<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
AT&T CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 4811 13-4924710
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
32 AVENUE OF THE AMERICAS,
NEW YORK, NEW YORK, 10013-2412
(212) 387-5400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
MARILYN WASSER, ESQ.
VICE PRESIDENT--LAW AND SECRETARY
AT&T CORP.
295 NORTH MAPLE AVENUE
BASKING RIDGE, NJ 07920
(908) 221-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES OF ALL COMMUNICATIONS TO:
STEVEN A. ROSENBLUM, ESQ. JOHN W. THOMSON, ESQ. TIMOTHY J. KELLEY, ESQ.
WACHTELL, LIPTON, ROSEN VICE PRESIDENT AND DOW, LOHNES & ALBERTSON,
& KATZ SECRETARY TELEPORT PLLC
51 WEST 52ND STREET COMMUNICATIONS GROUP INC. 1200 NEW HAMPSHIRE
NEW YORK, NEW YORK 10019 ONE TELEPORT DRIVE AVENUE, N.W.
(212) 403-1000 STATEN ISLAND, NEW YORK 10311 WASHINGTON, D.C.
(718) 355-2000 20036-6802
(202) 776-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective time of the Registration Statement and the
effective time of the merger of a subsidiary of AT&T Corp. and Teleport
Communications Group Inc., as described in the Agreement and Plan of Merger,
dated as of January 8, 1998 (the "Merger Agreement"), attached as Appendix A
to the Information Statement/Prospectus forming a part of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
<CAPTION>
PROPOSED
AMOUNT MAXIMUM PROPOSED
TITLE OF EACH CLASS OF TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common
Stock,
par
value
$1.00
per 192,644,565
share.. Shares(1) (2) $6,326,620,661(3) $1,866,354(3)
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Based upon the product of (a) 204,289,040, the number of outstanding
shares of Class A Common Stock, par value $.01 per share ("TCG Class A
Common Stock"), of Teleport Communications Group Inc. ("TCG") and Class B
Common Stock, par value $.01 per share ("TCG Class B Common Stock"), of
TCG, assuming the exercise of all outstanding options issued by TCG to
purchase TCG stock (whether or not currently exercisable) and assuming the
issuance of the maximum number of shares of TCG Class A Common Stock upon
the consummation of the transactions contemplated by the ACC Agreement (as
defined in the attached Merger Agreement), and (b) .943, the Exchange
Ratio (as defined in the attached Merger Agreement).
(2) Not applicable.
(3) Estimated solely for the purpose of calculating the registration fee. The
registration fee was computed pursuant to Rules 457(f)(1) and 457(c) under
the Securities Act of 1933, as amended, by adding (a) the product of (i)
$58.69, the average of the high and low sales prices of a share of TCG
Class A Common Stock quoted on the Nasdaq Stock Market's National Market,
on April 1, 1998 as reported in published financial sources, and (ii)
90,800,000, the number of outstanding shares of TCG Class A Common Stock,
assuming the exercise of all outstanding stock options issued by TCG to
purchase TCG stock (whether or not currently exercisable) and assuming the
issuance of the maximum number of shares of TCG Class A Common Stock upon
the consummation of the transactions contemplated by the ACC Agreement (as
defined in the attached Merger Agreement), to (b) the product of (i)
$8.79, the book value of a share of TCG Class B Common Stock as of
December 31, 1997 and (ii) 113,489,040, the number of outstanding shares
of TCG Class B Common Stock. The result was then multiplied by .000295.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TELEPORT COMMUNICATIONS GROUP INC.
INFORMATION STATEMENT
----------------
AT&T CORP.
PROSPECTUS
We are sending you this Information Statement/Prospectus to describe the
proposed merger between Teleport Communications Group Inc., which we call
"TCG," and AT&T Corp. When we complete this merger, TCG will become a
subsidiary of AT&T, and you will exchange your TCG shares for AT&T shares. You
will receive .943 of an AT&T share for each of your TCG shares. We will round
the total number of AT&T shares you receive down to the nearest whole number,
however, and you will receive a cash payment for any remaining fraction.
We expect the AT&T Merger to be a reorganization in which no gain or loss
will be recognized for federal income tax purposes by TCG or AT&T. In that
case, no gain or loss will be recognized for federal income tax purposes by you
except with respect to any cash you receive in place of a fractional AT&T
share.
We are also sending this document to holders of common stock of ACC Corp.,
because ACC has agreed to become a subsidiary of TCG and as a result the
holders of ACC shares will be receiving TCG shares. We expect to complete the
ACC merger before we complete the AT&T merger. ACC stockholders would,
therefore, first exchange their ACC shares for TCG shares in the ACC merger,
and then exchange those TCG shares for AT&T shares in the AT&T merger.
TCG's controlling stockholders, Comcast Corporation, Cox Communications, Inc.
and Tele-Communications, Inc., have already approved the AT&T merger by signing
a written stockholders' consent. No further vote of TCG stockholders is
necessary to approve the AT&T merger. WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY. As we explain in this Information
Statement/Prospectus, however, completion of the AT&T merger is still subject
to a number of conditions, including various regulatory approvals. We cannot
predict with certainty when we will complete the AT&T merger, but we hope to
complete the AT&T merger in the second or third quarter of 1998.
This Information Statement/Prospectus is also AT&T's prospectus for the AT&T
shares it will issue to TCG stockholders in the AT&T merger. AT&T will list the
shares of its common stock to be issued in the AT&T merger on the New York
Stock Exchange.
----------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED THE AT&T COMMON STOCK TO BE ISSUED UNDER THIS
INFORMATION STATEMENT/PROSPECTUS OR DETERMINED IF THE INFORMATION
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Information Statement/Prospectus is dated April , 1998, and was first
mailed to stockholders of TCG on or about April , 1998.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHAT IS THE PROPOSED TRANSACTION?
A. TCG will merge with a subsidiary of AT&T. As a result, TCG will become a
wholly owned subsidiary of AT&T, and TCG stockholders will exchange their
TCG shares for AT&T shares.
Q. WHAT EFFECT WILL THE AT&T MERGER HAVE ON ME?
A. Each share of TCG common stock that you own will be exchanged for .943 of an
AT&T share. You will receive a cash payment in place of any fractional AT&T
share you would have otherwise received.
For example, if you own 100 shares of TCG common stock, you will receive 94
AT&T shares plus cash equal to the market value of three-tenths of an AT&T
share at the time of the AT&T merger (about $ based on AT&T's trading
price on April , 1998). If you own 1,000 TCG shares, you will receive 943
AT&T shares and no cash payment. The total value of the shares AT&T will
issue, based on this price, is about $ billion.
Q. WILL THE VALUE OF THE TRANSACTION CHANGE BETWEEN NOW AND THE TIME THE AT&T
MERGER IS COMPLETED?
A. Yes. The .943 exchange ratio is a fixed exchange ratio, which means that it
will not change even if the trading price of the AT&T shares changes.
Therefore, the market value of the transaction, and of the AT&T shares you
will receive in the merger, will increase or decrease as the price of AT&T
shares increases or decreases.
Q. WHY IS THERE NO STOCKHOLDER VOTE?
A. Comcast Corporation, Cox Communications, Inc. and Tele-Communications, Inc.
own, through subsidiaries, about 65% of all of the shares of TCG common
stock and control about 95% of the voting power of TCG. On the day that AT&T
and TCG signed their merger agreement, these three companies, which we refer
to as the "Cable Stockholders," gave their written consent to the AT&T
merger. Their consent met the stockholder approval requirements under
Delaware law, so no separate stockholder vote is necessary.
Q. WHAT WILL THE CABLE STOCKHOLDERS RECEIVE IN THE AT&T MERGER AND WHAT WILL
THEY BE REQUIRED TO DO?
A. Even though these companies hold TCG shares with greater voting rights, they
will exchange their shares for AT&T shares at the same .943 ratio.
In addition, the Cable Stockholders must:
. vote their shares of TCG common stock in favor of the AT&T merger, unless
TCG and AT&T change the AT&T merger agreement in any adverse way to TCG
stockholders; and
. amend various agreements, and enter into new agreements, relating to
TCG's use of cable facilities owned by the Cable Stockholders. TCG
believes that these amendments are generally favorable to TCG.
The Cable Stockholders also entered into a Registration Rights Agreement
with AT&T which provides the three companies with rights to have the AT&T
shares they receive in the AT&T merger registered for sale under the
securities laws.
Please see pages 38 through 40 for more information concerning these
agreements.
Q. AM I ENTITLED TO APPRAISAL RIGHTS?
A. No. Under Delaware law, which governs TCG and the AT&T merger, you are not
entitled to appraisal rights.
Q. WHAT DO I NEED TO DO NOW?
A. Nothing. After the AT&T merger is completed, you will receive written
instructions and a letter of transmittal for exchanging your TCG shares for
AT&T shares and receiving your cash payment in place of any fraction of an
AT&T share. Please do not send your share certificates until you receive the
instructions and letter of transmittal.
2
<PAGE>
Q. WHEN DO YOU EXPECT TO COMPLETE THE AT&T MERGER?
A. We must still obtain certain regulatory approvals before we can close, but
we hope to complete the AT&T merger in the second or third quarter of this
year. However, delays in obtaining regulatory approvals could delay the AT&T
merger.
Q. WHERE CAN I FIND MORE INFORMATION ABOUT AT&T AND TCG?
A. From various sources described under "Where You Can Find More Information"
on page 54 of this Information Statement/Prospectus.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER................................... 2
SUMMARY.................................................................. 6
THE COMPANIES............................................................ 12
AT&T................................................................... 12
TA Merger Corp......................................................... 12
TCG.................................................................... 12
THE MERGER............................................................... 13
Background............................................................. 14
TCG's Reasons for the Merger; Recommendation of the TCG Board.......... 16
AT&T's Reasons for the Merger.......................................... 18
Opinion of the Financial Advisor to the TCG Board...................... 18
Cautionary Statement Concerning Forward-Looking Statements............. 22
Terms of the Merger.................................................... 22
Effective Time of the Merger........................................... 24
Exchange of Certificates in the Merger................................. 24
Listing of the AT&T Common Shares on the NYSE.......................... 25
Representations and Warranties......................................... 25
Business of TCG Pending the Merger..................................... 25
ACC Agreement.......................................................... 28
Certain Covenants of AT&T.............................................. 28
No Solicitation........................................................ 28
Conditions; Waivers.................................................... 29
Amendment; Termination................................................. 30
Certain Federal Income Tax Consequences................................ 31
Regulatory Approvals................................................... 32
Resale of AT&T Common Shares Issued in the Merger; Affiliates.......... 33
Accounting Treatment................................................... 33
Interests of Certain Persons in the Merger............................. 34
Management and Operations of TCG After the Merger...................... 36
Expenses and Fees...................................................... 36
Certain Litigation..................................................... 36
No Appraisal Rights.................................................... 37
OTHER AGREEMENTS......................................................... 38
Voting Agreement....................................................... 38
Master Facilities Agreement............................................ 39
Registration Rights Agreement.......................................... 39
DIVIDENDS ON AND MARKET PRICES OF AT&T COMMON SHARES AND TCG COMMON
STOCK................................................................... 41
AT&T................................................................... 41
TCG.................................................................... 42
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS OF TCG....... 43
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COMPARATIVE RIGHTS OF TCG STOCKHOLDERS AND AT&T STOCKHOLDERS............... 44
Beneficial Ownership of Stock............................................ 44
Business Combinations.................................................... 44
State Takeover Legislation............................................... 45
Appraisal Rights......................................................... 46
Amendments to Charters................................................... 46
Amendments to By-Laws.................................................... 46
Preemptive Rights........................................................ 47
Redemption of Capital Stock.............................................. 47
Dividend Sources......................................................... 47
Duration of Proxies...................................................... 48
Stockholder Action....................................................... 48
Special Stockholder Meetings............................................. 48
Cumulative Voting........................................................ 49
Number and Election of Directors......................................... 49
Removal of Directors..................................................... 50
Vacancies................................................................ 50
Indemnification of Directors and Officers................................ 51
Limitation of Personal Liability of Directors............................ 52
LEGAL OPINIONS............................................................. 53
EXPERTS.................................................................... 53
WHERE YOU CAN FIND MORE INFORMATION........................................ 54
INDEX OF DEFINED TERMS..................................................... 56
</TABLE>
APPENDICES
<TABLE>
<C> <S> <C>
APPENDIX A --Agreement and Plan of Merger, dated as of January 8, 1998,
among AT&T, Merger Sub and TCG.............................. A-1
APPENDIX B --Voting Agreement, dated as of January 8, 1998, by and among
AT&T, on the one hand, and Comcast, Cox and TCI, on the
other hand.................................................. B-1
APPENDIX C --Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................ C-1
</TABLE>
5
<PAGE>
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the AT&T
merger fully and for a more complete description of the legal terms of the AT&T
merger, you should read carefully this entire document and the documents to
which we have referred you.
THE COMPANIES
AT&T Corp.
32 Avenue of the Americas
New York, New York 10013-2412
Tel: 212-387-5400
AT&T is among the world's communications leaders, providing voice, data and
video telecommunications services to large and small businesses, consumers and
government entities. AT&T and its subsidiaries furnish regional, domestic,
international and local communication transmission services, including cellular
telephone and other wireless services.
Teleport Communications Group Inc.
Executive Offices:
437 Ridge Road
Executive Building 3
Dayton, New Jersey 08810
Tel: 732-392-2000
Headquarters:
One Teleport Drive
Staten Island, New York 10311
Tel: 718-355-2000
TCG is the first and largest competitive local exchange carrier in the United
States and offers comprehensive telecommunications services in major
metropolitan markets nationwide. TCG offers its customers, which are mostly
businesses, all the same kinds of telephone services as the local phone company
does. TCG's customers can use these services to make regular phone calls, send
data or pictures or connect to the Internet.
THE CABLE STOCKHOLDERS
Subsidiaries of Comcast Corporation, Cox Communications, Inc. and Tele-
Communications, Inc. beneficially own all of the TCG Class B common stock and
about 2% of the TCG Class A common stock. As a result, these three companies
control about 95% of TCG's voting power.
REASONS FOR THE AT&T MERGER (SEE PAGE 16)
The TCG Board believes the .943 exchange ratio provides fair value to you for
your TCG shares, and that the AT&T shares you will receive in the AT&T merger
will allow you to continue your investment in a combined enterprise that is
well positioned to take advantage of new opportunities and to meet competitive
challenges. The TCG Board believes that TCG's competitive position and overall
performance will benefit from AT&T's greater business, technological and
financial resources. Please note that achieving these benefits is subject to
important factors that could affect the future results of TCG and AT&T. For a
discussion of these factors, please see "Cautionary Statement Concerning
Forward-Looking Statements" on page 22.
NO FURTHER STOCKHOLDER APPROVAL REQUIRED; TCG BOARD APPROVAL (SEE PAGE 16)
We are not asking you to vote on the AT&T merger. On January 8, 1998,
Comcast, Cox and TCI, which together hold about 95% of TCG's voting power,
voted by written consent to approve the AT&T merger agreement and the AT&T
merger. Their vote was sufficient for stockholder approval of the AT&T merger.
TCG's Board of Directors believes that the AT&T merger is in your best
interest and in TCG's best interest. TCG's Board of Directors has unanimously
approved the AT&T merger agreement and the AT&T merger.
FAIRNESS OPINION (SEE PAGE 18)
Merrill Lynch, Pierce, Fenner & Smith Incorporated, TCG's financial advisor,
has given a written fairness opinion to TCG's Board of Directors as to the
fairness of the .943 exchange ratio to TCG's stockholders from a financial
point of view. This is subject to the qualifications and limitations referred
to in the opinion. Merrill Lynch's opinion does not address any other aspect of
the AT&T merger or any related transactions.
6
<PAGE>
We have attached a copy of Merrill Lynch's fairness opinion as Appendix C to
this Information Statement/Prospectus. We encourage you to read this opinion.
THE AT&T MERGER
The Merger Agreement (see page 22)
The AT&T merger agreement is the legal document that governs the AT&T merger.
It is attached as Appendix A to this Information Statement/Prospectus, and we
encourage you to read it carefully.
Conditions to the Merger (see page 29)
The completion of the AT&T merger depends upon meeting a number of
conditions, including, among others, the following:
. regulatory approvals and consents;
. receipt of legal opinions about certain tax consequences of the AT&T
merger; and
. the absence of certain material adverse changes in TCG or AT&T.
The AT&T merger will occur, and your TCG shares will be exchanged for AT&T
shares, as soon as practicable after TCG and AT&T satisfy all of the conditions
specified in the AT&T merger agreement. Also, either AT&T or TCG can waive
these conditions, to the extent permitted by law.
Regulatory Approvals (see page 32)
In order to complete the AT&T merger, TCG and AT&T must receive
authorizations from various federal, state, local and foreign governmental
agencies. These authorizations relate primarily to:
. competition and securities law issues;
. the approval of a change of control with respect to licenses granted by
the Federal Communications Commission and state public utility
commissions; and
. the approval of a change of control with respect to municipal franchise
rights.
Material Federal Income Tax Considerations (see page 31)
We have structured the merger so that neither AT&T, TCG nor TCG's
stockholders will recognize any gain or loss for federal income tax purposes in
the AT&T merger (except for tax payable on cash received by TCG stockholders
instead of fractional shares). One condition to the AT&T merger is that AT&T
and TCG receive opinions from legal counsel as to these tax consequences to
AT&T, TCG and TCG's stockholders.
Accounting Treatment (see page 33)
We expect that AT&T will account for the AT&T merger as a "pooling of
interests," which means that the book value of the assets, liabilities and
stockholders' equity of TCG will be carried over to the consolidated balance
sheet of AT&T, and no new goodwill will be created for AT&T. Although the
availability of this accounting treatment is not a condition to the closing of
the AT&T merger, TCG must use its reasonable best efforts not to take any
action, and to cure any prior action, that would prevent a pooling of
interests.
Termination (see page 30)
The AT&T merger agreement may be terminated, and the AT&T merger abandoned,
only in a very limited number of circumstances, including, among others, the
following:
. if the AT&T merger is not completed by December 31, 1998, or by March 31,
1999 if the delay is caused by the regulatory approval process;
. by AT&T's entry into other business transactions, in which case either
party may terminate the AT&T merger agreement only after March 31, 1999;
or
. the parties agree to terminate the agreement.
Effects of the Merger on the Rights of TCG Stockholders (see page 44)
As a result of the AT&T merger, you will become a stockholder of AT&T. AT&T
is governed by New York corporate law and by its Certificate of Incorporation
and Bylaws. Your rights under these provisions differ from your rights as a
stockholder of TCG. To review these differences in more detail, see pages 44
through 53.
7
<PAGE>
INTERESTS OF OFFICERS, DIRECTORS AND THE CONTROLLING STOCKHOLDERS IN THE MERGER
(SEE PAGE 34)
You should be aware that a number of TCG officers have entered or will enter
into employment agreements with AT&T following the AT&T merger that provide
them with interests in the AT&T merger that are different from, or in addition
to, yours. See page 34. In addition, subsidiaries and affiliates of Comcast,
Cox and TCI will continue to have commercial relationships with TCG and AT&T
after the AT&T merger. Please see pages 38 through 40 for more information
concerning the interests of the Cable Stockholders in the AT&T merger.
MARKETS AND MARKET PRICES
The TCG common stock trades on The Nasdaq National Market and the AT&T common
stock trades on the New York Stock Exchange. On January 8, 1998, the last full
day of trading before the public announcement of the proposed AT&T merger, TCG
Class A common stock closed at $54 1/8 and AT&T common stock closed at $62 5/8.
On April , 1998, TCG Class A common stock closed at $ and AT&T common stock
closed at $ . You may obtain more recent stock price quotes in most newspapers
or in other financial sources.
8
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
AT&T
In the table below, we provide you with selected historical consolidated
financial data of AT&T. We prepared this information using the consolidated
financial statements of AT&T as of the dates indicated and for each of the
fiscal years in the five-year period ended December 31, 1997. We derived the
consolidated income statement data below for each of the three years ended
December 31, 1997, and the consolidated balance sheet data at December 31, 1997
and 1996, from financial statements audited by Coopers & Lybrand L.L.P.,
independent accountants. We derived the remaining data from unaudited
consolidated financial statements which are not included here.
