AGREEMENT AND PLAN OF MERGER
AMONG
AT&T CORP.,
TA MERGER CORP.
AND
TELEPORT COMMUNICATIONS GROUP INC.
DATED AS OF JANUARY 8, 1998
TABLE OF CONTENTS
ARTICLE I
Definitions 1
ARTICLE II
The Merger; Effective Time; Closing 7
2.1. The Merger 7
2.2. Effective Time 7
2.3. Closing 7
ARTICLE III
Terms of Merger
3.1. Certificate of Incorporation 8
3.2. The By-Laws 8
3.3. Directors 8
3.4. Officers 8
ARTICLE IV
Share Consideration; Conversion or
Cancellation of Shares in the Merger 8
4.1. Share Consideration; Conversion or
Cancellation of Shares in the Merger 8
4.2. Payment for Shares in the Merger 11
4.3. Fractional Shares 13
4.4. Transfer of Shares after the Effective
Time 14
ARTICLE V
Representations and Warranties of the Company 14
5.1. Organization, Etc. of the Company 14
5.2. Subsidiaries 14
5.3. Agreement 15
5.4. Permits; Compliance 15
5.5. Fairness Opinion 16
-i-
5.6. Capital Stock 16
5.7. Litigation 17
5.8. Compliance with Other Instruments, Etc. 17
5.9. Employee Benefit Plans 18
5.10. Taxes 20
5.11. Intellectual Property 21
5.12. Reports and Financial Statements 21
5.13. Absence of Certain Changes or Events 22
5.14. Affiliated Transactions and Certain
Other Agreements 22
5.15. Brokers and Finders 23
5.16. S-4 Registration Statement and Information
Statement/Prospectus 23
5.17. ACC Agreement 24
ARTICLE VI
Representations and Warranties of Parent and
Merger Sub 24
6.1. Organization, Etc. of Parent 24
6.2. Subsidiaries 24
6.3. Agreement 25
6.4. Permits; Compliance 25
6.5. Capital Stock 26
6.6. Parent Common Shares 26
6.7. Litigation 26
6.8. Compliance with Other Instruments, Etc. 26
6.9. Taxes 27
6.10. Intellectual Property 28
6.11. Reports and Financial Statements 28
6.12. Brokers and Finders 29
6.13. S-4 Registration Statement and Information
Statement/Prospectus 30
6.14. Ownership of Merger Sub; No Prior Activities;
Assets of Merger Sub. 30
6.15. Ownership of Company or ACC Stock 30
ARTICLE VII
Additional Covenants and Agreements 31
7.1. Conduct of Business of the Company 31
7.2. Other Transactions 35
7.3. Stockholder Approval 36
7.4. Registration Statement 37
7.5. Reasonable Efforts 37
7.6. Access to Information 39
7.7. Indemnification of Directors and Officers 40
7.8. Registration and Listing of Parent
-ii-
Common Shares 41
7.9. Affiliates of Parent and the Company 42
7.10. Tax Matters 42
7.11. New York Real Property Transfer Tax 43
7.12. Employee Matters 43
7.13. Certain Covenants of Parent 44
7.14. Right of First Offer 44
ARTICLE VIII
Conditions 45
8.1. Conditions to Each Party's Obligations 45
8.2. Conditions to Obligations of Parent
and Merger Sub 46
8.3. Conditions to Obligations of the Company 48
ARTICLE IX
Termination 49
9.1. Termination by Mutual Consent 49
9.2. Termination by Either Parent or the Company 49
9.3. Termination by the Company 50
9.4. Termination by Parent and Merger Sub 50
9.5. Effect of Termination and Abandonment 50
ARTICLE X
Miscellaneous and General 50
10.1. Expenses 50
10.2. Notices, Etc. 51
10.3. Amendments, Waivers, Etc. 52
10.4. No Assignment 52
10.5. Entire Agreement 52
10.6. Specific Performance 52
10.7. Remedies Cumulative 52
10.8. No Waiver 53
10.9. No Third Party Beneficiaries 53
10.10. Jurisdiction 53
10.11. Public Announcements 53
10.12. Governing Law 53
10.13. Name, Captions, Etc. 54
10.14. Counterparts 54
10.15. Survival of Representations, Warranties,
Covenants and Agreements 54
-iii-
10.16. Severability 54
10.17. Disclosure Statements 54
EXHIBITS
A Form of Affiliate Agreement
B Employees Entering into Employment Agreements
-iv-
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
January 8, 1998, among AT&T Corp., a New York corporation ("Parent"), TA Merger
Corp., a Delaware corporation and a direct wholly owned subsidiary of Parent
("Merger Sub"), and Teleport Communications Group Inc., a Delaware corporation
(the "Company").
RECITALS
WHEREAS, the Boards of Directors of Parent, Merger Sub and the
Company each have determined that it is in the best interests of their
respective stockholders for Merger Sub to merge with and into the Company, upon
the terms and subject to the conditions of this Agreement (the "Merger");
WHEREAS, for United States federal income tax purposes, it is
intended that the Merger shall qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Code (as defined herein);
WHEREAS, it is intended that the Merger shall be recorded for
accounting purposes as a pooling of interests;
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger; and
WHEREAS, Parent and Merger Sub have required, as a condition
to their willingness to enter into this Agreement, that the Cable Stockholders
(as defined herein) contemporaneously enter into the Voting Agreement and
execute and deliver the Stockholders Consent (as defined herein) immediately
following the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants and agreements set forth herein, Parent,
Merger Sub and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
"ACC": ACC Corp., a Delaware corporation.
"ACC Agreement": The Agreement and Plan of Merger by and among
the Company, TCG Merger Co., Inc. and ACC dated as of November 26, 1997, as it
may be amended from time to time.
"Acquisition Proposal": As defined in Section 7.2.
"Affiliate": As defined in Rule 12b-2 under the Exchange Act.
"Authorization": Any consent, approval or authorization of,
expiration or termination of any waiting period requirement (including pursuant
to the HSR Act) by, or filing, registration, qualification, declaration or
designation with, any Governmental Body.
"Benefit Arrangement": As defined in Section 5.9(a).
"Cable Stockholder": Each of Comcast Corporation, Comcast
Teleport, Inc., Comcast Communications Properties, Inc., Xxx Communications,
Inc., Cox Teleport Partners, Inc., Tele-Communications, Inc. and TCI Teleport,
Inc. (which, collectively, shall be referred to herein as the "Cable
Stockholders").
"Certificate of Merger": The certificate of merger with
respect to the merger of Merger Sub with and into the Company, containing the
provisions required by, and executed in accordance with, Section 251 of the
DGCL.
"Certificates": As defined in Section 4.2(b).
"Claim": As defined in Section 7.7(a).
"Class A Common Stock": Class A Common Stock, par value $.01
per share, of the Company.
"Class B Common Stock": Class B Common Stock, par value $.01
per share, of the Company.
"Closing": The closing of the Merger.
"Closing Date": The date on which the Closing occurs.
"Code": The Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder, as in effect from time to time.
"Company": Teleport Communications Group Inc., a Delaware
corporation.
-2-
"Company Disclosure Statement": The disclosure statement,
dated the date of this Agreement, delivered by the Company to Parent.
"Company Option": As defined in Section 4.1(e).
"Company Permits": As defined in Section 5.4.
"Company SEC Reports": As defined in Section 5.12.
"Company Stock Incentive Right": As defined in Section 4.1(f).
"Company Stock Purchase Plan": As defined in Section 4.1(h).
"Company Stock Unit": As defined in Section 4.1(g).
"Controlled Group Liability": As defined in Section 5.9(e).
"DGCL": The Delaware General Corporation Law.
"Effective Time": As defined in Section 2.2.
"Employee Plan": As defined in Section 5.9(a).
"Employees": As defined in Section 5.9(a).
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended, and all regulations promulgated thereunder, as in effect from time
to time.
"ERISA Affiliates": Any trade or business, whether or not
incorporated, that is now or has at any time in the past five years been treated
as a single employer with the Company or any of its Subsidiaries under Section
414(b) or (c) of the Code and the Treasury Regulations thereunder.
"Excess Shares": As defined in Section 4.3.
"Exchange Act": The Securities Exchange Act of 1934, as
amended.
"Exchange Agent": As defined in Section 4.2(a).
"Exchange Fund": As defined in Section 4.2(a).
"Exchange Ratio": As defined in Section 4.1(a).
-3-
"FCC": The Federal Communications Commission.
"FCC Consent": Actions by the FCC granting its consent to the
transfer of control of the FCC Licenses in connection with the consummation of
the transactions contemplated hereby.
"FCC Licenses": All licenses, permits, construction permits
and other authorizations issued by the FCC in connection with the business and
operations of the Company and its Subsidiaries.
"Fractional Securities Fund": As defined in Section 4.3.
"Governmental Body": Any federal, state, municipal, political
subdivision or other governmental department, court, commission, board, bureau,
agency or instrumentality, domestic or foreign.
"HSR Act": The Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Indemnified Parties": As defined in Section 7.7(a).
"Information Statement/Prospectus": As defined in Section 7.4.
"Intellectual Property": All industrial and intellectual
property rights, including Proprietary Technology, patents, patent applications,
trademarks, trademark applications and registrations, service marks, service
xxxx applications and registrations, copyrights, know-how, licenses, trade
secrets, proprietary processes, formulae and customer lists. "Proprietary
Technology" means all proprietary processes, formulae, inventions, trade
secrets, know-how, development tools and other proprietary rights used by the
Company and its Subsidiaries or Parent and its Subsidiaries, as the case may be,
pertaining to any product, software or service manufactured, marketed, licensed
or sold by the Company and its Subsidiaries or Parent and its Subsidiaries, as
the case may be, in the conduct of their business or used, employed or exploited
in the development, license, sale, marketing, distribution or maintenance
thereof, and all documentation and media constituting, describing or relating to
the above, including manuals, memoranda, know-how, notebooks, software, records
and disclosures.
"knowledge": With respect to the Company, the actual knowledge
of any executive officer (determined in accordance with Rule 16a-1(f) under the
Exchange Act as in effect on the date hereof) of the Company and, with respect
to Parent or Merger Sub,
-4-
the actual knowledge of any executive officer (determined in accordance with
Rule 16a-1(f) under the Exchange Act as in effect on the date hereof) of Parent
or Merger Sub, as the case may be.
"Law": Any foreign or domestic law, statute, code, ordinance,
rule, regulation promulgated, or order, judgment, writ, stipulation, award,
injunction or decree entered by a Governmental Body.
"LEC": A local exchange carrier.
"Material Adverse Effect": On any Person, a material adverse
effect on the business, properties, operations or financial condition of such
Person and its Subsidiaries taken as a whole, other than any such effect (i)
arising out of or resulting from general economic conditions, (ii) arising out
of or resulting from changes in or affecting the telecommunications business
generally, or, in the case of a determination with respect to Parent and its
Subsidiaries, the long distance telecommunications business generally, or, in
the case of a determination with respect to the Company and its Subsidiaries,
the competitive local exchange carrier business generally, or (iii) arising out
of or resulting from, in the case of a determination with respect to the Company
and its Subsidiaries, any loss of customer revenues attributable to the
announcement of this Agreement and the transactions contemplated hereby, or, in
the case of a determination with respect to Parent and its Subsidiaries, the
entry of the Regional Xxxx Operating Companies into the long distance
telecommunications business.
"Merger": The merger of Merger Sub with and into the Company
as contemplated by Section 2.1.
"Merger Sub": TA Merger Corp., a Delaware corporation.
"NYSE": The New York Stock Exchange, Inc.
"Parent": AT&T Corp., a New York corporation.
"Parent Common Shares": Shares of common stock, par value
$1.00 per share, of Parent.
"Parent Disclosure Statement": The disclosure statement, dated
the date of this Agreement, delivered by Parent to the Company.
"Parent Option": As defined in Section 4.1(e).
"Parent Permits": As defined in Section 6.4.
-5-
"Parent Representatives": As defined in Section 7.6.
"Parent SEC Reports": As defined in Section 6.10(a).
"Parent Stock Incentive Right": As defined in Section 4.1(f).
"Parent Stock Unit": As defined in Section 4.1(g).
"Permit": Any franchise, grant, authorization, license,
permit, easement, variance, exception, consent, certificate, approval, clearance
or order of any Governmental Body.
"Person": Any individual or corporation, company, partnership,
trust, incorporated or unincorporated association, joint venture or other entity
of any kind.
"Proposed Financing": As defined in Section 7.14.
"Rule 145 Affiliate": As defined in Section 7.9.
"S-4 Registration Statement": As defined in Section 7.4.
"SEC": The Securities and Exchange Commission.
"Securities Act": The Securities Act of 1933, as amended.
"Share Consideration": As defined in Section 4.1(b).
"Shares": Collectively, the shares of Class A Common Stock and
the shares of Class B Common Stock.
"Stockholders' Agreement": The Amended and Restated
Stockholders' Agreement, dated June 26, 1996, by and among the Company and
Comcast Teleport, Inc., Comcast Communications Properties, Inc., Cox Teleport
Partners, Inc., and TCI Teleport, Inc.
"Stockholders Consent": As defined in Section 7.3.
"Subsidiary": As to any Person, any other Person of which at
least 50% of the equity and voting interests are owned, directly or
indirectly, by such first Person.
"Surviving Corporation": The surviving corporation in the
Merger.
"Tax": As defined in Section 5.10(d).
-6-
"Tax Return": As defined in Section 5.10(d).
"US Wats": US Wats, Inc., a New York corporation.
"US Wats Agreement": The Agreement and Plan of Merger, dated
as of October 28, 1997, by and among ACC, ACC Acquisition - Blue Corp. and US
Wats.
"Voting Agreement": The Voting Agreement, dated the date
hereof, by and among Parent and each of the Cable Stockholders.
"Wholly-Owned Subsidiary": As to any Person, a Subsidiary of
such Person 100% of the equity and voting interest in which is owned, directly
or indirectly, by such Person.
