General Statement of Beneficial Ownership — Schedule 13D
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 13D General Statement of Beneficial Ownership 12 42K
2: EX-2 Agreement & Plan of Merger (Exhibit 1), Dtd 1/4/98 93 250K
3: EX-99 Stock Option Agreement (Exhibit 2), Dtd 1/4/98 14 41K
EX-2 — Agreement & Plan of Merger (Exhibit 1), Dtd 1/4/98
Exhibit Table of Contents
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
Among
SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION,
SBC COMMUNICATIONS INC.
and
SBC (CT), INC.
Dated as of January 4, 1998
TABLE OF CONTENTS
Page
RECITALS ...................................................................1
ARTICLE I
The Merger; Closing; Effective Time................................2
1.1. The Merger...........................................2
1.2. Closing..............................................2
1.3. Effective Time.......................................2
ARTICLE II
Certificate of Incorporation and By-Laws
of the Surviving Corporation.......................................3
2.1. The Certificate of Incorporation.....................3
2.2. The By-Laws..........................................3
ARTICLE III
Officers, Directors and Management.................................3
3.1. Directors of Surviving Corporation...................3
3.2. Officers of Surviving Corporation....................3
3.3. Election to SBC's Board of Directors.................4
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates...........................................4
4.1. Effect on Capital Stock..............................4
(a) Merger Consideration......................4
(b) Cancellation of Shares....................5
(c) Restricted Stock..........................5
(d) Merger Sub................................5
4.2. Exchange of Certificates for Shares..................6
(a) Exchange Procedures.......................6
(b) Distributions with Respect to
Unexchanged Shares; Voting................7
(c) Transfers.................................8
(d) Fractional Shares.........................8
(e) Termination of Exchange Period;
Unclaimed Stock...........................8
(f) Lost, Stolen or Destroyed Certificates
.........................................9
(g) Affiliates................................9
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4.3. Dissenters' Rights...................................9
4.4. Adjustments to Prevent Dilution.....................10
4.5. Escrow Account for Payment of Dissenters'
Demands and Transfer Taxes..........................10
ARTICLE V
Representations and Warranties....................................11
5.1. Representations and Warranties of the Company,
SBC and Merger Sub..................................11
(a) Organization, Good Standing and
Qualification............................11
(b) Governmental Filings; No Violations......12
(c) Reports; Financial Statements............14
(d) Absence of Certain Changes...............15
(e) Litigation and Liabilities...............15
(f) Accounting, Tax and Regulatory Matters
........................................16
(g) Taxes....................................16
(h) Compliance with Laws.....................17
5.2. Representations and Warranties of the Company
...................................................18
(a) Capital Structure........................18
(b) Corporate Authority; Approval and
Fairness.................................19
(c) Employee Benefits........................20
(d) Takeover Statutes........................22
(e) Environmental Matters....................22
(f) Labor Matters............................23
(g) Rights Agreement.........................24
(h) Brokers and Finders......................24
(i) Intellectual Property....................24
(j) Severance Payments.......................25
5.3. Representations and Warranties of SBC and
Merger Sub..........................................25
(a) Capital Structure........................25
(b) Corporate Authority; Approval and
Fairness.................................27
(c) Brokers and Finders......................27
ARTICLE VI
Covenants.........................................................28
6.1. Interim Operations..................................28
6.2. Acquisition Proposals...............................31
6.3. Information Supplied................................33
6.4. Shareholders Meeting................................33
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6.5. Filings; Other Actions; Notification................34
6.6. Access; Consultation................................36
6.7. Affiliates..........................................37
6.8. Stock Exchange Listing and De-listing...............38
6.9. Publicity...........................................38
6.10. Benefits............................................38
(a) Stock Options..................................38
(b) Employee Benefits..............................39
6.11. Expenses............................................40
6.12. Indemnification; Directors' and Officers'
Insurance...........................................40
6.13. Takeover Statute....................................42
6.14. Dividends...........................................42
6.15. Confidentiality.....................................42
6.16. Control of the Company's Operations.................42
6.17. Tax Representation Letters..........................43
6.18. Transfer Taxes......................................43
ARTICLE VII
Conditions........................................................43
7.1. Conditions to Each Party's Obligation to Effect
the Merger..........................................43
(a) Shareholder Approval..........................43
(b) NYSE Listing..................................43
(c) Governmental Consents.........................43
(d) Laws and Orders...............................44
(e) S-4...........................................45
7.2. Conditions to Obligations of SBC and Merger Sub
45
(a) Representations and Warranties................45
(b) Performance of Obligations of the
Company...................................... 45
(c) Tax Opinion...................................45
(d) Dissenting Shares.............................46
(e) Accountants' Letter...........................46
7.3. Conditions to Obligation of the Company.............47
(a) Representations and Warranties................47
(b) Performance of Obligations of SBC and
Merger Sub....................................47
(c) Tax Opinion...................................47
ARTICLE VIII
Termination.......................................................48
8.1. Termination by Mutual Consent.......................48
8.2. Termination by Either SBC or the Company............48
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8.3. Termination by the Company..........................48
8.4. Termination by SBC..................................49
8.5. Effect of Termination and Abandonment...............50
ARTICLE IX
Miscellaneous and General.........................................52
9.1. Survival............................................52
9.2. Modification or Amendment...........................52
9.3. Waiver of Conditions................................52
9.4. Counterparts........................................52
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL
...................................................53
9.6. Notices.............................................54
9.7. Entire Agreement....................................55
9.8. No Third Party Beneficiaries........................55
9.9. Obligations of SBC and of the Company...............55
9.10. Severability........................................55
9.11. Interpretation......................................56
9.12. Assignment..........................................56
EXHIBITS
A Stock Option Agreement A-1
B Amendments to Company By-laws B-1
C Form of Company Affiliate's Letter C-1
D Form of SBC Affiliate's Letter D-1
SCHEDULES
1 Subsidiaries of the Company
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INDEX OF DEFINED TERMS
Term Section
Acquiring Party.................................................... 8.5(b)
Acquisition Proposal............................................... 6.2
Affiliate.......................................................... 5.1(g)
Affiliates Letter.................................................. 6.7
Agreement.......................................................... preamble
Audit Date......................................................... 5.1(e)
Bankruptcy and Equity Exception.................................... 5.2(b)
By-Laws............................................................ 2.2
CBCA............................................................... 1.1
Certificate........................................................ 4.1(a)
Certificate of Merger.............................................. 1.3
Charter............................................................ 2.1
Closing............................................................ 1.2
Closing Date....................................................... 1.2
Code............................................................... recitals
Company............................................................ preamble
Company Affiliate's Letter......................................... 6.7(a)
Company Disclosure Letter.......................................... 5.1
Company Option..................................................... 6.10(a)(i)
Company Required Consents.......................................... 5.1(b)(i)
Company Requisite Vote............................................. 5.2(b)
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Term Section
Company Shares..................................................... 4.1(a)
Compensation and Benefit Plans..................................... 5.2(c)(i)
Confidentiality Agreement.......................................... 6.15
Contracts.......................................................... 5.1(b)(ii)
Costs.............................................................. 6.12
CPUC............................................................... 8.2(f)
Current Premium.................................................... 6.12(c)
D&O Insurance...................................................... 6.12(c)
Director Designee.................................................. 3.3
Disclosure Letter.................................................. 5.1
Dissenting Shares.................................................. 4.1(a)
Dissenting Shareholders............................................ 4.1(a)
Effective Time..................................................... 1.3
Environmental Law.................................................. 5.2(e)
ERISA.............................................................. 5.2(c)(i)
ERISA Affiliate.................................................... 5.2(c)(iii)
ERISA Affiliate Plan............................................... 5.2(c)(iii)
Escrow Account..................................................... 4.5
Escrow Agent....................................................... 4.5
Escrow Agreement................................................... 4.5
Exchange Act....................................................... 5.1(b)(ii)
Exchange Agent..................................................... 4.2(a)
Exchange Ratio..................................................... 4.1(a)
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Term Section
Excluded Company Shares.......................................... 4.1(a)
Extended Termination Date........................................ 8.2
FCC.............................................................. 5.1(b)
Final Order...................................................... 7.1(c)
GAAP............................................................. 5.1(c)
Governmental Entity.............................................. 5.1(b)(i)
Hazardous Substance.............................................. 5.2(e)
HSR Act.......................................................... 5.1(b)
Indemnified Parties............................................. 6.12(a)
Initial 15 Day Period............................................ 8.4
IRS.............................................................. 5.2(c)(ii)
Laws............................................................. 5.1(h)
Litigation....................................................... 5.1(e)
Material Adverse Effect.......................................... 5.1(a)
Merger........................................................... recitals
Merger Consideration............................................. 4.1(a)
Merger Sub....................................................... preamble
NYSE............................................................. 6.8
Order............................................................ 7.1(d)
Owned Intellectual Property Rights............................... 5.2(i)(ii)(B)
Pension Plan..................................................... 5.2(c)(ii)
Person........................................................... 4.2(a)
Permits.......................................................... 5.1(h)
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Term Section
Preference Shares.................................................. 5.2(a)
Preference Shares.................................................. 5.2(a)
Preferred Shares................................................... 5.2(a)
Prospectus/Proxy Statement......................................... 6.3
PUC................................................................ 5.1(b)
Reports............................................................ 5.1(c)
Registered Silver Shares........................................... 4.2(a)
Representatives.................................................... 6.6(a)
Rights Agreement................................................... 5.2(a)
S-4 Registration Statement......................................... 6.3
SBC................................................................ preamble
SBC Affiliate's Letter............................................. 6.7(a)
SBC Common Stock................................................... 4.1(a)
SBC Disclosure Letter.............................................. 5.1
SBC Pooling Action................................................. 7.2(c)
SBC Preferred Shares............................................... 5.3(a)
SBC Required Consents.............................................. 5.1(b)
SBC Requisite Vote................................................. 5.1(c)
SBC Rights......................................................... 4.1(a)
SBC Rights Agreement............................................... 5.3(a)
SBC Stock Plans.................................................... 5.3(a)
SBC Voting Debt.................................................... 5.1(b)(ii)
SEC................................................................ 5.1(c)
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Term Section
Securities Act.................................................... 5.1(b)(i)
Shareholders Meeting.............................................. 6.4
Significant Subsidiaries.......................................... 5.1(b)(ii)
Stock Option Agreement............................................ recitals
Stock Plans....................................................... 5.2(a)
Subsidiary........................................................ 5.1(a)
Substitute Option................................................. 6.10(a)(i)
Superior Proposal................................................. 6.2
Surviving Corporation............................................. 1.1
Takeover Statute.................................................. 5.2(d)
Tax............................................................... 5.1(g)
Taxes............................................................. 5.1(g)
Taxable........................................................... 5.1(g)
Tax Return........................................................ 5.1(g)
Termination Date.................................................. 8.2
Termination Fee................................................... 8.5(b)
Third-Party Intellectual Property Right........................... 5.2(i)(ii)(A)
Transfer Taxes.................................................... 6.18
Utilities Laws.................................................... 5.1(d)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated as of
January 4, 1998, among Southern New England Telecommunications Corporation, a
Connecticut corporation (the "Company"), SBC Communications Inc., a Delaware
corporation ("SBC"), and SBC (CT), Inc., a Connecticut corporation and a
wholly-owned subsidiary of SBC ("Merger Sub").
RECITALS
WHEREAS, the respective boards of directors of each of SBC, Merger Sub
and the Company have approved the merger of Merger Sub with and into the Company
(the "Merger") and adopted this Agreement;
WHEREAS, it is intended that, for federal income tax purposes, the
Merger shall qualify as a "tax-free" reorganization under the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder (the "Code");
WHEREAS, for financial accounting purposes, it is intended that the
Merger shall be accounted for as a "pooling-of-interests"; and
WHEREAS, as an inducement to the willingness of SBC to enter into this
Agreement, the board of directors of the Company has approved the grant to SBC
of an option to purchase shares of common stock of the Company pursuant to a
stock option agreement, substantially in the form of Exhibit A (the "Stock
Option Agreement"), and each of the Company and SBC have duly authorized,
executed and delivered the Stock Option Agreement; and
WHEREAS, the Company, SBC and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, at the Effective Time (as defined in Section 1.3) Merger Sub
shall be merged with and into the Company and the separate corporate existence
of Merger Sub shall thereupon cease. The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Connecticut, and the Merger shall have the effects specified in the Connecticut
Business Corporation Act (the "CBCA").
1.2. Closing. The closing of the Merger (the "Closing") shall take
place (i) at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New
York 10004 at 9:00 A.M. local time on the second business day after the date on
which the last to be fulfilled or waived of the conditions set forth in Article
VII (other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the fulfillment or waiver of those conditions) shall be
satisfied or waived in accordance with this Agreement or (ii) at such other
place and time and/or on such other date as the Company and SBC may agree in
writing (the "Closing Date").
1.3. Effective Time. As soon as practicable following the Closing, the
Company and SBC will cause a certificate of merger (the "Certificate of Merger")
to be signed, acknowledged and delivered for filing with the Secretary of the
State of Connecticut as provided in Section 33-819 of the CBCA. The Merger shall
become effective at the time when the Certificate of Merger shall have become
effective in accordance with the CBCA (the "Effective Time").
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ARTICLE II
Certificate of Incorporation and By-Laws
of the Surviving Corporation
2.1. The Certificate of Incorporation. The certificate of incorporation
of the Company as in effect immediately prior to the Effective Time shall be the
certificate of incorporation of the Surviving Corporation (the "Charter"), until
duly amended as provided therein or by applicable law, except that (i) Section 3
of the Charter shall be amended to read in its entirety as follows: "The
authorized capital stock of the Corporation shall consist of one thousand shares
of common stock having a par value of one dollar per share.", and (ii) Section 4
of the Charter shall be amended to read in its entirety as follows: "The number
of directors of the Corporation shall be fixed from time to time by the Board of
Directors or the Shareholders in accordance with the By-laws of the Corporation.
A director shall hold office until the next annual meeting of shareholders of
the Corporation following his election and until his successor shall be elected
and shall qualify."
2.2. The By-Laws. The by-laws of the Company in effect at the Effective
Time shall be the by-laws of the Surviving Corporation (the "By-Laws"), until
duly amended as provided therein or by applicable law, except that the By-Laws
shall be amended as set forth in Exhibit B.
ARTICLE III
Officers, Directors and Management
3.1. Directors of Surviving Corporation. 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 shall have been duly elected or
appointed and shall have qualified or until their earlier death, resignation or
removal in accordance with the Charter and the By-Laws.
3.2. Officers of Surviving Corporation. 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 shall have been duly elected or
appointed and shall have qualified or until
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their earlier death, resignation or removal in accordance with the Charter and
the By-Laws.
3.3. Election to SBC's Board of Directors. At the Effective Time of the
Merger, SBC shall increase the size of its Board of Directors by one. The
nominee for such additional directorship shall be selected by the SBC Board of
Directors in consultation with the Chief Executive Officer and Board of
Directors of the Company from among the members of the Company's Board of
Directors (the "Director Designee"), and the SBC Board of Directors shall
appoint the Director Designee to the SBC Board of Directors as of the Effective
Time, with such Director Designee to serve in the director group determined in
accordance with Article II of the by-laws of SBC as in effect on the date hereof
until his or her successor shall have been duly elected or appointed and shall
have qualified or until his or her earlier death, resignation or removal in
accordance with the certificate of incorporation and the by-laws of SBC.
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1. Effect on Capital Stock. At the Effective Time, as a result of the
Merger and without any action on the part of the holder of any capital stock of
the Company:
(a) Merger Consideration. Each share of the common stock, having a par
value of one dollar per share (each a "Company Share" and together the "Company
Shares"), of the Company issued and outstanding immediately prior to the
Effective Time (other than (i) Company Shares that are owned by SBC or Merger
Sub, (ii) Company Shares that are owned by the Company, in each case (i) and
(ii) not held on behalf of third parties, or (iii) Company Shares ("Dissenting
Shares") that are owned by shareholders ("Dissenting Shareholders") who satisfy
all of the requirements to demand payment for such shares in accordance with
Sections 33-855 through 33-872 of the CBCA (collectively, "Excluded Company
Shares")) shall be converted into 0.8784 of a share (the "Exchange Ratio") of
Common Stock, par value $1 per share, of SBC ("SBC Common Stock"), subject to
adjustment as provided in Section 4.4 (the "Merger Consideration"). All
references in this
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agreement to SBC Common Stock to be issued pursuant to the Merger shall be
deemed to include the corresponding rights ("SBC Rights") to purchase shares of
SBC Common Stock pursuant to the SBC Rights Agreement (as defined in Section
5.3(a)), except where the context otherwise requires. At the Effective Time, all
Company Shares shall no longer be outstanding, shall be cancelled and retired
and shall cease to exist, and each certificate (a "Certificate") formerly
representing any Company Shares (other than Excluded Company Shares) shall
thereafter represent only the right to the Merger Consideration and the right,
if any, to receive pursuant to Section 4.2(d) cash in lieu of fractional shares
into which such Company Shares have been converted pursuant to this Section
4.1(a) and any distribution or dividend pursuant to Section 4.2(b), in each case
without interest.
(b) Cancellation of Shares. Each Company Share issued and outstanding
immediately prior to the Effective Time and owned directly by SBC, Merger Sub or
the Company (other than shares held for third parties) shall, by virtue of the
Merger and without any action on the part of the holder thereof, no longer be
outstanding, shall be cancelled and retired without payment of any consideration
therefor and shall cease to exist. Dissenters' Shares shall be cancelled and
retired at the Effective Time and paid for in accordance with Section 33-865 of
the CBCA.
