formerly Chairman
of the Board of Xxxxx XxXxxxxxx Resources, Inc. and Chairman of that company's
operating subsidiaries since April 1971. He was also Chief Executive Officer of
Xxxxx XxXxxxxxx Resources, Inc. from 1971 to January 1987. In 1969, Xx. Xxxxxx
co-founded a management consulting firm, Temple, Xxxxxx & Xxxxxx, Inc., and
served in the capacity of Executive Vice President. He is a Director of The
Pittston Company and Eastern Enterprises, is Vice Chairman of the Board of
Trustees of Stamford Hospital, and is President of the Committee of SKULD (an
Oslo, Norway based marine insurance company). Xx. Xxxxxx is Chairman of the
Nominating Committee and a member of the Executive Compensation and
Organizational Structure Committee and the Strategic Issues, Planning and
Technology Committee of GTE.
XXXXXX X. XXXX, 64 DIRECTOR SINCE 1985
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Retired Chairman of the Board of The Travelers Corporation. From January
1994 to September 1994, Xx. Xxxx was Chairman of Travelers Insurance Group,
Inc. Xx. Xxxx was elected President and Chief Operating Officer of The
Travelers Corporation in 1976, Chief Executive Officer in 1981 and Chairman in
1982. He is a Director of Travelers Group, Delta Air Lines, Inc. and a member
of The Business Council. He is Chairman of the Audit Committee and a member of
the Nominating Committee and the Executive Compensation and Organizational
Structure Committee of GTE.
XXXXXX X. XXXXXXX, 63 DIRECTOR SINCE 1996
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Retired Chairman, United Technologies Corporation. Xx. Xxxxxxx was elected
Chairman, United Technologies Corporation, effective January 1, 1987. He
relinquished the offices of President and Chief Operating Officer in February
1992 and the office of Chief Executive Officer in April 1994. Xx. Xxxxxxx was
elected President and Chief Operating Officer in 1984 and named to the
additional post of Chief Executive Officer, effective January 1, 1986. He was
elected Senior Vice President--Defense Systems in 1983 and had served as Vice
President of United Technologies from 1982 to 1983 and President of Sikorsky
Aircraft from 1981 to 1983. He is a director of Shell Oil Co. and the
Travelers Group Inc. Xx. Xxxxxxx is a member of the Audit Committee, the
Pension Trust Coordinating Committee and the Public Policy Committee of GTE.
XXXXX X. XXXXXXX, 70 DIRECTOR SINCE 1985
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Retired Chairman and Chief Executive Officer. Xx. Xxxxxxx, who retired in
1992, has been designated Chairman Emeritus by the Board. He joined GTE in
1949 and held a variety of management positions within the Telephone
Operations Group. He was elected President of the GTE Telephone Operations
Group in 1981, Senior Vice President of GTE and President and Chief Operating
Officer of its Telephone Operations Group in December 1983, President and
Chief Operating Officer of GTE in March 1986 and became Chairman and Chief
Executive Officer in May 1988. Xx. Xxxxxxx is a Director of MONY (The Mutual
Life Insurance Company of New York), Valero Energy Corporation, Xxxxx-Xxxxx
Communications, Inc., The Finover Group, Xxxxxx Industries, Inc. and CellStar
Corporation. He is also a Trustee of the Joint Council on Economic Education.
Xx. Xxxxxxx is a member of the Audit Committee, the Pension Trust Coordinating
Committee and the Strategic Issues, Planning and Technology Committee of GTE.
I-2
XXXXXXX X. XXXXX, 72 DIRECTOR FROM 1966-1974
DIRECTOR SINCE JANUARY 1975
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Business Consultant, PaineWebber Incorporated. From 1977 to 1988 he was
Managing Director and Executive Vice President of the investment banking firm
of X.X. Xxxxxx & Company, Inc. Prior to assuming that position, Xx. Xxxxx was
associated with Xxxxx, Webber, Xxxxxxx & Xxxxxx Incorporated, investment
bankers, having served as Senior Vice President and a Director of that firm
from 1973 to 1977. Xx. Xxxxx was also associated with Xxxxxxx, Xxxxx &
Xxxxxxxxx Incorporated, investment bankers, having served as President of that
firm from 1961 through 1970 and Chairman of the Board from 1970 through 1973.