ARTICLE II
THE MERGER; EFFECTIVE TIME; CLOSING
2.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, Merger Sub shall be merged with and into the
Company in accordance with the provisions of Section 251 of the DGCL and with
the effect provided in Sections 259 and 261 of the DGCL. The separate corporate
existence of Merger Sub shall thereupon cease and the Company shall be the
Surviving Corporation and shall continue its corporate existence as a Subsidiary
of Parent and shall continue to be governed by the laws of the State of
Delaware. At the election of Parent, any direct Wholly-Owned Subsidiary of
Parent with respect to which the representation and warranty set forth in
Section 6.14 is true and correct may be substituted for Merger Sub as a
constituent corporation in the Merger.
2.2. Effective Time. The Merger shall become effective on the
date and at the time (the "Effective Time") that the Certificate of Merger shall
have been accepted for filing by the Secretary of State of the State of Delaware
(or such later date and time as may be specified in the Certificate of Merger by
mutual agreement of Parent, Merger Sub and the Company), which shall be on the
Closing Date or as soon as practicable thereafter.
2.3. Closing. Subject to the fulfillment or waiver of the
conditions set forth in Article VIII, the Closing shall take place (a) at the
offices of Wachtell, Lipton, Xxxxx & Xxxx, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx
Xxxx, at 10:00 a.m. on the earliest practicable date (but no later than the
fifth business
-7-
day) following the satisfaction or waiver of the conditions set forth in Article
VIII (other than those conditions to be satisfied or waived at the Closing) or
(b) at such other place and/or time and/or on such other date as Parent, Merger
Sub and the Company may agree.
ARTICLE III
TERMS OF MERGER
3.1. Certificate of Incorporation. As of the Effective Time,
the Certificate of Incorporation of the Company shall be amended pursuant to the
Certificate of Merger to be identical to the Certificate of Incorporation of
Merger Sub in effect immediately prior to the Effective Time, except that
Article FIRST thereof shall read as follows: "The name of the Corporation (which
is hereinafter called the "Corporation") is Teleport Communications Group Inc."
Such Certificate of Incorporation as so amended shall be the Certificate of
Incorporation of the Surviving Corporation, until duly amended in accordance
with the terms thereof and of the DGCL. Prior to the Effective Time, Parent
shall take such steps as are necessary so that immediately prior to the
Effective Time the Certificate of Incorporation of Merger Sub shall include the
provisions of Articles V.B. and VIII of the Certificate of Incorporation of the
Company.
3.2. The By-Laws. The By-Laws of the Company shall be amended
as of the Effective Time to be identical to the By-Laws of Merger Sub in effect
immediately prior to the Effective Time and, in such amended form, shall be the
By-Laws of the Surviving Corporation, until duly amended in accordance with the
terms thereof, of the Certificate of Incorporation of the Surviving Corporation
and of the DGCL.
3.3. Directors. The directors of Merger Sub at the Effective
Time shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-Laws.
3.4. Officers. The officers of the Company at the Effective
Time shall, from and after the Effective Time, be the officers of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-Laws.
-8-
ARTICLE IV
SHARE CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER
4.1. Share Consideration; Conversion or Cancellation of Shares
in the Merger. Subject to the provisions of this Article IV, at the Effective
Time, by virtue of the Merger and without any action on the part of the holders
thereof, the shares of the constituent corporations shall be converted or
cancelled as follows:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares owned by Parent or the Company or any
of their respective Wholly-Owned Subsidiaries) shall be converted into
.943 of a Parent Common Share (the "Exchange Ratio"). If, prior to the
Effective Time, Parent should split or combine the Parent Common
Shares, or pay a stock dividend or other stock distribution in Parent
Common Shares, or otherwise change the Parent Common Shares into any
other securities, or make any other dividend or distribution on the
Parent Common Shares (other than normal quarterly dividends as the same
may be adjusted from time to time in the ordinary course), then the
Exchange Ratio will be appropriately adjusted to reflect such split,
combination, dividend or other distribution or change.
(b) All Shares to be converted into Parent Common Shares
pursuant to this Section 4.1 shall cease to be outstanding, shall be
canceled and retired and shall cease to exist, and each holder of a
certificate representing any such Shares shall thereafter cease to have
any rights with respect to such Shares, except the right to receive for
each of the Shares, upon the surrender of such certificate in
accordance with Section 4.2, the amount of Parent Common Shares
specified above (the "Share Consideration") and cash in lieu of
fractional Parent Common Shares as contemplated by Section 4.3.
(c) Each Share issued and outstanding and owned by Parent or
the Company, or any of their respective Wholly-Owned Subsidiaries,
immediately prior to the Effective Time shall cease to be outstanding,
shall be canceled and retired without payment of any consideration
therefor and shall cease to exist.
(d) Each share of Common Stock, par value $0.01 per share, of
Merger Sub issued and outstanding immediately
-9-
prior to the Effective Time shall be converted into one share of common
stock of the Surviving Corporation.
(e) At the Effective Time, each of the then outstanding stock
options, if any, to purchase Shares (each, a "Company Option") issued
by the Company pursuant to any stock option or similar plan of the
Company, and any non-plan options set forth in Section 5.6 of the
Company Disclosure Statement issued by the Company pursuant to an
option agreement or otherwise, shall, by virtue of the Merger, and
without any further action on the part of any holder thereof, be
assumed by Parent and converted into an option (a "Parent Option") to
purchase that number of Parent Common Shares determined by multiplying
the number of Shares subject to such Company Option at the Effective
Time by the Exchange Ratio, at an exercise price per Parent Common
Share equal to the exercise price per share of such Company Option
immediately prior to the Effective Time divided by the Exchange Ratio,
rounded down to the nearest whole cent. If the foregoing calculation
results in an assumed Company Option being exercisable for a fraction
of a Parent Common Share, then the number of Parent Common Shares
subject to such option shall be rounded up to the nearest whole number
of shares, with no cash being payable for such fractional share. The
terms and conditions of each Parent Option shall otherwise remain as
set forth in the Company Option converted into such Parent Option. The
adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Code) shall
be and is intended to be effected in a manner which is consistent with
Section 424(a) of the Code.
(f) At the Effective Time, each of the then outstanding stock
incentive rights to acquire Shares (each, a "Company Stock Incentive
Right") held by any Person as a result of the consummation of the
transactions contemplated by the ACC Agreement shall, by virtue of the
Merger, and without any further action on the part of any holder
thereof, be assumed by Parent and converted into a right (a "Parent
Stock Incentive Right") to acquire that number of Parent Common Shares
determined by multiplying the number of Shares subject to such Company
Stock Incentive Right at the Effective Time by the Exchange Ratio. If
the foregoing calculation results in an assumed Company Stock Incentive
Right providing the right to acquire a fraction of a Parent Common
Share, then the number of Parent Common Shares subject to such right
shall be rounded up to the nearest whole number of shares, with no cash
being payable for such fractional share. The terms and conditions of
each Parent Stock Incentive Right shall otherwise remain as set forth
in
-10-
the Company Stock Incentive Right converted into such Parent Stock
Incentive Right.
(g) At the Effective Time, each of the then outstanding share
units under the Company's 1996 Equity Incentive Plan (each, a "Company
Stock Unit") shall, by virtue of the Merger, and without any further
action on the part of any holder thereof, be assumed by Parent and
converted into a right (a "Parent Stock Unit") to receive that number
of Parent Common Shares determined by multiplying the number of Shares
subject to such Company Stock Unit at the Effective Time by the
Exchange Ratio. If the foregoing calculation results in an assumed
Company Stock Unit providing the right to acquire a fraction of a
Parent Common Share, then the number of Parent Common Shares subject to
such right shall be rounded up to the nearest whole number of shares,
with no cash being payable for such fractional share. The terms and
conditions of each Parent Stock Unit shall otherwise remain as set
forth in the Company Stock Unit converted into such Parent Stock Unit.
The Company shall take all necessary action prior to the Effective Time
to amend the Company's 1996 Equity Incentive Plan to permit the
assumption and conversion described in this Section 4.1(g) and to
provide that all determinations made by reference to Shares shall be
made by reference to Parent Common Shares.
(h) The Company shall terminate the Company's 1997 Employee
Stock Purchase Plan (the "Company Stock Purchase Plan") effective as of
no later than two business days prior to the Closing Date.
4.2. Payment for Shares in the Merger. The manner of making payment for
Shares in the Merger shall be as follows:
(a) At the Effective Time, Parent shall make available to an
exchange agent selected by Parent and reasonably acceptable to the
Company (the "Exchange Agent"), for the benefit of those Persons who
immediately prior to the Effective Time were the holders of Shares, a
sufficient number of certificates representing Parent Common Shares
required to effect the delivery of the aggregate Share Consideration
required to be issued pursuant to Section 4.1 (the certificates
representing Parent Common Shares comprising such aggregate Share
Consideration being hereinafter referred to as the "Exchange Fund").
The Exchange Agent shall, pursuant to irrevocable instructions, deliver
the Parent Common Shares contemplated to be issued pursuant to Section
4.1 and effect the sales provided for in Section 4.3 out of the
Exchange Fund. The Exchange Fund shall not be used for any other
purpose.
-11-
(b) Promptly after the Effective Time, the Exchange Agent
shall mail to each holder of record (other than holders of certificates
for Shares referred to in Section 4.1(c)) of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates") (i) a form of letter of
transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent) and (ii)
instructions for use in effecting the surrender of the Certificates for
payment therefor. Upon surrender of Certificates for cancellation to
the Exchange Agent, together with such letter of transmittal duly
executed and any other required documents, the holder of such
Certificates shall be entitled to receive for each of the Shares
represented by such Certificates the Share Consideration and the
Certificates so surrendered shall forthwith be canceled. Until so
surrendered, Certificates shall represent solely the right to receive
the Share Consideration and any cash in lieu of fractional Parent
Common Shares as contemplated by Section 4.3 with respect to each of
the Shares represented thereby. No dividends or other distributions
that are declared on the Parent Common Shares and payable to the
holders of record thereof after the Effective Time will be paid to
Persons entitled by reason of the Merger to receive Parent Common
Shares until such Persons surrender their Certificates. Upon such
surrender, there shall be paid to the Person in whose name the Parent
Common Shares are issued any dividends or other distributions having a
record date after the Effective Time and payable with respect to such
Parent Common Shares between the Effective Time and the time of such
surrender. After such surrender, there shall be paid on the applicable
payment date, to the Person in whose name the Parent Common Shares are
issued, any dividends or other distributions on such Parent Common
Shares which shall have a record date after the Effective Time and
prior to such surrender and a payment date after such surrender. In no
event shall the Persons entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or
other distributions. If any cash or any certificate representing Parent
Common Shares is to be paid to or issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered,
it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed and otherwise in proper form for
transfer and that the Person requesting such exchange shall pay to the
Exchange Agent any transfer or other taxes required by reason of the
issuance of certificates for such Parent Common Shares in a name
-12-
other than that of the registered holder of the Certificate
surrendered, or shall establish to the reasonable satisfaction of the
Exchange Agent that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither the Exchange Agent nor any party
hereto shall be liable to a holder of Shares for any Parent Common
Shares or dividends thereon or other distributions with respect thereto
or, in accordance with Section 4.3, proceeds of the sale of fractional
interests, delivered to a public official pursuant to applicable
escheat law. The Exchange Agent shall not be entitled to vote or
exercise any rights of ownership with respect to the Parent Common
Shares held by it from time to time hereunder, except that, subject to
applicable escheat law, it shall receive and hold all dividends or
other distributions paid or distributed with respect to such Parent
Common Shares for the account of the Persons entitled thereto.
(c) Certificates surrendered for exchange by any Person
constituting a Rule 145 Affiliate of the Company shall not be exchanged
for certificates representing Parent Common Shares until Parent has
received a written agreement from such Person as provided in Section
7.9.
(d) Any portion of the Exchange Fund and the Fractional
Securities Fund (and any dividends or other distributions with respect
to such portion of the Exchange Fund) which remains unclaimed by the
former stockholders of the Company for one year after the Effective
Time shall be delivered to Parent, upon demand of Parent, and any
former stockholders of the Company shall thereafter look only to Parent
for payment of their claim for the Share Consideration (and any such
dividends or other distributions) or for any cash in lieu of fractional
Parent Common Shares.
(e) In the event that any Certificate has been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a
bond in such reasonable amount as Parent may direct as indemnity
against any claim that may be made against it with respect to such
Certificate, Parent will, in exchange for such lost, stolen or
destroyed Certificate, issue or cause to be issued the number of Parent
Common Shares and pay or cause to be paid any amounts deliverable in
respect thereof pursuant to this Article IV.
4.3. Fractional Shares. No fractional Parent Common Shares
shall be issued in the Merger. In lieu of any such fractional securities, each
holder of Shares who would otherwise
-13-
have been entitled to a fraction of a Parent Common Share upon surrender of
Certificates for exchange pursuant to this Article IV will be paid an amount in
cash (without interest) equal to such holder's proportionate interest in the net
proceeds from the sale or sales in the open market by the Exchange Agent, on
behalf of all such holders, of the aggregate fractional Parent Common Shares
issued pursuant to this Article IV. As soon as practicable following the
Effective Time, the Exchange Agent shall determine the excess of (a) the number
of full Parent Common Shares delivered to the Exchange Agent by Parent over (b)
the aggregate number of full Parent Common Shares to be distributed to holders
of Shares (such excess being herein called the "Excess Shares"), and the
Exchange Agent, as agent for the former holders of Shares, shall sell the Excess
Shares at the prevailing prices on the NYSE. The sale of the Excess Shares by
the Exchange Agent shall be executed on the NYSE through one or more member
firms of the NYSE and shall be executed in round lots to the extent practicable.
Parent shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the Exchange
Agent, incurred in connection with such sale of Excess Shares. Until the net
proceeds of such sale have been distributed to the former stockholders of the
Company, the Exchange Agent will hold such proceeds in trust for such former
stockholders (the "Fractional Securities Fund"). As soon as practicable after
the determination of the amount of cash to be paid to former stockholders of the
Company in lieu of any fractional interests, the Exchange Agent shall make
available in accordance with this Agreement such amounts to such former
stockholders.
4.4. Transfer of Shares after the Effective Time. No transfers
of Shares shall be made on the stock transfer books of the Company after the
close of business on the day prior to the date of the Effective Time.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Merger Sub that, except as set forth in the Company Disclosure Statement (each
section of which qualifies the correspondingly numbered representation and
warranty or covenant as specified therein):
5.1. Organization, Etc. of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own and operate its
-14-
properties and to carry on its business as now conducted and proposed by the
Company to be conducted. The Company is duly qualified and in good standing in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary and
where the failure to be so qualified or in good standing has or would have,
individually or in the aggregate, a Material Adverse Effect on the Company.