(c) Restricted Stock. Each Company Share issued and outstanding
immediately prior to the Effective Time that, after giving effect to any
provision in the plans referred to below providing for the termination or lapse
of any restriction resulting from the transactions contemplated by this
Agreement, is restricted under the Company's 1995 Stock Incentive Plan,
Non-Employee Director Stock Plan or 1996 Non-Employee Director Stock Plan shall
be converted into a fraction of a share of SBC Common Stock equal to the
Exchange Ratio, having the same restrictions, terms and conditions as were
applicable to such Company Share of restricted stock.
(d) Merger Sub. At the Effective Time, each share of common stock, par
value $1.00 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into one share of common stock of the
Surviving Corporation, and the Surviving Corporation shall be a wholly-owned
subsidiary of SBC.
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4.2. Exchange of Certificates for Shares.
(a) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause an exchange agent selected by SBC with the
Company's prior approval, which shall not be unreasonably withheld (the
"Exchange Agent"), to mail to each holder of record of Company Shares (other
than holders of record of Excluded Company Shares) (i) a letter of transmittal
specifying that delivery shall be effected, and that risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates (or
affidavits of loss in lieu thereof) to the Exchange Agent, such letter of
transmittal to be in such form and have such other provisions as SBC and the
Company may reasonably agree, and (ii) instructions for surrendering the
Certificates in exchange for (A) uncertificated shares of SBC Common Stock
registered on the stock transfer books of SBC in the name of such holder
("Registered SBC Shares") or, at the election of such holder, certificates
representing shares of SBC Common Stock and (B) any unpaid dividends and other
distributions and cash in lieu of fractional shares. Subject to Section 4.2(g),
upon surrender of a Certificate for cancellation to the Exchange Agent together
with such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor (x) Registered SBC Shares or,
at the election of such holder, a certificate, representing that number of whole
shares of SBC Common Stock that such holder is entitled to receive pursuant to
this Article IV, (y) a check in the amount (after giving effect to any required
tax withholdings) of (A) any cash in lieu of fractional shares plus (B) any
unpaid non-stock dividends and any other dividends or other distributions that
such holder has the right to receive pursuant to the provisions of this Article
IV, and the Certificate so surrendered shall forthwith be cancelled. No interest
will be paid or accrued on any amount payable upon due surrender of the Certifi
cates. In the event of a transfer of ownership of Company Shares that is not
registered in the transfer records of the Company, the Registered SBC Shares or
certificate, as the case may be, representing the proper number of shares of SBC
Common Stock, together with a check for any cash to be paid upon due surrender
of the Certificate and any other divi dends or distributions in respect thereof,
may be issued and/or paid to such a transferee if the Certificate formerly
representing such Company Shares is presented to the Exchange Agent, accompanied
by all documents required to
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evidence and effect such transfer and to evidence that anya pplicable stock
transfer taxes have been paid. If any Registered SBC Shares or any certificate
for shares of SBC Common Stock is to be 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 Person (as defined below) requesting
such exchange shall pay any transfer or other taxes required by reason of the
issuance of Registered SBC Shares or certificates for shares of SBC Common Stock
in a name other than that of the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of SBC or the Exchange Agent
that such tax has been paid or is not applicable.
For the purposes of this Agreement, the term "Person" shall mean any
individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity (as defined in Section 5.1(b)) or
other entity of any kind or nature.
(b) Distributions with Respect to Unexchanged Shares; Voting. (i)
Whenever a dividend or other distribution is declared by SBC in respect of SBC
Common Stock, the record date for which is at or after the Effective Time, that
declaration shall include dividends or other distributions in respect of all
shares issuable pursu ant to this Agreement. No dividends or other distributions
in respect of the SBC Common Stock shall be paid to any holder of any
unsurrendered Certificate until such Certifi cate is surrendered for exchange in
accordance with this Article IV. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be issued and/or paid
to the holder of the Registered SBC Shares or certificates, as the case may be,
representing whole shares of SBC Common Stock issued in exchange for such
Certificate, without interest, (A) at the time of such sur render, the dividends
or other distributions with a record date at or after the Effective Time and a
payment date on or prior to the date of issuance of such whole shares of SBC
Common Stock and not previously paid and (B) at the appropriate payment date,
the dividends or other distribu tions payable with respect to such whole shares
of SBC Common Stock with a record date at or after the Effective Time but with a
payment date subsequent to surrender. For purposes of dividends or other
distributions in respect of shares of SBC Common Stock, all shares of SBC Common
Stock
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to be issued pursuant to the Merger shall be deemed issued and outstanding as of
the Effective Time.
(ii) Holders of unsurrendered Certificates shall be
entitled to vote after the Effective Time at any meeting of SBC stockholders
with a record date at or after the Effective Time the number of whole shares of
SBC Common Stock represented by such Certificates, regardless of whether such
holders have exchanged their Certificates.
(c) Transfers. After the Effective Time, there shall be no transfers on
the stock transfer books of the Company of the Company Shares that were
outstanding immediately prior to the Effective Time.
(d) Fractional Shares. Notwithstanding any other provision of this
Agreement, no fractional shares of SBC Common Stock will be issued and any
holder of record of Company Shares entitled to receive a fractional share of SBC
Common Stock but for this Section 4.2(d) shall be entitled to receive an amount
in cash (without interest) determined by multiplying such fraction (rounded to
the nearest one-hundredth of a share) by the closing price of a share of SBC
Common Stock, as reported in The Wall Street Journal, New York City edition, for
the last trading day prior to the Effective Time.
(e) Termination of Exchange Period; Unclaimed Stock. Any shares of SBC
Common Stock and any portion of the cash, dividends or other distributions
payable with respect to the SBC Common Stock pursuant to Section 4.1, Section
4.2(b) and Section 4.2(d) (including the proceeds of any investments thereof)
that remains unclaimed by the shareholders of the Company 180 days after the
Effective Time shall be paid to SBC. Any shareholders of the Company who have
not theretofore complied with this Article IV shall look only to SBC for payment
of their shares of SBC Common Stock and any cash, dividends and other
distributions in respect thereof issuable and/or payable pursuant to Section
4.1, Section 4.2(b) and Section 4.2(d) upon due surrender of their Certificates
(or affidavits of loss in lieu thereof), in each case, without any interest
thereon. Notwithstanding the foregoing, none of SBC, the Surviving Corporation,
the Exchange Agent or any other Person shall be liable to any former holder of
Company Shares for any amount
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properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(f) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have 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 the posting by such Person of a bond in the form
customarily required by SBC as indemnity against any claim that may be made
against it with respect to such Certificate, SBC will issue the shares of SBC
Common Stock, and the Exchange Agent will issue any unpaid dividends or other
distributions and any cash payment in lieu of a fractional share in respect
thereof, issuable and/or payable in exchange for such lost, stolen or destroyed
Certificate pursuant to this Article IV upon due surrender of and deliverable in
respect of the Company Shares represented by such Certificate pursuant to this
Agreement, in each case, without interest.
(g) Affiliates. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any "affiliate" (as determined pursuant
to Sec tion 6.7) of the Company shall not be exchanged until SBC has received a
written agreement from such Person as provided in Section 6.7 hereof.
4.3. Dissenters' Rights. No Dissenting Shareholder shall be entitled to
shares of SBC Common Stock or cash in lieu of fractional shares thereof or any
dividends or other distributions pursuant to this Article IV unless and until
the holder thereof shall have failed to perfect or shall have effectively
withdrawn or lost such holder's right to dissent from the Merger under the CBCA,
and any Dissenting Shareholder shall be entitled to receive only the payment
provided by Section 33-856 of the CBCA with respect to Company Shares owned by
such Dissenting Shareholder. Unless the obligation of the Company under Section
4.5 to establish an Escrow Account has been waived by SBC, such payment shall be
made from the Escrow Account in accordance with Section 4.5. If any Person who
would otherwise be deemed a Dissenting Shareholder shall have failed properly to
perfect or shall have effectively withdrawn or lost the right to dissent with
respect to any Company Shares, such shares shall thereupon be treated as though
such shares had been converted into shares of SBC Common Stock pursuant to
Section 4.1 hereof and any cash in
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lieu of fractional shares, dividends or other distributions as provided in
Section 4.2 hereof. The Company shall give SBC (i) prompt written notice of any
dissenters' demands for payment, attempted withdrawals of such demands and any
other instruments served pursuant to applicable law received by the Company
relating to dissenters' rights and (ii) the opportunity to direct all
negotiations with respect to dissenters under the CBCA. The Company shall not,
without the prior written consent of SBC, voluntarily make any payment with
respect to any demands for payment by Dissent ing Shareholders, offer to settle
or settle any such demands or approve any withdrawal of such demands.
4.4. Adjustments to Prevent Dilution. In the event that prior to the
Effective Time there is a change in the number of Company Shares or shares of
SBC Common Stock or securities convertible or exchangeable into or exercis able
for Company Shares or shares of SBC Common Stock issued and outstanding as a
result of a distribution, reclassifica tion, stock split (including a reverse
split), stock dividend or distribution, or other similar transaction, the
Exchange Ratio shall be equitably adjusted to eliminate the effects of such
event.
4.5. Escrow Account for Payment of Dissenters' Demands and Transfer
Taxes. Pursuant to an escrow agreement to be entered into by the Company with an
escrow agent selected by mutual agreement of the Company and SBC (the "Escrow
Agent"), in a form reasonably acceptable to SBC (the "Escrow Agreement"), unless
SBC shall elect, in its sole discretion, to waive the Company's obligations
under this Section 4.5 and shall notify the Company of such election, the
Company shall, immediately prior to the Effective Time, deposit in an account
with the Escrow Agent (the "Escrow Account") funds sufficient in the aggregate
to pay all Dissenting Shareholders who as of such time shall have satisfied all
applicable requirements under the CBCA to demand payment for their Dissenting
Shares the amounts the Company estimates to be the fair value of such Dissenting
Shares plus accrued interest in accordance with Section 33-865(a) of the CBCA,
and any Transfer Taxes (as defined herein) attributable to the Merger. These
funds will be released from the Escrow Account, upon certification by the
Company, (i) to make any payment to which a Dissenting Shareholder shall then be
entitled under the CBCA, whether pursuant to the procedures specified in Part
XIII thereof, a final judgment of a court of competent jurisdiction or any
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other agreement with such Dissenting Shareholder; (ii) to pay any Transfer Taxes
that become payable under any applicable state, local, foreign or provincial
law; or (iii) to the Company, upon the Company's reasonable deter mination and
certification that the Company's obligations in respect of the amounts specified
in clause (i) (with respect to all Dissenting Shareholders) and clause (ii) of
this Section 4.5 have been fully satisfied. All payments pur suant to clause (i)
above shall include interest accrued since the Effective Time in accordance with
the CBCA. The Escrow Agreement shall permit the Escrow Agent to invest the funds
in the Escrow Account as directed by the Company.
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company, SBC and Merger Sub.
Except as set forth in the corresponding sections or subsections of the
disclosure letter, dated the date hereof, delivered by the Company to SBC or by
SBC to the Company (each a "Disclosure Letter", and the "Company Disclosure
Letter" and the "SBC Disclosure Letter", respectively), as the case may be, the
Company (except for references in subparagraphs (a), (b)(ii) and (c) below to
documents made available or disclosed by SBC to the Company) hereby represents
and warrants to SBC and Merger Sub, and SBC (except for references in
subparagraphs (a), (b)(ii) and (c) below to documents made available or
disclosed by the Company to SBC), on behalf of itself and Merger Sub, hereby
represents and warrants to the Company, that:
(a) Organization, Good Standing and Qualifica tion. Each of it and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization and has
all requisite corporate or similar power and authority to own and operate its
properties and assets and to carry on its business as presently conducted and is
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the ownership or operation of its properties or conduct
of its business requires such qualifi cation, except where the failure to be so
qualified or in good standing is not, when taken together with all other such
failures, reasonably likely to have a Material Adverse
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Effect (as defined below) on it. It has made available to SBC, in the case of
the Company, and to the Company, in the case of SBC, a complete and correct copy
of its certificate of incorporation and by-laws, each as amended to date. Such
certificates of incorporation and by-laws as so made available are in full force
and effect.
As used in this Agreement, (i) the term "Subsidiary" means, with
respect to the Company, SBC or Merger Sub, as the case may be, any entity,
whether incor porated or unincorporated, of which at least fifty percent of the
securities or ownership interests having by their terms ordinary voting power to
elect at least fifty percent of the board of directors or other Persons
performing similar functions is directly or indirectly owned by such party or by
one or more of its respective Subsidiaries or by such party and any one or more
of its respective Subsidi aries, (ii) the term "Material Adverse Effect" means,
with respect to any Person, a material adverse effect on the total enterprise
value of such Person and its Subsidiaries, taken as a whole, other than effects
or changes resulting from the execution of this Agreement or the announcement
thereof or relating to (I) the telecommunications industry generally, (II) the
national economy generally or (A) with respect to SBC only, the economy of the
southwestern United States and California, taken together, generally or (B) with
respect to the Company only, the economy of New England generally or (III) the
securities markets generally, and (iii) reference to "the other party" means,
with respect to the Company, SBC and means, with respect to SBC, the Company.
(b) Governmental Filings; No Violations. (i) Other than (A) the filings
pursuant to Section 1.3, (B) the notification under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Exchange Act
and the Securities Act of 1933, as amended (the "Securities Act"), (C) the
filings and/or notices to comply with state securities or "blue-sky" laws, (D)
the necessary notices to and, if any, approvals of the Federal Communica tions
Commission ("FCC") pursuant to the Communications Act of 1934, as amended, and
(E) the necessary notices to and necessary approvals, if any, of the state
public utility commissions or similar state regulatory bodies (each a "PUC")
identified in its respective Disclosure Letter pursuant to applicable state laws
regulating the telephone, mobile cellular, paging, cable television or other
telecom-
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munications business ("Utilities Laws") (such filings and/or notices of SBC
being the "SBC Required Consents" and of the Company being the "Company Required
Consents"), no notices, reports or other filings are required to be made by it
to or with, nor are any consents, registrations, approvals, per mits or
authorizations required to be obtained by it from, any governmental or
regulatory authority, court, agency, commission, body or other governmental
entity ("Governmental Entity"), in connection with the execution and delivery of
this Agreement and the Stock Option Agreement by it and the consummation by it
of the Merger and the other transactions contemplated hereby and thereby, except
those that the failure to make or obtain are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on it or to
prevent, or materially impair its ability to effect, the consummation by it of
the transactions con templated by this Agreement or the Stock Option Agreement.
(ii) The execution, delivery and performance of this
Agreement and the Stock Option Agreement by it do not, and the consummation by
it of the Merger and the other transactions contemplated hereby and thereby will
not, constitute or result in (A) a breach or violation of, or a default under,
its certificate of incorporation or by-laws or the comparable governing
instruments of any of its "Significant Subsidiaries", as such term is defined in
Rule 1.02(w) of Regulation S-X promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (B) a breach or violation of, a default
under, the acceleration of any obligations or the creation of a lien, pledge,
security interest or other encumbrance on its assets or the assets of any of its
Subsidiaries (with or without notice, lapse of time or both) pursuant to, any
agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation ("Contracts") binding upon it or any of its Subsidiaries or any Law
(as defined in Section 5.1(h)) or governmental or non-governmental permit or
license to which it or any of its Subsidiaries is subject or (C) any change in
the rights or obligations of any party under any of its Contracts, except, in
the case of clause (B) or (C) above, for any breach, violation, default,
acceleration, creation or change that, individually or in the aggregate, is not
reasonably likely to have a Material Adverse Effect on it or to prevent, or
materially impair its ability to effect, the consummation by it of the
transactions contemplated by this Agreement or the Stock Option Agreement. The
Company Disclosure Letter, with respect to the Company, and the SBC
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Disclosure Letter, with respect to SBC, sets forth a correct and complete list
of all Contracts of it and its Subsidi aries required to be filed as material
contract exhibits under the Exchange Act and pursuant to which consents or
waivers are or may be required prior to consummation of the transactions
contemplated by this Agreement or the Stock Option Agreement (whether or not
subject to the exception set forth with respect to clauses (B) and (C) above).
(c) Reports; Financial Statements. It has made available to the other
party each registration statement, report, proxy statement or information
statement prepared by it since December 31, 1996 (the "Audit Date"), including
its Annual Report on Form 10-K for the year ended December 31, 1996 in the form
(including exhibits, annexes and any amend ments thereto) filed with the
Securities and Exchange Commission (the "SEC") (collectively, including any such
reports filed subsequent to the date hereof, its "Reports"). As of their
respective dates, its Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in the light of the circumstances in which
they were made, not misleading. Each of the consolidated balance sheets included
in or incor porated by reference into its Reports (including the related notes
and schedules) fairly presents the consolidated financial position of it and its
Subsidiaries as of its date and each of the consolidated statements of income
and of cash flows included in or incorporated by reference into its Reports
(including any related notes and schedules) fairly presents the consolidated
results of operations and cash flows of it and its Subsidiaries for the periods
set forth therein (subject, in the case of unaudited statements, to notes and
normal year-end audit adjustments that will not be material in amount or
effect), in each case in accordance with generally accepted accounting
principles ("GAAP") consistently applied during the periods involved, except as
may be noted therein. Since the Audit Date, it and each of its Subsidiaries
required to make filings under Utilities Laws has filed with the applicable PUCs
or the FCC, as the case may be, all material forms, statements, reports and
documents (including exhibits, annexes and any amendments thereto) required to
be filed by them, and each such filing complied in all material respects with
all applicable laws, rules and regulations, other than such failures to file and
non-compliance that are, individually or in the aggregate, not reasonably likely
to have a Material Adverse Effect on
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it or to prevent, or materially impair its ability to effect, the consummation
by it of the transactions contem plated by this Agreement or the Stock Option
Agreement. To its knowledge, as of the date hereof, no Person or "group"
"beneficially owns" 5% or more of its outstanding voting securities, with the
terms "beneficially owns" and "group" having the meanings ascribed to them under
Rule 13d-3 and Rule 13d-5 under the Exchange Act.