He is a member of the Audit Committee, the Pension Trust Coordinating
Committee and the Public Policy Committee of GTE.
XXXXX X. XXXXXXXX, 66 DIRECTOR SINCE 1986
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Retired Chairman of Tenneco Inc. Xx. Xxxxxxxx retired as Chairman of Tenneco
in 1992. He was elected Executive Vice President--Finance of Tenneco Inc. in
1972 and was appointed Chairman and Chief Executive Officer in 1978. He is a
Director of X.X. Xxxxxx & Co. Incorporated and its principal subsidiary,
Xxxxxx Guaranty Trust Company of New York, and of Xxxx Xxx Corporation and a
Trustee of Northwestern University. Xx. Xxxxxxxx is Chairman of the Pension
Trust Coordinating Committee and a member of the Executive Compensation and
Organizational Structure Committee and the Public Policy Committee of GTE.
XXXXXX X. XXXXX, 55 DIRECTOR SINCE 1978
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Senior Vice President, Director and Chair of the East Coast Practice, The
Boston Consulting Group, Inc. She is a Director of Rohm and Xxxx Company and
twenty-seven investment companies sponsored by The New England Funds, an
Overseer of the Xxxx Israel Deaconess Medical Center, a Trustee of the Boston
Public Library and a Director of the Harvard University Graduate School Alumni
Association. She is Chairperson of the Public Policy Committee and a member of
the Audit Committee and the Strategic Issues, Planning and Technology
Committee of GTE.
XXXXXXX X. XXXXXX, 62 DIRECTOR SINCE 1984
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Chairman and Chief Executive Officer, The Xxxxxx Group. Xx. Xxxxxx was
formerly Xxxx, The Xxxxxxx School, University of Pennsylvania from 1983 until
June 1990. Prior to that, he was Managing Director and Chief Executive Officer
of Xxxxxx Xxxx International (now Deloitte and Touche), a worldwide accounting
firm. Xx. Xxxxxx joined Xxxxxx Xxxx in 1956 and was elected Managing Director
of Touche Xxxx International in 1974. Xx. Xxxxxx is a Director of Bankers
Trust New York Corporation and its subsidiary, Bankers Trust Company, May
Department Stores Company, Allied-Signal, Inc., Safeguard Scientifics, Inc.
and Federal Home Loan Mortgage Corporation. He has been President of the
Financial Accounting Foundation and a member of the Board of Directors of the
American Institute of Certified Public Accountants. Xx. Xxxxxx is a former
member of the Presidential Commission on Management Improvement and serves on
the boards of a number of charitable and civic organizations. He is Chairman
of the Executive Compensation and Organizational Structure Committee and a
member of the Nominating Committee and the Strategic Issues, Planning and
Technology Committee of GTE.
XXXXXX X. XXXXXX, 61 DIRECTOR SINCE 1985
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Partner with the Cleveland law firm of Xxxxxxxx, Xxxx & Xxxxx LLP. Xx.
Xxxxxx previously was a partner with the Cleveland law firm of XxXxxxxx,
Hopkins, Xxxxx & Xxxxx Co., L.P.A. Xx. Xxxxxx joined its predecessor firm in
1967 and became a partner in 1971. In 1964 he began his career as an attorney
with The East Ohio Gas Company and in 1966 he became Assistant Director of The
Legal Aid Society of Cleveland. He is a Director of Bank One, Cleveland, The
Procter & Xxxxxx Company and May Department Stores Company. Xx. Xxxxxx is a
Trustee of Case Western Reserve University, the Xxxxxx Foundation and the
Xxxxxx Xxxx Foundation and a former Trustee of Xxxxxxxx Exeter Academy,
Cleveland State University and Overseer of Harvard University. He is a member
of the Audit Committee, the Nominating Committee and the Public Policy
Committee of GTE.