5.2. Subsidiaries. Section 5.2 of the Company Disclosure
Statement contains a complete and accurate list of all of the Subsidiaries of
the Company as of the date hereof. Each Subsidiary of the Company (a) is a
corporation or other legal entity duly organized, validly existing and (if
applicable) in good standing under the laws of the jurisdiction of its
organization and has all requisite corporate, partnership or similar power and
authority to own its properties and conduct its business and operations as
currently conducted, except where the failure to be duly organized, validly
existing and in good standing or to have such power and authority does not and
would not have, individually or in the aggregate, a Material Adverse Effect on
the Company, and (b) is duly qualified and in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified or in good standing does not and would not have,
individually or in the aggregate, a Material Adverse Effect on the Company.
5.3. Agreement. The Company has all necessary corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. This Agreement
and the consummation of the transactions contemplated hereby have been
unanimously approved by the Board of Directors of the Company and have been duly
authorized by all other necessary corporate action on the part of the Company,
except, in the case of the Merger only, for the approval of the Company's
stockholders contemplated by Section 7.3. This Agreement has been duly executed
and delivered by a duly authorized officer of the Company and constitutes a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms. The Board of Directors of the Company has unanimously
approved the transactions contemplated by this Agreement and the Voting
Agreement, including the Merger, so as to render the provisions of Section 203
of the DGCL inapplicable to the transactions contemplated by this Agreement and
to Parent and Merger Sub in connection with this Agreement and the Voting
Agreement. The Board of Directors of the Company has directed that this
Agreement be submitted to the stockholders of the Company for
-15-
their approval. The affirmative approval, by vote or written consent, of the
holders of Shares representing a majority of the votes that may be cast by the
holders of all outstanding Shares (voting as a single class) is the only vote of
the holders of any class or series of capital stock of the Company necessary to
adopt this Agreement and approve the Merger.
5.4. Permits; Compliance. Each of the Company and its
Subsidiaries is in possession of all Permits from appropriate Governmental
Bodies (including the FCC) necessary for the Company or any of its Subsidiaries
to own, lease and operate its properties or to carry on their respective
businesses as they are now being conducted (the "Company Permits"), and all such
Company Permits are valid, and in full force and effect, except where the
failure to have, or the suspension or cancellation of, any of the Company
Permits does not and would not, individually or in the aggregate, (a) have a
Material Adverse Effect on the Company or (b) prevent or materially delay the
performance of this Agreement by the Company. No suspension or cancellation of
any of the Company Permits is pending or, to the knowledge of the Company,
threatened, except where the failure to have, or the suspension or cancellation
of, any of the Company Permits does not and would not, individually or in the
aggregate, (x) have a Material Adverse Effect on the Company or (y) prevent or
materially delay the performance of this Agreement by the Company. Neither the
Company nor any of its Subsidiaries is in conflict with, or in default or
violation of, (i) any Law applicable to the Company or any of its Subsidiaries
or by which any property, asset or operation of the Company or any of its
Subsidiaries is bound or affected or (ii) any Company Permits, except for such
conflicts, defaults or violations that do not and would not, individually or in
the aggregate, (A) have a Material Adverse Effect on the Company or (B) prevent
or materially delay the performance of this Agreement by the Company.
5.5. Fairness Opinion. The Board of Directors of the Company
has received the opinion, dated as of the date hereof, of Xxxxxxx Lynch, Pierce,
Xxxxxx & Xxxxx Incorporated to the effect that the Exchange Ratio is fair to the
stockholders of the Company from a financial point of view.
5.6. Capital Stock. The authorized capital stock of the
Company consists of (a) 450,000,000 shares of Class A Common Stock, of which
61,273,746 shares were outstanding as of the close of business on the day prior
to the date hereof, (b) 300,000,000 shares of Class B Common Stock, of which
113,489,040 shares were outstanding as of the close of business on the day prior
to the date hereof, and (c) 150,000,000 shares of preferred stock, par value
$.01 per share, none of which is outstanding. All outstanding Shares are duly
authorized, validly issued, fully
-16-
paid and nonassessable, and no class of capital stock of the Company is entitled
to preemptive rights. There are no options, warrants or other rights to acquire
capital stock (or securities convertible into or exercisable or exchangeable for
capital stock) from the Company, other than (a) the issuance of up to a maximum
of 23,239,673 shares of Class A Common Stock pursuant to the ACC Agreement
(including with respect to options or other rights to acquire common stock of
ACC that are or may become outstanding and that will be converted into similar
rights to acquire shares of Class A Common Stock upon consummation of the
transactions contemplated by the ACC Agreement), (b) the right of the holders of
Class B Common Stock to convert shares of Class B Common Stock into Class A
Common Stock pursuant to the Certificate of Incorporation of the Company, (c)
options or other rights outstanding as of the close of business on the day prior
to the date hereof representing in the aggregate the right to purchase or
otherwise acquire up to 6,278,000 shares of Class A Common Stock pursuant to
Employee Plans or Benefit Arrangements (plus any options granted in accordance
with Section 7.1(a) after the date hereof), and (d) the right of eligible
employees to purchase shares of Class A Common Stock pursuant to the terms of
the Company Stock Purchase Plan as in effect on the date hereof. From the close
of business on the day prior to the date hereof until the execution of this
Agreement, the Company has not issued any capital stock or any options, warrants
or other rights to acquire capital stock (or securities convertible into or
exercisable or exchangeable for capital stock) other than the issuance of shares
of Class A Common Stock pursuant to options referred to in clause (c) of the
immediately preceding sentence that were outstanding as of the close of business
on the day prior to the date hereof. All outstanding shares of capital stock of,
or other equity or voting interest in, the Subsidiaries of the Company are owned
by the Company or a direct or indirect Wholly-Owned Subsidiary of the Company,
free and clear of all liens, charges, encumbrances, claims and options of any
nature and no Person has any right to acquire any shares of capital stock of, or
other equity or voting interest in, any Subsidiary of the Company.
5.7. Litigation. Except as disclosed in the Company SEC
Reports filed prior to January 1, 1998, there are no actions, suits,
investigations or proceedings (adjudicatory, rulemaking or otherwise) pending
or, to the knowledge of the Company, threatened against the Company or any of
its Subsidiaries (or any Employee Plan or Benefit Arrangement), or any property
of the Company or any such Subsidiary (including Intellectual Property), before
any arbitrator of any kind or in or before or by any Governmental Body, except
actions, suits, investigations or proceedings which, individually or in the
aggregate, do not and would not (a) have a Material Adverse Effect on the
Company or
-17-
(b) prevent or materially delay the performance of this Agreement by the
Company.
5.8. Compliance with Other Instruments, Etc. Neither the
Company nor any Subsidiary of the Company is in violation of any term of (a) its
charter, by-laws, other organizational documents or the Stockholders' Agreement,
or (b) any agreement or instrument related to indebtedness for borrowed money or
any other agreement to which it is a party or by which it is bound, the
consequences of which violation, whether individually or in the aggregate, do or
would (i) have a Material Adverse Effect on the Company or (ii) prevent or
materially delay the performance of this Agreement by the Company. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not result in any violation of or
conflict with, constitute a default under, require any consent, waiver or notice
under any term of, or result in the reduction or loss of any benefit or the
creation or acceleration of any right or obligation under, (a) the charter,
by-laws or other organizational document of the Company (or any of its
Subsidiaries) or (b) any agreement, note, bond, mortgage, indenture, contract,
lease, Permit or other obligation or right (excluding options, restricted stock,
employment contracts and other employee related obligations or rights which are
addressed in Section 5.9(f)) to which the Company or any of its Subsidiaries is
a party or by which any of the assets or properties of the Company or any of its
Subsidiaries is bound, or any instrument or Law, or result in the creation of
(or impose any obligation on the Company or any of its Subsidiaries to create)
any mortgage, lien, charge, security interest or other encumbrance upon any of
the properties or assets of the Company or any of its Subsidiaries pursuant to
any such term, except in the case of clause (b) where any of the foregoing,
individually or in the aggregate, does not and would not (i) have a Material
Adverse Effect on the Company or (ii) prevent or materially delay the
performance of this Agreement by the Company.
5.9. Employee Benefit Plans. (a) The Company Disclosure
Statement sets forth as of the date hereof a true and complete list of each
"employee benefit plan" (as defined in Section 3(3) of ERISA) of the Company and
its Subsidiaries in which current or former employees, agents, directors, or
independent contractors of the Company or its Subsidiaries ("Employees")
participate or pursuant to which the Company or any of its Subsidiaries may have
a liability with respect to Employees (each, an "Employee Plan"), and each other
plan, program, policy, contract or arrangement of the Company and its
Subsidiaries providing for bonuses, pensions, deferred pay, stock or stock
related awards, severance pay, salary continuation or similar benefits,
hospitalization, medical, dental or disability bene-
-18-
fits, life insurance or other employee benefits, or compensation to or for any
Employees or any beneficiaries or dependents of any Employees (other than
directors' and officers' liability policies), whether or not insured or funded
(each, a "Benefit Arrangement"). Except as disclosed on the Company Disclosure
Statement, neither the Company nor any of its Subsidiaries has any commitment to
establish any additional Employee Plans or Benefit Arrangements or to modify or
change any existing Employee Plan or Benefit Arrangement. The Company has made
available to Parent with respect to each Employee Plan and Benefit Arrangement:
(i) a true and complete copy of all written documents comprising such Employee
Plan or Benefit Arrangement (including amendments and individual agreements
relating thereto) or, if there is no such written document, an accurate and
complete description of such Employee Plan or Benefit Arrangement; (ii) the most
recent Form 5500 or Form 5500-C (including all schedules thereto), if
applicable; (iii) the most recent financial statements and actuarial reports, if
any; (iv) the summary plan description currently in effect and all material
modifications thereof, if any; and (v) the most recent Internal Revenue Service
determination letter, if any.
(b) Each Employee Plan and Benefit Arrangement has been
established and maintained in accordance with its terms and in compliance with
all applicable Laws, including ERISA and the Code (and the prohibited
transaction provisions of ERISA and the Code), and all contributions required to
be made to the Employee Plans and Benefit Arrangements have been made in a
timely fashion, except where such failure to establish, maintain or comply, or
to make such contributions, individually or in the aggregate, does not and would
not have a Material Adverse Effect on the Company. Each Employee Plan that is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service, and, to the
knowledge of the Company, no event has occurred which results or would result in
a revocation of such letter.
(c) No Employee Plan is subject to Title IV of ERISA.
(d) No Employee Plan is a "multiemployer plan" (as defined in
Section 3(37) of ERISA) or a "multiple employer plan" described in Section
4063(a) of ERISA, and the Company has not at any time in the past five years,
contributed to or been obligated to contribute to such a multiemployer plan or
multiple employer plan.
(e) Neither the Company nor any ERISA Affiliate has any
material Controlled Group Liability, nor do any circumstances exist that could
result in any of them having any Controlled Group Liability. "Controlled Group
Liability" means any and all liabilities under (i) Title IV of ERISA, (ii)
Section 000 xx
-00-
XXXXX, (xxx) Sections 412 and 4971 of the Code, or (iv) the continuation
coverage requirements of Sections 601 et seq. of ERISA and section 4980B of the
Code.
(f) None of the execution or delivery of this Agreement, the
Voting Agreement, stockholder approval of the Merger by the stockholders of the
Company pursuant to the Stockholders Consent or otherwise, or the consummation
of the transactions contemplated hereby or thereby (either alone or together
with any additional or subsequent events), constitutes an event under any
Employee Plan, Benefit Arrangement, loan to, or individual agreement or contract
with, an Employee that may result in any payment (whether of severance pay or
otherwise), restriction or limitation upon the assets of any Employee Plan or
Benefit Agreement, acceleration of payment or vesting, increase in benefits or
compensation, or required funding, with respect to any Employee, or the
forgiveness of any loan or other commitment of any Employees.
(g) There are no actions, suits, arbitrations, inquiries,
investigations or other proceedings (other than routine claims for benefits)
pending or, to the Company's knowledge, threatened, with respect to any Employee
Plan or Benefit Arrangement, except for any of the foregoing that do not and
would not have, individually or in the aggregate, a Material Adverse Effect on
the Company.
(h) Except as disclosed on the Company Disclosure Statement,
no amounts paid or payable by the Company or any Subsidiary to or with respect
to any Employee (including any such amounts that may be payable as a result of
the execution and delivery of this Agreement or the Voting Agreement or the
consummation of the transactions contemplated hereby or thereby) will fail to be
deductible for United States federal income tax purposes by reason of Section
280G of the Code.
(i) No Employees and no beneficiaries or dependents of
Employees are entitled under any Employee Plan or Benefit Arrangement to
post-employment welfare benefits of any kind, including death or medical
benefits, other than coverage mandated by Section 4980B of the Code.
(j) There are no agreements with, or pending petitions for
recognition of, a labor union or association as the exclusive bargaining agent
for any of the employees of the Company or any of its Subsidiaries; no such
petitions have been pending at any time within two years of the date of this
Agreement and, to the knowledge of the Company, there has not been any
organizing effort by any union or other group seeking to represent any employees
of the Company or any of its Subsidiaries as their
-20-
exclusive bargaining agent at any time within two years of the date of this
Agreement. There are no labor strikes, work stoppages or other labor troubles,
other than routine grievance matters, now pending, or, to the Company's
knowledge, threatened, against the Company or any of its Subsidiaries which have
or would have, individually or in the aggregate, a Material Adverse Effect on
the Company, and there have not been any such labor strikes, work stoppages or
other labor troubles, other than routine grievance matters, with respect to the
Company or any of its Subsidiaries at any time within two years of the date of
this Agreement.
5.10. Taxes. (a) The Company and its Subsidiaries have filed
all income Tax Returns and all material other United States federal, state,
county, local and foreign Tax Returns required to be filed by them. The Company
and its Subsidiaries have paid all material Taxes due, other than Taxes
appropriate reserves for which have been made in the Company's financial
statements (and, to the extent material, such reserves have been accurately
described to Parent). There are no material assessments or adjustments that have
been asserted in writing against the Company or its Subsidiaries for any period
for which the Company has not made appropriate reserves in the Company's
financial statements included in the Company SEC Reports.