(d) Absence of Certain Changes. Except as dis closed in its Reports
filed prior to the date hereof or as expressly contemplated by this Agreement,
since the Audit Date it and its Subsidiaries have conducted their respective
businesses only in the ordinary and usual course of such businesses, and there
has not been (i) any change in the financial condition, business or results of
operations of it and its Subsidiaries, except those changes that are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on it; (ii) any damage, destruc tion or other casualty loss with respect
to any asset or property owned, leased or otherwise used by it or any of its
Subsidiaries, whether or not covered by insurance, which damage, destruction or
loss is reasonably likely, individually or in the aggregate, after taking into
account any insurance coverage, to have a Material Adverse Effect on it; (iii)
any declaration, setting aside or payment of any divi dend or other distribution
in respect of its capital stock, except publicly announced regular quarterly
cash dividends on its common stock and, in the case of SBC, dividends in SBC
Common Stock; or (iv) any change by it in accounting principles, practices or
methods except as required by GAAP.
(e) Litigation and Liabilities. Except as dis closed in its Reports
filed prior to the date hereof, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
("Litiga tion") pending or, to the actual knowledge of its executive officers,
threatened against it or any of its Affiliates (as defined in Rule 12b-2 under
the Exchange Act) or (ii) obli gations or liabilities, whether or not accrued,
contingent or otherwise, including those relating to matters involving any
Environmental Law (as defined in Section 5.2(e)), that are reasonably likely to
result in any claims against or obligations or liabilities of it or any of its
Affiliates, except for those that are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on it or to prevent, or
materially impair its ability
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to effect, the consummation by it of the transactions con templated by this
Agreement or the Stock Option Agreement; provided, that for purposes of this
paragraph (e) no Litigation arising after the date hereof shall be deemed to
have a Material Adverse Effect if and to the extent such Litigation (or any
relevant part thereof) is based on this Agreement or the transactions
contemplated hereby.
(f) Accounting, Tax and Regulatory Matters. As of the date hereof,
neither it nor any of its affiliates (as determined in accordance with Section
6.7) has taken or agreed to take any action, nor do its executive officers have
any actual knowledge of any fact or circumstance, that would prevent SBC from
accounting for the business combination to be effected by the Merger as a
"pooling-of-interests" or prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code.
(g) Taxes. It and each of its Subsidiaries have prepared in good faith
and duly and timely filed (taking into account any extension of time within
which to file) all material Tax Returns (as defined below) required to be filed
by any of them and all such filed Tax Returns are complete and accurate in all
material respects and: (i) it and each of its Subsidiaries have paid all Taxes
(as defined below) that are shown as due on such filed Tax Returns or that it or
any of its Subsidiaries is obligated to withhold from amounts owing to any
employee, creditor or third party, except with respect to matters contested in
good faith or for such amounts that, alone or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on it; (ii) as of the date
hereof, there are not pending or, to the actual knowledge of its executive
officers, threatened, in writing, any audits, examinations, investigations or
other proceedings in respect of Taxes or Tax matters; and (iii) there are not,
to the actual knowl edge of its executive officers, any unresolved questions or
claims concerning its or any of its Subsidiaries' Tax liability that are
reasonably likely to have a Material Adverse Effect on it. Neither it nor any of
its Subsidi aries has any liability with respect to income, franchise or similar
Taxes in excess of the amounts accrued in respect thereof that are reflected in
the financial statements included in its Reports, except such excess liabilities
as are not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on it.
-16-
As used in this Agreement, (x) the term "Tax" (including, with
correlative meaning, the terms "Taxes", and "Taxable") includes all federal,
state, local and foreign income, profits, franchise, gross receipts,
environmental, customs duty, capital stock, severance, stamp, payroll, sales,
employment, unemployment, disability, use, property, withholding, excise,
production, value added, transfer, occupancy and other taxes, duties or
assessments of any nature whatsoever, together with all interest, penalties and
additions imposed with respect to such amounts and any interest in respect of
such penalties and additions, and (y) the term "Tax Return" includes all
returns, amended returns and reports (including elections, declarations,
disclosures, schedules, estimates and information returns) required to be
supplied to a Tax authority relating to Taxes.
(h) Compliance with Laws. Except as set forth in its Reports filed
prior to the date hereof, the businesses of each of it and its Subsidiaries
have not been, and are not being, conducted in violation of any law, statute,
ordinance, regulation, judgment, order, decree, injunction, arbitration award,
license, authorization, opinion, agency requirement or permit of any
Governmental Entity or common law (collectively, "Laws"), except for violations
that are not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on it or to prevent, or materially impair its ability to
effect, the consummation by it of the transactions contemplated by this
Agreement or the Stock Option Agreement. Except as set forth in its Reports
filed prior to the date hereof, as of the date hereof no investigation or review
by any Governmental Entity with respect to it or any of its Subsidiaries is
pending or, to the actual knowledge of its executive officers, threatened, nor
has any Governmental Entity indicated an intention to conduct the same, except
for those the outcome of which are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on it or to prevent, or
materially impair its ability to effect, the consummation by it of the
transactions contemplated by this Agreement or the Stock Option Agreement. To
the actual knowledge of its executive officers, as of the date hereof no
material change is required in its or any of its Subsidiaries' processes,
properties or procedures in connection with any such Laws, and it has not
received any notice or communication of any material noncompliance with any such
Laws that has not been cured as of the date hereof, except for such changes and
-17-
noncompliance that are not, individually or in the aggregate, reasonably likely
to have a Material Adverse Effect on it or to prevent, or materially impair its
ability to effect, the consummation by it of the transactions contemplated by
this Agreement or the Stock Option Agreement. Each of it and its Subsidiaries
has all permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals (collectively, "Permits")
necessary to conduct their business as presently conducted, except for those the
absence of which are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on it.
5.2. Representations and Warranties of the Company. Except as set forth
in the corresponding sections or subsections of the Company Disclosure Letter,
the Company hereby represents and warrants to SBC and Merger Sub that:
(a) Capital Structure. The authorized capital stock of the Company
consists of 300,000,000 Company Shares, of which 66,666,268 Company Shares were
issued and outstanding and 2,230,586 Company Shares were held in treasury as of
the close of business on December 31, 1997; 2,000,000 shares of preferred stock,
par value $50.00 per share (the "Preferred Shares"), of which no shares were
outstanding as of the close of business on December 31, 1997; and 50,000,000
shares of preference stock, par value $1.00 per share (the "Preference Shares"),
of which no shares were outstanding as of December 31, 1997. All of the
outstanding Company Shares have been duly authorized and are validly issued,
fully paid and nonassessable. Other than 2,000,000 Preference Shares, designated
"Series A Junior Participating Preference Stock", reserved for issuance pursuant
to the Rights Agreement, dated as of December 11, 1996, between the Company and
State Street Bank and Trust Company, as Rights Agent (the "Rights Agreement"),
Company Shares reserved for issuance pursuant to the Stock Option Agreement and
Company Shares reserved for issuance as set forth below or which may be issued
in accordance with Section 6.1(a), the Company has no Company Shares, Preferred
Shares or Preference Shares reserved for issuance. As of December 31, 1997,
there were not more than 6,650,000 Com pany Shares reserved for issuance
pursuant to the Company's 1986 Stock Option Plan, 1995 Stock Incentive Plan,
Non-Employee Director Stock Plan, Incentive Award Deferral Plan and 1996
Non-Employee Director Stock Plan (collectively, the "Stock Plans"). Each of the
outstanding shares of capital
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stock or other securities of each of the Company's Significant Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable and owned by the
Company or a direct or indirect wholly-owned Subsidiary of the Company, free and
clear of any lien, pledge, security interest, claim or other encumbrance. Except
as set forth above and except for Company Shares and options to purchase Company
Shares which may be issued in accordance with Section 6.1(a), neither the
Company nor any of its Subsidiaries has any obligation with respect to any
preemptive or other outstanding rights (other than stock appreciation rights in
respect of not more than 40,000 Company Shares), options, warrants, conversion
rights, stock appreciation rights, redemption rights, repurchase rights,
agreements, arrangements or commitments to issue or sell any shares of capital
stock or other securities of the Company or any of its Significant Subsidiaries
or any securities or obligations convertible or exchangeable into or exercisable
for, or giving any Person a right to subscribe for or acquire, any securities of
the Company or any of its Significant Subsidiaries, and no securities or
obligations evidencing such rights are authorized, issued or outstanding. The
Company Shares issuable pursuant to the Stock Option Agreement have been duly
reserved for issuance by the Company, and upon any issuance of such Company
Shares in accordance with the terms of the Stock Option Agreement, such Company
Shares will be duly and validly issued and fully paid and nonassessable. The
Company does not have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or convertible into or
exercisable for securities having the right to vote) with the shareholders of
the Company on any matter.
(b) Corporate Authority; Approval and Fairness. The Company has all
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement and the Stock Option Agreement and to consummate, subject only to
approval of this Agreement by the holders of two-thirds of the outstanding
Company Shares (the "Company Requisite Vote") and the Company Required Consents,
the Merger. Each of this Agreement and the Stock Option Agree ment has been duly
executed and delivered by the Company and is a valid and binding agreement of
the Company enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability
-19-
relating to or affecting creditors' rights and to general equity principles (the
"Bankruptcy and Equity Exception"). The board of directors of the Company (A)
has adopted this Agreement and approved the Merger and the other transactions
contemplated hereby, (B) has approved the execution and delivery of the Stock
Option Agreement and (C) has received the opinion of its financial advisors,
Salomon Smith Barney Inc., in a customary form and to the effect that the Merger
Consideration to be received by the holders of the Company Shares in the Merger
is fair to such holders from a financial point of view.
(c) Employee Benefits.
(i) A copy of each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option, employment, termination,
severance, compensation, medical, health or other material plan, agreement,
policy or arrangement that covers employees, directors, former employees or
former directors of it and its Subsidiaries (its "Compensation and Benefit
Plans") and any trust agreements or insurance contracts forming a part of such
Compensation and Benefit Plans has been made available by the Company to SBC
prior to the date hereof and each such Compensation and Benefit Plan is listed
in Section 5.2(c) of the Company Disclosure Letter.
(ii) All of its Compensation and Benefit Plans are in
substantial compliance with all applicable law, including the Code and the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") with the
exception of any instances of non-compliance that are not, individually or in
the aggregate, reasonably likely to have a Material Adverse Effect on the
Company. Each of its Compensation and Benefit Plans that is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan") and
that is intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service (the "IRS"),
and it is not aware of any circumstances likely to result in revocation of any
such favorable determination letter. As of the date hereof, there is no pending
or, to the knowledge of its executive officers, threatened in writing material
litigation relating to its Compensation and Benefit Plans. Neither it nor any
Subsidiary has
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engaged in a transaction with respect to any of its Compensation and Benefit
Plans that, assuming the taxable period of such transaction expired as of the
date hereof, would subject it or any of its Subsidiaries to a material tax or
penalty imposed by either Section 4975 of the Code or Section 502 of ERISA and
that is reasonably likely to have a Material Adverse Effect on the Company.
(iii) As of the date hereof, no liability under Subtitle
C or D of Title IV of ERISA (other than the payment of prospective premium
amounts to the Pension Benefit Guaranty Corporation in the normal course) has
been or is expected to be incurred by it or any Subsidiary with respect to any
ongoing, frozen or terminated "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them,
or the single-employer plan of any entity which is considered one employer with
it under Section 4001 of ERISA or Section 414 of the Code (its "ERISA
Affiliate") (each such single-employer plan, its "ERISA Affiliate Plan"). No
notice of a "reportable event", within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived, has been required to
be filed for any of its Pension Plans or any of its ERISA Affiliate Plans within
the 12-month period ending on the date hereof or will be required to be filed in
connection with the transactions contemplated by this Agreement.
(iv) Neither any of its Pension Plans nor any of its
ERISA Affiliate Plans has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of ERISA.
Neither it nor its Subsidiaries has provided, or is required to provide,
security to any of its Pension Plans or to any of its ERISA Affiliate Plans
pursuant to Section 401(a)(29) of the Code.
(v) The consummation of the Merger (or its approval by
its shareholders) and the other transactions contemplated by this Agreement and
the Stock Option Agreement will not (x) entitle any of its employees or
directors or any employees of its Subsidiaries to severance pay, directly or
indirectly, upon termination of employment, (y) accelerate the time of payment
or vesting or trigger any payment of compensation or benefits under, increase
the amount payable or trigger any other material obligation pursuant to, any of
its Compensation and Benefit Plans or
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(z) result in any breach or violation of, or a default under, any of its
Compensation and Benefit Plans.
(vi) Since the Audit Date, except as provided for herein,
in the Company Disclosure Letter or as disclosed in the Company's Reports filed
prior to the date hereof, there has not been any increase in the compensation
payable or that could become payable by it or any of its Subsidiaries to
officers or key employees or any amendment of any of its Compensation and
Benefit Plans other than increases or amendments in the ordinary course.
(d) Takeover Statutes. The Board of Directors of the Company, including
a majority of the non-employee directors of the Company, has duly adopted
resolutions approving the Merger, the Stock Option Agreement and the
transactions contemplated hereby and thereby and specifically naming SBC and its
existing and future affiliates or associates (as such terms are defined under
Section 33-840 and 33-843 of the CBCA). Such resolutions satisfy the
requirements of Sections 33-842(c)(1) and 33-844(a) of the CBCA, are by their
terms irrevocable, and have not been amended or modified in any manner. The
provisions of Sections 33-841 and 33-844 of the CBCA do not and will not apply
to the Merger or the other transactions contemplated by this Agreement or the
Stock Option Agreement. No other "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation (each a
"Takeover Statute") as in effect on the date hereof or any anti-takeover
provision in the Company's certificate of incorporation and by-laws is
applicable to the Company, the Company Shares, the Merger or the other
transactions contemplated by this Agreement or the Stock Option Agreement.
(e) Environmental Matters. Except as disclosed in its Reports
filed prior to the date hereof and except for such matters that, individually or
in the aggregate, are not reasonably likely to have a Material Adverse Effect on
it: (i) each of it and its Subsidiaries has complied with all applicable
Environmental
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Laws (as defined below); (ii) the properties currently owned or operated by it
or any of its Subsidiaries (including soils, any groundwater underlying such
properties, surface water, buildings or other structures) are not contaminated
with any Hazardous Substances (as defined below) at levels that require
investigation or cleanup under applicable Environmental Laws; (iii) the
properties formerly owned or operated by it or any of its Subsidiaries were not
contaminated with Hazardous Substances during the period of ownership or
operation by it or any of its Subsidiaries; (iv) neither it nor any of its
Subsidiaries has received written notice that it is subject to liability for any
Hazardous Substance disposal or contamination on any third party property; (v)
neither it nor any Subsidiary has been responsible for any release or threat of
release of any Hazardous Substance; (vi) as of the date hereof neither it nor
any Subsidiary has received any written notice, demand, letter, claim or request
for information alleging that it or any of its Subsidiaries may be in violation
of or liable under any Environmental Law; and (vii) neither it nor any of its
Subsidiaries is subject to any binding orders, decrees, injunctions or other
arrangements with any Governmental Entity or is subject to any indemnity or
other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances.
As used herein, the term "Environmental Law" means any Law relating to:
(A) the protection, investigation or restoration of the environment, health,
safety, or natural resources, (B) the handling, use, presence, disposal, release
or threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property in connection with any Hazardous Substance.
As used herein, the term "Hazardous Substance" means any substance that
is: listed, classified or regulated pursuant to any Environmental Law, including
any petroleum product or by-product, friable asbestos-containing material,
lead-containing paint, polychlorinated biphenyls, radioactive materials or
radon.
(f) Labor Matters. As of the date hereof, neither it nor any of its
Subsidiaries is the subject of any material proceeding asserting that it or any
of its Subsidiaries has committed an unfair labor practice or is seeking to
compel it to bargain with any labor union or labor organization nor is there
pending or, to the actual knowledge of its executive officers, threatened, nor
has there been for the past five years, any labor strike, dispute, walkout, work
stoppage, slow-down or lockout involving it or any of its Subsidiaries, except
in each case
-23-
as is not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on it.
(g) Rights Agreement. The Company has amended the Rights Agreement to
provide that neither SBC nor Merger Sub shall be deemed to be an Acquiring
Person (as defined in the Rights Agreement) and the Distribution Date (as
defined in the Rights Agreement) shall not be deemed to occur and that the
Rights will not become separable, distributable, unredeemable or exercisable as
a result of entering into this Agreement, the Stock Option Agreement or
consummating the Merger and/or the other transactions contemplated hereby and
thereby.