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EXECUTIVE OFFICERS OF PARENT
XXXXXXX X. XXX (see above).
XXXX X. XXXXXX (see above).
XXXXXXX X. XXXXX (see above).
XXXXXXX X. XXXX, 46
Senior Vice President and General Counsel since 1994. Prior to joining GTE,
Xx. Xxxx was a partner at the law firm of Shaw, Pittman, Xxxxx & Xxxxxxxxxx
since 1993. From 1991 to 1993 he served as Attorney General of the United
States.
XXXXXX X. XXXXXXXX, 56
Senior Vice President--Corporate Planning and Development since 1995.
XXXXX DER XXXXXXXXXXX, 59
Senior Vice President--Technology and Systems since 1995.
X. XXXXXXX XXXXX, 40
Senior Vice President--Finance since 1994.
X. XXXXXXX XXXXXXXXX, 48
Senior Vice President--Human Resources and Administration since 1995.
XXX X. XXXXX, 44
Vice President and Treasurer since 1995. Prior to that, Xx. Xxxxx served as
Assistant Treasurer of GTE from 1993 to 1995. He joined GTE from Northwest
Airlines where he was Vice President--International Finance.
XXXXXXXX X. XXXXX, 45
Vice President--Government and Regulatory Affairs since 1995.
XXXXXX X. XXXXXXXX, 48
Vice President--Corporate Communications since 1997.
XXXX X. X. XXXX, 56
Vice President--Taxes since 1989.
XXXXXXXX X. XXXXXXX, 45
Vice President and Controller since 1995.
XXXXXXXX XXXXX, 47
Secretary since 1985.
I-4
DIRECTORS AND EXECUTIVE OFFICERS
OF PURCHASER
The name of each director and executive officer of Purchaser are set forth
below. The present principal occupation or employment and five-year employment
history of such persons are set forth earlier in this Schedule I. The address
of each director and officer is GTE Massachusetts Incorporated, c/o GTE
Corporation, One Stamford Forum, Stamford, Connecticut 06904. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
employment with Purchaser. All directors and executive officers listed below
are citizens of the United States.
XXXXXX X. XXXXXXXX, Director and President.
XXXXX X. XXXXXXX, Director, Vice President and Treasurer. Xx. Xxxxxxx joined
GTE Service Corporation in 1995 and is Vice President--Corporate Planning and
Development. Prior to that he was an investment banker at Xxxxxxx, Xxxxx & Co.
Xx. Xxxxxx is 39 years old.
XXXXXXXX XXXXX, Director and Clerk.
I-5
The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each stockholder of the Company or
his broker, dealer, commercial bank or other nominee to the Depository at one
of its addresses set forth below.
The Depositary for the Offer is:
THE FIRST NATIONAL BANK OF BOSTON
Facsimile Transmission
(For Eligible Institutions Only)
(000) 000-0000
By Mail: By Overnight Delivery: By Hand:
Corporate Reorganization The First National Bank of Boston Securities Transfer & Reporting
Department Corporate Reorganization Department Services, Inc.
P.O. Box 1889 M/S 45-02-53 55 Broadway--3rd Floor
M/S 45-02-53 000 Xxxxxx Xxxxxx Xxx Xxxx, Xxx Xxxx
Xxxxxx, Xxxxxxxxxxxxx Xxxxxx, XX 00000 10006
02105-1889 Attention: Delivery Window
Confirm Receipt of Notice of Guaranteed Delivery:
(000) 000-0000
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent at its telephone numbers and location
listed below. You may also contact your broker, dealer, commercial bank or
trust company or nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
X.X. XXXX & CO., INC.
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000 (collect)
or
CALL TOLL FREE: (000) 000-0000
The Dealer Managers for the Offer are:
XXXXXXX, XXXXX & CO.
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