(b) There are no material claims or assessments pending
against the Company or any of its Subsidiaries for any alleged deficiency in any
Tax, and the Company has not been notified in writing of any proposed material
Tax claims or assessments against the Company or any of its Subsidiaries (other
than, in each case, claims or assessments for which adequate reserves in the
Company financial statements have been established or which are being contested
in good faith or are immaterial in amount).
(c) There are no liens for Taxes on the assets of the Company
or any of its Subsidiaries, except for statutory liens for current Taxes not yet
due and payable (and except for liens which do not and would not, individually
or in the aggregate, have a Material Adverse Effect on the Company).
(d) For purposes of this Agreement, the term "Tax" means any
United States federal, state, county or local, or foreign or provincial income,
gross receipts, property, sales, use, license, excise, franchise, employment,
payroll, value added, alternative or added minimum, ad valorem or transfer tax,
or any other tax, custom, duty or governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or penalty imposed by
any Governmental Body. The term "Tax Return" means a report, return or other
information
-21-
(including any attached schedules or any amendments to such report, return or
other information) required to be supplied to or filed with a Governmental Body
with respect to any Tax, including an information return, claim for refund,
amended return or declaration or estimated Tax.
5.11. Intellectual Property. The Company and its Subsidiaries
own, or have the defensible right to use, the Intellectual Property used in
their respective businesses, except where the failure to own or have the right
to use such Intellectual Property, individually or in the aggregate, does not
and would not have a Material Adverse Effect on the Company.
5.12. Reports and Financial Statements. (a) The Company has
filed all reports (including proxy statements) and registration statements
required to be filed with the SEC since its initial public offering
(collectively, the "Company SEC Reports"). The Company has previously furnished
or made available to Parent true and complete copies of all the Company SEC
Reports filed prior to the date hereof. None of the Company SEC Reports, as of
their respective dates, contained any untrue statement of material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Each of the balance sheets (including the related notes)
included in the Company SEC Reports presents fairly, in all material respects,
the consolidated financial position of the Company and its Subsidiaries as of
the respective dates thereof, and the other related statements (including the
related notes) included in the Company SEC Reports present fairly, in all
material respects, the results of operations and the changes in financial
position of the Company and its Subsidiaries for the respective periods or as of
the respective dates set forth therein, all in conformity with generally
accepted accounting principles consistently applied during the periods involved,
except as otherwise noted therein and subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments. All of the Company
SEC Reports, as of their respective dates, complied as to form in all material
respects with the requirements of the Exchange Act, the Securities Act and the
applicable rules and regulations thereunder.
(b) The Company and its Subsidiaries have not made any
misstatements of fact, or omitted to disclose any fact, to any Governmental
Body, or taken or failed to take any action, which misstatements or omissions,
actions or failures to act, individually or in the aggregate, subject or would
subject any Company Permits referred to in Section 5.4 to revocation or failure
to renew, except where such revocation or failure to renew, individually or in
the aggregate, does not and would not
-22-
have a Material Adverse Effect on the Company.
(c) Except (i) as and to the extent disclosed or reserved
against on the balance sheet of the Company as of September 30, 1997 included in
the Company SEC Reports, or (ii) as incurred after the date thereof in the
ordinary course of business consistent with prior practice and not prohibited by
this Agreement, the Company does not have any liabilities or obligations of any
nature, absolute, accrued, contingent or otherwise and whether due or to become
due, that, individually or in the aggregate, have or would have a Material
Adverse Effect on the Company.
5.13. Absence of Certain Changes or Events. During the period
since September 30, 1997, except as disclosed in the Company SEC Reports filed
prior to January 1, 1998, (a) the business of the Company and its Subsidiaries
has been conducted only in the ordinary course, consistent with past practice,
except for the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, and except as otherwise expressly
permitted by this Agreement, (b) neither the Company nor any of its Subsidiaries
has taken any action or omitted to take any action, or entered into any
contract, agreement, commitment or arrangement to take any action or omit to
take any action, which, if taken or omitted after the date hereof, would violate
Section 7.1 (other than paragraphs (a), (d), (l) or (p) thereof), and (c) there
has not been, and nothing has occurred that would have, a Material Adverse
Effect on the Company.
5.14. Affiliated Transactions and Certain Other Agreements.
Set forth in Section 5.14 of the Company Disclosure Statement is an accurate and
complete listing, as of the date hereof, of (a) all contracts, leases,
agreements or understandings, whether written or oral, that are material to the
Company and its Subsidiaries taken as a whole, with or on behalf of any
Affiliate of the Company (other than its Wholly-Owned Subsidiaries) or any of
the Cable Stockholders or any of their respective Affiliates, to which the
Company or any of its Subsidiaries is a party or is otherwise bound, or by which
any of their respective properties or assets is subject or bound, (b) all
contracts, leases, agreements or understandings, whether written or oral, to
which the Company or any of its Subsidiaries is a party or is otherwise bound
which contain any restriction or limitation on the ability of the Company or any
of its Affiliates (other than the Cable Stockholders and their non-Company
Affiliates) to engage in any business anywhere in the world, other than any such
contracts, leases, agreements or understandings the loss or breach of which,
individually or in the aggregate, does not and would not have a Material Adverse
-23-
Effect on the Company, and (c) all contracts, leases, agreements or
understandings, whether written or oral, giving any Person the right to require
the Company to register Shares or to participate in any registration of Shares.
The Company has previously provided or made available to Parent true and
complete copies of each of the foregoing agreements.
5.15. Brokers and Finders. Except for the fees and expenses
payable to Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated, which fees and
expenses are reflected in its agreements with the Company, copies of which have
been furnished to Parent, the Company has not employed any investment banker,
broker, finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to any investment
banking, brokerage, finder's or similar fee or commission in connection with
this Agreement or the transactions contemplated hereby.
5.16. S-4 Registration Statement and Information
Statement/Prospectus. None of the information supplied or to be supplied by the
Company in writing for inclusion or incorporation by reference in the S-4
Registration Statement or the Information Statement/Prospectus will (a) in the
case of the S-4 Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading or (b) in the case of the Information
Statement/Prospectus, at the time of the mailing thereof, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to the Company, its officers
and directors or any of its Subsidiaries shall occur which is required to be
described in an amendment of, or a supplement to, the Information
Statement/Prospectus or the S-4 Registration Statement, the Company shall notify
Parent thereof by reference to this Section 5.16 and such event shall be so
described. Any such amendment or supplement shall be promptly filed with the SEC
and, as and to the extent required by law, disseminated to the stockholders of
the Company, and such amendment or supplement shall comply in all material
respects with all provisions of applicable Law. The Information
Statement/Prospectus will (with respect to the Company) comply as to form in all
material respects with the requirements of the Exchange Act.
5.17. ACC Agreement. As of the date hereof, to the knowledge
of the Company, ACC is not in breach in any material respect of any of its
representations, warranties, covenants or
-24-
agreements contained in the ACC Agreement. None of the Company or any of its
Subsidiaries is in breach in any material respect of any of their respective
representations, warranties, covenants or agreements contained in the ACC
Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub each represents and warrants to the
Company that, except as set forth in the Parent Disclosure Statement (each
section of which qualifies the correspondingly numbered representation and
warranty or covenant as specified therein):
6.1. Organization, Etc. of Parent. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York and has all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted and
proposed by Parent to be conducted. Parent is duly qualified and in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary and where the failure to be so qualified or in good standing has or
would have, individually or in the aggregate, a Material Adverse Effect on
Parent.
6.2. Subsidiaries. Each Subsidiary of Parent (a) is a
corporation or other legal entity duly organized, validly existing and (if
applicable) in good standing under the laws of the jurisdiction of its
organization and has all requisite corporate, partnership or similar power and
authority to own its properties and conduct its business and operations as
currently conducted, except where the failure to be duly organized, validly
existing and in good standing or to have such power and authority does not and
would not have, individually or in the aggregate, a Material Adverse Effect on
Parent, and (b) is duly qualified and in good standing in each jurisdiction in
which the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified or in good standing does not and would not have, individually or
in the aggregate, a Material Adverse Effect on Parent.
6.3. Agreement. Each of Parent and Merger Sub has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement
-25-
and the consummation of the transactions contemplated hereby have been approved
by the respective Boards of Directors of Parent and Merger Sub and by Parent as
the sole stockholder of Merger Sub, and have been duly authorized by all other
necessary corporate action on the part of Parent or Merger Sub. This Agreement
has been duly executed and delivered by a duly authorized officer of Parent and
of Merger Sub and constitutes a valid and binding agreement of Parent and Merger
Sub, enforceable against Parent and Merger Sub in accordance with its terms.
Neither Parent nor Merger Sub, nor any of their respective Subsidiaries was an
"interested stockholder" of the Company, as defined for purposes of Section 203
of the DGCL, immediately prior to the approval of the transactions contemplated
by this Agreement and the Voting Agreement by the Board of Directors of the
Company.
6.4. Permits; Compliance. Each of Parent and its Subsidiaries
is in possession of all Permits from appropriate Governmental Bodies (including
the FCC) necessary for Parent or any of its Subsidiaries to own, lease and
operate its properties or to carry on their respective businesses as they are
now being conducted (the "Parent Permits"), and all such Parent Permits are
valid, and in full force and effect, except where the failure to have, or the
suspension or cancellation of, any of the Parent Permits does not and would not,
individually or in the aggregate, (a) have a Material Adverse Effect on Parent
or (b) prevent or materially delay the performance of this Agreement by Parent
or Merger Sub. No suspension or cancellation of any of the Parent Permits is
pending or, to the knowledge of Parent, threatened, except where the failure to
have, or the suspension or cancellation of, any of the Parent Permits does not
and would not, individually or in the aggregate, (x) have a Material Adverse
Effect on Parent or (y) prevent or materially delay the performance of this
Agreement by Parent or Merger Sub. Neither Parent nor any of its Subsidiaries is
in conflict with, or in default or violation of, (i) any Law applicable to
Parent or any of its Subsidiaries or by which any property, asset or operation
of Parent or any of its Subsidiaries is bound or affected or (ii) any Parent
Permits, except for such conflicts, defaults or violations that do not and would
not, individually or in the aggregate, (A) have a Material Adverse Effect on
Parent or (B) prevent or materially delay the performance of this Agreement by
Parent or Merger Sub.
6.5. Capital Stock. As of the date hereof, the authorized
capital stock of Parent consists of (a) 2,000,000,000 Parent Common Shares and
(ii) 100,000,000 shares of preferred stock, $1.00 par value per share. All of
the outstanding shares of capital stock of Parent are duly authorized, validly
issued, fully paid and nonassessable, and no class of capital stock of Parent is
entitled to preemptive rights. As of the close of
-26-
business on January 1, 1998, (i) 1,624,213,505 Parent Common Shares and no
shares of Parent preferred stock were issued and outstanding and (ii) 1,269,953
Parent Common Shares were held in the treasury of Parent. Except as disclosed in
the Parent SEC Reports, all outstanding shares of capital stock of the
Significant Subsidiaries (as defined for purposes of Regulation S-X under the
Exchange Act) of Parent are owned by Parent or a direct or indirect Wholly-Owned
Subsidiary of Parent, free and clear of all liens, charges, encumbrances, claims
and options of any nature. As of the close of business on January 1, 1998, there
were outstanding options to acquire no more than 69,000,000 Parent Common
Shares.
6.6. Parent Common Shares. The Parent Common Shares to be
issued pursuant to Article IV will, when issued, be duly authorized, validly
issued, fully paid and nonassessable and no stockholder of Parent will have any
preemptive right of subscription or purchase in respect thereof. The Parent
Common Shares to be issued in the Merger will, when issued, be registered under
the Securities Act and the Exchange Act and registered or exempt from
registration under any applicable state securities laws.
6.7. Litigation. Except as disclosed in the Parent SEC Reports
filed prior to January 1, 1998, there are no actions, suits, investigations or
proceedings (adjudicatory, rulemaking or otherwise) pending or, to the knowledge
of Parent, threatened against Parent or any of its Subsidiaries or any Benefit
Plans of Parent or any of its Subsidiaries, or any property of Parent or any
such Subsidiary (including Intellectual Property), in any court or before any
arbitrator of any kind or in or before or by any Governmental Body, except
actions, suits, investigations or proceedings or which, individually or in the
aggregate, do not and would not (a) have a Material Adverse Effect on Parent or
(b) prevent or materially delay the performance of this Agreement by Parent or
Merger Sub.
6.8. Compliance with Other Instruments, Etc. Neither Parent
nor any Subsidiary of Parent is in violation of any term of (a) its charter,
by-laws or other organizational documents, or (b) any agreement or instrument
related to indebtedness for borrowed money or any other agreement to which it is
a party or by which it is bound, the consequences of which violation, whether
individually or in the aggregate, do or would (i) have a Material Adverse Effect
on Parent or (ii) prevent or materially delay the performance of this Agreement
by Parent or Merger Sub. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any violation of or conflict with, constitute a default under, require
any consent, waiver or notice under any term of, or result in the reduction or
loss of any benefit or the creation
-27-
or acceleration of any obligation under, (a) the charter, by-laws or other
organizational document of Parent (or any of its Subsidiaries) or (b) any
agreement, note, bond, mortgage, indenture, contract, lease, Permit or other
obligation or any instrument to which Parent or any of its Subsidiaries is a
party or by which any of the assets or properties of Parent or any of its
Subsidiaries is bound or any instrument or Law, or result in the creation of (or
impose any obligation on Parent or any of its Subsidiaries to create) any
mortgage, lien, charge, security interest or other encumbrance upon any of the
properties or assets of Parent or any of its Subsidiaries pursuant to any such
term, except in the case of clause (b) where any of the foregoing, individually
or in the aggregate, does not and would not (i) have a Material Adverse Effect
on Parent or (ii) prevent or materially delay the performance of this Agreement
by Parent or Merger Sub.
6.9. Taxes. (a) Parent and its Subsidiaries have filed all
income Tax Returns and all material other United States federal, state, county,
local and foreign Tax Returns required to be filed by them. Parent and its
Subsidiaries have paid all material Taxes due, other than Taxes appropriate
reserves for which have been made in Parent's financial statements (and, to the
extent material, such reserves have been accurately described to the Company).