(h) Brokers and Finders. Neither it nor any of its officers, directors
or employees has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the Merger or
the other transactions contemplated in this Agreement and the Stock Option
Agreement except that the Company has employed Salomon Smith Barney Inc. as its
financial advisor, the arrangements with which have been disclosed to SBC prior
to the date hereof.
(i) Intellectual Property. (i) The Company and/or each of its
Subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use, all patents, trademarks, trade names, service marks, copyrights,
and any applications therefor, technology, know-how, computer software programs
or applications, and tangible or intangible proprietary information or materials
that are used in its or any of its Subsidiaries' businesses as currently
conducted, and to the actual knowledge of its executive officers all patents,
trademarks, trade names, service marks and copyrights held by it and/or its
Subsidiaries are valid and subsisting, except for any failures to so own, be
licensed or possess or to be valid and subsisting, as the case may be, that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on it.
(ii) Except as disclosed in its Reports filed prior to
the date hereof or as is not reasonably likely to have a Material Adverse Effect
on the Company:
(A) it and its Subsidiaries are not, nor will any of them
be as a result of the execution and
-24-
delivery of this Agreement or the performance of its
obligations hereunder, in violation of any licenses,
sublicenses and other agreements as to which it or any of
its Subsidiaries is a party and pursuant to which it or
any Subsidiary is authorized to use any third-party
patents, trademarks, service marks, and copyrights
("Third- Party Intellectual Property Right");
(B) to the actual knowledge of the Company, no claims as
of the date hereof with respect to (I) the patents,
registered and material unregistered trademarks and
service marks, registered copyrights, trade names, and
any applications therefor owned by it or any its
Subsidiaries (the "Owned Intellectual Property Rights");
(II) any trade secrets material to it; or (III)
Third-Party Intellectual Property Rights are currently
pending or, to the knowledge of its executive officers,
are threatened by any Person; and
(C) to the actual knowledge of its executive officers,
there is no unauthorized use, infringement or
misappropriation of any of the Owned Intellectual
Property Rights by any third party, including any of its
or any of its Subsidiaries' employees or former
employees.
(j) Severance Payments. No payments to be made to any of the officers
and employees of the Company or its Subsidiaries as a result of the consummation
of the Merger will be subject to the deduction limitations under Section 280G of
the Code.
5.3. Representations and Warranties of SBC and Merger Sub. Except as
set forth in the corresponding sections or subsections of the SBC Disclosure
Letter, SBC, on behalf of itself and Merger Sub, hereby represents and warrants
to the Company that:
(a) Capital Structure. (i) The authorized capital stock of SBC consists
of 2,200,000,000 shares of SBC Common Stock, of which 918,627,275 shares were
issued and outstanding and 13,831,028 shares were held in treasury as of the
close of business on December 30, 1997; and 10,000,000 shares of Preferred
Stock, par value $1.00 per share (the "SBC Preferred Shares"), of which no
shares were
-25-
outstanding as of the close of business on December 31, 1997. All of the
outstanding shares of SBC Common Stock have been duly authorized and are validly
issued, fully paid and nonassessable. SBC has no shares of SBC Common Stock or
SBC Preferred Shares reserved for issuance except that SBC has reserved no more
than 10,000,000 SBC Preferred Shares for issuance pursuant to the Rights
Agreement, dated as of January 27, 1989, between SBC and American Transtech,
Inc., as Rights Agent, as amended by the Amendment of Rights Agreement, dated as
of August 5, 1992, between SBC and The Bank of New York, as successor Rights
Agent, and the Second Amendment of Rights Agreement, dated as of June 15, 1994,
between SBC and The Bank of New York, as successor Rights Agent (as amended, the
"SBC Rights Agreement"). Each of the outstanding shares of capital stock of each
of SBC's Significant Subsidiaries is duly authorized, validly issued, fully paid
and nonassessable and owned by SBC or a direct or indirect wholly-owned
subsidiary of SBC, free and clear of any lien, pledge, security interest, claim
or other encumbrance. Except pursuant to SBC's Senior Management Long Term
Incentive Plan, Incentive Award Deferral Plan, Non-Employee Directors Stock and
Deferral Plan, Stock Savings Plan, 1994 Stock Option Plan, 1996 Stock and
Incentive Plan, 1995 Management Stock Option Plan, Savings Plan, Savings and
Security Plan and stock plans assumed by SBC pursuant to the merger of SBC
Communications (NV), Inc. with and into Pacific Telesis Group consummated on
April 1, 1997 (collectively, the "SBC Stock Plans"), neither SBC nor any of its
Subsidiaries has any obligation with respect to any preemptive or other
outstanding rights, options, warrants, conversion rights, stock appreciation
rights, redemption rights, repurchase rights, agreements, arrangements or
commitments to issue or to sell any shares of capital stock or other securities
of SBC or any of its Significant Subsidiaries or any securities or obligations
convertible or exchangeable into or exercisable for, or giving any Person a
right to subscribe for or acquire, any securities of the Company or any of its
Significant Subsidiaries, and no securities or obligation evidencing such rights
are authorized, issued or outstanding. SBC does not have outstanding any bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or convertible into or exercisable for securities having the right to
vote) with the stockholders of SBC on any matter.
(ii) The authorized capital stock of Merger Sub consists
of 1,000 shares of common stock, par
-26-
value $1.00 per share, all of which are validly issued and outstanding. All of
the issued and outstanding capital stock of Merger Sub is, and at the Effective
Time will be, owned by SBC, and there are (i) no other shares of capital stock
or other voting securities of Merger Sub, (ii) no securities of Merger Sub
convertible into or exchangeable for shares of capital stock or other voting
securities of Merger Sub and (iii) no options or other rights to acquire from
Merger Sub, and no obligations of Merger Sub to issue, any capital stock, other
voting securities or securities convertible into or exchangeable for capital
stock or other voting securities of Merger Sub. Merger Sub has not conducted any
business prior to the date hereof and has no, and prior to the Effective Time
will have no, assets, liabilities or obligations of any nature other than those
incident to its formation and pursuant to this Agreement and the Merger and the
other transactions contemplated by this Agreement.
(b) Corporate Authority; Approval and Fairness. SBC and Merger Sub each
has all requisite corporate power and authority and each has taken all corporate
action necessary in order to execute, deliver and perform its obligations under
this Agreement and the Stock Option Agreement and to consummate, subject only to
the SBC Required Consents, the Merger. Each of this Agreement and the Stock
Option Agreement has been duly executed and delivered by SBC and Merger Sub and
is a valid and binding agreement of SBC and Merger Sub, enforceable against each
of SBC and Merger Sub in accordance with its terms, subject to the Bankruptcy
and Equity Exception. SBC has received the opinion of its financial advisors,
Lazard Freres & Co., in a customary form and to the effect that the Merger
Consideration to be paid by SBC in the Merger is fair to SBC from a financial
point of view. The shares of SBC Common Stock, when issued pursuant to this
Agreement, will be validly issued, fully paid and nonassessable, and no
stockholder of SBC will have any preemptive right of subscription or purchase in
respect thereof.
(c) Brokers and Finders. Neither it nor any of its officers, directors
or employees has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the Merger or
the other transactions contemplated in this Agreement and the Stock Option
Agreement except that SBC and Merger Sub
-27-
have employed Lazard Freres & Co. as their financial advisor.
ARTICLE VI
Covenants
6.1. Interim Operations. (a) The Company covenants and agrees
as to itself and its Subsidiaries that, after the date hereof and prior to the
Effective Time (unless SBC shall otherwise approve in writing, which approval
shall not be unreasonably withheld or delayed, and except as otherwise expressly
contemplated by this Agreement or the Stock Option Agreement, in the Company
Disclosure Letter or as required by applicable Law):
(i) the business of it and its Subsidiaries shall be
conducted in the ordinary and usual course and, to the extent consistent
therewith, it and its Subsidiaries shall use all reasonable efforts to preserve
its business organization intact and maintain its existing relations and
goodwill with customers, suppliers, regulators, distributors, creditors,
lessors, employees and business associates;
(ii) it shall not (A) amend its certificate of
incorporation or by-laws or amend, modify or terminate the Rights Agreement; (B)
split, combine, subdivide or reclassify its outstanding shares of capital stock;
(C) declare, set aside or pay any dividend payable in cash, stock or property in
respect of any capital stock, other than per share regular quarterly cash
dividends not in excess of $0.44 per Company Share; or (D) repurchase, redeem or
otherwise acquire, or permit any of its Subsidiaries (other than the Company's
Employee Stock Ownership Plan) to purchase or otherwise acquire, any shares of
its capital stock or any securities convertible into or exchangeable or
exercisable for any shares of its capital stock;
(iii) neither it nor any of its Subsidiaries shall
knowingly take any action that would prevent the Merger from qualifying for
"pooling of interests" accounting treatment or as a tax-free "reorganization"
within the meaning of Section 368(a) of the Code or that would cause any of its
representations and warranties herein to become untrue in any material respect;
-28-
(iv) neither it nor any of its Subsidiaries shall
terminate, establish, adopt, enter into, make any new grants or awards under,
amend or otherwise modify, any Compensation and Benefit Plans or increase the
salary, wage, bonus or other compensation of any directors, officers or
employees except (A) for grants or awards to directors, officers and employees
of it or its Subsidiaries under existing Compensation and Benefit Plans in such
amounts and on such terms as are consistent with past practice, (B) in the
normal and usual course of business (which shall include normal periodic
performance reviews and related compensation and benefit increases and the
provision of individual Compensation and Benefit Plans consistent with past
practice for promoted or newly hired officers and employees and the adoption of
Compensation and Benefit Plans for employees of new Subsidiaries in amounts and
on terms consistent with past practice) or (C) for actions necessary to satisfy
existing contractual obligations under Compensation and Benefit Plans existing
as of the date hereof;
(v) neither it nor any of its Subsidiaries shall issue
any preferred stock or incur any indebtedness for borrowed money (other than
indebtedness incurred solely for the purpose of funding the Escrow Account or
the replacement or refinancing of existing short-term indebtedness) or guarantee
any such indebtedness if the Company should reasonably anticipate that as a
result of such incurrence any of the Company's or any of its Subsidiaries'
outstanding senior indebtedness would be rated lower than A by Standard &
Poor's;
(vi) neither it nor any of its Subsidiaries shall make
any capital expenditures in any calendar year in an aggregate amount in excess
of the aggregate amount reflected in the Company's capital expenditure budget
for such year, a copy of which has been provided to SBC, plus $100 million;
(vii) except as contemplated by Section 6.1(a)(iv),
neither the Company nor any of its Subsidiaries shall issue, deliver, sell, or
encumber shares of any class of its common stock or any securities convertible
into, or any rights, warrants or options to acquire, any such shares except the
option granted under the Stock Option Agreement, options outstanding on the date
hereof under the Stock Plans, awards of options and
-29-
restricted stock granted hereafter under the Stock Plans in the ordinary course
of business in accordance with this Agreement and shares issuable pursuant to
such options and awards;
(viii) neither it nor any of its Subsidiaries shall spend
in excess of $50 million in any calendar year to acquire any business, whether
by merger, consolidation, purchase of property or assets or otherwise (valuing
any non-cash consideration at its fair market value as of the date of the
agreement for such acquisition). For purposes of this clause (viii), the amount
spent with respect to any acquisition shall be deemed to include the aggregate
amount of capital expenditures that the Company is obligated to make at any time
or plans to make as result of such acquisition within two years after the date
of acquisition; (ix) neither it nor its Subsidiaries shall enter any business
other than the telecommunications business and those businesses traditionally
associated with the telecommunications business or enter into or extend any
telecommunications business outside the geographic areas served by it and its
Subsidiaries as of the date of this Agreement; and
(x) neither it nor any of its Subsidiaries shall agree
prior to the Effective Time to do any of the foregoing after the Effective Time.
(b) SBC covenants and agrees as to itself and its Subsidiaries that,
after the date hereof and prior to the Effective Time (unless the Company shall
otherwise approve in writing, which approval shall not be unreasonably withheld
or delayed, and except as otherwise expressly contemplated by this Agreement or
in the SBC Disclosure Letter or as required by applicable Law):
(i) it shall not (A) amend its certificate of
incorporation or by-laws in any manner that would prohibit or hinder, impede or
delay in any material respect the Merger or the consummation of the transactions
contemplated hereby; (B) declare, set aside or pay any dividend or other
distribution payable in cash or property (other than SBC Common Stock) in
respect of any capital stock, other than per share regular quarterly cash
dividends; or (C) repurchase, redeem or otherwise acquire,
-30-
or permit any of its Subsidiaries to purchase or otherwise acquire, except in
open market transactions or in connection with the SBC Stock Plans, any shares
of its capital stock or any securities convertible into or exchangeable for any
shares of its capital stock;
(ii) neither it nor any of its Subsidiaries shall
knowingly take any action that would prevent the Merger from qualifying as a
tax-free "reorganization" within the meaning of Section 368(a) of the Code or
that would cause any of its representations and warranties herein to become
untrue in any material respect, provided, however, that nothing contained herein
shall limit the ability of SBC to exercise its rights under the Stock Option
Agreement; and
(iii) neither it nor any of its Subsidiaries will
authorize or enter into an agreement to do any of the foregoing.
(c) SBC and the Company agree that any written approval obtained under
this Section 6.1 may be relied upon by the other party if signed by the Chief
Executive Officer, Chief Financial Officer, chief legal officer or another
executive officer of the other party.
6.2. Acquisition Proposals. (a) The Company agrees that neither it nor
any of its Subsidiaries nor any of the officers and directors of it or its
Subsidiaries shall, and that it shall direct and use its best efforts to cause
its and its Subsidiaries' Representatives not to, directly or indirectly,
initiate, solicit, encourage or otherwise facilitate any inquiries or the making
of any proposal or offer with respect to a merger, reorganization, share
exchange, consolidation or similar transaction involving it, or any purchase of,
or tender offer for, 15% or more of the equity securities of it or any of its
Subsidiaries listed on Schedule 1 or 15% or more of its and its Subsidiaries'
assets (based on the fair market value thereof) taken as a whole (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal").
The Company further agrees that neither it nor any of its Subsidiaries nor any
of the officers and directors of it or its Subsidiaries shall, and that it shall
direct and use its best efforts to cause its Representatives not to, directly or
indirectly, have any discussions with or provide any confidential information or
data to any Person relating to
31-
an Acquisition Proposal or engage in anynegotiations concerning an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal; provided, however, that nothing contained in this
Agreement shall prevent the Company or its board of directors from (A) complying
with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal; (B) making any disclosure to the Company's shareholders if, in the
good faith judgment of the board of directors of the Company, failure so to
disclose would be inconsistent with its obligations under applicable law; (C)
engaging in any discussions or negotiations with or providing any information
to, any Person in response to a bona fide written Acquisition Proposal by any
such Person received after the date hereof that was not solicited by the Company
after the date hereof; or (D) recommending such an Acquisition Proposal to the
shareholders of the Company if and only to the extent that, in such case
referred to in clause (C) or (D), the board of directors of the Company
concludes in good faith (after consultation with its financial advisor) that
such Acquisition Proposal is reasonably capable of being completed, taking into
account all legal, financial, regulatory and other aspects of the proposal and
the Person making the proposal, and would, if consummated, result in a
transaction more favorable to the Company's shareholders from a financial point
of view than the transaction contemplated by this Agreement (any such more
favorable Acquisition Proposal being referred to in this Agreement as a
"Superior Proposal"). The Company agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal. The
Company also agrees that it will promptly request each Person that has
heretofore executed a confidentiality agreement in connection with its
consideration of any Acquisition Proposal to return all confidential information
heretofore furnished to such Person by or on behalf of it or any of its
Subsidiaries.
(b) The Company agrees that it will take the necessary steps to
promptly inform the individuals or entities referred to in the first sentence
hereof of the obligations undertaken in this Section 6.2. The Company agrees
that it will notify SBC promptly if any such inquiries, proposals or offers are
received by, any such information is requested from, or any such discussions or
-32-
negotiations are sought to be initiated or continued with, any of the Company's
Representatives indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers and
thereafter shall keep SBC informed, on a current basis, of the status and
material terms of any such proposals or offers and the status of any such
discussions or negotiations.
6.3. Information Supplied. The Company and SBC each agrees, as to
itself and its Subsidiaries, that none of the information supplied or to be
supplied by it or its Subsidiaries for inclusion or incorporation by reference
in (i) the Registration Statement on Form S-4 to be filed with the SEC by SBC in
connection with the issuance of shares of SBC Common Stock in the Merger
(including the proxy statement and prospectus (the "Prospectus/Proxy Statement")
constituting a part thereof) (the "S-4 Registration Statement") will, at the
time the S-4 Registration Statement becomes effective under the Securities Act,
and (ii) the Prospectus/Proxy Statement and any amendment or supplement thereto
will, at the date of mailing to shareholders and at the time of the Shareholders
Meeting, in any such case, 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 the light of the circumstances under
which they were made, not misleading. If at any time prior to the Effective Time
any information relating to SBC or the Company, or any of their respective
affiliates, officers or directors, should be discovered by SBC or the Company
which should be set forth in an amendment or supplement to any of the S-4
Registration Statement or the Prospectus/Proxy Statement, so that any of such
documents would not include any misstatement of a material fact or omit to state
any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the shareholders of the Company.