When you read this selected historical consolidated financial information,
you should consider reading along with it the historical financial statements
and accompanying notes that AT&T has included in its Annual Report on Form 10-K
for the year ended December 31, 1997 (you can obtain this report by following
the instructions we provide in this Information Statement/Prospectus under
"WHERE YOU CAN FIND MORE INFORMATION" on page 54).
<TABLE>
<CAPTION>
(UNAUDITED)
AT OR FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995(1) 1994 1993(2)
------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues....................... $51,319 $50,546 $48,445 $46,000 $43,780
Operating income..................... 6,968 8,763 5,184 7,409 6,577
Income before cumulative effects of
accounting changes.................. 4,638 5,908 139 4,710 3,702
Net income (loss).................... 4,638 5,908 139 4,710 (5,906)
Weighted average common shares and
potential common shares............. 1,630 1,616 1,592 1,564 1,547
Net income (loss) per common share--
basic............................... 2.85 3.67 .09 3.03 (3.84)
Net income (loss) per common share--
diluted............................. 2.84 3.66 .09 3.01 (3.82)
Cash dividends declared per common
share............................... 1.32 1.32 1.32 1.32 1.32
BALANCE SHEET DATA:
Total assets......................... $58,635 $55,382 $62,228 $57,330 $50,023
Long-term debt, including capital
leases.............................. 6,826 7,883 8,545 8,938 10,287
Shareowners' equity.................. 22,647 20,295 17,274 17,921 13,374
</TABLE>
- --------
(1) 1995 net income for AT&T reflects $5.4 billion, or $3.36 per share, of
business restructuring and other charges.
(2) 1993 net income for AT&T reflects a $9.6 billion net charge for three
accounting changes.
9
<PAGE>
TCG
In the table below, we provide you with summary financial data derived from
the audited historical financial statements of TCG. We prepared the historical
summary combined financial data for the years 1993, 1994 and 1995 from the
combined audited historical financial statements of TCG and TCG Partners (a New
York general partnership which was initially owned by Comcast, Cox, TCI and
MediaOne of Delaware, Inc., formerly Continental Cablevision, Inc.
("Continental"), in the same percentages as TCG). We prepared the historical
summary consolidated financial data set forth below for 1996 and 1997 from the
consolidated audited historical financial statements of TCG. TCG's financial
statements for the years 1995 through 1997 have been audited by Deloitte &
Touche LLP, independent auditors.
When you read this selected historical consolidated and combined financial
data, you should consider reading along with it the historical financial
statements and accompanying notes that TCG has included in its Annual Report on
Form 10-K for the year ended December 31, 1997 (you can obtain this report by
following the instructions we provide in this Information Statement/Prospectus
under "WHERE YOU CAN FIND MORE INFORMATION" on page 54).
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenues.......... $ 494,304 $ 267,669 $ 166,169 $ 120,674 $ 83,929
Operating (loss)........ (132,515) (53,363) (15,261) (15,820) (20,767)
Net (loss).............. (222,667) (114,850) (53,804) (29,989) (18,271)
Weighted average common
shares................. 165,728,059 114,443,695 70,000,140 70,000,140 70,000,140
Net (loss) per share--
basic.................. (1.34) (1.00) (0.77) (0.43) (0.26)
BALANCE SHEET DATA:
Total assets............ $ 2,456,301 $ 2,050,097 $ 614,793 $ 486,983 $ 365,202
Long-term debt
(including capital
lease obligations)..... 1,054,079 1,021,063 368,464 200,462 29,689
Stockholders' equity and
partners' capital
(deficit).............. 1,031,616 796,870 125,348 179,152 209,141
</TABLE>
10
<PAGE>
COMPARATIVE PER SHARE DATA
In the table below, we provide you with historical per share data of AT&T and
TCG and pro forma per share data for TCG as if the ACC merger had occurred on
January 1, 1997. We also provide pro forma combined data per AT&T common share
and per .943 of an AT&T common share, as if the AT&T merger had been completed
as of the beginning of the periods indicated. The pro forma combined
information in the table is based upon the historical financial statements of
AT&T and TCG and is unaudited. We present the pro forma combined information
for comparison purposes only, to show on a pro forma basis the amounts
attributable to a full AT&T share and to the .943 of an AT&T share that you
will receive for each TCG share. You should remember, however, that pro forma
information is hypothetical and is not intended to predict AT&T's actual
operating results and financial position following completion of the AT&T
merger.
When you read this table, you should consider reading along with it the
separate historical financial statements and accompanying notes of AT&T and TCG
which are incorporated by reference in this document (you can obtain these
reports by following the instructions we provide in this Information
Statement/Prospectus under "WHERE YOU CAN FIND MORE INFORMATION" on page 54).
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED
DECEMBER 31,
------------------------------
1997 1996 1995(1)
-------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C>
HISTORICAL:
Per Share of AT&T Common Stock:
Book value.................................... $ 13.94 $ 12.50 $ 10.82
Cash dividends declared....................... 1.32 1.32 1.32
Earnings--diluted............................. 2.84 3.66 0.09
HISTORICAL:
Per Share of TCG Common Stock:
Book value.................................... $ 5.90 $ 4.98 $ 1.79
Cash dividends declared....................... -- -- --
Earnings (loss)............................... (1.34) (1.00) (0.77)
PRO FORMA(2):
Per share of TCG Common Stock:
Book value.................................... $ 10.37
Cash dividends declared....................... --
Earnings (loss)............................... (1.25)
PRO FORMA(3):
Per share of AT&T Common Stock
Book value.................................... $ 13.64
Cash dividends declared....................... 1.32 $ 1.32 $ 1.32
Earnings--diluted............................. 2.43 3.31 0.03
EQUIVALENT SHARE DATA(3):
Combined per .943 of an AT&T Common Share (i.e.,
per share of TCG Common Stock equivalent):
Book value.................................... $ 12.87
Cash dividends declared....................... 1.24 $ 1.24 $ 1.24
Earnings--diluted............................. 2.29 3.12 0.03
</TABLE>
- --------
(1) 1995 net income for AT&T reflects business restructuring and other charges
of $5.4 billion, or $3.36 per share.
(2) Assumes the issuance of 21,104,989 TCG common shares associated with the
ACC merger.
(3) Assumes 180,253,000, 130,991,000 and 88,200,000 additional weighted average
common shares and potential common shares of AT&T associated with the AT&T
merger in the years 1997, 1996 and 1995.
11
<PAGE>
THE COMPANIES
AT&T
AT&T Corp. ("AT&T") is among the world's communications leaders, providing
voice, data and video telecommunications services to large and small
businesses, consumers and government entities. AT&T and its subsidiaries
furnish regional, domestic, international and local communications
transmission services. AT&T's wholly owned subsidiaries, including AT&T
Wireless Services, Inc., provide cellular telephone and other wireless
services. AT&T also provides billing, directory, and calling card services to
support its communications business.
AT&T was incorporated in 1885 under the laws of the State of New York and
has its principal executive offices at 32 Avenue of the Americas, New York,
New York 10013-2412 (telephone number 212-387-5400). Internet users can obtain
information about AT&T and its services at "http://www.att.com."
TA MERGER CORP.
TA Merger Corp. ("Merger Sub") is a Delaware corporation formed by AT&T in
January 1998 solely for the purpose of being merged with and into TCG and is
wholly owned by AT&T. The mailing address of Merger Sub's principal executive
offices is c/o AT&T Corp., 32 Avenue of the Americas, New York, New York
10013-2412 (telephone number 212-387-5400).
TCG
TCG is the first and largest competitive local exchange carrier ("CLEC") in
the United States and offers comprehensive telecommunications services in
major metropolitan markets nationwide. TCG provides a broad array of
telecommunications services to meet the voice, data and video transmission
needs of its customers, including basic local exchange telephone services,
enhanced switched services, long distance services, dedicated services, high
speed switched data services, Internet services, disaster avoidance services
and video channel transmission services.
TCG was incorporated in 1983 under the laws of the State of Delaware and has
its principal executive offices at 437 Ridge Road, Executive Building 3,
Dayton, New Jersey 08810 (telephone number 732-392-2000). Internet users can
obtain information about TCG and its services at "http://www.tcg.com."
12
<PAGE>
THE MERGER
We are furnishing this Information Statement/Prospectus to you in connection
with the proposed merger between Merger Sub and TCG, with TCG surviving the
merger as a wholly owned subsidiary of AT&T. This merger will be carried out
as provided in the Agreement and Plan of Merger, dated as of January 8, 1998,
by and among TCG, AT&T and Merger Sub. In this Information
Statement/Prospectus, we refer to the above-referenced merger agreement as the
"Merger Agreement" and the AT&T merger as the "Merger." A copy of the Merger
Agreement is attached as Appendix A to this Information Statement/Prospectus.
TCG has also entered into an Agreement and Plan of Merger by and among TCG,
TCG Merger Co., Inc., a Delaware corporation, and ACC Corp., a Delaware
corporation ("ACC"), dated as of November 26, 1997 (the "ACC Agreement"),
providing for the merger of TCG Merger Co., Inc. with and into ACC (the "ACC
Merger"). As a result of the ACC Merger, ACC would become a wholly owned
subsidiary of TCG.
This Information Statement/Prospectus has been sent to you because you meet
at least one of the following three criteria:
. You are a holder of TCG Class A Common Stock, par value $0.01 per share
(the "TCG Class A Common Stock").
. You are a holder of TCG Class B Common Stock, par value $0.01 per share
(the "TCG Class B Common Stock"). In referring to both the TCG Class A
Common Stock and the TCG Class B Common Stock, we use the term "TCG
Common Stock."
. You were a holder of ACC Class A Common Stock, par value $0.015 per
share (the "ACC Stock") on March 18, 1998.
The record date for the determination of your status as a holder of TCG
Common Stock was March 23, 1998.
The Merger Agreement provides that TCG will become a wholly owned subsidiary
of AT&T. In the Merger, each outstanding share of TCG Common Stock will be
converted into .943 (the "Exchange Ratio") of a share of AT&T common stock,
par value $1.00 per share (the "AT&T Common Shares"). If the amount of AT&T
Common Shares that you would receive under the Exchange Ratio results in a
fraction of one AT&T Common Share, AT&T will instead pay you that amount in
cash rather than give you a fractional interest. The total aggregate amount of
consideration to be received by TCG's stockholders in the Merger, based on the
closing price of the AT&T Common Shares on , 1998, is approximately $
billion.
This Information Statement is to inform you of the Merger and constitutes
the notice of corporate action without a meeting required by Section 228 of
the Delaware General Corporation Law. Your vote is not required for the
Merger, because certain subsidiaries of Comcast Corporation ("Comcast"), Cox
Communications, Inc. ("Cox") and Tele-Communications, Inc. ("TCI")
(collectively, the "Cable Stockholders") executed and delivered to TCG, on
January 8, 1998, a written consent in lieu of a meeting of stockholders
approving and adopting the Merger Agreement and the Merger. The Cable
Stockholders then held of record, in the aggregate, 1,011,528 shares of TCG
Class A Common Stock (entitled to one vote per share) and 113,489,040 shares
of TCG Class B Common Stock (entitled to ten votes per share). This means that
the Cable Stockholders represented a majority of the votes entitled to be cast
at a meeting of TCG's stockholders to consider the Merger Agreement and the
Merger. As a result, so long as the Merger Agreement is not amended and no
provision of it is waived, no meeting or further approval or consent of
stockholders of TCG is necessary to effect the Merger. THE MERGER WILL BECOME
EFFECTIVE NO EARLIER THAN 20 BUSINESS DAYS AFTER THIS INFORMATION
STATEMENT/PROSPECTUS IS MAILED TO STOCKHOLDERS OF TCG, BUT ONLY AFTER
SATISFACTION OR WAIVER OF THE CONDITIONS TO THE MERGER CONTAINED IN THE MERGER
AGREEMENT.
This Information Statement/Prospectus also constitutes a prospectus of AT&T,
which is a part of the Registration Statement on Form S-4 filed by AT&T with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Securities Act"), in order to register the
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<PAGE>
AT&T Common Shares to be issued to TCG stockholders in the Merger. It is a
condition to the closing of the Merger that the AT&T Common Shares issuable to
TCG's stockholders in the Merger shall have been approved for listing on the
New York Stock Exchange ("NYSE"), subject to official notice of issuance.
BACKGROUND
For more than a decade, TCG and AT&T, and their respective subsidiaries,
have engaged in various arm's-length business arrangements with each other in
the ordinary course of business. These arrangements include the provision by
TCG to AT&T and its subsidiaries of dedicated and switched access
telecommunications services, which services are currently provided in
accordance with an agreement entered into in 1995 (the "Usage Agreement").
During a regular meeting of TCG's Board of Directors (the "TCG Board") on
November 13, 1996, TCG's management reviewed the strategic and commercial
alternatives available to TCG, and the TCG Board decided to retain Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") to assist TCG's
management in exploring various strategic alternatives. Based on the growing
concern of the TCG Board and TCG's management that the increasing
consolidation in the telecommunications industry could limit TCG's ability to
compete in the future, and in an effort to maximize shareholder value, the TCG
Board authorized Merrill Lynch and TCG's management to prepare materials and
contact potentially interested parties on a preliminary basis to determine
whether a sale of all or substantially all of TCG's assets or equity, or a
business combination between TCG and one of such parties, was possible at an
appropriate price. Merrill Lynch and TCG's management thereafter contacted
numerous companies on a confidential basis and provided certain nonpublic
information concerning TCG to several of those companies, including AT&T. The
contacts with these other companies did not result in any substantive
discussions with such parties or continuing indications of interest with
respect to a possible strategic transaction with TCG on the part of such other
potentially interested parties that the TCG Board or TCG management believed
was in the best interests of the stockholders of TCG to pursue.
During the months of January and February 1997, TCG and AT&T conducted a
series of exploratory discussions. During these discussions, the parties
considered various possible strategic transactions as well as the possibility
of an extended commercial relationship. These discussions, however, proved
inconclusive and ended in the latter part of February 1997.
In late November 1997, TCG and AT&T commenced new discussions with respect
to the possibility of a business combination or other transaction. In
furtherance of these discussions, on November 21, 1997, AT&T sent TCG a letter
which outlined various discussion points for a meeting on December 1, 1997.
AT&T and TCG signed a confidentiality agreement on December 1, 1997, and held
discussions on that day and on December 6 and 7, 1997. In the course of these
discussions, the companies explored various possible transaction structures,
including transaction structures that would involve the potential acquisition
of control of TCG by AT&T. On December 10, 1997, AT&T sent a due diligence
request list to TCG, and thereafter began its due diligence review of TCG
which continued through January 8, 1998. During this period, representatives
of TCG again contacted a number of potentially interested parties regarding
their possible interest in a strategic transaction involving TCG in order to
assess the likelihood that another possible candidate for such a transaction
would emerge. The results of these contacts indicated to the TCG Board and TCG
management that none of such parties was likely to make any offer regarding
such a transaction that would be in the best interests of stockholders to
pursue. Throughout this process, there were numerous interim updates given to
the members of the TCG Board concerning the results of such contacts. In
addition, special efforts were made to insure that the directors that were not
affiliated with the Cable Stockholders were fully informed.
Representatives of AT&T and TCG continued to meet from December 13 through
December 16, 1997 to assess the desirability and feasibility of a merger of
the two companies, and to discuss operational issues that would be involved in
combining the two companies. On December 18, 1997, Mr. C. Michael Armstrong,
Chairman of the Board and Chief Executive Officer of AT&T, met with Mr. Robert
Annunziata, Chairman of the Board, President and Chief Executive Officer of
TCG. At this meeting, Mr. Armstrong and Mr. Annunziata
14
<PAGE>
agreed to continue to assess and quantify the potential synergies of a merger
between the two companies, to commence preparation and negotiation of a merger
agreement for the potential merger, and to explore amending the terms of
certain commercial arrangements between the two companies. During this period,
AT&T and certain Cable Stockholders also had several conversations in which
the Cable Stockholders indicated their willingness to support and vote for a
transaction between AT&T and TCG, if mutually satisfactory terms could be
negotiated. The Cable Stockholders encouraged AT&T to continue its discussions
with TCG with respect to such a transaction.
From December 19, 1997 through January 3, 1998, AT&T's legal advisors
prepared initial drafts of the Merger Agreement and began negotiating its
terms with TCG's legal advisors. AT&T's legal advisors also prepared and
circulated proposed drafts of the Voting Agreement by and among AT&T, the
Cable Stockholders and certain subsidiaries of the Cable Stockholders (the
"Voting Agreement") and the Registration Rights Agreement by and among AT&T
and the Cable Stockholders (the "Registration Rights Agreement").
On January 4, 1998, AT&T, TCG and their respective legal and financial
advisors met in New York City to discuss the draft Merger Agreement and
related agreements. The parties' financial advisors discussed proposed
exchange ratios, but were unable to reach any agreement. On January 5, 1998,
representatives of AT&T and TCG had telephone conversations with respect to
the question of an appropriate exchange ratio, as well as AT&T's insistence
that: (i) the Cable Stockholders execute a stockholders' consent approving the
transaction promptly following execution of the Merger Agreement (the
"Stockholders Consent"); (ii) the Merger Agreement not permit TCG to terminate
the Merger Agreement in the event of a competing bid; (iii) the Merger be
conditioned on employment agreements between AT&T and certain senior managers
of TCG; and (iv) the Cable Stockholders agree to amend TCG's existing
facilities arrangements with the Cable Stockholders (the "Existing Facilities
Agreements") in order to make TCG's rights under such agreements more certain.
After further discussion, AT&T agreed to certain amendments to the existing
Usage Agreement with TCG (the "Usage Amendments") pursuant to which: (1)
AT&T's obligations to purchase dedicated and switched access services from TCG
would survive the Merger, without being conditioned on the consummation of the
Merger; and (2) AT&T and TCG would establish a marketing arrangement whereby
TCG and AT&T would market to customers a bundled offer of the companies'
respective local and long distance services.
The representatives of AT&T and TCG agreed that it might be advisable for
AT&T also to discuss these issues directly with representatives of the Cable
Stockholders. Thereafter, representatives of AT&T had telephone conversations
with representatives of the Cable Stockholders. In the course of these
conversations, the representatives of AT&T indicated that AT&T might be
willing to agree to a .943 exchange ratio assuming the other issues, described
above, could be resolved to AT&T's satisfaction. AT&T's representatives also
indicated their desire to execute definitive agreements no later than January
8, 1998. The representatives of the Cable Stockholders indicated their
willingness to work rapidly to assist in resolving these issues. They also
indicated that they would be willing to support and recommend acceptance of a
.943 exchange ratio if all other issues were satisfactorily resolved and such
exchange ratio was otherwise supported by (i) the members of the TCG Board
(including the directors that were not affiliated with the Cable
Stockholders), (ii) TCG management and (iii) TCG's financial advisors. They
also indicated that they were willing to discuss AT&T's proposed amendments to
the Existing Facilities Agreements.
Following these conversations, representatives of AT&T, TCG and the Cable
Stockholders, and their respective financial and legal advisors, met
continuously in New York City through January 8, 1998 to negotiate the final
terms of the Merger Agreement, the Voting Agreement, the Registration Rights
Agreement, an agreement (the "Master Facilities Agreement") embodying AT&T's
proposed amendments to the Existing Facilities Agreements and the Usage
Amendments. These negotiations resulted in the representatives of AT&T and TCG
agreeing to recommend to their respective Boards the approval of a transaction
based on a .943 exchange ratio, with a structure in which the Cable
Stockholders would execute the Stockholders Consent, TCG would not be entitled
to terminate the Merger Agreement for another offer, and the Merger would be
conditioned upon employment agreements between AT&T and certain senior
managers of TCG being in full force and effect.
15
<PAGE>
The representatives of AT&T and the Cable Stockholders also agreed to
recommend that their Boards approve the Master Facilities Agreement. During
the course of these meetings and conversations, members of TCG management had
numerous contacts with the individual members of the TCG Board in which the
status of the negotiations with AT&T and the possible terms of any transaction
with AT&T were discussed. In addition, separate conversations with the members
of the TCG Board that were not affiliated with the Cable Stockholders were
held by members of TCG management (as well as TCG's legal and financial
advisors) to insure that such persons were kept properly informed.