There are no material assessments or adjustments that have been asserted in
writing against Parentor its Subsidiaries for any period for which Parent has
not made appropriate reserves in Parent's financial statements included in
Parent SEC Reports.
(b) There are no material claims or assessments pending
against Parent or any of its Subsidiaries for any alleged deficiency in any Tax,
and Parent has not been notified in writing of any proposed material Tax claims
or assessments against Parent or any of its Subsidiaries (other than, in each
case, claims or assessments for which adequate reserves in Parent financial
statements have been established or which are being contested in good faith or
are immaterial in amount).
(c) There are no liens for Taxes on the assets of Parent or
any of its Subsidiaries, except for statutory liens for current Taxes not yet
due and payable (and except for liens which do not and would not, individually
or in the aggregate, have a Material Adverse Effect on Parent).
6.10. Intellectual Property. Parent and its Subsidiaries own,
or have the defensible right to use, the Intellectual Property used in their
respective businesses, except where the failure to own or have the right to use
such Intellectual Property, individually or in the aggregate, does not and would
not have a Material Adverse Effect on Parent.
-28-
6.11. Reports and Financial Statements. (a) Parent has filed
all reports (including proxy statements) and registration statements required to
be filed with the SEC since January 1, 1996 (collectively, the "Parent SEC
Reports"). Parent has previously furnished or made available to the Company true
and complete copies of all Parent SEC Reports filed prior to the date hereof.
None of the Parent SEC Reports, as of their respective dates, contained any
untrue statement of material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. Each of the
balance sheets (including the related notes) included in the Parent SEC Reports
presents fairly, in all material respects, the consolidated financial position
of Parent and its Subsidiaries as of the respective dates thereof, and the other
related statements (including the related notes) included in the Parent SEC
Reports present fairly, in all material respects, the results of operations and
the changes in financial position of Parent and its Subsidiaries for the
respective periods or as of the respective dates set forth therein, all in
conformity with generally accepted accounting principles consistently applied
during the periods involved, except as otherwise noted therein and subject, in
the case of the unaudited interim financial statements, to normal year-end
adjustments. All of the Parent SEC Reports, as of their respective dates,
complied as to form in all material respects with the requirements of the
Exchange Act, the Securities Act and the applicable rules and regulations
thereunder.
(b) Parent and its Subsidiaries have not made any
misstatements of fact, or omitted to disclose any fact, to any Governmental
Body, or taken or failed to take any action, which misstatements or omissions,
actions or failures to act, individually or in the aggregate, subject or would
subject any Parent Permits referred to in Section 6.4 to revocation or failure
to renew, except where such revocation or failure to renew, individually or in
the aggregate, does not and would not have a Material Adverse Effect on Parent.
(c) Except (i) as and to the extent disclosed or reserved
against on the balance sheet of Parent as of September 30, 1997 included in the
Parent SEC Reports, or (ii) as incurred after the date thereof in the ordinary
course of business consistent with prior practice and not prohibited by this
Agreement, Parent does not have any liabilities or obligations of any nature,
absolute, accrued, contingent or otherwise and whether due or to become due,
that, individually or in the aggregate, have or would have a Material Adverse
Effect on Parent.
-29-
(d) During the period since September 30, 1997, except as
disclosed in the Parent SEC Reports filed prior to January 1, 1998, there has
not been, and nothing has occurred that would have, a Material Adverse Effect on
Parent.
6.12. Brokers and Finders. Except for the fees and expenses
payable to CS First Boston Corporation and Xxxxxxx Sachs & Co., which fees and
expenses will be paid by Parent, Parent has not employed any investment banker,
broker, finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to any investment
banking, brokerage, finder's or similar fee or commission in connection with
this Agreement or the transactions contemplated hereby.
6.13. S-4 Registration Statement and Information
Statement/Prospectus. None of the information to be supplied by Parent or Merger
Sub in writing for inclusion or incorporation by reference in the S-4
Registration Statement or the Information Statement/Prospectus will (a) in the
case of the S-4 Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading or (b) in the case of the Information
Statement/Prospectus, at the time of the mailing thereof, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to Parent, its officers and
directors or any of its Subsidiaries shall occur which is required to be
described in an amendment of, or a supplement to, the Information
Statement/Prospectus or the S-4 Registration Statement, Parent shall notify the
Company thereof by reference to this Section 6.13 and such event shall be so
described. Any such amendment or supplement shall be promptly filed with the SEC
and, as and to the extent required by law, disseminated to the stockholders of
the Company, and such amendment or supplement shall comply in all material
respects with all provisions of applicable Law. The S-4 Registration Statement
will comply (with respect to Parent and Merger Sub and information provided in
writing therefor by Parent or Merger Sub) as to form in all material respects
with the provisions of the Securities Act.
6.14. Ownership of Merger Sub; No Prior Activities; Assets of
Merger Sub.
(a) Merger Sub was formed by Parent solely for the purpose of
engaging in the transactions contemplated hereby.
-30-
(b) As of the date hereof and the Effective Time, the capital
stock of Merger Sub is and will be owned 100% by Parent directly. Further, there
are not as of the date hereof and there will not be at the Effective Time any
outstanding or authorized options, warrants, calls, rights, commitments or any
other agreements of any character to or by which Merger Sub is a party or may be
bound requiring it to issue, transfer, sell, purchase, redeem or acquire any
shares of capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire, any
shares of capital stock of Merger Sub.
(c) As of the date hereof and immediately prior to the
Effective Time, except for obligations or liabilities incurred in connection
with its incorporation or organization and the transactions contemplated hereby
and by the Voting Agreement, Merger Sub has not and will not have incurred,
directly or indirectly through any Subsidiary or Affiliate, any obligations or
liabilities or engaged in any business or activities of any type or kind
whatsoever or entered into any agreements or arrangements with any Person.
(d) Parent will take all action necessary to ensure that
Merger Sub at no time prior to the Effective Time owns any material assets other
than an amount of cash necessary to incorporate Merger Sub and to pay the
expenses of the Merger attributable to Merger Sub if the Merger is consummated.
6.15. Ownership of Company or ACC Stock. Neither Parent nor
any Subsidiary of Parent (excluding any employee benefit plan, or related trust,
of Parent or its Subsidiaries) owns or, to the knowledge of Parent, has owned
within the last two years, any shares of the capital stock of either the Company
or ACC. Between the date of this Agreement and the Effective Time, neither
Parent nor any Subsidiary of Parent (excluding any employee benefit plan, or
related trust, of Parent or its Subsidiaries) will purchase or otherwise acquire
any shares of the capital stock of either the Company or ACC (except pursuant to
the terms of this Agreement or as provided in the ACC Agreement).
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS
7.1. Conduct of Business of the Company. Except as set forth
in Section 7.1 of the Company Disclosure Statement, as expressly permitted by
this Agreement, as required by any change in applicable Law, or as otherwise
agreed by Parent in writing, during the period from the date of this Agreement
to the
-31-
Effective Time, (i) the Company will, and will cause each of its Subsidiaries
to, conduct its operations according to its ordinary course of business
consistent with past practice, and (ii) to the extent consistent with the
foregoing, the Company will, and will use all reasonable efforts to cause each
of its Subsidiaries to, seek to preserve intact its current business
organizations, keep available the service of its current officers and employees,
and preserve its relationships with customers, suppliers and others having
business dealings with it, with the objective that their goodwill and ongoing
businesses shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, from and including the date hereof to the Effective
Time, the Company will not, and will not permit any of its Subsidiaries to,
without the prior written consent of Parent (except to the extent set forth in
Section 7.1 of the Company Disclosure Statement):
(a) except for (i) Shares issued upon exercise of options or
other rights outstanding as of the date hereof under Employee Plans or
Benefit Arrangements, (ii) (A) options to purchase, and awards of, no
more than an aggregate of 300,000 Shares, granted in connection with
new hires or promotions, directors' retainers, and bonus award
programs, in the ordinary course of business consistent with past
practice under currently existing Employee Plans or Benefit
Arrangements, and (B) options to purchase no more than an aggregate of
700,000 Shares issued pursuant to or in accordance with the terms of
the ACC Agreement (which options are included within the aggregate
maximum number of Shares issuable pursuant to the ACC Agreement as set
forth in Section 5.6), and the issuance of Shares upon the exercise
thereof, (iii) Shares issued pursuant to the terms of the ACC Agreement
(a copy of which, as in effect on the date hereof, has been provided to
Parent), (iv) Shares issued in accordance with the terms of the Company
Stock Purchase Plan as in effect on the date hereof, and (v) shares of
Class A Common Stock issued upon conversion of shares of Class B Common
Stock outstanding on the date hereof, in accordance with the terms of
the Company's Certificate of Incorporation as in effect on the date
hereof, issue, deliver, sell, dispose of, pledge or otherwise encumber,
or authorize or propose the issuance, sale, disposition or pledge or
other encumbrance of (A) any additional shares of its capital stock of
any class (including the Shares), or any securities or rights
convertible into, exchangeable for, or evidencing the right to
subscribe for any shares of its capital stock, or any rights, warrants,
options, calls, commitments or any other agreements of any character to
purchase or acquire any shares of its capital stock or any securities
or rights convertible into, exchangeable for, or evidencing the right
to subscribe for,
-32-
any shares of its capital stock, or (B) any other securities in respect
of, in lieu of, or in substitution for, Shares outstanding on the date
hereof;
(b) redeem, purchase or otherwise acquire, or propose to
redeem, purchase or otherwise acquire, any of its outstanding
securities (including the Shares);
(c) except for conversions of shares of Class B Common Stock
outstanding on the date hereof into shares of Class A Common Stock, in
accordance with the terms of the Company's Certificate of Incorporation
as in effect on the date hereof, split, combine, subdivide or
reclassify any shares of its capital stock or declare, set aside for
payment or pay any dividend, or make any other actual, constructive or
deemed distribution in respect of any shares of its capital stock or
otherwise make any payments to stockholders in their capacity as such
(other than dividends or distributions paid by any Wholly-Owned
Subsidiary of the Company);
(d) (i) grant any increases in the compensation of any of its
directors, officers or employees, except in the ordinary course of
business consistent with past practice, (ii) pay or award or agree to
pay or award any pension, retirement allowance, or other nonequity
incentive awards, or other employee benefit, not required by any of the
Employee Plans or Benefit Arrangements to any current or former
director, officer or employees, whether past or present, or to any
other Person, except for payments or awards that are in the ordinary
course of business, consistent with past practice, and that are not
material, (iii) pay or award or agree to pay or award any stock option
or equity incentive awards except as expressly permitted by Section
7.1(a), (iv) enter into any new or amend any existing employment
agreement with any director, officer or employee, except for employment
agreements with new employees entered into in the ordinary course of
business consistent with past practice and except for amendments in the
ordinary course of business, consistent with past practice, that do not
materially increase benefits or payments, (v) enter into any new or
amend any existing severance agreement with any current or former
director, officer or employee, except for agreements or amendments in
the ordinary course of business, consistent with past practice, that do
not provide for material benefits, or (vi) become obligated under any
new Employee Plan or Benefit Arrangement, which was not in existence on
the date hereof, or amend or exercise discretion pursuant to any such
Employee Plan or Benefit Arrangement in existence on the date hereof,
except for any
-33-
such amendment or exercise of discretion in the ordinary course of
business, consistent with past practice, that does not provide for
material benefits;
(e) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any of its Subsidiaries not
constituting an inactive Subsidiary (other than the Merger, and other
than (i) with respect to any Subsidiary of the Company such of the
foregoing as do not change the beneficial ownership interest of the
Company in such Subsidiary and (ii) with respect to the Company, any
such merger, consolidation, restructuring, recapitalization or other
reorganization that is used to effect an acquisition permitted pursuant
to Section 7.1(f) and which does not result in a change of control of
the Company or change the Shares into a different number or kind of
securities);
(f) make any acquisition, by means of merger, consolidation or
otherwise, of (i) any direct or indirect ownership interest in or
assets comprising any business enterprise or operation or (ii) except
in the ordinary course and consistent with past practice, any other
assets; provided, however, that the Company may make such acquisitions
for cash in an amount not to exceed $10 million in the case of any
single acquisition or $100 million for all such acquisitions in the
aggregate; provided further that such acquisitions do not and would not
prevent or materially delay the consummation of the Merger; and
provided further that the foregoing shall not prevent the Company from
exploring on a preliminary basis and conducting diligence
investigations (including having discussions with any potential
acquisition target) with respect to any potential acquisition that
would require Parent's consent hereunder, for the purpose of
determining the desirability of such potential acquisition and
developing the basis on which to seek Parent's consent, so long as the
Company does not submit any formal proposal or indication of interest
to such acquisition target, or make any binding commitments with
respect to such potential acquisition, without obtaining Parent's
consent;
(g) (i) dispose of any direct or indirect ownership interest
in any CLEC system or in any other local services or access system
(including any shares of capital stock of any Subsidiary holding any
such interest) or any controlling interest in any other material
business enterprise or operation, (ii) make any other disposition of
any other direct or indirect ownership interest in or assets comprising
any CLEC
-34-
system or any other local service or access system or other material
business enterprise or operation (except for the replacement or upgrade
of assets, or disposition of unnecessary assets, in the ordinary course
and consistent with past practice), or (iii) except in the ordinary
course and consistent with past practice, dispose of any other assets;
(h) adopt any amendments to its Certificate of Incorporation
or By-Laws or alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or
ownership of any Subsidiary not constituting an inactive Subsidiary of
the Company;
(i) incur any indebtedness for borrowed money or guarantee any
indebtedness of any other Person or make any loans, advances or capital
contributions to, or investments in, any other Person (other than to
the Company or any Wholly-Owned Subsidiary of the Company), except that
if the Company shall have complied with the provisions of Section 7.14
hereof with respect thereto, the Company may incur additional
indebtedness after the date hereof, under existing credit facilities
(or any renewals thereof) or in the high yield debt market, resulting
in aggregate net proceeds to the Company from such additional
indebtedness not exceeding $350 million;
(j) engage in the conduct of any business other than
telecommunications and related businesses;
(k) enter into any agreement or exercise any discretion
providing for acceleration of payment or performance as a result of a
change of control of the Company or its Subsidiaries;
(l) enter into any contracts, arrangements or understandings
requiring in the aggregate the purchase of equipment, materials,
supplies or services in excess of $35 million more than the amounts set
forth for capital expenditures in the Company's 1998 operating plan
approved by the Company's Board of Directors prior to the date hereof,
a copy of which has been provided by the Company to Parent;
(m) enter into or amend or waive any right under any agreement
with any Affiliates of the Company (other than its Subsidiaries) or
with any Cable Stockholder or any Affiliate of any Cable Stockholder,
other than any of the foregoing as may be done in the ordinary course
of business and that is not material, individually or in the aggregate,
to the
-35-
Company and its Subsidiaries;
(n) settle or compromise any material litigation or waive,
release or assign any material rights or claims, except in the ordinary
course of business consistent with past practice;
(o) amend, modify, supplement, or waive any right or condition
under, the ACC Agreement or consent to ACC doing any of the foregoing
under the US Wats Agreement, except, in either case, for amendments,
modifications, supplements or waivers which are not adverse to Parent
or the Company in any material respect and which in any event do not
(i) increase the consideration payable per share or in the aggregate to
shareholders of ACC under the ACC Agreement or US Wats under the US
Wats Agreement, (ii) otherwise increase the maximum aggregate number of
Shares that may be issuable under the ACC Agreement, or (iii) extend
the "drop-dead" date under either such agreement beyond November 26,
1998; or
(p) authorize, recommend or propose (other than to Parent), or
announce an intention to do any of the foregoing, or enter into any
contract, agreement, commitment or arrangement to do any of the
foregoing.