6.4. Shareholders Meeting. The Company will take, in accordance with applicable
law and its certificate of incorporation and by-laws, all action necessary to
convene a meeting of holders of Company Shares (the
-33-
"Shareholders Meeting") as promptly as practicable after the S-4 Registration
Statement is declared effective to consider and vote upon the approval of this
Agreement and the Merger. Unless the board of directors of the Company
determines in good faith after consultation with outside legal counsel that to
do so would result in a failure to comply with its fiduciary duties under
applicable law, the Company's board of directors shall recommend approval of
this Agreement and the Merger and shall take all lawful action to solicit such
approval.
6.5. Filings; Other Actions; Notification. (a) SBC and the Company
shall promptly prepare and file with the SEC the Prospectus/Proxy Statement, and
SBC shall prepare and file with the SEC the S-4 Registration Statement as
promptly as practicable. SBC and the Company each shall use all reasonable
efforts to have the S-4 Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing, and promptly
thereafter mail the Prospectus/Proxy Statement to the shareholders of the
Company. SBC shall also use all reasonable efforts to obtain prior to the
effective date of the S-4 Registration Statement all necessary state securities
law or "blue sky" permits and approvals required in connection with the Merger
and to consummate the other transactions contemplated by this Agreement and will
pay all expenses incident thereto.
(b) The Company and SBC each shall use all reasonable efforts
to cause to be delivered to the other party and its directors (i) letters of its
independent auditors, dated (A) the date on which the S-4 Registration Statement
shall become effective and (B) the Closing Date, and addressed to the other
party and its directors, in form and substance customary for "comfort" letters
delivered by independent public accountants in connection with registra tion
statements similar to the S-4 Registration Statement, and (ii) a letter from its
independent auditors addressed to SBC and the Company, dated as of the Closing
Date, stating their opinion that the Merger will qualify for
pooling-of-interests accounting treatment.
(c) The Company and SBC shall cooperate with the other and use (and
shall cause their respective Subsidi aries to use) their respective best efforts
to take or cause to be taken all actions, and do or cause to be done all things,
necessary, proper or advisable on its part under
-34-
this Agreement and the Stock Option Agreement and applicable Laws to consummate
and make effective the Merger and the other transactions contemplated by this
Agreement and the Stock Option Agreement as soon as practicable, including
preparing and filing as promptly as practicable all documentation to effect all
necessary applications, notices, petitions, filings and other documents and to
obtain as promptly as practicable all consents, registrations, approvals,
permits and authorizations necessary or advisable to be obtained from any third
party and/or any Governmental Entity in order to consummate the Merger or any of
the other transactions contemplated by this Agreement or the Stock Option
Agreement; provided, however, that nothing in this Section 6.5 shall require, or
be construed to require, SBC or the Company to proffer, or agree to, any
concession to any Governmental Entity if (i) such concession is reasonably
likely to have a Material Adverse Effect on the Company following the Effective
Time, (ii) such concession is reasonably likely to have a Material Adverse
Effect on SBC following the Effective Time (it being understood that, for this
purpose, materiality shall be determined with reference to the total enterprise
value of the Company and its Subsidiaries, taken as a whole, rather than that of
SBC and its Subsidiaries, taken as a whole, and taking into account any material
restrictions on the ability of SBC or any of its Significant Subsidiaries to
conduct its operations as currently conducted or as proposed to be conducted by
it). Subject to applicable laws relating to the exchange of information, SBC and
the Company shall have the right to review in advance, and to the extent
practicable each will consult the other on, all the information relating to SBC
or the Company, as the case may be, and any of their respective Subsidiaries,
that appears in any filing made with, or written materials submitted to, any
third party and/or any Governmental Entity in connection with the Merger and the
other transactions contemplated by this Agreement or the Stock Option Agreement.
In exercising the foregoing right, each of the Company and SBC shall act
reasonably and as promptly as practicable.
(d) Subject to applicable laws relating to the exchange of
information, the Company and SBC each shall, upon request by the other, furnish
the other with all information concerning itself, its Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the Prospectus/Proxy Statement, the S-4
Registration Statement
-35-
or any other statement, filing, notice or application made by or on behalf of
SBC, the Company or any of their respective Subsidiaries to any third party
and/or any Governmental Entity in connection with the Merger and the
transactions contemplated by this Agreement or the Stock Option Agreement.
(e) The Company and SBC each shall keep the other apprised of the
status of matters relating to comple tion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by SBC or the Company, as the case may be, or any of its
Subsidiaries, from any third party and/or any Governmental Entity with respect
to the Merger and the other transactions contemplated by this Agreement or the
Stock Option Agreement. Each of the Company and SBC shall give prompt notice to
the other of any change that is reasonably likely to result in a Material
Adverse Effect on it or of any failure of any of the conditions to the other
party's obligations to effect the Merger set forth in Article VII.
6.6. Access; Consultation. (a) Upon reasonable notice, and except as
may otherwise be required by appli cable law, the Company and SBC each shall
(and shall cause its Subsidiaries to) afford the other's and the other's
Subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by the other or any of the other's
Subsidiaries)(such officers, directors, employees, agents and representatives
being referred to in this Agreement, with respect to the Company or SBC, as the
context requires, as such party's "Representatives") reasonable access, during
normal business hours throughout the period prior to the Effective Time, to its
properties, books, contracts and records and, during such period, each shall
(and shall cause its Subsidiaries to) furnish promptly to the other all
information concerning its business, properties and personnel as may reasonably
be requested, provided that no investigation pursuant to this Section shall
affect or be deemed to modify any representation or warranty made by the
Company, SBC or Merger Sub hereunder, and provided, further, that the foregoing
shall not require the Company or SBC to permit any inspection, or to disclose
any information, that in the reasonable judgment of the Company or SBC, as the
case may be, would violate applicable law or any of its obligations with respect
to confidentiality or would result
-36-
in the disclosure of any trade secrets of third parties if the Company or SBC,
as the case may be, shall have used all reasonable efforts to obtain the consent
of such third party to such inspection or disclosure. All requests for
information made pursuant to this Section shall be directed to an executive
officer of the Company or SBC, as the case may be, or such Person as may be
designated by any such executive officer, as the case may be. All information
provided pursuant to this Section 6.6 shall be governed by the terms of the
Confidentiality Agreement.
(b) Subject to the Confidentiality Agreement and to Section 6.16, from
the date hereof to the Effective Time, SBC and the Company agree to consult with
each other on a regular basis on a schedule to be agreed with regard to their
respective operations.
(c) From the date hereof to the Effective Time, the Company agrees to
notify SBC in advance of any issuance by the Company or any of its Subsidiaries
of any long-term debt or preferred stock.
6.7. Affiliates. (a) Each of the Company and SBC shall deliver to the
other a letter identifying all Persons whom such party believes to be, at the
date of the Shareholders Meeting, "affiliates" of such party for purposes of
applicable interpretations regarding use of the pooling-of-interests accounting
method and, in the case of "affiliates" of the Company, for purposes of Rule 145
under the 1933 Act. Each of the Company and SBC shall use all reasonable efforts
to cause each Person who is identified as an "affiliate" in the letter referred
to above to deliver to SBC prior to the date of the Shareholders Meeting a
written agreement, in the form attached hereto as Exhibit C, in the case of
affiliates of the Company (the "Company Affiliate's Letter"), and Exhibit D, in
the case of affiliates of SBC (the "SBC Affiliate's Letter"). Prior to the
Effective Time, each of the Company and SBC shall use all reasonable efforts to
cause each additional Person who is identified as an "affiliate" to execute the
applicable written agreement as set forth in this Section 6.7.
(b) If the Merger would otherwise qualify for
pooling-of-interests accounting treatment, shares of SBC Common Stock issued to
such affiliates of the Company in exchange for Company Shares shall not be
transferable until such time as financial results covering at least 30 days of
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combined operations of SBC and the Company shall have been published within the
meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies, regardless of whether each such affiliate has provided the written
agreement referred to in this Section, except to the extent permitted by, and in
accordance with, SEC Accounting Series Release 135 and SEC Staff Accounting
Bulletins 65 and 76. Any Company Shares held by any such affiliate shall not be
transferable, regardless of whether such affiliate has provided the applicable
written agreement referred to in this Section, if such transfer, either alone or
in the aggregate with other transfers by affiliates, would preclude SBC's
ability to account for the business combination to be effected by the Merger as
a pooling of interests. The Company shall not register the transfer of any
Certificate, unless such transfer is made in compliance with the foregoing.
6.8. Stock Exchange Listing and De-listing. SBC shall use its best
efforts to cause the shares of SBC Common Stock to be issued in the Merger to be
approved for listing on the NYSE, subject to official notice of issuance, prior
to the Closing Date. The Surviving Corporation shall use its best efforts to
cause the Company Shares to be de-listed from the NYSE and the Pacific Exchange
and de-registered under the Exchange Act as soon as practicable following the
Effective Time.
6.9. Publicity. The initial press release with respect to the Merger
shall be a joint press release, and thereafter the Company and SBC each shall
consult with each other prior to issuing any press releases or otherwise making
public announcements with respect to the Merger and the other transactions
contemplated by this Agreement and the Stock Option Agreement and prior to
making any filings with any third party and/or any Governmental Entity
(including any national securities exchange) with respect thereto, except as may
be required by law or by obligations pursuant to any listing agreement with or
rules of any national securities exchange.
6.10. Benefits.
(a) Stock Options.
(i) At the Effective Time, each outstanding option to
purchase Company Shares (a "Company
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Option") under the Stock Plans, whether vested or unvested, shall be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such Company Option, after giving effect to any provision
requiring the vesting of any Company Option as a result of the transactions
contemplated by this Agreement, the same number of shares of SBC Common Stock as
the holder of such Company Option would have been entitled to receive pursuant
to the Merger had such holder exercised such Company Option in full immediately
prior to the Effective Time (rounded down to the nearest whole number) (a
"Substitute Option"), at an exercise price per share (rounded up to the nearest
whole cent) equal to (y) the aggregate exercise price for the Company Shares
otherwise purchasable pursuant to such Company Option divided by (z) the number
of full shares of SBC Common Stock deemed purchasable pursuant to such Company
Option in accordance with the foregoing. At or prior to the Effective Time, the
Company shall make all necessary arrangements with respect to the Stock Plans,
including any necessary amendments thereto, to permit the assumption of the
unexercised Company Options by SBC pursuant to this Section and no later than
five business days after the Effective Time SBC shall register under the
Securities Act of 1933 on Form S-8 or other appropriate form (and use its best
efforts to maintain the effectiveness thereof) shares of SBC Common Stock
issuable pursuant to all Substitute Options. As promptly as practicable after
the Effective Time, the Company shall deliver to the participants in the Stock
Plans appropriate notices setting forth such participants' rights pursuant to
such assumed Company Options.
(ii) Effective at the Effective Time, SBC shall assume
each Company Option in accordance with the terms of the Stock Plan under which
it was issued and the stock option agreement by which it is evidenced.
(b) Employee Benefits. SBC agrees that it shall cause the Surviving
Corporation for at least two years after the Effective Time to provide or cause
to be provided to employees of the Company and its Subsidiaries compensation and
benefit plans that are no less favorable, in the aggregate, than the Company's
Compensation and Benefit Plans; provided, however, if during this period SBC
implements any widespread increase or decrease in benefits under compensation
and benefit plans or in the cost thereof to participants under compensation and
benefit plans
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applicable to employees of SBC and its Subsidiaries (other than the Surviving
Corporation and its Subsidiaries), the Surviving Corporation shall
proportionately adjust the benefits under the Company's compensation and benefit
plans or the cost thereof to participants, and provided, further, with respect
to employees who are subject to collective bargaining, all benefits shall be
provided in accordance with the applicable collective bargaining agreement. SBC
shall, and shall cause the Surviving Corporation to, honor, pursuant to their
terms, all employee benefit obligations to current and former employees under
the Compensation and Benefit Plans.
6.11. Expenses. Except as otherwise provided in Section 6.18 or 8.5(b),
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the Merger and the other transactions
contemplated by this Agreement shall be paid by the party incurring such cost or
expense, except that expenses incurred in connection with the filing fee for the
S-4 Registration Statement and printing and mailing the Prospectus/Proxy
Statement and the S-4 Registration Statement and the filing fee under the HSR
Act shall be shared equally by SBC and the Company.
6.12. Indemnification; Directors' and Officers' Insurance. (a) From and
after the Effective Time, SBC agrees that it will indemnify and hold harmless
each present and former director and officer of the Company (when acting in such
capacity) determined as of the Effective Time (the "Indemnified Parties"),
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, "Costs") incurred
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertain ing
to matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent that the Company would have been permitted under Connecticut law and its
certificate of incorporation or by-laws in effect on the date hereof to
indemnify such Person (and SBC shall also advance expenses as incurred to the
fullest extent permitted under applicable law, provided 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).
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(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 6.12, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify SBC thereof, but the
failure to so notify shall not relieve SBC of any liability it may have to such
Indemnified Party if such failure does not materially prejudice SBC. In the
event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) SBC or the Surviving
Corporation shall have the right to assume the defense thereof and SBC shall not
be liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemni fied Parties in
connection with the defense thereof, except that if SBC or the Surviving
Corporation elects not to assume such defense or counsel for the Indemnified
Parties advises that there are issues which raise conflicts of interest between
SBC or the Surviving Corporation and the Indemnified Parties, the Indemnified
Parties may retain counsel satisfactory to them, and SBC or the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as state ments therefor are received; provided,
however, that SBC shall be obligated pursuant to this paragraph (b) to pay for
only one firm of counsel for all Indemnified Parties in any jurisdiction, (ii)
the Indemnified Parties will cooperate in the defense of any such matter, and
(iii) SBC shall not be liable for any settlement effected without its prior
written consent.
(c) SBC or the Surviving Corporation shall maintain a policy of
officers' and directors' liability insurance for acts and omissions occurring
prior to the Effective Time ("D&O Insurance") with coverage in amount and scope
at least as favorable as the Company's existing directors' and officers'
liability insurance coverage for a period of six years after the Effective Time;
provided, however, if the existing D&O Insurance expires, is terminated or
cancelled, or if the annual premium therefor is increased to an amount in excess
of 175% of the last annual premium paid prior to the date hereof (the "Current
Premium"), in each case during such six year period, SBC or the Surviving
Corporation will use its best efforts to obtain D&O Insurance in an amount and
scope as great as can be obtained for the remainder of such period for a premium
not in excess (on an annualized basis) of 175% of the Current Premium.
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(d) If SBC or the Surviving Corporation or any of its successors or
assigns (i) shall consolidate with or merge into any other corporation or entity
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or substantially all of its
properties and assets to any individual, corporation or other entity, then and
in each such case, proper provisions shall be made so that the successors and
assigns of SBC or the Surviving Corporation, as the case may be, shall assume
all of the obligations set forth in this Section.
(e) The provisions of this Section are intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, their heirs
and their representatives.
6.13. Takeover Statute. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement or the Stock Option Agreement, each party hereto and its board of
directors shall grant such approvals and take such actions as are necessary so
that such transactions may be consum mated as promptly as practicable on the
terms contemplated by this Agreement or the Stock Option Agreement or by the
Merger and otherwise act to eliminate or minimize the effects of such statute or
regulation on such transactions.
6.14. Dividends. The Company shall coordinate with SBC the declaration,
setting of record dates and payment dates of dividends on Company Shares so that
holders of Company Shares do not receive dividends on both Company Shares and
SBC Common Stock received in the Merger in respect of any calendar quarter or
fail to receive a dividend on either Company Shares or SBC Common Stock received
in the Merger in respect of any calendar quarter.
6.15. Confidentiality. The Company and SBC each acknowledges and
confirms that it has entered into a Confidentiality and Non-Disclosure
Agreement, dated October 22, 1997 (the "Confidentiality Agreement"), and that
the Confidentiality Agreement shall remain in full force and effect in
accordance with its terms, whether or not the Merger is consummated.
6.16. Control of the Company's Operations. Nothing contained in this
Agreement shall give SBC, directly
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or indirectly, rights to control or direct the Company's operations prior to the
Effective Time. Prior to the Effective Time, the Company shall exercise,
consistent with the terms and conditions of this Agreement, complete control and
supervision of its operations.
6.17. Tax Representation Letters. For purposes of the tax opinions
described in Sections 7.2(c) and 7.3(c) of this Agreement, each of the Company
and SBC shall provide representation letters, in form and substance reasonably
satisfactory to the Company and SBC, each dated as of the date that is two
business days prior to the date the Prospectus/Proxy Statement is first mailed
to shareholders of the Company and reissued as of the Closing Date.
6.18. Transfer Taxes. All state, local, foreign or provincial sales,
use, real property transfer, stock transfer or similar Taxes (including any
interest or penalties with respect thereto) attributable to the Merger
(collectively, the "Transfer Taxes") shall be timely paid by the Company, which
payments, if any, shall be made from the Escrow Account if required by Section
4.5.
ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Shareholder Approval. This Agreement shall have been duly approved
by holders of Company Shares constituting the Company Requisite Vote;
(b) NYSE Listing. The shares of SBC Common Stock issuable to the
Company shareholders pursuant to this Agreement shall have been approved for
listing on the NYSE subject to official notice of issuance.