On January 8, 1998, the TCG Board met to consider and vote upon the proposed
Merger and related transactions. At this specially scheduled meeting, Mr.
Annunziata and other members of TCG's senior management reported on the
potential benefits and risks of the proposed transactions and informed the TCG
Board of the employment agreements signed by certain TCG executives; TCG's
legal advisors reviewed the terms of the Merger Agreement, the Voting
Agreement, the Registration Rights Agreement and the Master Facilities
Agreement (including the terms described in clauses (i)--(iv) above which AT&T
had insisted were not negotiable) and discussed the directors' fiduciary and
other legal obligations under applicable law relating to their consideration
of the proposed transaction; and Merrill Lynch made a presentation to the TCG
Board regarding the financial terms of the proposed Merger, the background of
the proposed Merger and other potentially interested parties. At this meeting,
Merrill Lynch also delivered its written opinion, dated January 8, 1998, that,
as of such date, the Exchange Ratio to be received by TCG stockholders in
connection with the Merger was fair to such stockholders from a financial
point of view. Following extensive discussion and numerous questions and
answers regarding the proposed Merger, and after considering the matters set
forth below under "--TCG's Reasons for the Merger; Recommendation of the TCG
Board," the TCG Board unanimously approved and authorized the Merger and the
Merger Agreement, the execution by the Cable Stockholders of the Voting
Agreement (which the TCG Board needed to approve for purposes of the business
combination provisions of Delaware law), the Master Facilities Agreement with
respect to TCG's interests thereunder and the Usage Amendments.
Later on January 8, 1998, the AT&T Board met to consider and vote upon the
proposed transactions. At this meeting, the AT&T Board received presentations
with respect to the terms of the Merger Agreement and the other agreements and
the financial and strategic impact of the proposed Merger on AT&T. Following
these presentations and discussion, the AT&T Board approved the Merger
Agreement, the Registration Rights Agreement, the Voting Agreement and the
form of Master Facilities Agreement by unanimous vote of those directors
present.
On January 8, 1998, following conclusion of the respective meetings of the
AT&T and TCG Boards of Directors, the Merger Agreement, the Registration
Rights Agreement and the Voting Agreement were executed and announced.
Following execution of these agreements, the Cable Stockholders executed and
delivered the Stockholders Consent.
TCG'S REASONS FOR THE MERGER; RECOMMENDATION OF THE TCG BOARD
The TCG Board has determined that the Merger and the Merger Agreement are
fair to and in the best interests of TCG and its stockholders. ACCORDINGLY,
THE TCG BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE MERGER.
During the course of its deliberations relating to a possible merger with
AT&T, the TCG Board considered the following factors:
(i) the terms and conditions of the Merger Agreement, including the
amount and form of consideration, the fact that the holders of shares of
TCG Class B Common Stock will receive for their shares the same
consideration offered the holders of shares of TCG Class A Common Stock,
the degree of flexibility provided to TCG to conduct its business prior to
the closing of the Merger (the "Closing") and the fact that the lack of
appraisal rights for TCG's public stockholders would not prevent such
stockholders from
16
<PAGE>
obtaining "liquid" consideration, since the AT&T Common Shares they will
receive in the Merger will be listed on the NYSE;
(ii) the possibility that, because the ratio at which shares of TCG
Common Stock will be exchanged for AT&T Common Shares in the Merger is
fixed, the value of the consideration received by the stockholders of TCG
in the Merger may increase or decrease;
(iii) the historical and prospective business of TCG, including, among
other things, the current financial condition and future prospects of TCG,
the strategic direction of TCG's business, the current conditions in, and
future prospects of, the local telecommunications industry, the competitive
position of TCG in that industry, and the historical business and future
prospects of AT&T and its current financial condition, and the competitive
position of AT&T in the telecommunications industry, all of which led the
TCG Board to believe that there is a good strategic fit between the two
companies and that the Merger may produce benefits to TCG stockholders by
allowing them to participate in a combined enterprise with greater business
and financial resources that is well positioned to take advantage of new
opportunities and meet competitive challenges;
(iv) the unique combination of technological and financial resources
offered by AT&T, which the TCG Board believed would give TCG the
opportunity to share in AT&T's research and development activities and in
the resulting technological advances and allow the exchange of AT&T Common
Shares for shares of TCG Common Stock without prohibitive dilution;
(v) the potential for synergies from the companies' complementary assets
and businesses, which the TCG Board believed would have a favorable impact
on long-term value for TCG stockholders as holders of AT&T Common Shares
after the Merger, although the TCG Board realized that no assurances could
be given that any particular level of cost synergies will be achieved;
(vi) the opportunity for the TCG stockholders to retain a significant
continuing interest in the telecommunications industry in general and the
local and long distance telecommunications industry in particular;
(vii) historical data relating to market prices and trading volumes of
the TCG Common Stock, historical data relating to market prices and trading
volumes of and dividends on AT&T Common Shares, market prices of and
dividends on AT&T Common Shares compared to those of certain other publicly
traded companies and the likely effects of the Merger on AT&T's financial
condition, including the dilutive effects of the issuance of AT&T Common
Shares in the Merger, the likely reaction of the financial market to the
Merger and the effect of such reaction on the price of AT&T Common Shares,
which the TCG Board believed indicated that the value of the AT&T Common
Shares to be received in the Merger was within the range of fair value from
a financial point of view to TCG stockholders;
(viii) the regulatory approvals required for the Merger and the estimated
length of time required to consummate the Merger;
(ix) alternatives to the Merger, including, among other things, remaining
an independent entity, the fact that Merrill Lynch and TCG's management had
solicited interest from numerous companies over a 15-month period for the
sale of all or a portion of TCG, that TCG had preliminary discussions with
several potential strategic partners, none of which led to substantive
discussions, and that ultimately, only AT&T made a final proposal to
consummate a transaction with TCG, as well as the risk associated with and
likelihood of any such alternative transactions becoming available and
being completed;
(x) the structure of the Merger, which would permit holders of TCG Common
Stock to exchange all their shares of TCG Common Stock for AT&T Common
Shares on a tax-free basis (except with regard to any cash received in lieu
of a fractional interest in AT&T Common Shares);
(xi) the terms of the Master Facilities Agreement, including its
immediate effectiveness upon execution and other benefits to TCG;
(xii) the willingness of the Cable Stockholders to execute the Voting
Agreement and to act by written consent to approve the Merger, but which
the TCG Board weighed against the probability that no alternative
17
<PAGE>
transaction would become available in light of the Cable Stockholders'
commitments under the Voting Agreement (including the execution of such
written consent), and the fact that AT&T was unwilling to sign a merger
agreement that included provisions that would permit TCG to terminate the
agreement in the event of a competing bid;
(xiii) the expected treatment of the Merger as a pooling of interests for
financial reporting and accounting purposes; and
(xiv) the presentation of Merrill Lynch delivered to the TCG Board at its
meeting on January 8, 1998, including Merrill Lynch's written opinion dated
January 8, 1998 that, as of such date, the Exchange Ratio was fair from a
financial point of view to the holders of TCG Common Stock.
Based on all of these matters, and such other matters as the members of the
TCG Board deemed relevant, the TCG Board unanimously approved the Merger
Agreement and the transactions contemplated thereby.
In view of the variety of factors and the amount of information considered,
the TCG Board did not find it practicable to provide specific assessments of,
quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. The determination to approve the
Merger was made after consideration of all the factors taken as a whole,
though individual members of the TCG Board may have given different weights to
different factors. For discussion of the interests of certain members of TCG's
management, the TCG Board and the Cable Stockholders in the Merger, see "--
Interests of Certain Persons in the Merger" and "OTHER AGREEMENTS."
AT&T'S REASONS FOR THE MERGER
The AT&T Board believes that the Merger is in the best interests of AT&T and
its stockholders. AT&T expects the Merger to enable it to accelerate its
ability to offer local telephony services to business customers and,
ultimately, to other customers. AT&T believes this will allow it to expand its
telecommunications offerings, to deepen and build upon its relationships with
its long distance customers, and to strengthen its overall strategic
positioning.
OPINION OF THE FINANCIAL ADVISOR TO THE TCG BOARD
Merrill Lynch has acted as financial advisor to TCG in connection with the
Merger. At the January 8, 1998 meeting of the TCG Board, Merrill Lynch
delivered to the TCG Board its written opinion dated January 8, 1998 that, as
of the date of such opinion, based upon the procedures followed, assumptions
made, matters considered and limits on the review undertaken as set forth in
such opinion, the Exchange Ratio was fair from a financial point of view to
the holders of TCG Common Stock. No limitations were imposed by the TCG Board
upon Merrill Lynch with respect to the investigations made or the procedures
followed by it in rendering its opinion.
THE FULL TEXT OF THE OPINION OF MERRILL LYNCH DATED JANUARY 8, 1998, WHICH
SETS FORTH THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX C TO THIS INFORMATION
STATEMENT/PROSPECTUS. WE URGE THE HOLDERS OF TCG COMMON STOCK TO READ SUCH
OPINION IN ITS ENTIRETY. MERRILL LYNCH'S OPINION IS DIRECTED ONLY TO THE
FAIRNESS OF THE EXCHANGE RATIO TO THE HOLDERS OF TCG COMMON STOCK, AND DOES
NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR ANY RELATED TRANSACTIONS. THE
SUMMARY OF THE OPINION OF MERRILL LYNCH SET FORTH IN THIS INFORMATION
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF SUCH OPINION.
In arriving at its opinion, Merrill Lynch, among other things: (i) reviewed
certain publicly available business and financial information relating to TCG
and AT&T that Merrill Lynch deemed to be relevant; (ii) reviewed certain
information, including financial forecasts, relating to the business,
earnings, cash flows, assets, liabilities
18
<PAGE>
and prospects of TCG furnished to Merrill Lynch by TCG, as well as the amount
and timing of the cost savings and related expenses and synergies expected to
result from the Merger (the "Expected Synergies") furnished to Merrill Lynch
by TCG and AT&T; (iii) conducted discussions with members of senior management
of TCG and AT&T concerning the matters described in clauses (i) and (ii)
above, as well as their respective businesses and prospects before and after
giving effect to the Merger and the Expected Synergies; (iv) reviewed the
market prices and valuation multiples for TCG Common Stock and AT&T Common
Shares and compared them with those of certain publicly traded companies that
Merrill Lynch deemed to be relevant; (v) reviewed the results of operations of
TCG and compared them with those of certain publicly traded companies that
Merrill Lynch deemed to be relevant; (vi) compared the proposed financial
terms of the Merger with the financial terms of certain other transactions
that Merrill Lynch deemed to be relevant; (vii) participated in certain
discussions and negotiations among representatives of TCG, including the Cable
Stockholders, and AT&T and their financial and legal advisors; (viii) reviewed
the potential pro forma impact of the Merger; (ix) reviewed drafts dated
January 7, 1998 of the Merger Agreement, the Voting Agreement, the
Registration Rights Agreement and the Master Facilities Agreement; and (x)
reviewed such other financial studies and analyses and took into account such
other matters as Merrill Lynch deemed necessary, including its assessment of
general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
it, discussed with or reviewed by or for it, or publicly available, and
Merrill Lynch did not assume any responsibility for independently verifying
such information or undertake an independent evaluation or appraisal of any of
the assets or liabilities of TCG or AT&T and was not furnished with any such
evaluation or appraisal. In addition, Merrill Lynch did not assume any
obligation to conduct, nor did it conduct, any physical inspection of the
properties or facilities of TCG or AT&T. With respect to the financial
forecast information and the Expected Synergies furnished to or discussed with
it by TCG and/or AT&T, Merrill Lynch assumed that they had been reasonably
prepared and reflected the best currently available estimates and judgment of
TCG's and/or AT&T's management as to the expected future financial performance
of TCG or AT&T, as the case may be, and the Expected Synergies. Merrill Lynch
further assumed that the Merger will be accounted for as a pooling of
interests under generally accepted accounting principles and that it will
qualify as a tax free reorganization for U.S. federal income tax purposes.
Merrill Lynch also assumed that the final form of the Merger Agreement, the
Voting Agreement, the Registration Rights Agreement and the Master Facilities
Agreement would be substantially similar to the last draft of each reviewed by
it.
Merrill Lynch's opinion is necessarily based upon market, economic and other
conditions as they existed and could be evaluated on, and on the information
made available to Merrill Lynch as of, the date thereof. Merrill Lynch assumed
that in the course of obtaining the necessary regulatory or other consents or
approvals (contractual or otherwise) for the Merger, no restrictions,
including any divestiture requirements or amendments or modifications, will be
imposed that will have a material adverse effect on the contemplated benefits
of the Merger.
The following is a summary of the material financial and comparative
analyses performed by Merrill Lynch in arriving at its opinion dated January
8, 1998, which were presented to and discussed with the TCG Board at its
January 8, 1998 meeting.
Historical Stock Trading Analysis. Merrill Lynch reviewed the per share
daily closing market price movement of TCG Common Stock for the period
beginning June 27, 1996 and ending January 5, 1998. Merrill Lynch also
analyzed trading volume for TCG Common Stock for the same period to determine
the percent of volume which traded at various price ranges. Merrill Lynch
compared the TCG Common Stock price history from June 27, 1996 to January 5,
1998 to the S&P 400 and a composite comprised of American Communications
Services Incorporated ("ACSI"), GST Telecommunications, Inc. ("GST"), IntelCom
Group (U.S.A.), Inc. ("ICG"), McLeod, Inc. ("McLeod"), Intermedia
Communications of Florida, Inc. ("Intermedia"), Electric Lightwave Inc.
("ELI") and NEXTLINK Incorporated ("NEXTLINK"). Merrill Lynch also discussed
the relationship of the implied offer premium based on a price of $55.99 to
various daily pre-announcement closing price averages for the TCG Common
Stock.
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Comparable Public Market Analysis. Utilizing the closing stock prices as of
January 5, 1998, Merrill Lynch compared the ratios of market capitalization
(market value of equity plus debt and redeemable preferred stock less cash and
cash equivalents) to gross property, plant and equipment ("Gross PP&E"),
estimated 1998 revenues, route miles and access lines for TCG (6.3x, 8.7x,
$1,343 and $46,208, respectively) to similar ratios for certain companies
(ACSI, ELI, GST, ICG, Intermedia, McLeod and NEXTLINK). The companies had (i)
Gross PP&E ratios (excluding NEXTLINK and McLeod) ranging from 2.8x to 4.0x
(mean 3.4x), (ii) estimated 1998 revenues ratios (excluding McLeod) ranging
from 4.2x to 12.2x (mean 7.2x), (iii) route miles ratios (excluding
Intermedia) from $502 to $1,392 (mean $842) and (iv) access lines ratios from
$9,713 to $51,137 (mean $31,140). Utilizing this methodology, Merrill Lynch
derived estimated per share valuations for the TCG Common Stock ranging from
$23 to $47 per share.
Comparable Private Market Transaction Analysis. Using publicly available
information, Merrill Lynch reviewed five recent transactions involving the
acquisition of CLEC companies (the "Comparable Acquisitions"). The Comparable
Acquisitions (and announcement date for each transaction) were WorldCom, Inc.
("WorldCom")/MFS Communications Company, Inc. (August 1996), TCG/Eastern
TeleLogic Corporation (October 1996), Brooks Fiber Properties, Inc.
("BFP")/Metro Access Networks Inc. (March 1997), WorldCom/BFP (September 1997)
and TCG/Kansas City Fiber Network (December 1997).
With respect to each of the Comparable Acquisitions, Merrill Lynch compared
the transaction value as a multiple of Gross PP&E and latest quarter revenues
annualized ("Run Rate Revenue") of each acquired company. For the Comparable
Acquisitions, the minimum and maximum multiple ranges were 2.1x to 6.4x for
Gross PP&E and 6.7x to 23.9x for Run Rate Revenue. Utilizing this methodology,
Merrill Lynch derived estimated per share valuations for the TCG Common Stock
ranging from $39 to $57 per share. Merrill Lynch noted that it believed that
these transactions were of limited relevance given the lack of direct
comparability to the Merger.
Discounted Cash Flow Analysis. Merrill Lynch performed a discounted cash
flow analysis for TCG using (i) management projections used for reviewing
strategic alternatives (the "Base Case") and (ii) management projections used
for reviewing financing alternatives (the "Conservative Case"). For both the
Base Case and the Conservative Case, Merrill Lynch added the net present
values of (i) TCG's projected unlevered free cash flows for the years 1998 to
2006, (ii) ACC's projected unlevered free cash flows for the years 1998 to
2002 and (iii) the unlevered free cash flows associated with the estimated
synergies from the ACC Merger for the years 1998 to 2002. For both the Base
Case and the Conservative Case, Merrill Lynch then added the aggregate net
present values of the terminal values of TCG, ACC and the synergies. For each
of TCG, ACC and the synergies, the net present value was calculated assuming
discount rates ranging from 12.0%-16.0%, 12.4%-14.4% and 9.0%-13.0%,
respectively. The terminal values were based upon multiples of earnings before
interest, tax, depreciation and amortization ("EBITDA") of 9.0-11.0x, 8.1-
10.1x and 4.5-5.5x, respectively. The synergies information was provided by
TCG management. Utilizing this methodology, Merrill Lynch derived estimated
per share valuations for the TCG Common Stock ranging from $39 to $69 for the
Base Case and $31 to $53 for the Conservative Case.
Historical Implied Exchange Ratio Analysis. Merrill Lynch reviewed the
historical implied exchange ratios (TCG Common Stock price/AT&T Common Shares
price) from January 2, 1997 to January 5, 1998. Merrill Lynch noted that the
low and high historical implied exchange ratios for that period were 0.66x and
1.19x, respectively, and the mean was 0.90x. Merrill Lynch also reviewed the
historical implied exchange ratios from September 29, 1997 to January 5, 1998.
Merrill Lynch noted that the low and high historical implied exchange ratios
for that period were 0.84x and 1.19x, respectively, and the mean was 0.98x.
Merrill Lynch also noted the mean historical implied exchange ratios for the
periods beginning December 5, 1997, October 5, 1997, July 5, 1997 and January
5, 1997 and, in each case, ending January 5, 1998. For these periods, the mean
historical implied exchange ratios were .94x, .97x, .99x and .90x,
respectively.
Review of AT&T. Merrill Lynch reviewed (i) AT&T's market capitalization (pro
forma to reflect the sale of AT&T Universal Card Services, Inc., its customer
care business and its stake in DirecTV, Inc.) as a multiple
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of estimated EBITDA, (ii) the AT&T Common Shares price as a multiple of
estimated earnings per share and (iii) the stock price trading history of AT&T
Common Shares from January 2, 1997 through January 5, 1998. Merrill Lynch also
compared the AT&T Common Shares price history from January 2, 1997 to January
5, 1998 to the S&P 400 and two composite groups of long distance carriers (MCI
Communications Corporation, Sprint Corporation ("Sprint") and WorldCom
(together, "IXCs First Tier") and EXCEL Communications Inc. Holding Co.
("Excel"), Frontier Corporation ("Frontier"), LCI International, Inc. ("LCI"),
Tel-Save Holdings, Inc. ("Tel-Save"), Pacific Gateway Exchange Inc. ("Pacific
Gateway"), Viatel, Inc., IXC Communications, Inc., Qwest Communications
International Inc. and RSL Communications, Ltd.). Merrill Lynch also reviewed
recent analyst research reports and target prices with respect to AT&T.
Merrill Lynch analyzed the intrinsic value of AT&T's businesses (wireline
telecommunications, wireless telecommunications, international and other),
aggregated those values and derived estimated per share valuations of AT&T
Common Shares ranging from $58.90 to $69.55. Merrill Lynch also compared
ratios of 1998 estimated price/earnings to total return (calculated based on
estimated five-year compound annual earnings per share growth rates plus
dividend yield) for AT&T to those of the IXCs First Tier, the "IXCs Second
Tier" (Excel, Frontier, LCI, Pacific Gateway, Teleglobe Inc. and Tel-Save) and
certain other telecommunications companies (Ameritech Corporation ("AIT"),
Bell Atlantic Corporation ("BEL"), BellSouth Corporation ("BLS"), GTE
Corporation ("GTE"), SBC Communications Inc. ("SBC") and U S West
Communications Group, Aliant Communications Co., ALLTEL Corporation, Century
Communications Corp. and Cincinnati Bell Inc.).