7.2. Other Transactions. Prior to the Effective Time, the
Company and its Subsidiaries shall not, and shall use all reasonable efforts to
cause their respective officers, employees, representatives, agents and
Affiliates not to, directly or indirectly, encourage, solicit or engage in
discussions or negotiations with any third party (other than Parent) concerning
any merger, consolidation, share exchange or similar transaction involving the
Company or any of its Subsidiaries, or any purchase of all or a significant
portion of the assets of or equity interest in the Company or any of its
Subsidiaries, or any other transaction that would involve the transfer or
potential transfer of control of the Company or any of its Subsidiaries (an
"Acquisition Proposal"), or provide any confidential information relating to the
Company or any of its Subsidiaries in connection with or in contemplation of an
Acquisition Proposal, other than the transactions contemplated hereby. The
Company shall immediately request that any Person that has received any
confidential information involving the Company or any of its Subsidiaries in
connection with an Acquisition Proposal return all copies thereof to the
Company, and the Company and its Subsidiaries shall, and shall use all
reasonable efforts to cause their respective officers, employees,
representatives, agents and Affiliates to, terminate all discussions or
negotiations with any Person with respect to any Acquisition Proposal. The
Company
-36-
will notify Parent promptly of any written inquiries or proposals with respect
to any such transaction that are received by, or any such negotiations or
discussions that are sought to be initiated with, the Company or any of its
Subsidiaries after the date hereof, will advise Parent of the identity of any
Person making any such Acquisition Proposal and of the material terms thereof,
and shall keep Parent apprised with respect to all material matters relating
thereto. Nothing contained in this Agreement shall prohibit or restrict the
Company's Board of Directors from taking and disclosing to the Company's
stockholders a position in accordance with Rules 14d-9 and 14e-2 under the
Exchange Act with respect to a tender offer or an exchange offer for Shares
commenced by a third party, provided that Parent shall be given reasonable
advance notice thereof, and provided, further, that nothing in this Agreement
shall be deemed to relieve the Cable Stockholders from their obligations under
the Voting Agreement.
7.3. Stockholder Approval. (a) Pursuant to the Voting
Agreement, each of the Cable Stockholders has agreed to execute, or cause to be
executed, immediately following execution and delivery of this Agreement a
written consent with respect to all Shares owned by it or which it has the right
to vote or consent in favor of approval and adoption of the Merger and this
Agreement (the "Stockholders Consent"). Notwithstanding the foregoing, if Parent
so requests, the Company will take all action necessary in accordance with
applicable law and its Certificate of Incorporation and By-Laws to convene a
meeting of its stockholders to consider and vote upon the approval and adoption
of this Agreement and the transactions contemplated hereby, and to submit this
Agreement to the stockholders of the Company for their approval, or to solicit a
further written consent, in lieu of a stockholders' meeting, of its stockholders
approving and adopting this Agreement and the transactions contemplated hereby,
and the Company and its Board of Directors shall take all lawful reasonable
action to solicit, and use all reasonable efforts to obtain, such approval.
(b) Notwithstanding the provisions of Section 7.3(a), after
the adoption of this Agreement by the stockholders of the Company, without the
affirmative approval, by vote or written consent, of the holders of Shares
representing a majority of the votes that may be cast by the holders of all then
outstanding Shares, the Company will not (i) enter into any amendment to this
Agreement that would alter or change any of the terms and conditions of this
Agreement if such alteration or change would adversely affect the holders of
Shares, (ii) waive any condition set forth in Section 8.1 or Section 8.3 if such
waiver would materially adversely affect the holders of Shares or (iii)
consummate the Merger after a time at which the Company would be
-37-
entitled to terminate the Agreement pursuant to Section 9.2(a) (without regard
to any amendment of such Section not approved pursuant to this Section 7.3(b)).
(c) Parent, as the sole stockholder of Merger Sub, hereby
consents to the adoption of this Agreement by Merger Sub and agrees that such
consent shall be treated for all purposes as a vote duly adopted at a meeting of
the stockholders of Merger Sub held for this purpose.
7.4. Registration Statement. Parent will, as promptly as
practicable, prepare and file with the SEC a registration statement on Form S-4
(the "S-4 Registration Statement"), containing an information
statement/prospectus, in connection with the registration under the Securities
Act of the Parent Common Shares issuable upon conversion of the Shares and the
other transactions contemplated hereby. The Company will, as promptly as
practicable, prepare and file with the SEC an information statement that will be
the same information statement/prospectus contained in the S-4 Registration
Statement (such information statement/prospectus together with any amendments
thereof or supplements thereto, in the form or forms mailed to the Company's
stockholders, "Information Statement/Prospectus"). Parent and the Company will
use all reasonable efforts to have or cause the S-4 Registration Statement to be
declared effective as promptly as practicable, and also will take any other
action reasonably required to be taken under federal or state securities laws,
and the Company will use all reasonable efforts to cause the Information
Statement/Prospectus to be mailed to stockholders of the Company at the earliest
practicable date. If, pursuant to Section 7.3, Parent requests a meeting of the
stockholders of the Company, then the S-4 Registration Statement shall include a
proxy statement/prospectus meeting the requirements of the Exchange Act and all
references herein to the Information Statement/Prospectus shall be deemed to
refer to such proxy statement/prospectus. Each party hereto agrees to cooperate
reasonably with each other party in connection with the preparation and filing
of the S-4 Registration Statement and Information Statement/Prospectus, and of
the registration statement and the proxy statement/prospectus to be used in
connection with the ACC Agreement, including providing information to the other
party with respect to itself as may be reasonably required in connection
therewith.
7.5. Reasonable Efforts. (a) Subject to Section 7.5(c), the
Company and Parent shall, and shall use all reasonable efforts to cause their
respective Subsidiaries, as applicable, to: (i) promptly make all filings and
seek to obtain all Authorizations required under all applicable Laws with
respect to the Merger and the other transactions contemplated
-38-
hereby and will reasonably consult and cooperate with each other with respect
thereto; (ii) not take any action (including effecting or agreeing to effect or
announcing an intention or proposal to effect, any acquisition, business
combination or other transaction) which would impair the ability of the parties
to consummate the Merger (regardless of whether such action would otherwise be
permitted or not prohibited hereunder); and (iii) use all reasonable efforts to
promptly take, or cause to be taken, all other actions and do, or cause to be
done, all other things necessary, proper or appropriate to satisfy the
conditions set forth in Article VIII (unless waived) and to consummate and make
effective the transactions contemplated by this Agreement on the terms and
conditions set forth herein (including seeking to remove promptly any injunction
or other legal barrier that may prevent such consummation); provided, however,
that nothing in this sentence shall prohibit the Company from effecting the
transactions contemplated by the ACC Agreement in accordance with its terms.
Each party shall promptly notify the other party of any communication to that
party from any Governmental Body in connection with any required filing with, or
approval or review by, such Governmental Body in connection with the Merger and
permit the other party to review in advance any proposed communication to any
Governmental Body in such connection to the extent permitted by applicable law.
Notwithstanding the foregoing, in connection with any filing or submission
required or action to be taken by either the Company or Parent or any of their
respective Subsidiaries to effect the Merger and to consummate the other
transactions contemplated hereby, (A) neither the Company nor any of its
Subsidiaries shall, without Parent's prior written consent, commit to any
divestiture or hold separate or similar transaction and each of the Company and
its Subsidiaries shall commit to, and shall use reasonable efforts to effect,
such thereof (which may, at the Company's option, be conditioned upon and
effective as of the Effective Time) as Parent shall request, and (B) neither
Parent nor any of its Subsidiaries shall be required to divest or hold separate
or otherwise take (or refrain from taking) or commit to take (or refrain from
taking) any action that limits its freedom of action with respect to, or its
ability to retain, the Company or any of its Subsidiaries or any material
portion of the assets of the Company and its Subsidiaries, or any of the
business, product lines or assets of Parent or any of its Subsidiaries, if any
of the foregoing, individually or in the aggregate, would have a Material
Adverse Effect on the Company (or an effect on Parent and its Subsidiaries that,
were such effect applied to the Company and its Subsidiaries, would constitute a
Material Adverse Effect on the Company).
(b) The Company and its Subsidiaries shall use their
reasonable best efforts (i) not to take any action (regardless of
-39-
whether such action would otherwise be permitted or not prohibited hereunder)
that, to the Company's knowledge based on consultation with its independent
accountants (which consultation shall be required before the Company may use its
lack of knowledge as a defense), prevents or would prevent Parent from
accounting for the Merger as a pooling of interests and (ii) to take any action
necessary to cure any action previously taken by or any condition relating to
the Company or any of its Subsidiaries that, to the Company's knowledge based on
consultation with its independent accountants (which consultation shall be
required before the Company may use its lack of knowledge as a defense),
prevents or would prevent Parent from accounting for the Merger as a pooling of
interests, in each case unless Parent shall have irrevocably and unconditionally
waived in writing the condition set forth in Section 8.2(e).
(c) Notwithstanding anything to the contrary in this
Agreement, nothing in this Agreement shall prevent or restrict Parent and its
Subsidiaries from engaging in any merger, acquisition, business combination or
other transaction (whether or not Parent is the surviving corporation); provided
that such merger, acquisition, business combination or other transaction would
not (i) prevent, or delay beyond March 31, 1999, the ability of Parent to
consummate the Merger or (ii) cause the Merger, or the merger contemplated by
the ACC Agreement, to fail to qualify as a tax-free reorganization.
7.6. Access to Information. Subject to currently existing
contractual and legal restrictions applicable to the Company (which the Company
represents and warrants are not material), and upon reasonable notice, the
Company shall (and shall cause each of its Subsidiaries to) afford to officers,
employees, counsel, accountants and other authorized representatives of Parent
("Parent Representatives") reasonable access, during normal business hours
throughout the period prior to the Effective Time, to its properties, books and
records (including, subject to execution of appropriate access letters, the work
papers of independent accountants), such access not to unreasonably interfere
with the Company's business or operations, and, during such period, shall (and
shall cause each of its Subsidiaries to) furnish promptly to such Parent
Representatives all information concerning its business, properties and
personnel as may reasonably be requested, provided that no investigation
pursuant to this Section 7.6 shall affect or be deemed to modify any of the
respective representations or warranties made by the Company. Parent agrees that
it will not, and will cause the Parent Representatives not to, use any
information obtained pursuant to this Section 7.6 for any purpose unrelated to
the consummation of the transactions contemplated by this Agreement. Subject to
the requirements of law, Parent will keep confidential, and will
-40-
cause the Parent Representatives to keep confidential, all information and
documents obtained pursuant to this Section 7.6 except as otherwise consented to
by the Company; provided, however, that Parent shall not be precluded from
making any disclosure which it deems required by law in connection with the
Merger. In the event Parent is required to disclose any information or documents
pursuant to the immediately preceding sentence, Parent shall promptly give prior
written notice of such disclosure that is proposed to be made to the Company so
that Parent and the Company can work together to limit the disclosure to the
greatest extent possible and, in the event that Parent is legally compelled to
disclose any information, to seek a protective order or other appropriate remedy
or both. Upon any termination of this Agreement, Parent will collect and deliver
to the Company all documents obtained pursuant to this Section 7.6 or otherwise
from the Company or its Subsidiaries by Parent or the Parent Representatives
then in their possession and any copies thereof. All requests for access to the
Company and their Subsidiaries pursuant to this Section 7.6 shall be made
through the representatives of the Company named in Section 7.6 of the Company
Disclosure Statement.