(c) Governmental Consents. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and all material
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Company Required Consents and SBC Required Consents from or with the FCC, the
DPUC or any other Governmental Entity shall have been made or obtained pursuant
to a Final Order, free of any conditions adverse to the Company or SBC (other
than for conditions that (i) are not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Company following the
Effective Time, or (ii) are not reasonably likely to have a Material Adverse
Effect on SBC following the Effective Time (it being understood that, for this
purpose, materiality shall be determined with reference to the total enterprise
value of the Company and its Subsidiaries, taken as a whole, rather than that of
SBC and its Subsidiaries, taken as a whole, and taking into account any material
restrictions on the ability of SBC or any of its Significant Subsidiaries to
conduct its operations as currently conducted or as proposed to be conducted by
it)). For the purposes of this Agreement, "Final Order" means an action or
decision that has been granted as to which (a) no request for a stay or any
similar request is pending, no stay is in effect, the action or decision has not
been vacated, reversed, set aside, annulled or suspended and any deadline for
filing such a request that may be designated by statute or regulation has
passed, (b) no petition for rehearing or reconsideration or application for
review is pending and the time for the filing of any such petition or
application has passed, (c) none of the FCC, the DPUC or any other Governmental
Entity has the action or decision under reconsideration on its own motion and
the time within which it may effect such reconsideration has passed and (d) no
appeal is pending (including other administrative or judicial review) or in
effect and any deadline for filing any such appeal that may be specified by
statute or rule has passed, which in any such case (a), (b), (c) or (d) is
reasonably likely to result in vacating, reversing, setting aside, annulling,
suspending or modifying such action or decision (in any such case in a manner
which would have a Material Adverse Effect on SBC or the Company following the
Effective Time).
(d) Laws and Orders. No Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any Law (whether
temporary, preliminary or permanent) that is in effect and restrains, enjoins or
otherwise prohibits consummation of the Merger or the other transactions
contemplated by this Agreement or that is, individually or in the aggregate with
all other such Laws, reasonably likely to have a Material Adverse
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Effect on SBC or the Company (collectively, an "Order"), and none of the
Department of Justice, the Federal Trade Commission, the FCC or the DPUC shall
have instituted any proceeding or threatened in writing or publicly announced
its intention to institute any proceeding seeking any such Order.
(e) S-4. The S-4 Registration Statement shall have become effective
under the Securities Act. No stop order suspending the effectiveness of the S-4
Registration Statement shall have been issued, and no proceedings for that
purpose shall have been initiated or be threatened by the SEC.
7.2. Conditions to Obligations of SBC and Merger Sub. The obligations
of SBC and Merger Sub to effect the Merger are also subject to the satisfaction
or waiver by SBC at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement (i) to the extent qualified by
Material Adverse Effect shall be true and correct and (ii) to the extent not
qualified by Material Adverse Effect shall be true and correct, except that this
clause (ii) shall be deemed satisfied so long as any failures of such
representations and warranties to be true and correct, taken together, do not
have a Material Adverse Effect on the Company, in each case (i) and (ii), as of
the date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on
and as of the Closing Date, and SBC shall have received a certificate signed on
behalf of the Company by an executive officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed all material obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and SBC shall have received a
certificate signed on behalf of the Company by an executive officer of the
Company to such effect.
(c) Tax Opinion. SBC shall have received the opinion of Sullivan &
Cromwell, special counsel to SBC, dated the Closing Date, to the effect that the
Merger will
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be treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, and that each of SBC, Merger Sub and the
Company will be a party to that reorganization within the meaning of Section
368(b) of the Code; it being understood that in rendering such opinion, such tax
counsel shall be entitled to rely upon representations provided by the parties
hereto in the representation letters referred to in Section 6.17.
(d) Dissenting Shares. The Dissenting Shares shall not constitute more
than 9% of the aggregate number of Company Shares outstanding immediately prior
to the Effective Time provided, however, that this condition shall be deemed to
be waived by SBC if the condition set forth in Section 7.2(e) is deemed waived
by SBC pursuant to the proviso to Section 7.2(e).
(e) Accountants' Letter. SBC shall have received a letter from its
independent public accounting firm to the effect that the Merger will qualify
for "pooling-of-interests" accounting treatment; provided, however, that this
condition shall be deemed to be waived by SBC if SBC's independent accounting
firm shall have failed to deliver such letter solely as a result of one or more
SBC Pooling Actions.
For purposes of this Section 7.2(e), "SBC Pooling Action" shall mean
(i) any action taken by SBC or any of its Subsidiaries after the date hereof
that would prevent the Merger from qualifying for "pooling-of-interests"
accounting treatment if any of the executive officers of SBC actually knew or,
after appropriate inquiry, should have known that such action would prevent the
Merger from qualifying for "pooling-of-interests" accounting treatment, (ii) the
escrow arrangements referred to in Section 4.5 hereof, if the Company's
obligation to make such arrangements has not been waived by SBC in accordance
with Section 4.5 and (iii) any condition existing on the date hereof which, with
reference only to SBC and its Subsidiaries, would prevent the Merger from
qualifying for "pooling-of-interests" accounting treat ment under the currently
published and effective guidelines and interpretations of the American Institute
of Certified Public Accountants, the Financial Accounting Standards Board and
the SEC relating to "pooling-of-interests" accounting treatment.
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7.3. Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of SBC and Merger Sub set forth in this Agreement (i) to the extent qualified by
Material Adverse Effect shall be true and correct, and (ii) to the extent not
qualified by Material Adverse Effect shall be true and correct, except that this
clause (ii) shall be deemed satisfied so long as any failures of such
representations and warranties to be true and correct, taken together, do not
have a Material Adverse Effect on SBC, in each case (i) and (ii), as of the date
of this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date, and the Company shall have received a certificate signed on
behalf of SBC by an executive officer of SBC to such effect.
(b) Performance of Obligations of SBC and Merger Sub. Each of SBC and
Merger Sub shall have performed all material obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and the
Company shall have received a certificate signed on behalf of SBC and Merger Sub
by an executive officer of SBC to such effect.
(c) Tax Opinion. The Company shall have received the opinion of
Cravath, Swaine & Moore, counsel to the Company, dated the Closing Date, to the
effect that the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that each
of SBC, Merger Sub and the Company will be a party to that reorganization within
the meaning of Section 368(b) of the Code; it being understood that in rendering
such opinion, such tax counsel shall be entitled to rely upon representations
provided by the parties hereto in the representation letters referred to in
Section 6.17.
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ARTICLE VIII
Termination
8.1. Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by shareholders of the Company referred to in
Section 7.1(a), by mutual written consent of the Company and SBC, by action of
their respective boards of directors.
8.2. Termination by Either SBC or the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the board of directors of either SBC or the Company if (i) the
Merger shall not have been consummated by December 31, 1998, whether such date
is before or after the date of approval by the shareholders of the Company (the
"Termination Date"); provided, however, that if the Company or SBC determines
that additional time is necessary in connection with obtaining a Company
Required Consent or a SBC Required Consent from or with the FCC, the DPUC or any
other Governmental Entity, the Termination Date may be extended by the Company
or SBC from time to time by written notice to the other party to a date no later
than June 30, 1999 (the "Extended Termination Date"), (ii) the approval of the
Company's shareholders required by Section 7.1(a) shall not have been obtained
at a meeting duly convened therefor or at any adjournment or postponement
thereof or (iii) any Order permanently restraining, enjoining or otherwise
prohibiting consummation of the Merger shall become final and non-appealable
(whether before or after the approval by the shareholders of the Company);
provided, that the right to terminate this Agreement pursuant to clause (i)
above shall not be available to any party that has breached in any material
respect its obligations under this Agreement in any manner that shall have
proximately contributed to the failure of the Merger to be consummated.
8.3. Termination by the Company. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after
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the approval by shareholders of the Company referred to in Section 7.1(a), by
action of the board of directors of the Company:
(a) If (i) the Company shall not have willfully breached any of the
terms of this Agreement in a manner resulting in failure of a condition set
forth in Section 7.2(a) or 7.2(b), (ii) the board of directors of the Company
approves entering into a binding written agreement concerning a transaction that
constitutes a Superior Proposal and the Company notifies SBC in writing that the
Company wishes to enter into such agreement, (iii) SBC does not make, within
five business days of receipt of the Company's written notification of its
desire to enter into a binding agreement for a Superior Proposal, an offer that
the board of directors of the Company believes, in good faith after consultation
with its financial advisors, is at least as favorable, from a financial point of
view, to the shareholders of the Company as the Superior Proposal, and that
contains terms and conditions (other than with respect to type or amount of
consideration) that do not differ materially from either the terms and
conditions of this Agreement or the terms and conditions of the proposed
agreement for such Superior Proposal and (iv) the Company prior to such
termination pays to SBC in immediately available funds any fees required to be
paid pursuant to Section 8.5. The Company agrees to notify SBC promptly if its
desire to enter into a written agreement referred to in its notification shall
change at any time after giving such notification.
(b) If there has been a breach by SBC or Merger Sub of any
representation, warranty, covenant or agreement contained in this Agreement
which (i) would result in a failure of a condition set forth in Section 7.3(a)
or 7.3(b) and (ii) cannot be cured prior to the Extended Termination Date.
8.4. Termination by SBC. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by action of the
board of directors of SBC if (i) the board of directors of the Company shall
have withdrawn or adversely modified its approval or recommendation of this
Agreement or failed to reconfirm its recommendation of this Agreement within ten
business days after a written request by SBC to do so, provided that such a
request is made after the board of directors of the
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Company has taken any of the actions specified in clause (C) or (D) of the
proviso of Section 6.2 with respect to an Acquisition Proposal and such
Acquisition Proposal has not been rejected by such board of directors or
withdrawn, (ii) there has been a breach by the Company of any representation,
warranty, covenant or agreement contained in this Agreement which (A) would
result in a failure of a condition set forth in Section 7.2(a) or 7.2(b) and (B)
cannot be cured prior to the Extended Termination Date or (iii) if the Company
or any of its Representatives shall take any of the actions that would be
proscribed by Section 6.2 but for the exception therein allowing certain actions
to be taken pursuant to clause (C) or (D) of the proviso thereof (other than any
such actions taken pursuant to such clause (C) with respect to any bona fide
written Acquisition Proposal (received after the date hereof that was not
solicited by the Company after the date hereof) taken during the ten calendar
day period following receipt of such Acquisition Proposal by the Company if, and
only if, the Company receives such Acquisition Proposal during the Initial 15
Day Period). For purposes of this Agreement, the "Initial 15 Day Period" shall
mean the 15 calendar day period commencing with the first calendar day after
which this Agreement shall have been filed by SBC or the Company with the SEC as
an exhibit to a Current Report on Form 8-K under the Exchange Act.
8.5. Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, this Agreement (other than as set forth in Section 9.1) shall
become void and of no effect with no liability on the part of any party hereto
(or of any of its directors, officers, employees, agents, legal or financial
advisors or other representatives); provided, however, except as otherwise
provided herein, no such termination shall relieve any party hereto of any
liability or damages resulting from any willful and intentional breach of this
Agreement (in any such case in which SBC is not the breaching party, to the
extent any such liability or damages exceed any Termination Fee which may have
been paid to SBC pursuant to Section 8.5(b)).
(b) In the event that (i) after the date hereof a bona fide Acquisition
Proposal with respect to the Company or any Subsidiary of the Company that was
not solicited by the Company after the date hereof shall have been made to
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the Company or any of its Subsidiaries and made known to shareholders generally
or has been made directly to shareholders generally or any Person shall have
publicly announced an intention (whether or not conditional) to make a bona fide
Acquisition Proposal with respect to the Company or any Subsidiary of the
Company and such Acquisition Proposal or announced intention shall not have been
withdrawn prior to the Shareholders Meeting and thereafter this Agreement is
terminated by either SBC or the Company pursuant to Section 8.2(ii) and within
nine months after such termination the Company shall have entered into an
agreement to consummate a transaction that would constitute an Acquisition
Proposal if it were the subject of a proposal, or (ii) this Agreement is
terminated (x) by the Company pursuant to Section 8.3(a) or (y) by SBC pursuant
to Section 8.4(i), (ii) (solely with respect to a willful and intentional breach
of Section 6.2) or (iii), then the Company shall promptly, but in no event later
than two days after the date of such termination (except as otherwise provided
in Section 8.3(a)) or, in the case of a termination pursuant to Section 8.2(ii),
two days after the relevant agreement is entered into, pay SBC a fee equal to
$125 million (the "Termination Fee"), which amount shall be exclusive of any
expenses to be paid pursuant to Section 6.11, payable by wire transfer of same
day funds. The Company acknowledges that the agreements contained in this
Section 8.5(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, SBC and Merger Sub would not
enter into this Agreement; accordingly, if the Company fails to promptly pay the
amount due pursuant to this Section 8.5(b), and, in order to obtain such
payment, SBC or Merger Sub commences a suit which results in a judgment against
the Company for the fee set forth in this paragraph (b), the Company shall pay
to SBC or Merger Sub its costs and expenses (including attorneys' fees) in
connection with such suit, together with interest on the amount of the fee at
the prime rate of Citibank N.A. in effect on the date such payment was required
to be made. Solely for purposes of Section 8.5(b)(i), the term "Acquisition
Proposal" shall have the meaning assigned to such term in Section 6.2(a) except
that references to "15%" in the definition of "Acquisition Proposal" in Section
6.2(a) shall be deemed to be references to 35% and the reference in such
definition to "or any of its Subsidiaries listed on Schedule 1" shall be deemed
to be a reference to "or the Southern New England Telephone Company".
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ARTICLE IX
Miscellaneous and General
9.1. Survival. This Article IX (other than Sections 9.2 and 9.4) and
the agreements of the Company, SBC and Merger Sub contained in Sections 6.10
(Benefits), 6.11 (Expenses) and 6.12 (Indemnification; Directors' and Officers'
Insurance) shall survive the consummation of the Merger. This Article IX (other
than Section 9.2 (Modification or Amendment), Section 9.3 (Waiver of Conditions)
and Section 9.14 (Assignment)) and the agreements of the Company, SBC and Merger
Sub contained in Section 6.11 (Expenses), Section 6.15 (Confidentiality) and
Section 8.5 (Effect of Termination and Abandonment) shall survive the
termination of this Agreement. All other representations, warranties, covenants
and agreements in this Agreement shall not survive the consummation of the
Merger or the termination of this Agreement.
9.2. Modification or Amendment. Subject to the provisions of applicable
law, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
9.3. Waiver of Conditions. (a) Any provision of this Agreement may be
waived prior to the Effective Time if, and only if, such waiver is in writing
and signed by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. Except as otherwise herein
provided, the rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each such counter part being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
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9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. (A) THIS AGREEMENT
SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED,
CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF
DELAWARE, WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF, EXCEPT THAT
THE MERGER SHALL BE GOVERNED BY AND IN ACCORDANCE WITH THE CBCA, TO THE EXTENT
APPLICABLE. The parties hereby irrevocably submit to the jurisdiction of the
Federal courts of the United States of America located in the State of Delaware
solely in respect of the interpreta tion and enforcement of the provisions of
this Agreement and of the documents referred to in this Agreement, and in
respect of the transactions contemplated hereby and thereby, and hereby waive,
and agree not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it is not
subject thereto or that such action, suit or proceeding may not be brought or is
not maintainable in said courts or that the venue thereof may not be appropriate
or that this Agreement or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such a Federal court.
The parties hereby consent to and grant any such court jurisdiction over the
Person of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 9.6 or in such other manner as may
be permitted by law, shall be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS
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AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 9.5.
9.6. Notices. Notices, requests, instructions or other documents to be
given under this Agreement shall be in writing and shall be deemed given, (i)
three business days following sending by registered or certified mail, postage
prepaid, (ii) when sent if sent by facsimile, provided that the fax is promptly
confirmed by telephone confirmation thereof, (iii) when delivered, if delivered
personally to the intended recipient, and (iv) one business day later, if sent
by overnight delivery via a national courier service, and in each case,
addressed to a party at the following address for such party:
if to SBC or Merger Sub
SBC Communications Inc.
175 E. Houston
San Antonio, Texas 78205
Attention: James D. Ellis, Esq.
with copies to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004-2498
Attention: Benjamin F. Stapleton, Esq.
if to the Company
Southern New England Telecommunications
Corporation
227 Church Street
New Haven, Connecticut 06510
Attention: Madeline DeMatteo, Esq.
with copies to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attention: Robert A. Kindler, Esq.
Robert I. Townsend III, Esq.
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or to such other Persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.7. Entire Agreement. This Agreement (includ ing any exhibits hereto),
the Stock Option Agreement, the Confidentiality Agreement, the Company
Disclosure Letter and the SBC Disclosure Letter constitute the entire agreement,
and supersede all other prior agreements, understandings, representations and
warranties both written and oral, among the parties with respect to the subject
matter hereof. EACH PARTY HERETO AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN THIS AGREEMENT AND THE STOCK OPTION AGREEMENT, NEITHER
SBC AND MERGER SUB NOR THE COMPANY MAKES ANY OTHER REPRESENTATIONS OR
WARRANTIES, AND EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES
MADE BY ITSELF OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL
AND LEGAL ADVISORS OR OTHER REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND
DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR THE OTHER'S
REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY
ONE OR MORE OF THE FOREGOING.