Pro Forma Merger Analysis. Merrill Lynch analyzed the estimated earnings per
share growth and the estimated earnings per share accretion/dilution from 1998
through 2002 for AT&T pro forma the Merger (assuming also the ACC Merger and
related synergies). Without the Expected Synergies, the Merger was dilutive to
AT&T's earnings per share in each year from 1998 through 2002, respectively,
by -11.9%, -10.4%, -9.0%, -7.4% and -5.4%. With the Expected Synergies, the
Merger was dilutive/accretive in each year from 1998 through 2002,
respectively, by -6.8%, 0.9%, 6.5%, 10.1% and 10.5%. Merrill Lynch also
analyzed the estimated compound annual growth rate of earnings per share from
1998 to 2002 for AT&T (the "AT&T EPS Growth Rate"), and noted that the AT&T
EPS Growth Rate pro forma for the Merger without Expected Synergies would be
1.5% lower than for the stand alone scenario, and that the AT&T EPS Growth
Rate pro forma for the Merger with Expected Synergies would be 3.0% greater
than for the stand alone scenario.
The summary set forth above does not purport to be a complete description of
the analyses performed by Merrill Lynch, although it is a summary of the
material financial and comparative analyses performed by Merrill Lynch in
arriving at its opinion. Arriving at a fairness opinion is a complex process
not necessarily susceptible to partial analysis or summary description.
Merrill Lynch believes that its analyses must be considered as a whole and
that selecting portions of its analyses and of the factors considered by it,
without considering all such factors and analyses, could create a misleading
view of the processes underlying its opinion. Merrill Lynch did not assign
relative weights to any of its analyses in preparing its opinion. The matters
considered by Merrill Lynch in its analyses were based on numerous
macroeconomic, operating and financial assumptions with respect to industry
performance, general business and economic conditions and other matters, many
of which are beyond TCG's control and involve the application of complex
methodologies and educated judgment. Any estimates incorporated in the
analyses performed by Merrill Lynch are not necessarily indicative of actual
past or future results or values, which may be significantly more or less
favorable than such estimates. Estimated values do not purport to be
appraisals and do not necessarily reflect the prices at which businesses or
companies may be sold in the future, and such estimates are inherently subject
to uncertainty. No public company utilized as a comparison is identical to
TCG, and none of the Comparable Acquisitions or other business combinations
utilized is identical to the proposed Merger. Accordingly, an analysis of
publicly traded comparable companies and comparable business combinations is
not mathematical; rather it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
comparable companies and business combinations and other factors that could
affect the public trading value of the comparable companies or company to
which they are being compared.
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Merrill Lynch is an internationally recognized investment banking firm that
regularly engages in the valuation of businesses and their securities in
connection with mergers and acquisitions. The TCG Board selected Merrill Lynch
to act as its financial advisor on the basis of Merrill Lynch's international
reputation, TCG's prior relationship with Merrill Lynch and Merrill Lynch's
familiarity with TCG. Merrill Lynch is currently advising TCG in connection
with its acquisition of ACC and is providing financial advisory services to
AT&T and the Cable Stockholders in connection with other potential
transactions. Merrill Lynch has, in the past, provided financial advisory and
financing services to TCG, AT&T and the Cable Stockholders and may continue to
do so and has received, and may receive, fees for the rendering of such
services.
Fees Paid to Merrill Lynch. Pursuant to a letter agreement dated February
11, 1997, TCG agreed to pay Merrill Lynch a fee of $100,000 within five days
of the date of the letter agreement and an additional fee of $3,000,000
payable upon the execution of the Merger Agreement. TCG has also agreed to pay
a fee, upon the closing of the Merger, equal to the product of 0.25% and the
Transaction Value (as defined below) less any fees previously paid to Merrill
Lynch pursuant to the letter agreement. The Transaction Value is defined as
the aggregate fair market value of the AT&T Common Shares to be issued in
connection with the Merger plus all indebtedness (net of any cash or
marketable securities) of TCG which is assumed by AT&T or retired in
connection with the Merger. In addition, TCG has agreed to reimburse Merrill
Lynch for its reasonable expenses (including the reasonable fees and
disbursements of its legal counsel) and to indemnify Merrill Lynch and certain
related parties from and against certain liabilities, including liabilities
under the federal securities laws, arising out of its engagement.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Information Statement/Prospectus contains forward-looking statements,
including statements concerning possible or assumed future results of
operations of TCG and AT&T set forth under "--TCG's Reasons for the Merger;
Recommendation of the TCG Board" and "--AT&T's Reasons for the Merger" and "--
Opinion of the Financial Advisor to the TCG Board" and those preceded by,
followed by or that include the words "believes," "expects," "anticipates" or
similar expressions. For those statements, the companies claim the protection
of the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. You should understand that the
following important factors, in addition to those discussed elsewhere in this
document and in the documents which the companies incorporate by reference,
could affect the future results of TCG and AT&T, and could cause those results
to differ materially from those expressed in such forward-looking statements:
materially adverse changes in economic conditions in the markets served by the
companies; a significant delay in the expected closing of the Merger; future
regulatory actions and conditions in the companies' operating areas;
competition from others in the telecommunications market; the timing of entry
of the Regional Bell Operating Companies in the long distance telephony
services market; the timing of entry and profitability of AT&T in the local
telephony services market; failure to realize fully expected cost savings from
the Merger; greater than expected costs or difficulties related to the
integration of the businesses of AT&T and TCG; and other risks and
uncertainties as may be detailed from time to time in AT&T's and/or TCG's
public announcements and Commission filings.
TERMS OF THE MERGER
THE DESCRIPTION OF THE MERGER AGREEMENT SET FORTH BELOW DOES NOT PURPORT TO
BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER
AGREEMENT, A COPY OF WHICH IS ATTACHED AS APPENDIX A TO THIS INFORMATION
STATEMENT/PROSPECTUS AND INCORPORATED BY REFERENCE HEREIN.
The Merger. Subject to the terms and conditions of the Merger Agreement,
Merger Sub will merge with and into TCG on the date and at the time (the
"Effective Time") that the certificate of merger with respect to the Merger is
accepted for filing by the Secretary of State of the State of Delaware (or
such later time as specified in such certificate of merger). See "--Effective
Time of the Merger." The separate corporate existence of Merger Sub will then
cease, and the internal corporate affairs of TCG (the "Surviving Corporation")
will continue to be governed by the laws of the State of Delaware.
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Certificate of Incorporation and By-Laws. The Merger Agreement provides that
the certificate of incorporation of TCG shall be amended pursuant to the
certificate of merger to be identical to the certificate of incorporation of
Merger Sub as in effect immediately prior to the Effective Time, except to
indicate that the name of the Surviving Corporation is "Teleport
Communications Group Inc." Prior to the Effective Time, AT&T shall amend the
certificate of incorporation of Merger Sub to include the indemnification
provisions of TCG's Amended and Restated Certificate of Incorporation as in
effect on January 8, 1998 (the "TCG Certificate of Incorporation"). Such
certificate of incorporation as so amended will become the certificate of
incorporation of the Surviving Corporation. The Amended and Restated By-Laws
of TCG (the "TCG By-Laws") shall be further amended as of the Effective Time
to be identical to the by-laws of Merger Sub in effect immediately prior to
the Effective Time and, in such amended form, will become the by-laws of the
Surviving Corporation.
Directors and Officers. The directors of Merger Sub at the Effective Time
will become the directors of the Surviving Corporation until their successors
have been duly elected or appointed and qualified or until their earlier
death, resignation or removal. The officers of TCG at the Effective Time will
become the officers of the Surviving Corporation until their successors have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal. See "--Management and Operations of TCG after the
Merger."
Conversion of TCG Common Stock in the Merger. At the Effective Time, each
issued and outstanding share of TCG Common Stock (other than shares owned by
AT&T or TCG or any of their respective wholly owned subsidiaries) will be
converted into .943 of an AT&T Common Share. If, prior to the Effective Time,
AT&T should split or combine the AT&T Common Shares, or pay a stock dividend
or other stock distribution in AT&T Common Shares, or otherwise change the
AT&T Common Shares into any other securities, or make any other dividend or
distribution on the AT&T Common Shares (other than normal quarterly dividends
as they may be adjusted from time to time in the ordinary course), then the
Exchange Ratio will be appropriately adjusted to reflect such split,
combination, dividend or other distribution or change.
Each outstanding option to purchase shares of TCG Common Stock (each, an
"Option") issued pursuant to TCG's stock option plans and certain non-plan
options issued by TCG pursuant to option agreements or otherwise
(collectively, the "Option Plans"), whether or not vested or exercisable, will
be assumed by AT&T and will constitute an option to acquire, on the same terms
and conditions as were applicable under such assumed Option, that number of
AT&T Common Shares equal to the product of the Exchange Ratio and the number
of shares of TCG Common Stock subject to such Option, at an exercise price per
AT&T Common Share equal to the exercise price per share of such Option
immediately prior to the Effective Time of the Merger divided by the Exchange
Ratio, rounded down to the nearest whole cent; provided, however, that (i)
subject to the provisions of clause (ii) below, if the foregoing calculation
results in an assumed Option being exercisable for a fraction of an AT&T
Common Share, then the number of AT&T Common Shares subject to such Option
shall be rounded up to the nearest whole number of shares, with no cash being
payable for such fractional share, and (ii) in the case of any Options which
are "incentive stock options" (as defined in Section 422 of the Internal
Revenue Code of 1986, as amended, and all regulations promulgated thereunder
(collectively, the "Code")), the adjustment provided above shall be effected
in a manner which is consistent with Section 424(a) of the Code. AT&T will
comply with the terms of the Option Plans as they apply to the Options assumed
as set forth above.
In addition, (i) each outstanding stock incentive right to purchase shares
of TCG Common Stock (each, a "Stock Incentive Right") held by any person as a
result of the consummation of the ACC Agreement, and (ii) each outstanding
share unit under TCG's 1996 Equity Incentive Plan (each, a "Stock Unit") will
be assumed by AT&T and converted into the right to acquire that number of AT&T
Common Shares determined by multiplying the number of shares of TCG Common
Stock subject to such Stock Incentive Right or Stock Unit, as the case may be,
at the Effective Time of the Merger by the Exchange Ratio. If the foregoing
calculation results in an assumed Stock Incentive Right or Stock Unit, as the
case may be, providing the right to acquire a fraction of an AT&T Common
Share, then the number of AT&T Common Shares subject to such right will be
rounded up to the nearest whole number of shares, with no cash being payable
for such fractional share. The terms and conditions of each Stock Incentive
Right and each Stock Unit assumed by AT&T will be the same terms and
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conditions as set forth in the TCG Stock Incentive Right or TCG Stock Unit, as
the case may be, prior to AT&T's assumption and conversion of the Stock
Incentive Rights and Stock Units.
TCG will terminate its 1997 Employee Stock Purchase Plan effective as of no
later than two business days prior to the Closing Date under the Merger
Agreement.
Fractional Shares. No fractional AT&T Common Shares will be issued in the
Merger. In lieu of any such fractional shares, each holder of TCG Common Stock
who otherwise would be entitled to receive a fractional AT&T Common Share
pursuant to the Merger will be paid an amount in cash, without interest, equal
to such holder's proportionate interest in the net proceeds from the sale or
sales in the open market by an exchange agent selected by AT&T and reasonably
acceptable to TCG (the "Exchange Agent"), on behalf of all such holders, of
the aggregate fractional AT&T Common Shares, if any (the "Excess Shares"),
that would have been issued in the Merger. As soon as practicable following
the Effective Time, the Exchange Agent will determine the number of Excess
Shares, if any, and the Exchange Agent, as agent for the former holders of TCG
Common Stock, will sell any such Excess Shares at the prevailing prices on the
NYSE. The sale of any Excess Shares will be executed through one or more
member firms of the NYSE and will be executed in round lots to the extent
practicable. AT&T will pay all commissions, transfer taxes and other out-of-
pocket transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sale of fractional shares.
EFFECTIVE TIME OF THE MERGER
Promptly following, but no later than the fifth business day after,
satisfaction or waiver of the conditions to the Merger (other than those
conditions to be satisfied or waived at the Closing), the Merger will be
consummated and become effective at the time at which the certificate of
merger to be filed pursuant to the Delaware General Corporation Law ("DGCL")
is accepted for filing by the Secretary of State of the State of Delaware or
such later date and time as may be specified in such certificate of merger.
See "--Conditions; Waivers."
EXCHANGE OF CERTIFICATES IN THE MERGER
Promptly after the Effective Time, the Exchange Agent will mail a
transmittal form and instructions to each holder of record (other than AT&T or
TCG or any of their respective wholly owned subsidiaries) of certificates
which immediately prior to the Effective Time represented outstanding shares
of TCG Common Stock (the "Certificates"), which form and instructions are to
be used in forwarding the Certificates for surrender and exchange for (i)
certificates representing that number of whole AT&T Common Shares that such
holder has the right to receive pursuant to the Merger and (ii) cash for any
fractional AT&T Common Shares to which such holder otherwise would be
entitled. WE REQUEST THAT YOU NOT SURRENDER YOUR CERTIFICATES FOR EXCHANGE
UNTIL YOU RECEIVE SUCH TRANSMITTAL FORM AND INSTRUCTIONS. At and after the
Effective Time and until surrendered as provided above, Certificates will be
deemed to represent the right to receive certificates representing that number
of whole AT&T Common Shares into which the shares of TCG Common Stock formerly
represented by such Certificates were converted in the Merger and a cash
payment in lieu of any fractional shares, and the holders of Certificates will
not be entitled to receive dividends or any other distributions from AT&T
until such Certificates are so surrendered. For clarification purposes,
following the Merger, former TCG stockholders will be AT&T stockholders with
all rights thereof, except for the right to receive dividends and
distributions pending surrender of their Certificates. Upon surrender of a
Certificate, there shall be paid to the person in whose name such AT&T Common
Shares are issued any dividends or other distributions which have a record
date after the Effective Time and which became payable prior to surrender with
respect to such AT&T Common Shares. After such surrender, there shall be paid
to the person in whose name the AT&T Common Shares are issued any dividends or
other distributions on such AT&T Common Shares which have a record date after
the Effective Time and prior to such surrender and a payment date after such
surrender, and such payment will be made on the applicable payment date. In no
event shall the persons entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or other
distributions.
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LISTING OF THE AT&T COMMON SHARES ON THE NYSE
In the Merger Agreement, AT&T has agreed to use all reasonable efforts to
cause the AT&T Common Shares which are to be issued pursuant to the Merger
Agreement and upon exercise of Options granted to employees of TCG and its
subsidiaries to be listed for trading on the NYSE. Such authorization for
listing is a condition to the obligations of AT&T, Merger Sub and TCG to
consummate the Merger.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of the
parties thereto. The Merger Agreement includes representations and warranties
by TCG as to (i) the corporate organization, standing and power of TCG and its
subsidiaries, (ii) the authorization of the Merger Agreement, approvals by the
TCG Board and the inapplicability of Section 203 of the DGCL (the "Delaware
Business Combination Law") to the transactions contemplated by the Merger
Agreement, (iii) TCG's possession of all governmental permits necessary for
TCG or any of its subsidiaries to conduct its current business and TCG's
compliance with applicable laws, (iv) the fairness opinion received by TCG,
(v) its capitalization, (vi) pending or threatened litigation, (vii) the
Merger Agreement's noncontravention of any agreement, law or charter or by-law
provision, (viii) the terms, existence, operations, liabilities and compliance
with applicable laws of TCG employee plans, and certain other matters relating
to the Employee Retirement Income Security Act of 1974, as amended, (ix)
certain tax matters, (x) ownership of and rights to use certain intellectual
property, (xi) the accuracy of TCG's financial statements and filings with the
Commission, (xii) the conduct of TCG's business in the ordinary and usual
course and the absence of any Material Adverse Effect (as defined in the
Merger Agreement) on TCG, (xiii) certain contracts and leases of TCG and its
subsidiaries, and certain transactions with affiliates and the Cable
Stockholders, (xiv) brokers and finders employed by TCG, (xv) the accuracy of
information to be supplied by TCG for inclusion in this Information
Statement/Prospectus and in the Registration Statement of which this
Information Statement/Prospectus is a part and (xvi) the fact that none of TCG
or any of its subsidiaries is in breach in any material respect of its
representations, warranties, covenants or agreements contained in the ACC
Agreement and, to TCG's knowledge, ACC is not in breach in any material
respect of any of its representations, warranties, covenants or agreements
contained in the ACC Agreement.
The Merger Agreement also includes representations and warranties by AT&T
and Merger Sub as to (i) the corporate organization, standing and power of
AT&T and its subsidiaries, (ii) the authorization of the Merger Agreement,
(iii) AT&T's possession of all governmental permits necessary for AT&T or any
of its subsidiaries to conduct its current business and AT&T's compliance with
applicable laws, (iv) AT&T's capitalization, (v) the authorization of the AT&T
Common Shares to be issued pursuant to the Merger Agreement, (vi) pending or
threatened litigation, (vii) the Merger Agreement's noncontravention of any
agreement, law or charter or by-law provision, (viii) certain tax matters,
(ix) ownership of and rights to use certain intellectual property, (x) the
accuracy of AT&T's financial statements and filings with the Commission, (xi)
the absence of any Material Adverse Effect (as defined in the Merger
Agreement) on AT&T, (xii) brokers and finders employed by AT&T, (xiii) the
accuracy of information to be supplied by AT&T for inclusion in this
Information Statement/Prospectus and in the Registration Statement of which
this Information Statement/Prospectus is a part, (xiv) the ownership,
activities and assets of Merger Sub and (xv) the ownership of shares of TCG
Common Stock or capital stock of ACC by AT&T.