7.7. Indemnification of Directors and Officers. (a) From and
after the Effective Time, Parent and the Surviving Corporation shall jointly and
severally indemnify, defend and hold harmless the present and former officers,
directors and employees of the Company and any of its Subsidiaries, and any
Person who is or was serving at the request of the Company as an officer,
director or employee or agent of another Person, against all losses, expenses,
claims, damages or liabilities arising out of actions or omissions occurring on
or prior to the Effective Time (including the transactions contemplated by this
Agreement) to the fullest extent permitted under applicable Law (and shall also,
subject to Section 7.7(b), advance expenses as incurred to the fullest extent
permitted under applicable Law, provided that the Person to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such Person is not entitled to indemnification); provided,
however, that such indemnification shall be provided only to the extent any
directors' and officers' liability insurance policy of the Company or its
Subsidiaries does not provide coverage and actual payment thereunder with
respect to the matters that would otherwise be subject to indemnification
hereunder (it being understood that the Surviving Corporation shall, subject to
Section 7.7(b), advance expenses on a current basis as provided in this
paragraph (a) notwithstanding such insurance coverage to the extent that
payments thereunder have not yet been made, in which case Parent or the
Surviving Corporation, as the case may be, shall be entitled to repayment of
such advances from the proceeds of such insurance coverage). Parent and Merger
Sub agree that
-41-
all rights to indemnification, including provisions relating to advances of
expenses incurred in defense of any action, suit or proceeding, whether civil,
criminal, administrative or investigative (each, a "Claim"), existing in favor
of the present or former directors, officers, employees, fiduciaries and agents
of the Company or any of its Subsidiaries, and any Person who is or was serving
at the request of the Company as an officer, director or employee or agent of
another Person (collectively, the "Indemnified Parties") as provided in the
Company's Certificate of Incorporation or By-Laws or pursuant to other
agreements, or certificates of incorporation or by-laws or similar documents of
any of the Company's Subsidiaries, as in effect as of the date hereof, with
respect to matters occurring through the Effective Time, shall survive the
Merger and shall continue in full force and effect for a period of not less than
six years from the Effective Time; provided, however, that all rights to
indemnification in respect of any Claim asserted, made or commenced within such
period shall continue until the final disposition of such Claim. The Surviving
Corporation shall maintain in effect for not less than six years after the
Effective Time the current policies of directors' and officers' liability
insurance maintained by the Company and the Company's Subsidiaries with respect
to matters occurring prior to the Effective Time; provided, however, that (i)
the Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are no less advantageous to the
Indemnified Parties with an insurance company or companies, the claims paying
ability of which is substantially equivalent to the claims paying ability of the
insurance company or companies providing such insurance coverage for directors
and officers of Parent and (ii) the Surviving Corporation shall not be required
to pay an annual premium for such insurance in excess of three times the last
annual premium paid prior to the date hereof, but in such case shall purchase as
much coverage as possible for such amount.
(b) In the event that any Claim relating hereto or to the
transactions contemplated by this Agreement is commenced, before the Effective
Time, the parties hereto agree to cooperate and use their respective reasonable
efforts to vigorously defend against and respond thereto. Any Indemnified Party
wishing to claim indemnification under paragraph (a) of Section 7.7, upon
learning of any such claim, action, suit, proceeding or investigation, shall
promptly notify Parent thereof, whereupon Parent or the Surviving Corporation
shall have the right, from and after the Effective Time, to assume and control
the defense thereof, and upon such assumption, the Surviving Corporation shall
not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof. The Surviving Corporation shall not be
liable for any settlement
-42-
effected without its prior written consent.
(c) This Section 7.7 is intended to benefit the Indemnified
Parties and shall be binding on all successors and assigns of Parent, Merger Sub
and the Surviving Corporation.
7.8. Registration and Listing of Parent Common Shares. (a)
Parent will use all reasonable efforts to register the Parent Common Shares to
be issued pursuant to this Agreement, and upon exercise of stock options granted
to employees of the Company and its Subsidiaries, under the applicable
provisions of the Securities Act and, if required, under any applicable state
securities laws.
(b) Parent will use all reasonable efforts to cause the Parent
Common Shares to be issued pursuant to this Agreement and upon exercise of stock
options granted to employees of the Company and its Subsidiaries, to be listed
for trading on the NYSE.
7.9. Affiliates of Parent and the Company. Concurrently with
the execution of this Agreement, each of the directors of the Company has
executed an agreement to the effect set forth in this Section 7.9. Prior to the
Effective Time, the Company shall deliver to Parent a letter identifying all
other Persons who, to the Company's knowledge, at the time of the execution and
delivery of the Stockholders Consent or at the Effective Time, may be deemed to
be "affiliates" of the Company for purposes of Rule 145 under the Securities Act
or who may otherwise be deemed to be Affiliates of the Company (the "Rule 145
Affiliates"). The Company shall use all reasonable efforts to cause each Person
who is identified as a Rule 145 Affiliate in such list to deliver to Parent on
or prior to the 30th day prior to the Effective Time, a written agreement, in
the form attached hereto as Exhibit A, that such Rule 145 Affiliate will not (a)
sell, pledge, transfer or otherwise dispose of any Parent Common Shares issued
to such Rule 145 Affiliate pursuant to the Merger, except pursuant to an
effective registration statement or in compliance with Rule 145 under the
Securities Act or an exemption from the registration requirements of the
Securities Act, or (b) sell, pledge, transfer or otherwise dispose of, or hedge
or otherwise reduce its risk with respect to, any Shares or any Parent Common
Shares, in each case from the 30th day prior to the Effective Time to the time
that results covering at least 30 days of combined operations of the Company and
Parent have been published by Parent in the form of a quarterly earnings report,
an effective registration statement filed with the SEC, a report to the SEC on
Form 10-K, 10-Q or 8-K, or any other public filing or announcement which
includes the combined results of operations.
-43-
7.10. Tax Matters. Each of the parties shall use all
reasonable efforts to cause each of (i) the Merger and (ii) the merger
contemplated by the ACC Agreement to constitute a tax-free "reorganization"
under Section 368(a) of the Code. None of the parties will knowingly take any
action, and none of the parties will permit any of its Subsidiaries or
Affiliates knowingly to take any action, that would cause either (i) the Merger
or (ii) the merger contemplated by the ACC Agreement to fail to qualify as
tax-free reorganizations under Section 368(a) of the Code. Each of the parties
shall use all reasonable efforts to permit Wachtell, Lipton, Xxxxx & Xxxx and
Dow, Xxxxxx & Xxxxxxxxx, PLLC to issue their opinions provided in Sections
8.2(d) and 8.3(d), respectively, and to permit Dow, Xxxxxx & Xxxxxxxxx, PLLC to
issue its opinion pursuant to Section 6.3.7 of the ACC Agreement as in effect on
the date hereof. If so requested by Wachtell, Lipton, Xxxxx & Xxxx or Dow,
Xxxxxx & Xxxxxxxxx, PLLC, the Company shall deliver to each such counsel a
certificate signed by an officer of the Company to the effect that, except to
the extent set forth and identified in such certificate, to the knowledge of the
Company, there is no plan or intention by the stockholders of the Company who
own 5% or more of the issued and outstanding Shares, and, to the knowledge of
the Company, there is no present plan or intention on the part of the remaining
stockholders of the Company to sell, exchange, or otherwise dispose of Parent
Common Shares received in the Merger (it being understood that Shares exchanged
for cash in lieu of fractional Parent Common Shares and Shares and Parent Common
Shares held by stockholders of the Company and otherwise sold, redeemed or
disposed of prior or subsequent to the Merger will be considered in making this
representation). Each party agrees to report the Merger on all tax returns and
other filings as a tax-free reorganization under Section 368(a) of the Code.
7.11. New York Real Property Transfer Tax. Any liability
arising out of New York State and/or New York City Real Property Transfer Taxes,
with respect to interests in real property owned, directly or indirectly, by the
Company immediately prior to the Merger, if applicable and due with respect to
the Merger, shall be borne by the Company and expressly shall not be a liability
of the stockholders of the Company.
7.12. Employee Matters. As soon as practicable following the
Closing (using reasonable best efforts to accomplish the transition by the later
of January 1, 1999 or 90 days after Closing), all employees of the Company and
its Subsidiaries who remain employed by the Company or its Subsidiaries (or who
become employed by Parent or its Subsidiaries) immediately after the Closing
("Company Employees"), and their dependents and beneficiaries if
-44-
applicable, shall be eligible to participate in the employee benefit and
compensation arrangements, plans, programs and practices of the Parent generally
applicable to other similarly situated employees of the Parent (the "Parent
Plans"). Company Employees shall be credited with all service with the Company
and its Subsidiaries and their predecessors prior to the Closing for purposes of
determining eligibility to participate, vesting and benefit accrual (to the
extent applicable) in the Parent Plans, but not for (i) purposes of benefit
accruals under any of the Parent's defined benefit pension plans, or the
schedule of benefits under Parent's severance pay and short-term disability
plans and programs, (ii) eligibility to receive post-retirement ancillary
benefits (consisting at this time of medical, dental, death and telephone
concession benefits) or (iii) calculating Parent service for purposes of
"bridging" prior Parent service under Parent Plans. In the event any Company
Employee's employment with Parent or its Subsidiaries is involuntarily
terminated (other than for cause) prior to the first anniversary of the Closing,
such Company Employee shall receive a severance benefit calculated in accordance
with the schedule of benefits set forth in Section 7.12 of the Company
Disclosure Statement, taking into account all years of such Company Employee's
service, including service with the Company or its Subsidiaries and their
predecessors prior to the Closing. Thereafter, Company Employees who remain
employed by Parent or its Subsidiaries shall be eligible to participate in the
applicable Parent severance pay plan, and benefits payable under the terms of
such plan shall be based on such Company Employee's actual service with Parent
or its Subsidiaries from and after Closing.
7.13. Certain Covenants of Parent. Except as otherwise
permitted in this Agreement, prior to the Effective Time Parent will not,
without the prior written consent of the Company, adopt a plan of complete or
partial liquidation or dissolution, or authorize, recommend, propose or announce
an intention to do so or enter into any contract, agreement, commitment or
arrangement to do so.
7.14. Right of First Offer. Whenever the Company or any of its
Subsidiaries intends to incur any indebtedness for borrowed money as permitted
pursuant to Section 7.1(i) hereof, the Company shall notify Parent in writing of
the expected terms, conditions, amount, uses, lenders or other alternative
financing sources and other material provisions thereof (the "Proposed
Financing") and shall provide Parent with the opportunity to provide all of the
Proposed Financing on the same terms and conditions. Parent shall notify the
Company of its determination to provide all of the Proposed Financing on such
terms and conditions within seven business days of receipt of such notice from
the Company. If Parent so elects to provide all of the
-45-
Proposed Financing, the Company shall not enter into any alternative financing
arrangements with respect thereto. If Parent does not elect to provide all of
the Proposed Financing, the Company and its Subsidiaries may enter into the
Proposed Financing with any Person other than Parent on terms and conditions no
less favorable in any material respect to the Company and its Subsidiaries than
those offered to Parent pursuant to this Section 7.14. Nothing in this Section
7.14 shall require Parent to accept any offer or to provide any Proposed
Financing to the Company.
ARTICLE VIII
CONDITIONS
8.1. Conditions to Each Party's Obligations. The respective
obligations of each party to consummate the transactions contemplated by this
Agreement are subject to the fulfillment at or prior to the Effective Time of
each of the following conditions, any or all of which may be waived in whole or
in part by the party being benefitted thereby, to the extent permitted by
applicable Law:
(a) Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been duly approved and adopted or
ratified by the requisite holders of Shares in accordance with
applicable Law and the Certificate of Incorporation and By-Laws of the
Company and the provisions of Section 7.3(b) hereof (it being agreed
that the condition set forth in this Section 8.1(a) shall not be waived
by the parties);
(b) HSR Act; FCC. Any waiting period applicable to the Merger
under the HSR Act shall have expired or early termination thereof shall
have been granted, and the FCC Consent shall have been granted, in each
case without limitation, restriction or condition that has or would
have a Material Adverse Effect on the Company (or an effect on Parent
and its Subsidiaries that, were such effect applied to the Company and
its Subsidiaries, would constitute a Material Adverse Effect on the
Company).
(c) No Injunction. There shall not be in effect any judgment,
writ, order, injunction or decree of any court or Governmental Body of
competent jurisdiction, restraining, enjoining or otherwise preventing
consummation of the transactions contemplated by this Agreement or
permitting such consummation only subject to any condition or
restriction that has or would have a Material Adverse Effect on the
-46-
Company (or an effect on Parent and its Subsidiaries that, were such
effect applied to the Company and its Subsidiaries, would constitute a
Material Adverse Effect on the Company).
(d) Registration Statement. The S-4 Registration Statement
shall have been declared effective and shall be effective at the
Effective Time, and no stop order suspending effectiveness shall have
been issued, no action, suit, proceeding or investigation by the SEC to
suspend the effectiveness thereof shall have been initiated and be
continuing, and all necessary approvals under state securities laws or
the Securities Act or Exchange Act relating to the issuance or trading
of the Parent Common Shares shall have been received.
(e) Listing of Parent Common Shares on NYSE. The Parent Common
Shares required to be issued hereunder shall have been approved for
listing on the NYSE, subject only to official notice of issuance.
(f) Information Statement. At least twenty business days shall
have elapsed from the mailing of the Information Statement/Prospectus
to the stockholders of the Company.
8.2. Conditions to Obligations of Parent and Merger Sub. The
respective obligations of Parent and Merger Sub to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or prior to the
Effective Time of each of the following additional conditions, any or all of
which may be waived in whole or part by Parent and Merger Sub, as the case may
be, to the extent permitted by applicable Law:
(a) Representations and Warranties True. The representations
and warranties of the Company contained herein or otherwise required to
be made after the date hereof in a writing expressly referred to herein
by or on behalf of the Company pursuant to this Agreement, to the
extent qualified by materiality or Material Adverse Effect, shall have
been true and, to the extent not qualified by materiality or Material
Adverse Effect, shall have been true in all material respects, in each
case when made and on and as of the Closing Date as though made on and
as of the Closing Date (except for representations and warranties made
as of a specified date, which need be true, or true in all material
respects, as the case may be, only as of the specified date).
(b) Performance. The Company shall have performed or complied
in all material respects with all agreements and
-47-
conditions contained herein required to be performed or complied with
by it prior to or at the time of the Closing.
(c) Compliance Certificate. The Company shall have delivered
to Parent a certificate, dated the date of the Closing, signed by the
President or any Vice President of the Company (but without personal
liability thereto), certifying as to the fulfillment of the conditions
specified in Sections 8.2(a) and 8.2(b).
(d) Tax Opinion. Parent shall have received an opinion of
Wachtell, Lipton, Xxxxx & Xxxx, dated the Effective Time, to the effect
that (i) the Merger will be treated for federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the Code; (ii)
each of Parent, Merger Sub and the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code; (iii)
no gain or loss will be recognized by the Company, Parent or Merger Sub
as a result of the Merger; and (iv) no gain or loss will be recognized
by a stockholder of the Company as a result of the Merger with respect
to the Shares converted solely into Parent Common Shares. In rendering
such opinion, Wachtell, Lipton, Xxxxx & Xxxx may receive and rely upon
representations contained in certificates of the Company, Parent,
Merger Sub, the Cable Stockholders and others, in each case in form and
substance reasonably acceptable to Wachtell, Lipton, Xxxxx & Xxxx.