9.8. No Third Party Beneficiaries. Except as provided in Section 6.12
(Indemnification; Directors' and Officers' Insurance), this Agreement is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
9.9. Obligations of SBC and of the Company. Whenever this Agreement
requires a Subsidiary of SBC to take any action, such requirement shall be
deemed to include an undertaking on the part of SBC to cause such Subsidiary to
take such action. Whenever this Agreement requires a Subsidiary of the Company
to take any action, such require ment shall be deemed to include an undertaking
on the part of the Company to cause such Subsidiary to take such action and,
after the Effective Time, on the part of the Surviving Corporation to cause such
Subsidiary to take such action.
9.10. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or
-55-
unenforceable, (a) a suitable and equitable provision shallbe substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of such provision to other
Persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
9.11. Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
9.12. Assignment. This Agreement shall not be assignable by operation
of law or otherwise; provided, however, that SBC may designate prior to the
Effective Time, by written notice to the Company, another wholly owned direct or
indirect Subsidiary to be a party to the Merger in lieu of Merger Sub, in which
event all references herein to Merger Sub shall be deemed references to such
other Subsidiary (except with respect to representations and warranties made
herein with respect to Merger Sub as of the date hereof) and all representations
and warranties made herein with respect to Merger Sub as of the date hereof
shall be also made with respect to such other subsidiary as of the date of such
designation. Any assignment in contravention of the preceding sentence shall be
null and void.
-56-
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the date first
written above.
SOUTHERN NEW ENGLAND
TELECOMMUNICATIONS CORPORATION
By: /s/ Daniel J. Miglio
------------------------------
Name: Daniel J. Miglio
Title: Chairman of the Board
and Chief Executive
Officer
SBC COMMUNICATIONS INC.
By: /s/ Edward E. Whitacre, Jr.
------------------------------
Name: Edward E. Whitacre, Jr.
Title: Chairman of the Board
and Chief Executive
Officer
SBC (CT), INC.
By: /s/ Edward E. Whitacre, Jr.
------------------------------
Name: Edward E. Whitacre, Jr.
Title: President
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EXHIBIT A
STOCK OPTION AGREEMENT
A-1
EXHIBIT A
STOCK OPTION AGREEMENT, dated as of the 4th day of January, 1998 (this
"Agreement"), between Southern New England Telecommunications Corporation, a
Connecticut corporation ("Issuer"), and SBC Communications Inc., a Delaware
corporation ("Grantee").
RECITALS
(a) The Merger Agreement. Prior to the entry into this Agreement and
prior to the grant of the Option (as defined in Section 1(a)), Grantee, SBC
(CT), Inc., a wholly-owned subsidiary of Grantee ("Merger Sub"), and Issuer have
entered into an Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement"), pursuant to which Grantee and Issuer intend to effect a
merger of Merger Sub with and into Issuer (the "Merger").
(b) The Option Agreement. As an inducement and condition to Grantee's
and Merger Sub's willingness to enter into the Merger Agreement, and in
consideration thereof, the board of directors of Issuer has approved the grant
to Grantee of the Option pursuant to this Agreement; provided, that such grant
was expressly conditioned upon, and made of no effect until after, execution and
delivery by Issuer, Grantee and Merger Sub of the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. The Option. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 13,266,587 fully paid and nonassessable shares of common stock, having a par
value of one dollar per share ("Common Stock"), of Issuer at a price per share
in cash equal to $65.00 (the "Option Price"); provided, however, that in no
event shall the number of shares for which the Option is exercisable exceed
19.9% of the shares of Common Stock issued and out standing at the time of
exercise (without giving effect to the shares of Common Stock issued or issuable
under the Option) (the "Maximum Applicable Percentage"). The number of shares of
Common Stock purchasable upon exercise of the Option and the Option Price are
subject to adjustment as set forth herein.
(b) In the event that any additional shares of Common Stock are issued
or otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the aggregate number of shares of Common Stock
purchasable upon exercise of the Option (inclusive of shares, if any, previously
purchased upon exercise of the Option) shall automatically be increased (without
any further action on the part of Issuer or Grantee being neces sary) so that,
after such issuance, it equals the Maximum Applicable Percentage. Any such
increase shall not affect the Option Price.
2. Exercise; Closing;. (a) Conditions to Exer cise; Termination.
Grantee or any other person that shall become a holder of all or a part of the
Option in accordance with the terms of this Agreement (each such person being
referred to herein as the "Holder") may exercise the Option, in whole or in
part, by delivering a written notice thereof as provided in Section 2(d) within
90 days of the occurrence of a Triggering Event (as defined in Section 2(b))
unless prior to such Triggering Event the Effective Time (as defined in the
Merger Agreement) shall have occurred. The Option shall terminate upon either
(i) the occurrence of the Effective Time or (ii) the close of business on the
earlier of (x) the day 90 days after the date that Grantee becomes entitled to
receive the Termination Fee (as defined in the Merger Agreement) and (y) the
date that Grantee is no longer potentially entitled to receive the Termination
Fee, in each case under Section 8.5(b) of the Merger Agreement.
(b) Triggering Event. A "Triggering Event" shall have occurred if the
Merger Agreement is terminated and Grantee then or thereafter becomes entitled
to receive the Termination Fee pursuant to Section 8.5(b) of the Merger
Agreement.
(c) Notice of Trigger Event by Issuer. Issuer shall notify Grantee
promptly in writing of the occurrence of any Triggering Event, it being
understood that the giving of such notice by Issuer shall not be a condition to
the right of the Holder to exercise the Option.
(d) Notice of Exercise by Grantee. If a Holder shall be entitled to and
wishes to exercise the Option, it shall send to Issuer a written notice (the
date of which is referred to herein as the "Notice Date") specifying (i) the
total number of shares that the Holder will purchase pursu ant to such exercise
and (ii) a place and date (a "Closing Date") not earlier than three business
days nor later than
-2-
60 business days from the Notice Date for the closing of such purchase (a
"Closing"); provided, that if a filing is required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), or prior
notification to or approval of the FCC, the CDPUC or any other regulatory
authority is required in connection with such purchase, the Holder or Issuer, as
required, promptly after the giving of such notice shall file the required
notice or application for approval and shall expeditiously process the same and
the period of time referred to in clause (ii) shall commence on the date on
which the Holder furnishes to Issuer a supplemental written notice setting forth
the Closing Date, which notice shall be furnished as promptly as practicable
after all required notification periods shall have expired or been terminated
and all required approvals shall have been obtained and all requisite waiting
periods shall have passed. Each of the Holder and the Issuer agrees to use all
reasonable efforts to cooperate with and provide information to Issuer or
Holder, as the case may be, for the purpose of any required notice or
application for approval.
(e) Payment of Purchase Price. At each Closing, the Holder shall pay to
Issuer the aggregate purchase price for the shares of Common Stock purchased
pursuant to the exercise of the Option in immediately available funds by a wire
transfer to a bank account designated by Issuer; provided, that failure or
refusal of Issuer to designate such a bank account shall not preclude the Holder
from exercising the Option, in whole or in part.
(f) Delivery of Common Stock. At such Closing, simultaneously with the
payment of the purchase price by the Holder, Issuer shall deliver to the Holder
a certificate or certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option shall be exercised in part only, a
new Option evidencing the rights of the Holder to purchase the balance (as
adjusted pursuant to Section 1(b)) of the shares then purchasable hereunder.
(g) Restrictive Legend. Certificates for Common Stock delivered at a
Closing may be endorsed with a restric tive legend that shall read substantially
as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder hereof
and Issuer, a copy of which agreement is on file at the principal office of
Issuer, and to resale restrictions arising under the Securities
-3-
Act of 1933, as amended. A copy of the aforemen tioned agreement will be
mailed to the holder hereof without charge promptly after receipt by Issuer
of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "Securities Act"), in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the Securities and Exchange Commission, or a written opinion of
counsel, in form and substance reasonably satisfactory to Issuer, to the effect
that such legend is not required for purposes of the Securities Act; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) both are satisfied. In
addition, such certificates shall bear any other legend as may be required by
applicable law.
(h) Ownership of Record; Tender of Purchase Price; Expenses. Upon the
giving by the Holder to Issuer of a written notice of exercise referred to in
Section 2(e) and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates repre
senting such shares of Common Stock shall not have been delivered to the Holder.
Issuer shall pay all expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
3. Covenants of Issuer. In addition to its other agreements and
covenants herein, Issuer agrees:
(a) Shares Reserved for Issuance. To maintain, free from preemptive
rights, sufficient authorized but unissued or treasury shares of Common Stock so
that the Option may be fully exercised without additional authoriza tion of
Common Stock after giving effect to all other
-4-
options, warrants, convertible securities and other rights of third parties to
purchase shares of Common Stock from Issuer, or to issue the appropriate number
of shares of Common Stock pursuant to the terms of this Agreement;
(b) No Avoidance. Not to avoid or seek to avoid (whether by charter
amendment or through reorganization, consolidation, merger, issuance of rights,
dissolution or sale of assets, or by any other voluntary act) the observance or
performance of any of the covenants, agreements or conditions to be observed or
performed hereunder by Issuer; and
(c) Further Assurances. Promptly after the date hereof to take all
actions as may from time to time be required (including (i) complying with all
applicable premerger notification, reporting and waiting period requirements
under the HSR Act and (ii) in the event that prior approval of or notice to the
FCC, the CDPUC or any other regulatory authority is necessary under any
applicable federal, state or local law before the Option may be exercised,
cooperating fully with the Holder in preparing and processing the required
applications or notices) in order to permit each Holder to exercise the Option
and purchase shares of Common Stock pursuant to such exercise and to take all
action necessary to protect the rights of the Holder against dilution.
4. Representations and Warranties of Issuer. Issuer hereby makes each
of the representations and warranties contained in Sections 5.1(b)(ii), 5.2(a)
and 5.2(b) of the Merger Agreement as they relate to this Agreement as if such
representations and warranties were set forth herein. Issuer hereby further
represents and warrants to Grantee that all shares of Common Stock, upon
issuance pursuant to the Option, will be delivered free and clear of all claims,
liens, encumbrances, and security interests (other than those created by this
Agreement) and not subject to any preemptive rights.
5. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that Grantee has all requisite corporate power and
authority and has taken all corporate action necessary in order to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby; this Agreement has been duly and validly
executed and delivered by Grantee and constitutes a valid and binding agreement
of Grantee enforceable against Grantee in
-5-
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affect ing creditors' rights and to general equity principles.
6. Exchange; Replacement. This Agreement and the Option granted hereby
are exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal office of Issuer,
for other Agreements providing for Options of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable at such time hereunder, subject to corresponding
adjustments in the number of shares of Common Stock purchasable upon exercise so
that the aggregate number of such shares under all Stock Option Agreements
issued in respect of this Agreement shall not exceed the Maximum Applicable
Percentage. Unless the context shall require otherwise, the terms "Agreement"
and "Option" as used herein include any Stock Option Agreements and related
Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon (i) receipt by Issuer of evidence reason ably satisfactory to it
of the loss, theft, destruction, or mutilation of this Agreement, (ii) receipt
by Issuer of reasonably satisfactory indemnification in the case of loss, theft
or destruction and (iii) surrender and cancellation of this Agreement in the
case of mutilation, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by any person other than the holder of the new Agreement.
7. Adjustments. In addition to the adjustment to the total number of
shares of Common Stock purchasable upon exercise of the Option pursuant to
Section 1(b), the total number of shares of Common Stock purchasable upon the
exercise hereof and the Option Price shall be subject to adjustment from time to
time as follows:
(a) In the event of any change in the outstanding shares of Common
Stock by reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares or the like, the
type and number of shares of Common Stock purchasable upon
-6-
exercise of the Option shall be appropriately adjusted, and proper provision
shall be made in the agreements governing any such transaction, so that (i) any
Holder shall receive upon exercise of the Option the number and class of shares,
other securities, property or cash that such Holder would have received in
respect of the shares of Common Stock purchas able upon exercise of the Option
if the Option had been exercised and such shares of Common Stock had been issued
to such Holder immediately prior to such event or the record date therefor, as
applicable; and (ii) in the event any additional shares of Common Stock are to
be issued or otherwise become outstanding as a result of any such change (other
than pursuant to an exercise of the Option), the number of shares of Common
Stock purchasable upon exercise of the Option shall be increased so that, after
such issuance and together with shares of Common Stock previously issued
pursuant to the exercise of the Option (as adjusted on account of any of the
foregoing changes in the Common Stock), the number of shares so purchasable
equals the Maximum Applicable Percentage of the number of shares of Common Stock
issued and outstanding immediately after the consummation of such change; and
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 7, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which is equal to the number of shares of Common Stock purchasable prior to
the adjustment and the denominator of which is equal to the number of shares of
Common Stock purchasable after the adjustment.
8. Registration. (a) Upon the occurrence of a Triggering Event prior to
an Exercise Termination Event, Issuer shall, at the request of Grantee delivered
in the written notice of exercise of the Option provided for in Section 2(e), as
promptly as practicable prepare, file and keep current a shelf registration
statement under the Securities Act covering any or all shares issued and
issuable pursuant to the Option and shall use its best efforts to cause such
registration statement to become effective and remain current in order to permit
the sale or other disposition of any shares of Common Stock issued upon total or
partial exercise of the Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee; provided, however, that Issuer may postpone
filing a registration statement relating to a registration request by Grantee
under this Section 8 for a period of time (not in excess of 30 days) if in its
judgment such filing would require the disclosure of material information that
Issuer has a bona fide business purpose for preserving as confidential. Issuer
will use its best efforts to cause
-7-
such registration statement first to become effective and then to remain
effective for 270 days from the day such registration statement first becomes
effective or until such earlier date as all shares registered shall have been
sold by Grantee. In connection with any such registration, Issuer and Grantee
shall provide each other with representa tions, warranties, indemnities and
other agreements customarily given in connection with such registrations. If
requested by Grantee in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating Issuer in respect of representations,
warranties, indemnities, contribution and other agreements customarily made by
issuers in such underwriting agreements.
(b) In the event that Grantee so requests, the closing of the sale or
other disposition of the Common Stock or other securities pursuant to a
registration statement filed pursuant to Section 8(a) shall occur substantially
simultaneously with the exercise of the Option.
9. Repurchase of Option and/or Shares. (a) Repurchase; Repurchase
Price. Upon the occurrence of a Triggering Event prior to an Exercise
Termination Event, (i) at the request of a Holder, delivered in writing within
180 days of such occurrence (or such later period as pro vided in Section 2(e)
with respect to any required notice or application or in Section 10), Issuer
shall repurchase the Option from the Holder, in whole or in part, at a price
(the "Option Repurchase Price") equal to the number of shares of Common Stock
then purchasable upon exercise of the Option (or such lesser number of shares as
may be designated in the Repurchase Notice (as defined below)) multiplied by the
amount by which the market/offer price (as defined below) exceeds the Option
Price and (ii) at the request of a Holder or any person who has been a Holder
(for purposes of this Section 9 only, each such person being referred to as a
"Holder"), delivered in writing within 180 days of such occurrence (or such
later period as provided in Section 2(e) with respect to any required notice or
application or in Section 10), Issuer shall repurchase such number of Option
Shares from such Holder as the Holder shall designate in the Repurchase Notice
at a price (the "Option Share Repurchase Price") equal to the number of shares
designated multiplied by the market/offer price. The term "market/offer price"
shall mean the highest of (x) the price per share of Common Stock at which a
tender or exchange offer for Common Stock has been made, (y) the price per share
of Common Stock to be paid by any third party pursuant to an agreement with
Issuer
-8-
and (z) the highest closing price for shares of Common Stock on the NYSE (or, if
the Common Stock is not then listed on the NYSE, any other national securities
exchange or auto mated quotation system on which the Common Stock is then listed
or quoted) within the six-month period immediately preceding the delivery of the
Repurchase Notice. In the event that a tender or exchange offer is made for the
Common Stock or an agreement is entered into for a merger, share exchange,
consolidation or reorganization involving consid eration other than cash, the
value of the securities or other property issuable or deliverable in exchange
for the Common Stock shall be determined in good faith by a nationally
recognized investment banking firm selected by Issuer.
(b) Method of Repurchase. A Holder may exercise its right to require
Issuer to repurchase the Option, in whole or in part, and/or any Option Shares
then owned by such Holder pursuant to this Section 9 by surrendering for such
purpose to Issuer, at its principal office, this Agreement or certificates for
Option Shares, as applicable, accompanied by a written notice or notices stating
that the Holder elects to require Issuer to repurchase the Option and/or such
Option Shares in accordance with the provisions of this Section 9 (each such
notice, a "Repurchase Notice"). Within two business days after the surrender of
the Option and/or certificates representing Option Shares and the receipt of the
Repurchase Notice relating thereto, Issuer shall deliver or cause to be
delivered to the Holder the applicable Option Repurchase Price and/or the Option
Share Repurchase Price or, in either case, the portion thereof that Issuer is
not then prohibited under applicable law and regulation from so delivering. In
the event that the Repurchase Notice shall request the repurchase of the Option
in part, Issuer shall deliver with the Option Repurchase Price a new Stock
Option Agreement evidencing the right of the Holder to purchase that number of
shares of Common Stock purchasable pursuant to the Option at the time of
delivery of the Repurchase Notice minus the number of shares of Common Stock
represented by that portion of the Option then being repurchased.