BUSINESS OF TCG PENDING THE MERGER
TCG has agreed that, among other things, prior to the Effective Time or
earlier termination of the Merger Agreement, except as permitted by the Merger
Agreement, as required by any change in applicable law or as otherwise agreed
by AT&T in writing, TCG will, and will cause each of its subsidiaries to,
conduct its operations according to its ordinary course of business consistent
with past practice, seek to preserve intact its current business
organizations, keep available the service of its current officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it with the objective that their goodwill and
ongoing business shall be unimpaired at the Effective Time. TCG has agreed
that, unless AT&T
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agrees in writing or except as otherwise permitted pursuant to the Merger
Agreement, prior to the Effective Time neither TCG nor any of its subsidiaries
will:
(i) except for (A) shares of TCG Common Stock issued upon exercise of
Options or other rights outstanding as of January 8, 1998 under TCG's
employee benefit plans, (B) (x) Options to purchase, and awards of, no more
than an aggregate of 300,000 shares of TCG Common Stock, granted in
connection with new hires or promotions, directors' retainers, and bonus
award programs in the ordinary course of business consistent with past
practice under TCG benefit plans, and (y) Options to purchase no more than
an aggregate of 700,000 shares of TCG Common Stock issued pursuant to or in
accordance with the terms of the ACC Agreement, and shares of TCG Common
Stock issued upon exercise of such Options, (C) shares of TCG Common Stock
issued pursuant to the ACC Agreement, (D) shares of TCG Common Stock issued
in accordance with the terms of the TCG Stock Purchase Plan as in effect on
January 8, 1998, and (E) shares of TCG Class A Common Stock issued upon
conversion of shares of TCG Class B Common Stock outstanding on January 8,
1998, in accordance with the terms of the TCG Certificate of Incorporation,
issue, deliver, sell, dispose of, pledge or otherwise encumber, or
authorize or propose the issuance, sale, disposition or pledge or other
encumbrance of (x) any additional shares of its capital stock of any class
(including TCG Common Stock), or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for any shares of
its capital stock, or any rights, warrants, options, calls, commitments or
any other agreements of any character to purchase or acquire any shares of
its capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of
its capital stock, or (y) any other securities in respect of, in lieu of,
or in substitution for, TCG Common Stock outstanding on January 8, 1998;
(ii) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding securities (including
TCG Common Stock);
(iii) except for conversions of TCG Class B Common Stock outstanding on
January 8, 1998 into shares of TCG Class A Common Stock, in accordance with
the terms of the TCG Certificate of Incorporation, split, combine,
subdivide or reclassify any shares of its capital stock or declare, set
aside for payment or pay any dividend, or make any other actual,
constructive or deemed distribution in respect of any shares of its capital
stock or otherwise make any payments to stockholders in their capacity as
such (other than dividends or distributions paid by any wholly owned
subsidiary of TCG);
(iv) (A) grant any increases in the compensation of any of its directors,
officers or employees, except in the ordinary course of business consistent
with past practice, (B) pay or award or agree to pay or award any pension,
retirement allowance or other nonequity incentive awards or other employee
benefit, not required by any of the existing benefit, severance, pension or
employment plans, agreements or arrangements as in effect on January 8,
1998 to any current or former director, officer or employees, whether past
or present, or to any other person, except for payments or awards that are
in the ordinary course of business and consistent with past practice, and
that are not material, (C) pay or award or agree to pay or award any stock
option or equity incentive awards, except as permitted by paragraph (i)
above, (D) enter into any new or amend any existing employment agreement
with any director, officer or employee, except for employment agreements
with new employees entered into in the ordinary course of business
consistent with past practice and except for amendments in the ordinary
course of business, consistent with past practice, that do not materially
increase benefits or payments, (E) enter into any new or amend any existing
severance agreement with any current or former director, officer or
employee, except for agreements or amendments in the ordinary course of
business consistent with past practice, that do not provide for material
benefits or (F) become obligated under any new pension plan or arrangement,
welfare plan or arrangement, multi-employer plan or arrangement, employee
benefit plan or arrangement, severance plan or arrangement, benefit plan or
arrangement, or similar plan or arrangement, which was not in existence on
January 8, 1998, or amend or exercise discretion pursuant to any such plan
or arrangement in existence on January 8, 1998, except for any amendment or
exercise of discretion in the ordinary course of business, consistent with
past practice, that does not provide for material benefits;
(v) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
TCG or any of its subsidiaries not constituting an inactive
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subsidiary (other than the Merger, and other than (A) such of the foregoing
with respect to any TCG subsidiary as do not change TCG's beneficial
ownership interest in such subsidiary and (B) such of the foregoing with
respect to TCG that is used to effect an acquisition permitted in paragraph
(vi) below and which does not result in a change of control of TCG or
change the shares of TCG Common Stock into a different number or kind of
securities);
(vi) make any acquisition, by means of merger, consolidation or
otherwise, of (A) any direct or indirect ownership interest in or assets
comprising any business enterprise or operation or (B) except in the
ordinary course and consistent with past practice, any other assets;
provided, however, that TCG may make such acquisitions for cash in an
amount not to exceed $10 million in the case of any single acquisition or
$100 million for all such acquisitions in the aggregate if such
acquisitions do not and would not prevent or materially delay the
consummation of the Merger; and provided further that the foregoing will
not prevent TCG from exploring on a preliminary basis and conducting
diligence investigations (including having discussions with any potential
acquisition target) with respect to any potential acquisition that would
require AT&T's consent under the Merger Agreement, for the purpose of
determining the desirability of such potential acquisition and developing
the basis on which to seek AT&T's consent, so long as TCG does not submit
any formal proposal or indication of interest to such acquisition target,
or make any binding commitments with respect to such potential acquisition,
without obtaining AT&T's consent;
(vii) (A) dispose of any direct or indirect ownership interest in any
CLEC system or in any other local services or access system (including any
shares of capital stock of any subsidiary holding any such interest) or any
controlling interest in any other material business enterprise or
operation, (B) make any other disposition of any other direct or indirect
ownership interest in or assets comprising any CLEC system or any other
local service or access system or other material business enterprise or
operation (except for the replacement or upgrade of assets, or disposition
of unnecessary assets, in the ordinary course and consistent with past
practice) or (C) except in the ordinary course and consistent with past
practice, dispose of any other assets;
(viii) adopt any amendments to the TCG Certificate of Incorporation or
the TCG By-Laws or alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership
of any TCG subsidiary not constituting an inactive TCG subsidiary;
(ix) incur any indebtedness for borrowed money or guarantee any
indebtedness of any other person or make any loans, advances or capital
contributions to, or investments in, any other person (other than to TCG or
any wholly owned subsidiary of TCG) except that if TCG shall have complied
with its covenant to provide AT&T with the first opportunity to provide all
of any proposed financing with respect thereto, TCG may incur additional
indebtedness after January 8, 1998, under existing credit facilities (or
any renewals thereof) or in the high yield debt market, resulting in
aggregate net proceeds to TCG from such additional indebtedness not
exceeding $350 million;
(x) engage in the conduct of any business other than telecommunications
and related businesses;
(xi) enter into any agreement or exercise any discretion providing for
acceleration of payment or performance as a result of a change of control
of TCG or its subsidiaries;
(xii) enter into any contracts, arrangements, or understandings requiring
in the aggregate the purchase of equipment, materials, supplies or services
in excess of $35 million more than the amounts set forth for capital
expenditures in TCG's 1998 operating plan approved by the TCG Board prior
to January 8, 1998;
(xiii) enter into or amend or waive any right under any agreement with
any affiliates of TCG (other than its subsidiaries) or with any Cable
Stockholder or any affiliate of any Cable Stockholder other than any of the
foregoing as may be done in the ordinary course of business and that is not
material, individually or in aggregate, to TCG and its subsidiaries;
(xiv) settle or compromise any material litigation or waive, release or
assign any material rights or claims, except in the ordinary course of
business consistent with past practice;
(xv) amend, modify, supplement, or waive any right or condition under,
the ACC Agreement, except for amendments, modifications, supplements or
waivers which are not adverse to AT&T or TCG in any
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material respect and which in any event do not (A) increase the
consideration payable per share or in the aggregate to shareholders of ACC
under the ACC Agreement, (B) otherwise increase the maximum aggregate
number of shares of TCG Common Stock that may be issuable under the ACC
Agreement, or (C) extend the "drop-dead" date under the ACC Agreement
beyond November 26, 1998; or
(xvi) authorize, recommend or propose (other than to AT&T), or announce
an intention to do any of the foregoing, or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing.
ACC AGREEMENT
TCG has entered into the ACC Agreement providing for the ACC Merger, with
ACC becoming a wholly owned subsidiary of TCG. ACC is a switch-based provider
of telecommunications services to businesses, residential customers, and
educational institutions in the United States, United Kingdom and Canada. ACC
has recently commenced operations in Germany. The ACC Agreement provides that
ACC's stockholders will receive approximately that number of shares of TCG
Class A Common Stock for each ACC share, equal to $50 divided by the average
per share closing price of TCG Class A Common Stock for a ten-day trading
period prior to closing of the transaction. In the event, however, that the
average per share closing price of TCG Class A Common Stock during the ten-day
trading period prior to closing is below $45, the exchange ratio is fixed at
1.11111 shares of TCG Class A Common Stock for each ACC share, and, if the
average per share closing price of TCG Class A Common Stock during the ten-day
trading period prior to closing is above $55, the exchange ratio is fixed at
0.90909 of a share of TCG Class A Common Stock for each ACC share. The total
aggregate amount of consideration to be received by the ACC stockholders is
expected to be approximately $1 billion.
Upon execution of the ACC Agreement, ACC amended its shareholder rights plan
to exempt TCG from the 7.5% threshold by which the rights become exercisable.
This amendment will remain in effect until December 31, 1998. In the event
that the ACC Merger is completed, the underlying rights granted under the ACC
shareholder rights plan will be redeemed by ACC.
TCG and ACC expect the transaction to be completed by the end of April,
1998, subject to, among other things, approval by a majority of the holders of
ACC's outstanding shares. Under the ACC Agreement, ACC has agreed not to
solicit or take other actions with respect to any competing proposal, subject
to compliance with fiduciary duties. ACC agreed to pay TCG $32.5 million, plus
up to $7.5 million for expenses, if the ACC Agreement is terminated under
certain circumstances.
The obligations of AT&T and Merger Sub to effect the Merger are subject,
among other conditions, to the consummation or termination of the transactions
contemplated by the ACC Agreement. See "--Conditions; Waivers."
CERTAIN COVENANTS OF AT&T
AT&T has agreed that prior to the Effective Time or earlier termination of
the Merger Agreement, except as permitted in the Merger Agreement or with
TCG's prior written consent, AT&T will not (i) adopt a plan of complete or
partial liquidation or dissolution, or (ii) authorize, recommend, propose or
announce an intention, or enter into any contract, agreement, commitment or
arrangement, to do any of the foregoing.
NO SOLICITATION
Under the Merger Agreement, TCG has agreed that, prior to the Effective
Time, TCG and its subsidiaries shall not, and TCG shall use all reasonable
efforts to cause their respective officers, employees, representatives, agents
and affiliates not to, directly or indirectly, encourage, solicit or engage in
discussions or negotiations with any third party (other than AT&T) concerning
any merger, consolidation, share exchange or similar transaction involving TCG
or any of its subsidiaries, or any purchase of all or a significant portion of
the assets of or equity interest in TCG or any of its subsidiaries, or any
other transaction that would involve the transfer or potential transfer of
control of TCG or any of its subsidiaries (an "Acquisition Proposal"), or
provide any confidential
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information relating to TCG or any of its subsidiaries in connection with or
in contemplation of an Acquisition Proposal, other than the transactions
contemplated by the Merger Agreement; provided, however, that the TCG Board
may take and disclose to TCG stockholders a position under applicable Exchange
Act rules with respect to a tender offer or an exchange offer for shares of
TCG Common Stock commenced by a third party, provided that TCG or the TCG
Board gives AT&T reasonable advance notice of such position. TCG has agreed to
notify AT&T promptly of (i) any written inquiries or proposals with respect to
any such transaction that are received by, or any such negotiations or
discussions that are sought to be initiated with, TCG or any of its
subsidiaries, and (ii) the identity of any third party making any Acquisition
Proposal.
CONDITIONS; WAIVERS
Conditions to Each Party's Obligations to Effect the Merger. The respective
obligations of TCG, AT&T and Merger Sub to effect the Merger are subject to
the satisfaction or waiver of the following conditions: (i) the Merger shall
have been approved by the holders of shares representing at least a majority
of the votes that may be cast by the holders of all then outstanding shares of
TCG Common Stock (which condition has been satisfied by the Cable
Stockholders' execution of the Stockholders Consent), (ii) any waiting period
applicable to the Merger under the HSR Act shall have expired or early
termination thereof shall have been granted (which waiting period has
expired), and actions by the FCC granting its consent to the transfer of
control of all licenses, permits and other authorizations issued by the FCC in
connection with the business and operations of TCG and its subsidiaries to
AT&T, shall have been taken, in each case without limitation, restriction or
condition that has or would have a Material Adverse Effect on TCG (or an
effect on AT&T and its subsidiaries that, were such effect applied to TCG and
its subsidiaries, would constitute a Material Adverse Effect on TCG), (iii)
there shall not be in effect any judgment, writ, order, injunction or decree
of any court or governmental body enjoining or otherwise preventing
consummation of the transactions contemplated by the Merger Agreement, or
permitting consummation only subject to conditions or restrictions that have
or would have a Material Adverse Effect on TCG (or an effect on AT&T and its
subsidiaries that, were such effect applied to TCG and its subsidiaries, would
constitute a Material Adverse Effect on TCG), (iv) there shall be no stop
order suspending the effectiveness of, or any action by the Commission to
suspend the effectiveness of, the Registration Statement of which this
Information Statement/Prospectus is a part, (v) the AT&T Common Shares
required to be issued pursuant to the Merger Agreement shall have been
approved for listing on the NYSE, and (vi) at least twenty business days shall
have elapsed from the mailing of this Information Statement/Prospectus to TCG
stockholders.
Conditions to the Obligations of AT&T and Merger Sub. The respective
obligations of AT&T and Merger Sub to effect the Merger are subject to the
satisfaction or waiver of the following additional conditions: (i) each of the
representations and warranties of TCG contained in the Merger Agreement or
otherwise expressly required by the Merger Agreement to be made after the
execution thereof to the extent qualified by materiality or Material Adverse
Effect, shall have been true and, to the extent not qualified by materiality
or Material Adverse Effect, shall have been true in all material respects,
when made and except for certain specific exceptions, at the time of the
Closing with the same effect as though such representations and warranties had
been made at such time, (ii) at or prior to the Closing, TCG shall have
performed or complied in all material respects with all agreements and
conditions required of it pursuant to the Merger Agreement, (iii) TCG shall
have delivered to AT&T a certificate, dated the date of the Closing and signed
by the President or any Vice President of TCG, certifying as to the
fulfillment of the conditions specified in clauses (i) and (ii) of this
sentence, (iv) AT&T shall have received a tax opinion of its counsel,
including an opinion that the Merger will constitute a reorganization under
Section 368(a) of the Code, (v) TCG and its subsidiaries shall have complied
with the covenant to use their reasonable best efforts (A) not to take any
action that prevents or would prevent AT&T from accounting for the Merger as a
pooling of interests and (B) to take any action necessary to cure any prior
action or condition that prevents or would prevent AT&T from accounting for
the Merger as a pooling of interests, (vi) all authorizations (other than
those required under the HSR Act or from the FCC) required in connection with
the execution and delivery of the Merger Agreement and the performance of the
obligations thereunder shall have been made or obtained, without any
limitation, restriction or condition that has or would have a Material Adverse
Effect on TCG (or an effect on AT&T and its subsidiaries that, were such
effect applied to TCG and its subsidiaries, would constitute
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a Material Adverse Effect on TCG), except for such authorizations the failure
of which to have been made or obtained does not and would not, individually or
in the aggregate, have a Material Adverse Effect on TCG (or an effect on AT&T
and its subsidiaries that, were such effect applied to TCG and its
subsidiaries, would constitute a Material Adverse Effect on TCG), (vii) each
of the employment agreements between TCG and certain employees shall be in
full force and effect, and each employee shall be employed thereunder unless
the failure of such employee to be employed thereunder results from the death
or disability of such employee, (viii) all required authorizations of any
third parties (other than a governmental body) with respect to any contracts,
leases, agreements or understandings between TCG and/or any of its
subsidiaries, on the one hand, and any other person, on the other, relating to
the use of or access to the facilities of such person for the provision of
telecommunications services, the failure to obtain which has or would have,
individually or in the aggregate, a Material Adverse Effect on TCG, shall have
been obtained, (ix) there shall not have been a material breach of the Voting
Agreement by any of the Cable Stockholders and (x) the transactions
contemplated by the ACC Agreement shall have been consummated in accordance
with the terms of such agreement or such agreement shall have been terminated.
Conditions to the Obligations of TCG. The obligations of TCG to effect the
Merger are subject to the satisfaction or waiver of the following additional
conditions: (i) each of the representations and warranties of AT&T and Merger
Sub contained in the Merger Agreement or otherwise expressly required by the
Merger Agreement to be made after the execution thereof to the extent
qualified by materiality or Material Adverse Effect, shall have been true and,
to the extent not qualified by materiality or Material Adverse Effect, shall
have been true in all material respects, when made and except for certain
specific exceptions, at the time of the Closing with the same effect as though
such representations and warranties had been made at such time, (ii) at or
prior to the Closing, AT&T shall have performed or complied in all material
respects with all agreements and conditions required of it pursuant to the
Merger Agreement, (iii) AT&T shall have delivered to TCG a certificate, dated
the date of the Closing and signed by the President or any Vice President of
AT&T, certifying as to the fulfillment of the conditions specified in clauses
(i) and (ii) of this sentence, and (iv) TCG shall have received a tax opinion
of its counsel, including an opinion that the Merger will constitute a
reorganization under Section 368(a) of the Code.
AMENDMENT; TERMINATION
The parties to the Merger Agreement may not amend, change, supplement, waive
or otherwise modify the Merger Agreement except by an instrument in writing
signed by the party against whom enforcement is sought. Furthermore, TCG must
obtain the affirmative approval, by vote or written consent, of TCG
stockholders representing a majority of the votes that may be cast by the
holders of all then outstanding shares of TCG Common Stock, to: (i) enter into
any amendment to the Merger Agreement that would adversely affect TCG
stockholders, (ii) waive any closing condition of TCG in the Merger Agreement
if such waiver would materially adversely affect TCG stockholders or (iii)
consummate the Merger after the time at which TCG would be entitled to
terminate the Merger Agreement, as set forth below.
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, before or after the approval by TCG
stockholders, either by the mutual written consent of AT&T and TCG, or by
mutual action of their respective Boards of Directors.
The Merger Agreement may also be terminated by action of either the AT&T
Board or the TCG Board if (i) the Merger has not been consummated by December
31, 1998 (provided that the right to terminate under this clause (i) will not
be available to any party whose failure to fulfill any obligation under the
Merger Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date, and provided further that such date
will be extended to March 31, 1999 in the event that the failure of the Merger
to occur on or before December 31, 1998 is the result of (A) a delay
attributable to any permitted transaction involving AT&T or (B) the failure of
any of the conditions relating to the absence of injunctions preventing the
consummation of the Merger Agreement, the obtaining of all required
authorizations or the consummation (or termination) of the ACC Agreement or
(ii) any court or governmental body in the United States has issued a
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final and nonappealable order, decree or ruling or taken any other final and
nonappealable action permanently restraining, enjoining or otherwise
prohibiting the Merger. In addition, the Merger Agreement may be terminated by
AT&T and the Merger abandoned by the AT&T Board if any of the Cable
Stockholders shall have breached any of its representations, covenants or
obligations under the Voting Agreement in any material respect and such breach
shall not be curable.
In addition, either TCG or AT&T and Merger Sub may terminate the Merger
Agreement if the other party breaches or fails in any material respect to
perform or comply with its covenants and agreements contained in the Merger
Agreement or breaches its representations and warranties, in each case in a
manner that is not curable, such that the corresponding closing conditions
cannot be satisfied.
In the event of termination of the Merger Agreement and abandonment of the
Merger, neither AT&T, Merger Sub nor TCG (or any of their directors or
officers) will have any liability or further obligation to any party to the
Merger Agreement, except with respect to certain confidentiality requirements
as provided for in the Merger Agreement. Notwithstanding the foregoing, each
party to the Merger Agreement will remain liable for any breach of the Merger
Agreement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is a condition to the obligation of TCG to consummate the Merger that TCG
receive an opinion from Dow, Lohnes & Albertson, pllc, tax counsel to TCG, to
the effect that (i) the Merger will be treated for federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code, (ii)
each of AT&T, Merger Sub and TCG will be a party to the reorganization within
the meaning of Section 368(b) of the Code, (iii) no gain or loss will be
recognized by TCG as a result of the Merger, and (iv) no gain or loss will be
recognized by a stockholder of TCG as a result of the Merger with respect to
shares of TCG Common Stock converted solely into AT&T Common Shares. It is a
condition to the obligation of AT&T to consummate the Merger that AT&T receive
an opinion from Wachtell, Lipton, Rosen & Katz, special tax counsel to AT&T,
to the same effect, and also to the effect that no gain or loss will be
recognized by AT&T or Merger Sub as a result of the Merger. The effect of any
cash received by a TCG stockholder in lieu of a fractional AT&T Common Share
is discussed below.
Based upon the advice of their respective counsel, TCG and AT&T expect that
the Merger will qualify as a reorganization under the Code with the
consequences set forth above. Assuming that the Merger so qualifies, the
aggregate tax basis of the AT&T Common Shares received by TCG stockholders in
the Merger will be the same, in each instance, as the aggregate tax basis of
the TCG Common Stock surrendered in exchange therefor, excluding any basis
allocable to fractional share interests in AT&T Common Shares for which cash
is received. In addition, the holding period of the AT&T Common Shares
received by TCG stockholders in the Merger will include the period during
which the shares of TCG Common Stock surrendered in exchange therefor were
held, provided that such shares of TCG Common Stock were held as capital
assets at the Effective Time.
A holder of TCG Common Stock who receives cash in the Merger in lieu of a
fractional share interest in AT&T Common Shares will be treated as having
received the fractional share interest and then having sold such interest for
the cash received. This sale will result in the recognition of gain or loss
for federal income tax purposes, measured by the difference between the amount
of cash received and the tax basis of the TCG Common Stock allocable to such
fractional share interest. This gain or loss will be capital gain or loss,
provided that the TCG Common Stock was held as a capital asset at the
Effective Time. In addition, in the case of an individual holder of TCG Common
Stock, any such capital gain will be subject to a maximum federal income tax
rate of (i) 20% if the stockholder's holding period in the TCG Common Stock
was more than 18 months at the Effective Time and (ii) 28% if the
stockholder's holding period was more than one year but not more than 18
months at the Effective Time.