(e) Pooling Covenant. The Company and its Subsidiaries shall
have complied with the covenant contained in Secion 7.5(b) hereof.
(f) Other Authorizations. All Authorizations (other than those
specified in Section 8.1(b) hereof) required in connection with the
execution and delivery of this Agreement and the performance of the
obligations hereunder shall have been made or obtained, without any
limitation, restriction or condition that has or would have a Material
Adverse Effect on the Company (or an effect on Parent and its
Subsidiaries that, were such effect applied to the Company and its
Subsidiaries, would constitute a Material Adverse Effect on the
Company), except for such Authorizations the failure of which to have
been made or obtained does not and would not, individually or in the
aggregate, have a Material Adverse Effect on the Company (or an effect
on Parent and its Subsidiaries that, were such effect applied to the
Company and its Subsidiaries, would constitute a Material Adverse
Effect on the Company).
(g) Employment Agreements. Each of the employment
-48-
agreements between the Company and each employee of the Company
identified in Exhibit B hereto (which employment agreements are being
executed concurrently with the execution of this Agreement) shall be in
full force and effect, and each such employee shall be employed
thereunder, unless the failure of such employee to be employed
thereunder results from the death or disability of such employee.
(h) Consents Under Facilities Agreements. All required
authorizations, consents or approvals of any third parties (other than
a Governmental Body) with respect to any contracts, leases, agreements
or understandings between the Company and/or any of its Subsidiaries,
on the one hand, and any other Person, on the other, relating to the
use of or access to the facilities of such Person for the purpose of
providing telecommunications services, the failure to obtain which has
or would have, individually or in the aggregate, a Material Adverse
Effect on the Company, shall have been obtained.
(i) Voting Agreement. There shall not have been a material
breach of the Voting Agreement by any of the Cable Stockholders.
(j) Other Transactions. The transactions contemplated by the
ACC Agreement shall have been consummated in accordance with the terms
of such agreement or such agreement shall have been terminated and,
prior thereto, the transactions contemplated by the US Wats Agreement
shall have been consummated in accordance with the terms of such
agreement or such agreement shall have been terminated.
8.3. Conditions to Obligations of the Company. The obligations
of the Company to consummate the transactions contemplated by this Agreement are
subject to the fulfillment at or prior to the Effective Time of each of the
following conditions, any or all of which may be waived in whole or in part by
the Company to the extent permitted by applicable Law:
(a) Representations and Warranties True. The representations
and warranties of Parent and Merger Sub contained herein or otherwise
required to be made after the date hereof in a writing expressly
referred to herein by or on behalf of Parent and Merger Sub pursuant to
this Agreement, to the extent qualified by materiality or Material
Adverse Effect, shall have been true and, to the extent not qualified
by materiality or Material Adverse Effect, shall have been true in all
material respects, in each case when made and on and as of the Closing
Date as
-49-
though made on and as of the Closing Date (except for representations
and warranties made as of a specified date, which need be true, or true
in all material respects, as the case may be, only as of the specified
date).
(b) Performance. Parent shall have performed or complied in
all material respects with all agreements and conditions contained
herein required to be performed or complied with by it prior to or at
the time of the Closing.
(c) Compliance Certificate. Parent shall have delivered to the
Company a certificate, dated the date of the Closing, signed by the
President or any Vice President of Parent (but without personal
liability thereto), certifying as to the fulfillment of the conditions
specified in Sections 8.3(a) and 8.2(b).
(d) Tax Opinion. The Company shall have received an opinion of
Dow, Xxxxxx & Xxxxxxxxx, PLLC, dated the Effective Time, to the effect
that (i) the Merger will be treated for federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the Code; (ii)
each of Parent, Merger Sub and the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code; (iii)
no gain or loss will be recognized by the Company as a result of the
Merger; and (iv) no gain or loss will be recognized by a stockholder of
the Company as a result of the Merger with respect to the Shares
converted solely into Parent Common Shares. In rendering such opinion,
Dow, Xxxxxx & Xxxxxxxxx, PLLC may receive and rely upon representations
contained in certificates of Parent and Merger Sub, the Company, the
Cable Stockholders and others, in each case in form and substance
reasonably acceptable to Dow, Xxxxxx & Xxxxxxxxx, PLLC.
ARTICLE IX
TERMINATION
9.1. Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval by holders of Shares, either by the mutual
written consent of Parent and the Company, or by mutual action of their
respective Boards of Directors.
9.2. Termination by Either Parent or the Company. This
Agreement may be terminated (upon notice from the terminating party to the other
parties) and the Merger may be aban-
-50-
doned by action of the Board of Directors of either Parent or the Company if (a)
the Merger shall not have been consummated by December 31, 1998, provided that
the right to terminate this Agreement under this clause (a) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date, and provided, further, that such date shall be
extended to March 31, 1999 in the event that the failure of the Merger to occur
on or before December 31, 1998 is the result of (i) a delay attributable to any
transaction permitted pursuant to Section 7.5(c) or (ii) the failure of any of
the conditions set forth in Section 8.1(b), 8.1(c), 8.2(f) or 8.2(j) to be
satisfied or waived prior to December 31, 1998, or (b) any court of competent
jurisdiction in the United States or Governmental Body in the United States
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and nonappealable.
In addition, this Agreement may be terminated by Parent (upon notice from Parent
to the Company) and the Merger may be abandoned by action of the Board of
Directors of Parent if any of the Cable Stockholders shall have breached any of
its representations, covenants or obligations under the Voting Agreement in any
material respect and such breach shall not be curable.
9.3. Termination by the Company. This Agreement may be
terminated (upon notice to Parent) by the Company and the Merger may be
abandoned by action of the Board of Directors of the Company if Parent or Merger
Sub breaches or fails in any material respect to perform or comply with its
covenants and agreements contained herein or breaches its representations and
warranties, in each case that is not curable, such that the conditions set forth
in Sections 8.3(a) and (b) cannot be satisfied.
9.4. Termination by Parent and Merger Sub. This Agreement may
be terminated (upon notice to the Company) by Parent and Merger Sub, and the
Merger may be abandoned by action of the Board of Directors of Parent if the
Company breaches or fails in any material respect to perform or comply with its
covenants and agreements contained herein or breaches its representations and
warranties, in each case that is not curable, such that the conditions set forth
in Section 8.2(a) and (b) cannot be satisfied.
9.5. Effect of Termination and Abandonment. In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article IX, no party hereto (or any of its directors or officers) shall have any
liability or further
-51-
obligation to any other party to this Agreement, except as provided in Section
7.6 and except that nothing herein will relieve any party from liability for any
breach of this Agreement.
ARTICLE X
MISCELLANEOUS AND GENERAL
10.1. Expenses. Except as set forth in Section 7.11, each
party shall bear its own expenses, including the fees and expenses of any
attorneys, accountants, investment bankers, brokers, finders or other
intermediaries or other Persons engaged by it, incurred in connection with this
Agreement and the transactions contemplated hereby; provided, however, that the
costs and expenses of filing the Information Statement/Prospectus with the SEC
and any other applicable Governmental Body or securities regulatory authority,
and of printing the Information Statement/Prospectus, shall be paid by Parent.
10.2. Notices, Etc. All notices, requests, demands or other
communications required by or otherwise with respect to this Agreement shall be
in writing and shall be deemed to have been duly given to any party when
delivered personally (by courier service or otherwise), when delivered by
telecopy and confirmed by return telecopy, or upon receipt after being mailed by
first-class mail, postage prepaid and return receipt requested in each case to
the applicable addresses set forth below:
If to the Company:
Teleport Communications Group Inc.
000 Xxxxx Xxxx
Xxxxxx, Xxx Xxxxxx 00000
Attn: Chairman, President and CEO
Facsimile: (000) 000-0000
with a copy to:
Dow, Xxxxxx & Xxxxxxxxx, PLLC
0000 Xxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X.
Attn: Xxxxxxx X. Xxxx, Esq.
Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
and a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
-00-
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Xxxxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Parent or Merger Sub:
AT&T Corp.
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxx Xxxxx, Xxx Xxxxxx 00000
Attn: Vice President-Law
and Corporate Secretary
Facsimile: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx X. Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address as such party shall have designated by notice so given
to each other party.
10.3. Amendments, Waivers, Etc. This Agreement may be amended,
changed, supplemented, waived or otherwise modified only by an instrument in
writing signed by the party (or, in the case of Section 7.7, the Indemnified
Party) against whom enforcement is sought; provided that, after the adoption of
this Agreement by the stockholders of the Company, no such amendment, change,
supplement or waiver shall be made without the further requisite approval of
such stockholders if such amendment, change, supplement or waiver by law
requires the further approval by such stockholders.
10.4. No Assignment. This Agreement shall be binding upon and
shall inure to the benefit of and be enforceable by the parties and their
respective successors and assigns; provided that, except as otherwise expressly
set forth in this Agreement, neither the rights nor the obligations of any party
may be assigned or delegated without the prior written consent of the other
party.
10.5. Entire Agreement. Except as otherwise provided herein,
this Agreement (together with the Confidentiality Agreement between Parent and
the Company and the other agreements expressly contemplated hereby) embodies the
entire agreement and understanding between the parties relating to the subject
matter
-53-
hereof and supersedes all prior agreements and understandings relating to such
subject matter. There are no representations, warranties or covenants by the
parties hereto relating to such subject matter other than those expressly set
forth in this Agreement (including the Company Disclosure Statement and the
Parent Disclosure Statement) and any writings expressly required hereby.
10.6. Specific Performance. The parties acknowledge that money
damages are not an adequate remedy for violations of this Agreement and that any
party may, in its sole discretion, apply to a court of competent jurisdiction
for specific performance or injunctive or such other relief as such court may
deem just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable Law, each party waives any
objection to the imposition of such relief.
10.7. Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise or beginning
of the exercise of any thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by such party.
10.8. No Waiver. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
10.9. No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of and shall not be enforceable by any Person or
entity who or which is not a party hereto, except for the indemnification
provisions contained in Section 7.7, which provisions may be enforced by any
Indemnified Party referred to therein and except that the provisions of Section
7.3(b) may be enforced by holders of Shares. Notwithstanding anything to the
contrary contained in this Agreement, the provisions of Section 7.7 of this
Agreement may not be amended or altered in any manner with respect to any
Indemnified Party without the written consent of such Indemnified Party. No
assignment of this Agreement shall relieve Parent from its obligations to any
Indemnified Party contained in Section 7.7 of this Agreement.
10.10. Jurisdiction. Each party hereby irrevocably submits to
the exclusive jurisdiction of the United States Dis-
-54-
trict Court for the District of Delaware or the Chancery Court of the State of
Delaware in any action, suit or proceeding arising in connection with this
Agreement, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
any other objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this Section 10.10 and
shall not be deemed to be a general submission to the jurisdiction of said
courts or in the State of Delaware other than for such purpose. Parent, Merger
Sub and the Company hereby waive any right to a trial by jury in connection with
any such action, suit or proceeding.
10.11. Public Announcements. Parent and the Company will agree
upon the timing and content of the initial press release to be issued describing
the transactions contemplated by this Agreement, and will not make any public
announcement thereof prior to reaching such agreement unless required to do so
by applicable Law or regulation. To the extent reasonably requested by either
party, each party will thereafter consult with and provide reasonable
cooperation to the other in connection with the issuance of further press
releases or other public documents describing the transactions contemplated by
this Agreement.
10.12. Governing Law. This Agreement and all disputes
hereunder shall be governed by and construed and enforced in accordance with the
internal laws of the State of Delaware, without regard to principles of conflict
of laws.
10.13. Name, Captions, Etc. The name assigned this Agreement
and the section captions used herein are for convenience of reference only and
shall not affect the interpretation or construction hereof. Unless otherwise
specified, (a) the terms "hereof", "herein" and similar terms refer to this
Agreement as a whole and (b) references herein to Articles or Sections refer to
articles or sections of this Agreement. Wherever appearing herein, the word
"including" shall be deemed to be followed by the words "without limitation."
10.14. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one instrument. Each counterpart may consist
of a number of copies each signed by less than all, but together signed by all,
the parties hereto.
10.15. Survival of Representations, Warranties, Covenants and
Agreements. The respective representations and warranties of the parties
contained herein or in any certificates or other documents delivered prior to or
at the Closing shall
-55-
survive the execution and delivery of this Agreement, notwithstanding any
investigation made or information obtained by the other parties, but shall
terminate at the Effective Time. The respective covenants and agreements of the
parties contained herein or in any certificates or other documents delivered
prior to or at the Closing shall survive the execution and delivery of this
Agreement and shall only terminate in accordance with their respective terms.
10.16. Severability. In case any provision in this Agreement
shall be held invalid, illegal or unenforceable in a jurisdiction, such
provision shall be modified or deleted, as to the jurisdiction involved, only to
the extent necessary to render the same valid, legal and enforceable, and the
validity, legality and enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby nor shall the validity, legality
or enforceability of such provision be affected thereby in any other
jurisdiction.
10.17. Disclosure Statements. The parties acknowledge that the
Company Disclosure Statement and the Parent Disclosure Statement to this
Agreement (i) relate to certain matters concerning the disclosures required and
transactions contemplated by this Agreement, (ii) are qualified in their
entirety by reference to specific provisions of this Agreement, (iii) are not
intended to constitute and shall not be construed as indicating that such matter
is required to be disclosed, nor shall such disclosure be construed as an
admission that such information is material with respect to the Company or
Parent, as the case may be, except to the extent required by this Agreement, and
(iv) disclosure of the information contained in one section or part of the
Company Disclosure Statement or the Parent Disclosure Statement shall be deemed
as proper disclosure for all sections or parts of the Company Disclosure
Statement or the Parent Disclosure Statement, as the case may be, only if
appropriately cross-referenced or if the relevance thereof is clearly apparent
from the context in which it appears.
-56-
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties set forth below.
TELEPORT COMMUNICATIONS GROUP INC.
By: /s/ Xxxxxx Xxxxxxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxxxxxx
Title: Chairman, President
and CEO
AT&T CORP.
By: /s/ C. Xxxxxxx Xxxxxxxxx
-----------------------------------
Name: C. Xxxxxxx Xxxxxxxxx
Title: Chairman and CEO
TA MERGER CORP.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