(c) Effect of Statutory or Regulatory Restraints on Repurchase. To the
extent that, upon or following the delivery of a Repurchase Notice, Issuer is
prohibited under applicable law or regulation from repurchasing the Option (or
portion thereof) and/or any Option Shares subject to such Repurchase Notice (and
Issuer hereby undertakes to use its reasonable best efforts to obtain all
required regula-
-9-
tory and legal approvals and to file any required notices as promptly as
practicable in order to accomplish such repur chase), Issuer shall immediately
so notify the Holder in writing and thereafter deliver or cause to be delivered,
from time to time, to the Holder the portion of the Option Repurchase Price and
the Option Share Repurchase Price that Issuer is no longer prohibited from
delivering, within 2 business days after the date on which it is no longer so
prohibited; provided, however, that upon notification by Issuer in writing of
such prohibition, the Holder may, within 5 days of receipt of such notification
from Issuer, revoke in writing its Repurchase Notice, whether in whole or to the
extent of the prohibition, whereupon, in the latter case, Issuer shall promptly
(i) deliver to the Holder that portion of the Option Repurchase Price and/or the
Option Share Repurchase Price that Issuer is not prohibited from delivering; and
(ii) deliver to the Holder, as appropriate, (A) with respect to the Option, a
new Stock Option Agreement evidencing the right of the Holder to purchase that
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the Repurchase Notice less
the number of shares as to which the Option Repurchase Price has theretofore
been delivered to the Holder, and/or (B) with respect to Option Shares, a
certificate for the Option Shares as to which the Option Share Repurchase Price
has not theretofore been delivered to the Holder. Notwithstanding anything to
the contrary in this Agreement, including, without limitation, the time
limitations on the exercise of the Option, the Holder may exercise the Option
for 180 days after a notice of revocation has been issued pursuant to this
Section 9(c).
(d) Acquisition Transactions. In addition to any other restrictions or
covenants, Issuer hereby agrees that, in the event that a Holder delivers a
Repurchase Notice, it shall not enter or agree to enter into any Acquisition
Transaction unless the other party or parties thereto agree to assume in writing
Issuer's obligations under Section 9(a) and, notwithstanding any notice of
revocation delivered pursuant to the proviso to Section 9(c), a Holder may
require such other party or parties to perform Issuer's obligations under
Section 9(a) unless such party or parties are pro hibited by law or regulation
from such performance, in which case such party or parties shall be subject to
the obliga tions of the Issuer under Section 9(c).
10. Extension of Exercise Periods. The 180-day periods for exercise of
certain rights under Sections 2 and 9 shall be extended in each such case at the
request of the
-10-
Holder to the extent necessary to avoid liability by the Holder under Section
16(b) of the Exchange Act by reason of such exercise.
11. Assignment. Neither party hereto may assign any of its rights or
obligations under this Agreement or the Option to any other person without the
express written consent of the other party except that, in the event that a
Triggering Event shall have occurred, Grantee may assign the Option, in whole or
in part. Any attempted assignment in contravention of the preceding sentence
shall be null and void.
12. Filings; Other Actions. Each of Grantee and Issuer will use its
best efforts to make all filings with, and to obtain consents of, all third
parties and govern mental authorities necessary for the consummation of the
transactions contemplated by this Agreement.
13. Specific Performance. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be specifically
enforceable through injunctive or other equitable relief.
14. Severability; Etc. If any term, provision, covenant, or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of compe tent jurisdiction to be invalid, void, or unenforceable, the
remainder of the terms, provisions, covenants, and restric tions contained in
this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired, or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 9, the full number of shares of
Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Sections
1(b) and 7 hereof), it is the express intention of Issuer to allow the Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
15. Notices. All notices, requests, instruc tions, or other documents
to be given hereunder shall be in writing and shall be deemed given (i) three
business days following sending by registered or certified mail, postage
prepaid, (ii) when sent if sent by facsimile, provided that the fax is promptly
confirmed by telephone confirmation thereof, (iii) when delivered, if delivered
personally to
-11-
the intended recipient, and (iv) one business day later, if sent by overnight
delivery via a national courier service, in each case at the respective
addresses of the parties set forth in the Merger Agreement.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN
ALL RESPECTS SHALL BE INTER PRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE
WITH THE LAW OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES THEREOF, EXCEPT TO THE EXTENT THAT THE CONNECTICUT BUSINESS
CORPORATION ACT IS APPLICABLE HERETO.
17. Expenses. Except as otherwise expressly pro vided herein or in the
Merger Agreement, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such expense, including fees and expenses of its own
financial consultants, investment bankers, accountants, and counsel.
18. Entire Agreement, Etc. This Agreement and the Merger Agreement
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties, both written and oral, between
the parties, with respect to the subject matter hereof. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors and permitted assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
19. Limitation on Profit. (a) Notwithstanding any other provision of
this Agreement, in no event shall the Grantee's Total Profit (as hereinafter
defined) plus any Termination Fee paid to Grantee pursuant to Section 8.5(b) of
the Merger Agreement exceed in the aggregate $175 million and, if it otherwise
would exceed such amount, the Grantee, at its sole election, shall either (i)
reduce the number of shares of Common Stock subject to this Option, (ii) deliver
to the Issuer for cancellation Option Shares previously purchased by Grantee,
(iii) pay cash to the Issuer, or (iv) any combination thereof, so that Grantee's
realized Total Profit, when aggregated with such Termination Fee so paid to
Grantee shall not exceed $175 million after taking into account the foregoing
actions.
-12-
(b) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below) which, together
with any Termination Fee theretofore paid to Grantee would exceed $175 million;
provided, that nothing in this sentence shall restrict any exercise of the
Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) (x) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof) or any
Option Shares pursuant to Section 9, less, in the case of any repurchase of
Option Shares, (y) the Grantee's purchase price for such Option Shares, as the
case may be, (ii) (x) the net cash amounts received by Grantee pursuant to the
sale of Option Shares (or any other securities into which such Option Shares are
converted or exchanged) to any unaffiliated party, less (y) the Grantee's
purchase price of such Option Shares, and (iii) the net cash amounts received by
Grantee on the transfer of the Option (or any portion thereof) to any
unaffiliated party.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of shares as to which Grantee may propose to exercise this Option
shall be the Total Profit determined as of the date of such proposal assuming
that this Option were exercised on such date for such number of shares and
assuming that such shares, together with all other Option Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price for the Common Stock as of the close of business on the preceding trading
day (less customary brokerage commissions).
20. Captions. The Article, Section and paragraph captions herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
-13
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the date first
written above.
SOUTHERN NEW ENGLAND
TELECOMMUNICATIONS CORPORATION
By:________________________________
Name:
Title:
SBC COMMUNICATIONS INC.
By:________________________________
Name:
Title:
-14-
EXHIBIT B
AMENDMENTS TO COMPANY BY-LAWS
B-1
EXHIBIT B
AMENDMENTS TO THE BY-LAWS OF THE COMPANY
Article II and Article III of the By-laws of the Company shall be amended at the
Effective Time to read in their entirety as follows:
"ARTICLE II
BOARD OF DIRECTORS
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, subject to any limitation set
forth in the Certificate of Incorporation. The Board of Directors shall consist
of one or more members ("Directors"), the number thereof to be determined from
time to time by the Board or by the holders of shares of the Corporation
entitled to vote generally in the election of Directors, except as a greater
number may be required to give effect to the rights of the holders of any class
of preferred or preference stock or any series thereof to elect additional
Directors under specified circumstances. Directors need not be shareholders and
shall be elected and shall hold office in accordance with the provisions of the
Certificate of Incorporation and these By-laws.
Subject to the rights of the holders of any class of preferred or
preference stock or any series thereof to elect additional Directors under
specified circumstances, vacancies in the Board resulting from any increase in
the number of directorships or any vacancies resulting from death, resignation,
disqualification, removal from office or other cause shall be filled by a
majority vote of the Directors then in office even though less than a quorum of
the Board, or by the sole remaining Director, and Directors so chosen shall hold
office until the next annual meeting of shareholders following their election
and until such Directors' successors shall have been elected and qualified. A
reduction of the number of directorships shall not remove any Director in office
or shorten his term.
Subject to the rights of the holders of any class of preferred or
preference stock or any series thereof to elect Directors under specified
circumstances, any Director may be removed from office at any time, but only
either (i) by the vote of the holders of a majority of the shares of the
Corporation then entitled to vote generally in the election of Directors, with
or without cause, at a meeting called for the purpose of removing such Director,
the notice for which meeting must state that the purpose of the meeting, or one
of the purposes, is removal of the Director or (ii) by the Board pursuant to a
resolution approved by a majority of the entire Board, upon not less than ten or
more than sixty days' written notice of the meeting at which said resolution is
to be presented.
At the meeting of the Directors held immediately after the annual
meeting of the shareholders, or at any meeting of the Directors held in lieu of
such meeting, the Board
shall elect a Chairman of the Board, a President, a Secretary and other officers
of the Corporation.
ARTICLE III
MEETINGS OF DIRECTORS
Regular meetings of the Directors may be held at such place within or
without the State of Connecticut and at such time as the Directors may from time
to time determine, and if so determined notice thereof need not be given.
Special meetings of the Directors may be held at any time or place
whenever called by the Chairman of the Board, by the Chief Executive Officer or
by any two directors. A written or printed notice of the time and place of every
special meeting of the Board shall be given by the Secretary by mailing such
notice to each and every Director, addressed to him at his usual place of
business or such address as may appear on the books of the Corporation, at least
two days before the time named for the meeting or by providing notice
personally, telephonically or by telegram or telecopy at least 24 hours before
such meeting. Such notice need not describe the purpose of the special meeting.
Except as otherwise provided by law, at all meetings of the Directors
one-third of the entire Board shall constitute a quorum. Except as otherwise
provided by law, the Certificate of Incorporation or these By-laws, at any
meeting of the Board at which a quorum is present at the time, the act of a
majority of the Directors present at the meeting shall be the act of the Board."
B-2
EXHIBIT C
COMPANY AFFILIATE'S LETTER
C-1
EXHIBIT C
FORM OF COMPANY AFFILIATE'S LETTER
_______, 1998
SBC Communications Inc.
175 East Houston
San Antonio, Texas 78205
Ladies and Gentlemen:
The undersigned is a holder of shares of Common Stock, par value $1.00 per share
("SNET Common Stock"), of SOUTHERN NEW ENGLAND TELECOMMUNICA TIONS CORPORATION,
a Connecticut corporation ("SNET"). Pursuant to the terms of that certain
Agreement and Plan of Merger, dated as of January 4, 1998, among SNET, SBC
Communications Inc., a Delaware corporation ("SBC"), and SBC (CT), Inc., a
Connecticut corporation and a wholly-owned subsidiary of SBC ("Merger Sub"),
Merger Sub will be merged with and into SNET and SNET will become a wholly owned
subsidiary of SBC (the "Merger"). In connection with the Merger, the
undersigned, as a holder of SNET Common Stock, will be entitled to receive
Common Stock, par value $1.00 per share, of SBC (the "Securities") in exchange
for the shares of SNET Common Stock held by the undersigned at the effective
time of the Merger.
The undersigned acknowledges that the undersigned may be deemed an "affiliate"
of SNET within the meaning of Rule 145 ("Rule 145") promulgated under the
Securities Act of 1933, as amended (the "Act"), and/or as such term is used in
and for purposes of Accounting Series Release Nos. 130 and 135, as amended, of
the Securities and Exchange Commission (the "Commission"), although nothing
contained herein shall be construed as an admission of such status.
If in fact the undersigned were an affiliate of SNET under the Act, the
undersigned's ability to sell, assign or transfer any Securities received by the
undersigned in exchange for any shares of SNET Common Stock pursuant to the
Merger may be restricted unless such transaction is registered under the Act or
an exemption from such registration is available. The undersigned understands
that such exemptions are limited and the undersigned has obtained advice of
counsel as to the nature and conditions of such exemptions, including
information with respect to the applicability to the sale of such Securities of
Rules 144 and 145(d) promulgated under the Act.
SBC Communications Inc.
_______, 1998
Page 2
The undersigned hereby represents to and covenants with SBC that it will not
sell, assign or transfer any Securities received by the undersigned in exchange
for shares of SNET Common Stock pursuant to the Merger except (i) pursuant to an
effective registration statement under the Act, (ii) by a sale made in
conformity with the volume and other limitations of Rule 145 (and otherwise in
accordance with Rule 144 under the Act, if the undersigned is an affiliate of
SBC and if so required at the time) or (iii) in a transaction which, in the
opinion of independent counsel reasonably satisfactory to SBC or as described in
a "no-action" or interpretive letter from the Staff of the Commission, is not
required to be registered under the Act.
The undersigned understands that SBC is under no obligation to register the
sale, transfer or other disposition of the Securities by the undersigned or on
behalf of the undersigned under the Act or to take any other action necessary in
order to make compliance with an exemption from such registration available
solely as a result of the Merger.
In the event of a sale of Securities pursuant to Rule 145, the undersigned will
supply SBC with evidence of compliance with such Rule, in the form of customary
seller's and broker's Rule 145 representation letters or as SBC may otherwise
reasonably request. The undersigned understands that SBC may instruct its
transfer agent to withhold the transfer of any Securities disposed of by the
undersigned in a manner inconsistent with this letter.
The undersigned acknowledges and agrees that appropriate legends will be placed
on certificates representing Securities received by the undersigned in the
Merger or held by a transferee thereof, which legends will be removed (i) by
delivery of substitute certificates upon receipt of an opinion in form and
substance reasonably satisfactory to SBC to the effect that such legends are no
longer required for the purposes of the Act and the rules and regulations of the
Commission promulgated thereunder or (ii) in the event of a sale of the
Securities which has been registered under the Act or made in conformity with
the provisions of Rule 145.
The undersigned further represents to and covenants with SBC that (i) the
undersigned will not, during the 30 days prior to the effective time of the
Merger sell, transfer or otherwise dispose of, or reduce any risk relative to,
any securities of SNET or SBC, and (ii) the undersigned will not sell, transfer
or otherwise dispose of, or reduce any risk relative to, the Securities received
by the undersigned in the Merger or any other shares of the capital stock of SBC
until after such time as financial results covering at least 30 days of
post-Merger operations of SBC (including the combined operations of SNET and
SBC) have been published by SBC in the form of a quarterly earnings report, an
effective
C-2
SBC Communications Inc.
_______, 1998
Page 3
registration statement filed with the Commission, a report to the Commission on
Form 10-K, 10-Q or 8-K, or any other public filing or announcement which
includes such results of operations, except in the cases of clauses (i) and (ii)
of this paragraph to the extent permitted by, and in accordance with, SEC
Accounting Series Release 135 and SEC Staff Accounting Bulletins 65 and 76 if
and to the extent that such Release and Bulletins remain in full force and
effect at the relevant time.
I further understand and agree that this letter agreement shall apply to all
shares of SNET Common Stock and shares of SBC Common Stock that I am deemed to
beneficially own pursuant to applicable federal securities law.
The undersigned acknowledges that it has carefully reviewed this letter and
understands the requirements hereof and the limitations imposed upon the
distribution, sale, transfer or other disposition of Securities.
Sincerely,
[NAME OF SNET AFFILIATE]
C-3
EXHIBIT D
FORM OF SEC AFFILIATE'S LETTER
D-1
EXHIBIT D
FORM OF SBC AFFILIATE'S LETTER
_______, 1998
SBC Communications Inc.
175 East Houston
San Antonio, Texas 78205
Ladies and Gentlemen:
The undersigned is a holder of shares of Common Stock, par value $1.00 per share
(the "Securities"), of SBC COMMUNICATIONS INC., a Delaware corporation ("SBC").
Pursuant to the terms of that certain Agreement and Plan of Merger, dated as of
January 4, 1998, among SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION, a
Connecticut corporation ("SNET"), SBC, and SBC (CT) Inc., a Connecticut
corporation and a wholly-owned subsidiary of SBC ("Merger Sub"), Merger Sub will
be merged with and into SNET and SNET will become a wholly owned subsidiary of
SBC (the "Merger").
The undersigned acknowledges that the undersigned may be deemed an "affiliate"
of SBC as such term is used in and for purposes of Accounting Series Release
Nos. 130 and 135, as amended, of the Securities and Exchange Commission (the
"Commission"), although nothing contained herein shall be construed as an
admission of such status.
The undersigned hereby represents to and covenants with SBC that the undersigned
will not, during the 30 days prior to the effective time of the Merger sell,
transfer or otherwise dispose of, or reduce any risk relative to, the Securities
or any other shares of the capital stock of SBC until after such time as
financial results covering at least 30 days of post-Merger operations of SBC
(including the combined operations of SNET and SBC) have been published by SBC
in the form of a quarterly earnings report, an effective registration statement
filed with the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K,
or any other public filing or announcement which includes such results of opera-
tions, except to the extent permitted by, and in accordance with, SEC Accounting
Series Release 135 and SEC Staff Accounting Bulletins 65 and 76 if and to the
extent that such Release and Bulletins remain in full force and effect at the
relevant time.
I further understand and agree that this letter agreement shall apply to all
Securities that I am deemed to beneficially own pursuant to applicable federal
securities law.
SBC Communications Inc.
_______, 1998
Page 2
The undersigned acknowledges that it has carefully reviewed this letter and
understands the requirements hereof and the limitations imposed upon the sale,
transfer or other disposition of Securities.
Sincerely,
[NAME OF SBC AFFILIATE]
D-2
Schedule 1
The Southern New England Telephone Company
SNET America, Inc.
SNET Information Services
Springwich Inc.
SNET Cellular, Inc.
SNET Personal Vision, Inc.
Dates Referenced Herein and Documents Incorporated by Reference
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