THE FOREGOING DISCUSSION IS ONLY A SUMMARY OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER AND IS NOT A COMPLETE ANALYSIS OR LISTING OF ALL
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POTENTIAL TAX EFFECTS RELEVANT TO THE MERGER AGREEMENT AND THE MERGER. THE
DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES THAT MAY BE RELEVANT TO A
PARTICULAR TCG STOCKHOLDER SUBJECT TO SPECIAL TREATMENT UNDER CERTAIN FEDERAL
INCOME TAX LAWS, SUCH AS DEALERS IN SECURITIES, BANKS, INSURANCE COMPANIES,
TAX-EXEMPT ORGANIZATIONS, NON-UNITED STATES PERSONS AND STOCKHOLDERS WHO
ACQUIRED THEIR SHARES OF TCG COMMON STOCK PURSUANT TO THE EXERCISE OF TCG
OPTIONS OR OTHERWISE AS COMPENSATION, NOR ANY CONSEQUENCES ARISING UNDER THE
LAWS OF ANY STATE, LOCALITY OR FOREIGN JURISDICTION. MOREOVER, THE TAX
CONSEQUENCES TO HOLDERS OF TCG OPTIONS ARE NOT DISCUSSED. IN RENDERING THE
OPINIONS REFERRED TO IN THIS SECTION, RESPECTIVE COUNSEL FOR THE COMPANIES
WILL RELY UPON REPRESENTATIONS MADE BY AT&T, MERGER SUB AND TCG IN THE MERGER
AGREEMENT AND RELATED DOCUMENTS AND IN CERTIFICATES TO BE EXECUTED IN
CONNECTION WITH THE MERGER, AND WILL RELY UPON REPRESENTATIONS MADE BY THE
CABLE STOCKHOLDERS IN THE VOTING AGREEMENT. THE DISCUSSION IS BASED UPON THE
CODE, TREASURY REGULATIONS THEREUNDER AND ADMINISTRATIVE RULINGS AND COURT
DECISIONS AS OF THE DATE HEREOF. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE
AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION.
WE URGE YOU TO CONSULT YOUR OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO YOU.
REGULATORY APPROVALS
HSR Act and Antitrust. AT&T and TCG have observed the notification and
waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"). The HSR Act provides for an initial
30-calendar day waiting period following the filing with the Federal Trade
Commission (the "FTC") and the Department of Justice of certain Notification
and Report Forms by the parties to the Merger. The HSR Act further provides
that if, within the initial 30-calendar-day waiting period, the FTC or the
Department of Justice issues a request for additional information or
documents, the waiting period will be extended until 11:59 p.m. on the
twentieth day after the date of substantial compliance by the filing parties
with such request. Only one such extension of the initial waiting period is
permitted under the HSR Act; however, the filing parties may voluntarily
extend the waiting period.
On February 18, 1998 AT&T and TCG filed the Notification and Report Forms
with the Department of Justice and the FTC for review in connection with the
Merger. The applicable waiting periods expired at 11:59 p.m. on March 20,
1998. Notwithstanding expiration of the waiting periods, at any time before or
after the Effective Time, the FTC, the Department of Justice or others could
take action under the antitrust laws with respect to the Merger, including
seeking to enjoin the consummation of the Merger or seeking the divestiture by
AT&T of all or part of the stock or assets of TCG, or of other business
conducted by AT&T.
Injunctions. The obligations of AT&T and TCG to consummate the Merger are
subject to the condition that there be no preliminary or permanent injunction
or other order by any court or governmental or regulatory authority of
competent jurisdiction, including any state governmental or regulatory
authorities, prohibiting consummation of the Merger or permitting such
consummation only subject to any condition or restriction that has or would
have a Material Adverse Effect on TCG (or an effect on AT&T and its
subsidiaries that, if such effect applied to TCG and its subsidiaries, would
constitute a Material Adverse Effect on TCG).
FCC. In addition, the companies are required to obtain approvals from the
Federal Communications Commission (the "FCC"). On February 3, 1998, the
companies filed the required applications with the FCC, seeking approval of
the transfer of control to AT&T of the FCC microwave licenses and
international operating authorities held by certain TCG subsidiaries. In
evaluating such applications, the FCC will consider whether AT&T is qualified
to control such licenses and authorizations and whether the public interest,
convenience and necessity will be served by such transfer of control.
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State Governmental Authorities. The Merger is also subject to certain state
regulatory approvals. TCG and AT&T have filed applications for approval of the
Merger in 24 states, and have or will file the appropriate notification
letters in the remaining jurisdictions, which do not require pre-approval of
the transfers of control of the licenses, permits and authorizations issued by
such jurisdictions. The filings seek the level of review appropriate under
each state's laws. The governing legal standard varies from state to state,
but generally requires a showing that the Merger is consistent with the public
interest. As part of that evaluation, these state regulatory commissions may
examine the impact of the Merger on competition, and its effect on the
customers and employees of TCG, AT&T, and the local telephone company or
incumbent local exchange carrier.
Foreign Regulatory Filings. Although TCG's operations are limited to the
United States, ACC conducts significant operations not only domestically, but
in Canada and the United Kingdom as well, and has recently begun operations in
Germany. See "--ACC Agreement." In each of Canada, the United Kingdom and
Germany, notifications or approvals from governmental agencies are required
for the indirect acquisition of ACC by AT&T though its acquisition of TCG. The
Merger does, however, fall below the thresholds at which merger approval from
the European Community would be required.
It is possible that the authorities in one or more of the foregoing
jurisdictions may seek, as conditions for granting approval, various
concessions. If any regulatory body conditions its approval of the Merger upon
concessions that would be expected to have a Material Adverse Effect (as
defined in the Merger Agreement) on TCG or AT&T, either company can terminate
the Merger Agreement. There can be no assurance that the required regulatory
approvals will be obtained within the time frame contemplated by the Merger
Agreement or on terms that are satisfactory to TCG and AT&T. See "--Amendment;
Termination," and "--Conditions; Waivers."
RESALE OF AT&T COMMON SHARES ISSUED IN THE MERGER; AFFILIATES
The AT&T Common Shares to be issued to TCG stockholders in connection with
the Merger will be freely transferable under the Securities Act, except for
AT&T Common Shares issued to any person deemed to be an affiliate of TCG for
purposes of Rule 145 under the Securities Act at the time of the execution and
delivery of the Stockholders Consent ("Affiliates"). Affiliates may not sell
their AT&T Common Shares acquired in connection with the Merger except
pursuant to an effective registration statement under the Securities Act
covering such shares, or in compliance with Rule 145 promulgated under the
Securities Act or another applicable exemption from the registration
requirements of the Securities Act. Pursuant to the Merger Agreement, TCG has
agreed that prior to the Effective Time it will deliver to AT&T a letter
identifying all persons who at the time of the execution and delivery of the
Stockholders Consent may be deemed to be Affiliates. TCG has further agreed to
use all reasonable efforts to cause each person who is so identified as an
Affiliate in such letter to deliver to AT&T on or prior to the date which is
30 days prior to the Effective Time a written agreement that such Affiliate
will not sell, pledge, transfer or otherwise dispose of any AT&T Common Shares
received in the Merger in violation of the Securities Act, and that such
Affiliate will not sell any AT&T Common Shares or any shares of TCG Common
Stock or otherwise reduce such Affiliate's risk relative to any AT&T Common
Shares until after such time as consolidated financial statements which
reflect at least 30 days of post-Merger operations have been published by AT&T
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 the
combined results of operations. See "--Accounting Treatment."
ACCOUNTING TREATMENT
It is expected that the Merger will be accounted for as a pooling of
interests for accounting and financial reporting purposes. It is a condition
to the obligations of AT&T to consummate the Merger that TCG and its
subsidiaries shall have complied with the covenant to use their reasonable
best efforts (i) not to take any action that, to TCG's knowledge, prevents or
would prevent AT&T from accounting for the Merger as a pooling of interests
and (ii) to take any action necessary to cure any prior action or condition by
or relating to TCG or any of its subsidiaries that, to TCG's knowledge,
prevents or would prevent AT&T from accounting for the Merger as a pooling of
interests. See "--Conditions; Waivers."
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
General. TCG will be the Surviving Corporation in the Merger and, following
the Merger, will be a wholly owned subsidiary of AT&T. Certain officers of TCG
have certain interests in the Merger that are different from, or in addition
to, the interests of stockholders of TCG generally. Robert Annunziata,
President and Chief Executive Officer of TCG, was a member of TCG's 13-person
Board of Directors when the Board approved the Merger. It is currently
anticipated that Mr. Annunziata will continue in such capacity, and that
certain other executive officers, including Messrs. Scarpati, Hansen, Mencher,
Atkinson and Gross, will continue in their capacities with TCG after the
Merger. Each of Messrs. Annunziata, Scarpati, Hansen, Mencher, Atkinson and
Gross has entered into an employment agreement with AT&T, dated as of January
8, 1998 (as did certain other executive officers of TCG). Each such agreement
commences as of the Effective Time. The Merger is conditioned upon the
agreements with each of Messrs. Annunziata, Scarpati and Hansen being in full
force and effect and each being employed thereunder as of the Effective Time,
subject to their death or disability.
The terms of each of the employment agreements for Messrs. Annunziata,
Scarpati, Hansen, Mencher, Atkinson and Gross are substantially identical. The
terms of the employment agreements of Messrs. Annunziata and Scarpati expire
on the fourth anniversary of the Effective Time, and the employment agreements
of Messrs. Hansen, Mencher, Atkinson and Gross expire on the third anniversary
of the Effective Time. Each agreement specifies the annual base salary to be
received by the executive, and provides for annual adjustment of the annual
base salary by AT&T's compensation committee, provided that the annual
increase must be at least 5%. The following annual base salaries are specified
for the twelve-month period commencing March 1, 1999: Mr. Annunziata--
$500,000, Mr. Scarpati--$315,000, Mr. Hansen--$260,000, Mr. Mencher--$260,000,
Mr. Atkinson--$260,000 and Mr. Gross--$260,000. In addition, each executive is
entitled to annual bonuses. For fiscal year 1998, such annual bonus will be
determined under the annual bonus policies of TCG. For fiscal year 1999 and
subsequent fiscal years during the employment term, the executive is eligible
for an annual target bonus of 55% of his annual base salary (90% of the annual
base salary for Mr. Annunziata), subject to the attainment of certain
performance objectives agreed upon by AT&T and the executive.
The executives will be granted stock options in 1999 and 2000 under AT&T's
1997 Long Term Incentive Program ("LTIP") for the following minimum number of
AT&T Common Shares per year: Mr. Annunziata--65,000, Mr. Scarpati--18,000, Mr.
Hansen--16,000, Mr. Mencher--15,000, Mr. Atkinson--14,000 and Mr. Gross--
14,000. In addition, the executives will be granted upon the Effective Time
restricted performance shares/units ("Performance Awards") under the LTIP in
the following amounts: Mr. Annunziata--27,000, Mr. Scarpati--9,000, Mr.
Hansen--7,000, Mr. Mencher--7,000, Mr. Atkinson--7,000 and Mr. Gross--7,000
each. Similarly, in 1999 and 2000, the executives will be granted Performance
Awards in the following minimum amounts per year: Mr. Annunziata--12,500, Mr.
Hansen--3,400, Mr. Scarpati--3,500, Mr. Mencher--3,500, Mr. Atkinson--3,500
and Mr. Gross--3,500 each. An executive's right to earn the Performance Awards
is conditioned upon the attainment of certain performance objectives. In
addition, upon the Effective Time, Mr. Annunziata will be granted 50,000
restricted AT&T Common Shares or restricted phantom share units, which will
vest on the last day of the employment term.
Upon the Effective Time, AT&T will credit the following amounts to a
deferred account for each executive: Mr. Annunziata--$2.5 million, Mr.
Scarpati--$780,000, Mr. Hansen--$572,000, Mr. Mencher--$572,000, Mr.
Atkinson--$572,000, and Mr. Gross--$572,000. Each executive will earn a vested
right to the amount in the deferred account on the last day of the employment
term. The vested deferred account will be paid to the executive in annual
installments within ten years. In addition, each of Messrs. Annunziata,
Scarpati, Hansen, Mencher, Atkinson and Gross are entitled to special
supplemental pension benefits. Mr. Annunziata is entitled to a non-qualified
supplemental pension benefit ("Special Pension") equal to a percentage of his
annual pay, which is a function of his years of service following the
Effective Time, to commence following his termination of employment after the
employment term. The Special Pension will be reduced by benefits to which Mr.
Annunziata is entitled from AT&T under any pension, retirement, disability or
annuity plan other than AT&T's Long-Term Savings Plan for Management Employees
and AT&T's Senior Management Incentive Award Deferral Plan. Each executive,
other than Mr. Annunziata, is entitled to have AT&T credit to a non-qualified
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supplemental pension account ("Pension Account") the following amounts: Mr.
Scarpati--$630,000, Mr. Hansen--$585,000, Mr. Mencher--$520,000, Mr.
Atkinson--$520,000 and Mr. Gross--$520,000. Each Pension Account will vest on
the last day of the employment term, and the amount therein generally will be
payable to the executive in one to ten annual installments following the later
of the executive's (i) termination of employment, or (ii) attainment of age 55
(age 60 for Mr. Mencher); provided, that for Mr. Hansen payments will commence
following termination of employment.
If AT&T terminates the executive's employment without Cause, or the
executive terminates employment for Good Reason, the executive will be
entitled to receive (i) twenty-four monthly payments equal in the aggregate to
two times his annual base salary and annual target bonus, plus welfare
benefits during such twenty-four month period, (ii) continued employment
service credit, for the remaining term of the employment agreement, for
purposes of vesting the deferred account and the vesting of the executive's
Special Pension or Pension Account, as applicable, (iii) continued vesting in
his stock options, restricted stock, if applicable, and Performance Awards
under the LTIP, and (iv) lump-sum payment of any deferred compensation
transferred by the executive to AT&T's Management Deferred Compensation Plan.
The executive may be terminated for "Cause" if he is convicted of a felony,
materially breaches the restrictive covenants in his employment agreement,
willfully acts with results that are materially injurious to AT&T or TCG or
repeatedly fails to undertake directives on material business matters. The
executive may terminate employment for "Good Reason" if, there is (i) a
material adverse change in the executive's title or duties materially and
adversely inconsistent with his position, (ii) any material failure to comply
with the compensation provisions under the agreement, or (iii) the executive
is required to relocate his primary office outside New York, New Jersey or
Connecticut.
Each executive has agreed not to compete with AT&T and its affiliates in the
local and long distance telecommunication industries during the term of his
employment and for the two-year period following the termination of his
employment.
Stock Options. At the Effective Time, each Option issued pursuant to the
Option Plans and then outstanding, whether or not vested or exercisable, will
be assumed by AT&T and will constitute an option to acquire, on the same terms
and conditions as were applicable under such assumed Option, that number of
AT&T Common Shares equal to the product of the Exchange Ratio and the number
of shares of TCG Common Stock subject to such Option, at an exercise price per
AT&T Common Share equal to the exercise price per share of such Option
immediately prior to the Effective Time divided by the Exchange Ratio, rounded
down to the nearest whole cent; provided, however, that (i) subject to the
provisions described in clause (ii) below, if the foregoing calculation
results in an assumed Option being exercisable for a fraction of an AT&T
Common Share, then the number of AT&T Common Shares subject to such Option
shall be rounded up to the nearest whole number of shares with no cash being
payable for such fractional share and (ii) in the case of any Options which
are "incentive stock options" (as defined in Section 422 of the Code), the
adjustment provided above shall be effected in a manner which is consistent
with Section 424(a) of the Code.
The exercisability of Options will not accelerate upon consummation of the
Merger. However, to the extent an Optionee is terminated without cause or
terminated for good reason following the Merger, the Option will become fully
exercisable for a period of one year following the Effective Time. As of
December 31, 1997, Options to purchase 5,806,516 shares of TCG Class A Common
Stock were outstanding under the Option Plans at exercise prices ranging from
$6.90 to $55.02 per share. For additional information regarding the Options
held by officers and directors, see "SECURITY OWNERSHIP OF MANAGEMENT AND
PRINCIPAL STOCKHOLDERS OF TCG."
Stock Incentive Rights and Stock Units. In addition, (i) each Stock
Incentive Right held by any person as a result of the consummation of the ACC
Agreement, and (ii) each Stock Unit will be assumed by AT&T and converted into
the right to acquire that number of AT&T Common Shares determined by
multiplying the number of shares of TCG Common Stock subject to such Stock
Incentive Right or Stock Unit, as the case may be, at the Effective Time of
the Merger by the Exchange Ratio. If the foregoing calculation results in an
assumed Stock
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Incentive Right or Stock Unit, as the case may be, providing the right to
acquire a fraction of an AT&T Common Share, then the number of AT&T Common
Shares subject to such right will be rounded up to the nearest whole number of
shares. The terms and conditions of each Stock Incentive Right and each Stock
Unit assumed by AT&T will be the same terms and conditions as set forth in the
TCG Stock Incentive Right or TCG Stock Unit, as the case may be, prior to
AT&T's assumption and conversion of the Stock Incentive Rights and Stock
Units. Each employee's right in a Stock Unit will be fully vested as a result
of the Merger.
Bonus Pools. TCG and AT&T have agreed that there will be a pool of $40
million available to provide bonuses to certain employees of TCG in connection
with the Merger and their continued employment with AT&T following the Merger.
It is anticipated that approximately one-third of the bonus pool will be
distributed on or about the Effective Time and approximately one-third will be
distributed upon each of the first and second anniversaries of the Effective
Time.
Severance Arrangements. In the event any TCG employee is terminated without
cause during the one-year period following the Effective Time, such employee
will be entitled to a severance benefit generally in accordance with the
severance pay policy of AT&T, taking into account all of the employee's
service with TCG.
Indemnification of Directors and Officers Pursuant to the Merger
Agreement. From and after the Effective Time, AT&T and the Surviving
Corporation will jointly and severally indemnify, defend and hold harmless the
present and former officers, directors and employees of TCG and its
subsidiaries, and any person who is or was serving at TCG's request as an
officer, director or employee or agent of another person, against all losses,
expenses, claims, damages or liabilities arising out of actions or omissions
occurring on or prior to the Effective Time to the full extent permitted or
required under applicable law (except to the extent of directors' and
officers' liability insurance coverage and actual payment with respect
thereto). AT&T has agreed to maintain for not less than six years the current
(or appropriate replacement) policies of directors' and officers' liability
insurance maintained by TCG and its subsidiaries with respect to matters
occurring prior to the Effective Time. AT&T is not required to pay an annual
premium for such insurance in excess of three times the last annual premium
paid prior to January 8, 1998, but will, in such case, purchase as much
coverage as possible for such amount.
For a summary of the interests of the Cable Stockholders in the Merger, see
"OTHER AGREEMENTS."
MANAGEMENT AND OPERATIONS OF TCG AFTER THE MERGER
After the Merger, TCG will be a wholly owned subsidiary of AT&T. TCG will
operate as one of AT&T's business units. After the Merger, TCG will have
access to resources generally available to AT&T's other business units, will
participate in appropriate activities with other AT&T business units and will
operate under the direction and guidance of AT&T's senior management and the
AT&T Board. See "--Terms of the Merger."
Mr. Robert Annunziata, President and Chief Executive Officer of TCG, Mr.
John A. Scarpati, Senior Vice President and Chief Financial Officer of TCG,
and other Senior Vice Presidents, including Messrs. Atkinson, Hansen, Mencher
and Gross, as well as other executives of TCG, have each executed employment
agreements with AT&T. Each of such employees will serve in their respective
capacities after the Effective Time.
EXPENSES AND FEES
Whether or not the Merger is consummated, AT&T and TCG will each pay their
own expenses in connection with the Merger, except that AT&T will pay the
costs and expenses of printing and filing this Information
Statement/Prospectus with the Commission and any other applicable governmental
body.
CERTAIN LITIGATION
On December 16, 1997, prior to public announcement of the Merger, an action
was filed by one TCG public stockholder in the Delaware Court of Chancery
against TCG, TCG's directors and the Cable Stockholders. The plaintiff's
complaint alleges that, based on public reports, TCG's directors, management
and controlling
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stockholders were negotiating the sale of TCG to AT&T on a preferential basis.
This sale on a preferential basis, the complaint alleges, would offer little
or no premium over the current market price of TCG Class A Common Stock and is
therefore unfair and inadequate to TCG's public stockholders. The plaintiff
seeks to enjoin the merger of TCG and AT&T or, alternatively, to rescind the
transaction and/or recover damages in the event that the transaction is
consummated. The complaint seeks to have the action certified for class action
status and to appoint the plaintiff as the class representative.
On January 12, 1998 an action was filed by two TCG public stockholders in
the Delaware Court of Chancery against TCG, certain TCG directors and
officers, the Cable Stockholders and AT&T. The complaint alleges that the
Exchange Ratio in the Merger represents an inadequate premium for stockholders
of TCG Class A Common Stock. The complaint further alleges that the actions of
the TCG directors, officers and Cable Stockholders in connection with the
Merger constitute a breach of various fiduciary duties owed to the
stockholders of TCG Class A Common Stock. The complaint alleges, among other
things, that the Cable Stockholders have conflicted loyalties because of their
alleged desire to forge broader alliances with AT&T. The plaintiffs seek to
enjoin the merger of TCG and AT&T or, alternatively, to rescind the
transaction and/or recover damages in the event that the transaction is
consummated. The complaint seeks to have the action certified for class action
status and to appoint the plaintiffs as the class representatives.
On January 28, 1998, an action was filed by a TCG public stockholder in the
Delaware Court of Chancery against TCG, certain TCG directors and officers,
and the Cable Stockholders. The complaint alleges that the Exchange Ratio in
the Merger represents an inadequate premium for stockholders of TCG Class A
Common Stock. The complaint further alleges that the actions of the TCG
directors, officers and Cable Stockholders in connection with the Merger
constitute a breach of various duties owed to the stockholders of TCG Class A
Common Stock. The complaint alleges, among other things, that the Cable
Stockholders have conflicted loyalties because of their alleged desire to
forge broader alliances with AT&T. The plaintiffs seek to enjoin the Merger
or, alternatively, to rescind the transaction and/or recover damages and fees
in the event that the transaction is consummated. The complaint seeks to have
the action certified for class action status and to appoint the plaintiff as
the class representative.
Plaintiffs' counsel in the above three putative class action proceedings
have agreed (i) to defer the obligation of the defendants to answer the
actions and (ii) to consolidate the actions by filing an amended consolidated
complaint. As of the end of March, 1998, the amended consolidated complaint
had not been filed. The Company believes that these proceedings, individually
and in the aggregate, are without merit and that any associated costs will not
have a material adverse effect on TCG's financial condition, results of
operations or cash flows.
NO APPRAISAL RIGHTS
Under Delaware law, stockholders in a public company are not generally
entitled to appraisal rights in a merger if the consideration they receive in
the merger consists only of shares listed on a national securities exchange
and cash in lieu of fractional shares. Accordingly, holders of TCG Common
Stock are not entitled to appraisal rights in connection with the Merger
because the shares of TCG Class A Common Stock are designated as Nasdaq
National Market securities and AT&T Common Shares are listed on the NYSE.
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OTHER AGREEMENTS
THE DESCRIPTIONS OF THE VOTING AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT
AND THE MASTER FACILITIES AGREEMENT SET FORTH BELOW DO NOT PURPORT TO BE
COMPLETE AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE VOTING
AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT AND THE MASTER FACILITIES
AGREEMENT. A COPY OF THE VOTING AGREEMENT IS ATTACHED AS APPENDIX B TO THIS
INFORMATION STATEMENT/PROSPECTUS AND IS INCORPORATED BY REFERENCE HEREIN.
VOTING AGREEMENT
Concurrently with the execution of the Merger Agreement, AT&T and the Cable
Stockholders entered into the Voting Agreement. Pursuant to the Voting
Agreement, each Cable Stockholder agreed to execute and deliver, in accordance
with Section 228 of the DGCL, the Stockholders Consent, with respect to all
shares of TCG Common Stock that such Stockholder has the right to vote for
approval and adoption of the Merger Agreement and the Merger. On January 8,
1998, each Cable Stockholder executed the Stockholders Consent and delivered
it to TCG. As a result, no further vote or action by TCG's public stockholders
is necessary to effect the Merger; provided, that TCG must obtain the
affirmative approval, by vote or written consent, of TCG stockholders
representing a majority of the votes that may be cast by the holders of all
then outstanding shares of TCG Common Stock, to (i) enter into any amendment
to the Merger Agreement that would adversely affect TCG stockholders, (ii)
waive any closing condition of TCG in the Merger Agreement if such waiver
would materially adversely affect TCG stockholders or (iii) consummate the
Merger after the time at which TCG would be entitled to terminate the Merger
Agreement, as specified therein. See "THE MERGER--Amendment; Termination." In
the event of the occurrence of one of the events described in clauses (i),
(ii) or (iii) above, the obligations of the Cable Stockholders in the Voting
Agreement to vote in favor of, or execute a written consent approving, the
Merger described in this section will not apply. As of January 8, 1998, the
Cable Stockholders owned, through subsidiaries, all of the shares of TCG Class
B Stock, which collectively represented approximately 65% of the equity and
approximately 95% of the voting power of the TCG Common Stock.
In addition to agreeing to deliver the Stockholders Consent, each Cable
Stockholder agreed in the Voting Agreement to deliver any additional written
consents with respect to, or to vote, in person or by proxy, all shares of TCG
Common Stock or other voting securities owned by such Cable Stockholder or its
affiliates (a) in favor of approval and adoption of the Merger Agreement, the
Merger, and any action required in furtherance thereof, (b) against any action
or agreement that would result in a material breach of any representation,
warranty, covenant or obligation of TCG contained in the Merger Agreement, and
(c) against any Competing Transaction (as defined in the Voting Agreement).
Each Cable Stockholder also agreed not to, and not to permit its affiliates
to, cast any vote or execute any written consent inconsistent with such Cable
Stockholder's obligations under the Voting Agreement. Each Cable Stockholder
further agreed that it would not, and would not permit any of its affiliates
to, contract to sell, sell or otherwise pledge, encumber, transfer or dispose
of any shares of TCG Common Stock other than pursuant to the Merger or with
the written consent of AT&T.
Pursuant to the Voting Agreement, each Cable Stockholder also agreed that it
and its affiliates will not, and will use reasonable best efforts to cause
their respective officers, employees, representatives and agents not to,
directly or indirectly, encourage, solicit or engage in discussions or
negotiations with any third party (other than AT&T) concerning any Acquisition
Proposal (as defined in the Voting Agreement), that it will terminate any
current discussions and negotiations, and that it will notify AT&T of any new
Acquisition Proposal and the identity of any third party making such
Acquisition Proposal.
The Voting Agreement further provides that each Cable Stockholder will not,
and will cause its affiliates not to, dispose of AT&T Common Shares received
in the Merger in a manner (or at a time) that could jeopardize AT&T's ability
to account for the Merger as a pooling of interests.
Pursuant to the Voting Agreement, each Cable Stockholder agreed to release
TCG and its affiliates (other than the Cable Stockholders and their other
affiliates), as of the Effective Time, from any obligation to such
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Cable Stockholder (i) not to compete with such Cable Stockholder or its
affiliates anywhere in the world, (ii) not to engage in any activity anywhere
in the world, or (iii) that otherwise restricts or limits the ability of TCG
to engage in any business anywhere in the world. Under the Voting Agreement,
such release will not apply to any provision of the Master Facilities
Agreement (as defined below) or of an agreement entered into as of April 18,
1996 between TCG and Comcast (as amended in accordance with the Voting
Agreement).
The Voting Agreement provides that AT&T will not agree to the inclusion, in
any governmental authorization required in connection with the Merger, by any
Governmental Body of any restriction of any Cable Stockholder's exercise and
enjoyment of full rights of ownership of AT&T Common Shares received in the
Merger, any material modification of any license, franchise or permit held by
such Cable Stockholder or any of its affiliates, the imposition of any
requirement relating to the divestiture or rearrangement of the composition of
any material assets of such Cable Stockholder or any of its affiliates, any
material limitation on such Cable Stockholder's or any of its affiliates'
freedom of action with respect to future acquisitions of assets or with
respect to any existing or future business activities or relationship or the
enjoyment by such Cable Stockholder or any of its affiliates of the full
rights of ownership, possession and use of any material asset now owned or
later acquired by such Cable Stockholder or any of its affiliates (including
the AT&T Common Shares to be acquired by such Cable Stockholder in the
Merger), or any other material restrictions, limitations, requirements, or
conditions which are reasonably likely to be burdensome on such Cable
Stockholder or its affiliates (any of the foregoing, a "Prohibited Effect"),
in the case of any of the foregoing that is unacceptable to such Cable
Stockholder in its reasonable judgment. Notwithstanding the Voting Agreement,
no Cable Stockholder will be required to consent to any Prohibited Effect that
is unacceptable to such Cable Stockholder in its reasonable judgement.
MASTER FACILITIES AGREEMENT
Pursuant to the Voting Agreement, each of the Cable Stockholders, on behalf
of itself and certain of its affiliates, agreed that (i) certain right-of-way,
colocation and similar agreements with TCG and its affiliates would be amended
as of January 8, 1998 to provide that each such agreement would remain in
effect for the longer of five years from such date and the current term of
such agreement; and (ii) certain existing facilities agreements, facilities
lease agreements or other arrangements (including arrangements relating to
future agreements) relating to the lease or other grant of right to use fiber
optic facilities between such Cable Stockholder or any of its affiliates and
TCG or any of its subsidiaries would be automatically amended as of January 8,
1998 to conform with a form of Master Facilities Agreement agreed to by AT&T,
the Cable Stockholders and TCG at the time of the execution of the Merger
Agreement. Among other things, agreements amended and entered into in
accordance with the Master Facilities Agreement will, subject to the terms,
conditions and limitations of the Master Facilities Agreement, (i) grant TCG
an indefeasible right to use the facilities that are the subject of the
existing facilities agreements, and (ii) grant TCG an indefeasible right to
use additional fiber optic facilities which, subject to certain conditions,
TCG may require the Cable Stockholder or its affiliates to construct. The
Master Facilities Agreement continues to contain a provision prohibiting TCG
from using the fiber optic facilities to provide cable television signals to
subscribers. In the event of disruption or trouble with the facilities, the
Cable Stockholder or its affiliates must use best efforts to begin restoration
and repair within 30 minutes of notification from TCG or such other required
period under current maintenance specifications. Each of the Cable
Stockholders also agreed to, or to cause its appropriate affiliate to, subject
to certain limitations, execute an agreement in the form of the Master
Facilities Agreement in any new service territory in which such Cable
Stockholder (or affiliate) provides services or owns or operates facilities or
in any existing service territory of such Cable Stockholder (or affiliate) for
which a facilities agreement was not in place as of January 8, 1998. These
amendments became effective immediately and are not subject to completion of
the Merger.
REGISTRATION RIGHTS AGREEMENT
Concurrently with the execution of the Merger Agreement and pursuant to the
Voting Agreement, AT&T and the Cable Stockholders entered into the
Registration Rights Agreement, pursuant to which, during the period commencing
on the Effective Time and ending on the second anniversary of the Effective
Time (the
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"Registration Period"), each of the Cable Stockholders shall have the right to
request (a "Request") that AT&T register for sale under the Securities Act (a
"Request Registration") all or a part of AT&T Common Shares and certain other
related securities referred to in the Registration Rights Agreement
(collectively, "Registrable Securities") then owned by such Cable Stockholder.
Each Cable Stockholder is entitled to make two Requests during the
Registration Period, but no more than one Request may be made by each Cable
Stockholder during the first twelve-month period of the Registration Period
and no more than one Request may be made by each Cable Stockholder during the
remainder of the Registration Period. Upon receipt of any such Request, AT&T
is required to notify the other Cable Stockholders of the Request, and AT&T is
required to include in the Request Registration, subject to specified limits,
any Registrable Securities for which registration is requested by any such
Cable Stockholders.
The Registration Rights Agreement provides that AT&T may include in any
Request Registration other securities for sale for its own account or for the
account of any other Person, subject to certain rights of the Cable
Stockholders in the event marketing factors limit the number of shares to be
included in such registration. Under the Registration Rights Agreement, AT&T
is not obligated to register any securities on a "shelf" registration
statement pursuant to Rule 415 under the Securities Act (or any successor
provisions of such Act) or otherwise to register securities on a continuous or
delayed basis.
The Registration Rights Agreement contains a customary "holdback" provision
obligating the Cable Stockholders, if required by the managing underwriter of
any underwritten registration, not to effect any public sale or distribution
of Registrable Securities during the seven days prior to and the 90 days after
any underwritten registration by AT&T has become effective. AT&T is not
entitled to require that any Cable Stockholder agree to such restriction for
more than an aggregate of 90 days in the first year of the Registration Period
or for more than 90 days during the remainder of the term of the Registration
Period.
The Registration Rights Agreement also provides that AT&T is entitled to
postpone any Request Registration or delivery of a prospectus or supplement or
amendment if it determines that in view of the advisability of deferring
public disclosure of material corporate developments or other information, the
disclosures required to be made pursuant thereto would not be in the best
interests of AT&T at that time. No single postponement of any Request
Registration or delivery of a prospectus or supplement may exceed 90 days and
all such postponements may not exceed 180 days in the aggregate.
40
<PAGE>
DIVIDENDS ON AND MARKET PRICES OF
AT&T COMMON SHARES AND TCG COMMON STOCK
AT&T
The AT&T Common Shares are listed and primarily traded on the NYSE. The
table below sets forth for the fiscal periods indicated the high and low sale
prices per AT&T Common Share in the NYSE Composite Transactions (as reported
in published financial sources) and the dividends declared per AT&T Common
Share.
<TABLE>
<CAPTION>
AT&T COMMON SHARES
----------------------------
CASH
DIVIDENDS
HIGH LOW PER SHARE
--------- -------- ---------
<S> <C> <C> <C>
Fiscal 1996
First Quarter................................... $68 7/8 $60 1/8 $0.33
Second Quarter.................................. 64 7/8 58 $0.33
Third Quarter................................... 62 3/8 49 1/4 $0.33*
Fourth Quarter.................................. 44 1/2 33 1/4 $0.33**
Fiscal 1997
First Quarter................................... 41 7/8 34 3/8 $0.33
Second Quarter.................................. 38 1/4 30 3/4 $0.33
Third Quarter................................... 45 15/16 34 1/4 $0.33
Fourth Quarter.................................. 63 15/16 43 3/16 $0.33
Fiscal 1998
First Quarter................................... 68 1/2 58 3/8 $0.33
Second Quarter (through April , 1998).......... [ ] [ ] [ ]
</TABLE>
- --------
* In the Third Quarter of Fiscal 1996, AT&T declared a spin-off stock
dividend of .324084 shares of Lucent Technologies for each AT&T Common
Share.
** In the Fourth Quarter of Fiscal 1996, AT&T declared a spin-off stock
dividend of .0625 shares of NCR Corporation for each AT&T Common Share.
On January 8, 1998, the last full trading day prior to announcement of the
execution of the Merger Agreement, the reported NYSE Composite Transactions
closing price per AT&T Common Share was $62 5/8. On April , 1998, the most
recent available date prior to printing this Information Statement/Prospectus,
the reported NYSE Composite Transactions closing price per AT&T Common Share
was $[ ]. We urge TCG stockholders to obtain current market quotations.
41
<PAGE>
TCG
The TCG Class A Common Stock has been traded on The Nasdaq National Market
("Nasdaq") under the symbol "TCGI" since TCG's initial public offering on June
27, 1996. The table below sets forth for the fiscal periods indicated the high
and low sale prices per share of the TCG Class A Common Stock on Nasdaq as
reported in published financial sources.
<TABLE>
<CAPTION>
TCG CLASS A
COMMON STOCK
---------------
HIGH LOW
------- -------
<S> <C> <C>
Fiscal 1996
Second Quarter................................................ $19 1/8 $16
Third Quarter................................................. 27 3/8 14 1/8
Fourth Quarter................................................ 35 3/8 22
Fiscal 1997
First Quarter................................................. 35 1/4 22 5/8
Second Quarter................................................ 34 1/8 21
Third Quarter................................................. 46 1/8 33 1/2
Fourth Quarter................................................ 60 44 1/4
Fiscal 1998
First Quarter................................................. 60 5/8 52 3/8
Second Quarter (through April , 1998)........................ [ ] [ ]
</TABLE>
There is no public trading market for the TCG Class B Common Stock.
TCG has never paid or declared dividends on TCG Common Stock and intends to
retain future earnings to finance the development and expansion of its
networks and operations. TCG does not anticipate paying any cash dividends in
the foreseeable future on its Common Stock. Any decision whether to pay cash
dividends will be made by TCG's Board in light of the conditions then
existing, including TCG's results of operations, financial condition and
requirements, business conditions and other factors. In addition, as a holding
company, the ability of TCG to pay dividends is dependent upon the receipt of
dividends or other payments from its subsidiaries, and the Indentures
governing TCG's 9 7/8% Senior Notes due 2006 and 11 1/8% Senior Discount Notes
due 2007 contain covenants which may limit the ability of TCG to pay dividends
on the TCG Class A Common Stock. Under the most restrictive of these
covenants, TCG currently is not permitted to pay dividends on TCG Common
Stock.
On January 8, 1998, the last full trading day prior to announcement of the
execution of the Merger Agreement, the reported Nasdaq closing price per share
of Class A Common Stock was $54 1/8. On April , 1998, the most recent
available date prior to printing this Information Statement/Prospectus, the
reported Nasdaq closing price per share of Class A Common Stock was $[ ]. We
urge TCG stockholders to obtain current market quotations.
42
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS OF TCG
The following table provides information, as of March 23, 1998, with respect
to the beneficial ownership of TCG Common Stock by (i) each person known by
TCG to be the beneficial owner of more than 5% of any class of TCG's voting
securities, (ii) each director, TCG's President and Chief Executive Officer
and the four most highly compensated other executive officers and (iii) all
directors and executive officers as a group. Except as otherwise indicated,
the address of each holder is the same as TCG. Each holder has sole voting and
investment power with respect to all shares of stock listed as owned by such
person.
<TABLE>
<CAPTION>
CLASS A COMMON CLASS B COMMON PERCENT OF VOTE
STOCK OWNED AND STOCK OWNED AND OF ALL CLASSES OF
NAME PERCENT OF CLASS PERCENT OF CLASS COMMON STOCK
---- ---------------- ----------------- -----------------
<S> <C> <C> <C>
Cox(1)(2)................ -- 39,087,594(34.4%) 32.7
TCI(3)(2)................ 1,011,528(1.6%) 48,779,388(43.0%) 40.9
Comcast(4)(2)............ -- 25,622,058(22.6%) 21.4
The Equitable Companies
Incorporated(5)......... 5,644,983(9.2%) -- **
FMR Corp.(6)............. 5,322,130(8.6%) -- **
Robert Annunziata........ 239,907(**) -- **
John A. Scarpati......... 93,264(**) -- **
Stuart A. Mencher........ 66,341(**) -- **
Joel D. Gross............ 86,862(**) -- **
Alf T. Hansen............ 102,013(**) -- **
James O. Robbins......... 4,700(**) -- **
John R. Alchin........... -- -- **
John R. Dillon........... 3,500(**) -- **
Gerald W. Gaines......... -- -- **
Lawrence S. Smith........ -- -- **
Larry E. Romrell......... -- -- **
David M. Woodrow......... 1,500(**) -- **
James Bruce Llewelyn..... 5,582(**) -- **
C.B. Rogers, Jr.......... 10,582(**) -- **
Jimmy W. Hayes........... 1,100(**) -- **
Bernard W. Schotters..... -- -- **
Executive Officers and
Directors, as group(7).. 1,008,088(1.6%) -- **
</TABLE>
- --------
** Represents less than one percent of the vote of all classes of TCG Common
Stock.
(1) Owned by Cox Teleport Partners, Inc., a wholly owned subsidiary of Cox, a
subsidiary of Cox Enterprises, Inc. The business address for Cox Teleport
Partners, Inc. is 1400 Lake Hearn Drive, Atlanta, Georgia 30319. The
information contained in this table with respect to Cox is based on a
joint filing on Schedule 13D reporting ownership as of July 17, 1996, by
Cox, TCI, Comcast, Continental and certain control persons of such
entities (the "Joint 13D"). The Joint 13D was amended by Cox, TCI and
Comcast on January 28, 1998.
(2) Solely as a result of the agreement of the Cable Stockholders to vote in
favor of the others' director nominees under the Amended Stockholders'
Agreement, the Cable Stockholders may be deemed to share beneficial
ownership of the shares beneficially owned by each of them.
(3) Owned by TCI Teleport, Inc., a wholly owned subsidiary of TCI. The
business address of TCI is 5619 DTC Parkway, Englewood, Colorado 80111-
3000. The information contained in this table with respect to TCI is based
on the Joint 13D.
(4) Owned by Comcast Teleport, Inc. and Comcast Communications Properties,
Inc., two wholly owned subsidiaries of Comcast. The business address of
Comcast is 1500 Market Street, Philadelphia, Pennsylvania 19102-2148. The
information contained in this table with respect to Comcast is based on
the Joint 13D, as amended separately by Comcast on October 22, 1996,
December 23, 1996, May 12, 1997 and October 27, 1997. See footnote (1).
(5) The business address for The Equitable Companies Incorporated is 1290
Avenue of the Americas, New York, New York 10104. The information
contained in this table with respect to The Equitable Companies
Incorporated is based on a Schedule 13G/A jointly filed by the Mutuelles
AXA, AXA-UAP, The Equitable Companies Incorporated, and their subsidiaries
on February 17, 1998.
(6) The business address for FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109. The information contained in this table with respect
to FMR Corp. is based on a Schedule 13G filed on February 14, 1998.
(7) Includes 709,791 shares of TCG Class A Common Stock subject to stock
options exercisable within 60 days. Excludes all shares of TCG Common
Stock held by the Cable Stockholders including shares of TCG Common Stock
that may be deemed to be indirectly owned by a director of TCG who is also
an executive officer or director of one of the Cable Stockholders.
43
<PAGE>
COMPARATIVE RIGHTS OF TCG
STOCKHOLDERS AND AT&T STOCKHOLDERS
If the Merger is consummated, holders of TCG Common Stock, whose rights are
currently governed by Delaware law and the TCG Certificate of Incorporation
and TCG By-Laws, will become holders of AT&T Common Shares, whose rights will
be governed by the laws of the State of New York and by the AT&T Certificate
of Incorporation and the AT&T By-Laws, as amended. The rights of AT&T
stockholders under the AT&T Certificate of Incorporation and the AT&T By-Laws
differ in certain respects from the rights of TCG stockholders under the TCG
Certificate of Incorporation and the TCG By-Laws. The following discussion is
intended only to highlight certain material differences between the rights of
shareholders under Delaware law and New York law generally and specifically
with respect to stockholders of TCG and AT&T pursuant to their respective
charters and by-laws. THIS SUMMARY IS NOT INTENDED TO BE RELIED UPON AS AN
EXHAUSTIVE LIST OR A DETAILED DESCRIPTION OF THE PROVISIONS DISCUSSED AND IS
QUALIFIED IN ITS ENTIRETY BY THE RESPECTIVE CORPORATE CODES OF THE STATES OF
NEW YORK AND DELAWARE AND BY THE TCG CERTIFICATE OF INCORPORATION AND TCG BY-
LAWS AND THE AT&T CERTIFICATE OF INCORPORATION AND BY-LAWS. For information as
to how you can obtain such documents, see "WHERE YOU CAN FIND MORE
INFORMATION."
As a general matter, two New York State bills (Numbers S476B and S5680),
which passed the Senate on June 25, 1997 and the Assembly on July 15, 1997 and
were signed into law by the Governor on August 26, 1997, generally revise the
New York Business Corporation Law (the "NYBCL"). These new laws and their
revisions to the NYBCL took effect on February 22, 1998. The new amendments to
the NYBCL are extensive and amend certain provisions, including those relating
to corporate finance, proxies, powers of directors and mergers, and also
repeal certain provisions relating thereto. The most relevant new amendments
are summarized below. The provisions of the NYBCL and the DGCL differ in
numerous respects. Summarized below are certain of the principal differences
between the NYBCL and the DGCL affecting the rights of stockholders.
TCG and the Cable Stockholders entered into an amended and restated
stockholders' agreement as of June 26, 1996 (the "Stockholders' Agreement").
The Stockholders' Agreement sets forth certain rights of the stockholders of
TCG Class B Common Stock, which was filed as an exhibit to the Registration
Statement on Form S-1 (Registration Nos. 333-3850 and 333-3984, as amended).
For example, parties to the Stockholders' Agreement have certain rights of
first offer and rights of first refusal with respect to proposed sales of the
TCG Class B Common Stock.
BENEFICIAL OWNERSHIP OF STOCK
As of March 23, 1998, the Cable Stockholders owned approximately 65% of the
outstanding equity of TCG. As a result of the disproportionate voting rights
between the TCG Class A Common Stock and the TCG Class B Common Stock, as of
March 23, 1998, the Cable Stockholders held approximately 95% of the combined
voting power of the TCG Common Stock. See "SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS OF TCG."
To the best of AT&T's knowledge, no person or entity is the beneficial owner
of 5% or more of the AT&T Common Shares as of the date of this Information
Statement/Prospectus. As a result of the Merger, the Cable Stockholders will
collectively become the beneficial owners of approximately 6% of the AT&T
Common Shares, with no single Cable Stockholder beneficially owning 5% or more
of the AT&T Common Shares.
BUSINESS COMBINATIONS
Generally, under the DGCL, the approval by the affirmative vote of the
holders of a majority of the outstanding stock (or, if the certificate of
incorporation provides for more or less than one vote per share, a majority of
the votes of the outstanding stock) of a corporation entitled to vote on the
matter is required for a merger or consolidation or sale, lease or exchange of
all or substantially all the corporation's assets to be
44
<PAGE>
consummated. The TCG Certificate of Incorporation does not contain any
provisions relating to stockholder approval of business combinations.
The new amendments to the NYBCL include provisions permitting a plan of
merger, plan of share exchange, or sale, lease, exchange or other disposition
to be adopted by a majority of all outstanding shares (instead of a two-thirds
vote) in cases where the certificate of incorporation so provides. The AT&T
Certificate of Incorporation does not contain any provisions relating to
stockholder approval of business combinations.
STATE TAKEOVER LEGISLATION
Delaware Business Combination Law. Section 203 of the DGCL generally
prohibits any business combination (defined to include a variety of
transactions, including (i) mergers and consolidations, (ii) sales or
dispositions of assets having an aggregate market value equal to 10% or more
of the aggregate market value of the corporation determined on a consolidated
basis, (iii) issuances of stock (except for certain pro rata and other
issuances), and (iv) disproportionate benefits from the corporation (including
loans and guarantees)) between a Delaware corporation and any interested
stockholder (defined generally as any person who, directly or indirectly,
beneficially owns 15% or more of the outstanding voting stock of the
corporation) for a period of three years after the date on which the
interested stockholder became an interested stockholder. The restrictions of
the Delaware Business Combination Law do not apply, however, (A) if, prior to
such date, the board of directors of the corporation approved either the
business combination or the transaction which resulted in such stockholder's
becoming an interested stockholder, (B) if, upon consummation of the
transaction resulting in such stockholder's becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation at the time the transaction was commenced (excluding, for
the purposes of determining the number of shares outstanding, shares owned by
persons who are directors and also officers and by certain employee plans of
the corporation), (C) if, on or subsequent to such date, the business
combination is approved by the board of directors and the holders of at least
two-thirds of the shares not involved in the transaction or (D) under certain
other circumstances.
In addition, a Delaware corporation may adopt an amendment to its
certificate of incorporation or by-laws expressly electing not to be governed
by the Delaware Business Combination Law if, in addition to any other vote
required by law, such amendment is approved by the affirmative vote of a
majority of the shares entitled to vote. Such amendment will not, however, be
effective until 12 months after such stockholder vote and will not apply to
any business combination with an interested stockholder who was such on or
prior to the effective date of such amendment. Because the TCG By-Laws do not
opt out of the Delaware Business Combination Law, the Delaware Business
Combination Law is applicable to the Merger. The TCG Board has unanimously
approved the Merger and the transactions contemplated by the Merger Agreement
and resolved that AT&T and Merger Sub shall not be "interested stockholders"
as a result thereof for purposes of the Delaware Business Combination Law. See
"THE MERGER--Representations and Warranties."
New York Business Combination Law. Section 912 of the NYBCL (the "New York
Business Combination Law") prohibits any business combination (defined to
include a variety of transactions, including mergers, sales or dispositions of
assets, issuances of stock, liquidations, reclassifications and benefits from
the corporation, including loans or guarantees) with, involving or proposed by
any interested stockholder (defined generally as any person who, directly or
indirectly, beneficially owns 20% or more of the outstanding voting stock of a
resident domestic New York corporation) for a period of five years after the
date on which the interested stockholder became an interested stockholder.
After such five-year period a business combination between a resident domestic
New York corporation and such interested stockholder is prohibited unless
either certain "fair price" provisions are complied with or the business
combination is approved by a majority of the outstanding voting stock not
beneficially owned by such interested stockholder or its affiliates. The
restrictions of the New York Business Combination Law do not apply, however,
to any business combination with an interested stockholder if such business
combination, or the purchase of stock by the interested stockholder that
caused such stockholder to become such, is approved by the board of directors
of the resident domestic New York corporation
45
<PAGE>
prior to the date on which the interested stockholder becomes such. AT&T will
be considered a resident domestic New York corporation as long as at least 10%
of its voting stock is owned beneficially by residents of (or organizations
having their principal offices in) the State of New York.
A resident domestic New York corporation may adopt an amendment to its by-
laws, approved by the affirmative vote of the holders, other than interested
stockholders and their affiliates and associates, of a majority of the
outstanding voting stock, excluding the voting stock of interested
stockholders and their affiliates and associates, expressly electing not to be
governed by the New York Business Combination Law. Such amendment will not,
however, be effective until 18 months after such stockholder vote and will not
apply to any business combination with an interested stockholder who was such
on or prior to the effective date of such amendment. AT&T has not amended the
AT&T By-Laws to elect not to be governed by the New York Business Combination
Law.
APPRAISAL RIGHTS
Under the DGCL, except as otherwise provided by the DGCL, stockholders have
the right to demand and receive payment of the fair value of their stock in
the event of a merger or consolidation. However, except as otherwise provided
by the DGCL, stockholders do not have appraisal rights if, among other things,
the consideration they receive for their shares consists of (i) shares of
stock of the corporation surviving or resulting from such merger or
consolidation, (ii) shares of stock of any other corporation which at the
effective date of the merger or consolidation will be either listed on a
national securities exchange (which is true in the case of the AT&T Common
Shares) or designated as a national market system security on an inter-dealer
quotation system by the National Association of Securities Dealers, Inc.
("NASD") or held of record by more than 2,000 stockholders, (iii) cash in lieu
of fractional shares of the corporations described in clause (i) or (ii) of
this sentence, or (iv) any combination of shares of stock and cash in lieu of
fractional shares described in the foregoing clauses (i), (ii) and (iii). See
"THE MERGER--No Appraisal Rights."
Stockholders of a New York corporation have the right to dissent and receive
payment of the fair value of their shares, except as otherwise provided by the
NYBCL, in the event of certain amendments or changes to the certificate of
incorporation adversely affecting their shares, certain mergers or
consolidations, certain sales, leases, exchanges or other dispositions of all
or substantially all the corporation's assets and certain share exchanges.
AMENDMENTS TO CHARTERS
Under the DGCL, unless otherwise provided in the charter, a proposed charter
amendment requires an affirmative vote of a majority of all votes entitled to
be cast on the matter. If any such amendment would adversely affect the rights
of any holders of shares of a class or series of stock, the vote of the
holders of a majority of all outstanding shares of the class or series, voting
as a class, is also necessary to authorize such amendment. The TCG Certificate
of Incorporation does not alter the basic DGCL requirements for the amendment
of its charter.
Under the NYBCL, amendments of the certificate of incorporation may be
authorized by vote of the holders of a majority of all outstanding shares
entitled to vote thereon at a meeting of stockholders. If any such amendment
would adversely affect the rights of any holders of shares of a class or
series of stock, the vote of the holders of a majority of all outstanding
shares of the class or series, voting as a class, is also necessary to
authorize such amendment.
AMENDMENTS TO BY-LAWS
Under the DGCL, the power to adopt, alter and repeal the by-laws is vested
in the stockholders, except to the extent that the charter vests concurrent
power in the board of directors. The TCG Certificate of Incorporation does not
vest such power in the TCG Board.
46
<PAGE>
The TCG Certificate of Incorporation provides that the stockholders may
alter, amend, repeal or adopt new by-laws at any regular meeting of the
stockholders or at any special meeting of the stockholders if notice of such
alteration, amendment, repeal, or adoption of new by-laws is contained in the
notice of such special meeting.
Under the NYBCL, except as otherwise provided in the certificate of
incorporation, by-laws may be amended, repealed or adopted by vote of the
holders of the shares at the time entitled to vote in the election of any
directors. When so provided in the certificate of incorporation or a by-law
adopted by the stockholders, by-laws also may be amended, repealed or adopted
by the board by such vote as may be therein specified, which may be greater
than the vote otherwise prescribed by law, but any by-law adopted by the board
may be amended or repealed by the stockholders entitled to vote thereon as
provided by the NYBCL.
The AT&T By-Laws may be amended by the stockholders of AT&T at any meeting,
or by the AT&T Board at any meeting by a majority vote of the full AT&T Board,
or at two successive meetings by a majority vote of a quorum present.
PREEMPTIVE RIGHTS
Under the DGCL, a stockholder does not possess preemptive rights unless such
rights are specifically granted in the certificate of incorporation. The TCG
Certificate of Incorporation does not provide for preemptive rights.
Under the NYBCL, except as otherwise provided in the NYBCL or in the
certificate of incorporation, the holders of equity shares are granted certain
preemptive rights. The AT&T Certificate of Incorporation provides that no
holder of AT&T Common Shares has any preemptive rights to purchase any shares
or other securities of AT&T.
REDEMPTION OF CAPITAL STOCK
Under the DGCL, subject to certain limitations, a corporation's stock may be
made subject to redemption by the corporation at its option, at the option of
the holders of such stock or upon the happening of a specified event. The TCG
Certificate of Incorporation does not address the redemption of common stock.
Under the NYBCL, subject to certain limitations, a corporation's certificate
of incorporation may provide for one or more classes or series of shares to be
redeemable at the option of the corporation or the holders thereof, at such
prices, within such times and under such conditions as are stated in the
certificate of incorporation. The AT&T Certificate of Incorporation does not
contain such a provision.
DIVIDEND SOURCES
Under the DGCL, a board of directors may authorize a corporation to make
distributions to its stockholders, subject to any restrictions in its
certificate of incorporation, either (i) out of surplus or (ii) if there is no
surplus, out of net profits for the fiscal year in which the dividend is
declared and/or the preceding fiscal year. Under the DGCL, no distribution out
of net profits is permitted, however, if the corporation's capital is less
than the amount of capital represented by the issued and outstanding stock of
all classes having a preference upon the distribution of assets, until such
deficiency has been repaired.
Under the NYBCL, except as otherwise provided in the NYBCL, dividends may be
declared and paid and other distributions may be made out of surplus only, so
that the net assets of the corporation remaining after such declaration,
payment or distribution must at least equal the amount of its stated capital.
A corporation may declare and pay dividends or make other distributions,
except when the corporation is insolvent or would thereby be made insolvent,
or when the declaration, payment or distribution would be contrary to any
restrictions contained in the corporation's certificate of incorporation.
47
<PAGE>
DURATION OF PROXIES
Under the DGCL, no proxy is valid more than three years after its date
unless otherwise provided in the proxy. A proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is coupled with
an interest sufficient in law to support an irrevocable power. A proxy may be
made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the corporation
generally.
Under the NYBCL, no proxy is valid more than 11 months after its date unless
otherwise provided in the proxy. Irrevocable proxies may be created for (i) a
pledgee, (ii) a person who has purchased or agreed to purchase the shares,
(iii) a creditor of the corporation who extends credit in consideration of the
proxy, (iv) a person who has contracted to perform services as an officer of
the corporation if a proxy is required by the employment contract and (v) a
person designated under a voting agreement.
STOCKHOLDER ACTION
Under the DGCL, unless otherwise provided in the certificate of
incorporation, any action required or permitted to be taken at a meeting of
stockholders may be taken without a meeting, without prior notice and without
a vote, if a written consent or consents setting forth the action taken is
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote upon such action were present and
voted. The TCG By-Laws permit stockholder action to be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, is signed by the holders of record of
shares of the corporation's common stock having not less than the minimum
number of votes necessary to authorize or take such action at a meeting at
which the holders of record of all shares of the corporation's common stock
entitled to vote thereon were present and voted.
The new amendments to the NYBCL include provisions similar to those of the
DGCL and allow, if the certificate of incorporation so permits, stockholder
action without a meeting upon the written consent of holders of outstanding
shares having not less than the minimum number of votes that would be
necessary to authorize such action at a meeting at which all shares entitled
to vote thereon were present and voted. The AT&T Certificate of Incorporation
does not contain such a provision.
SPECIAL STOCKHOLDER MEETINGS
The DGCL provides that a special meeting of stockholders may be called by
the board of directors or by such person or persons as may be authorized by
the certificate of incorporation or by the by-laws. The TCG By-Laws provide
that special meetings may be called by the President and must be called by the
President or the Secretary upon the written request of a majority of the TCG
Board or at the written request of stockholders owning a majority of the
voting power of TCG's capital stock entitled generally to vote for the
election of directors.
The NYBCL provides that if, for a period of one month after the date fixed
by or under the by-laws for the annual meeting of stockholders or, if no date
has been so fixed, for a period of 13 months after the last annual meeting,
there is a failure to elect a sufficient number of directors to conduct the
business of the corporation, the board shall call a special meeting for the
election of directors. If such special meeting is not called by the board
within two weeks after the expiration of such period or if it is called but
there is a failure to elect such directors for a period of two months after
the expiration of such period, holders of 10% of the shares entitled to vote
in an election of directors may, in writing, demand the call of a special
meeting for the election of directors. The AT&T By-Laws provide that special
meetings of the stockholders may be called at any time by the Chairman of the
Board, by the AT&T Board or upon a request signed by stockholders representing
at least one-third of the AT&T Common Shares.
48
<PAGE>
CUMULATIVE VOTING
Under the DGCL, the certificate of incorporation may provide that at all
elections of directors, or at elections held under specified circumstances,
each stockholder is entitled to cumulate such stockholder's votes. Neither the
TCG Certificate of Incorporation nor the TCG By-Laws provide for cumulative
voting for the election of directors.
Under the NYBCL, the certificate of incorporation may provide that in all
elections of directors each stockholder is entitled to cumulate such
stockholder's votes. The AT&T Certificate of Incorporation does not contain
such a provision.
NUMBER AND ELECTION OF DIRECTORS
The DGCL permits the certificate of incorporation or the by-laws of a
corporation to contain provisions governing the number and terms of directors.
However, if the certificate of incorporation contains provisions fixing the
number of directors, such number may not be changed without amending the
certificate of incorporation. The TCG Certificate of Incorporation provides
that the number of directors shall be as provided for in the TCG By-Laws,
unless the TCG By-Laws fail to contain the provision for the number of
directors, in which case the number of directors shall be 13. The TCG By-Laws
provide that the number of directors is to be set according to the TCG
Certificate of Incorporation.
The Stockholders' Agreement provides that at each annual meeting of TCG's
stockholders at which directors are elected, the holders of the TCG Class B
Common Stock will vote their shares in favor of nominees for director to be
designated as follows: (i) the holders of TCG Class B Common Stock will
designate ten nominees (with the right of a holder of TCG Class B Common Stock
to designate one or more nominees depending on the percentage of the TCG Class
B Common Stock held by it), (ii) the TCG Board will designate by unanimous
consent the Chief Executive Officer of TCG as a nominee and (iii) the TCG
Board, with the unanimous approval of the holders of TCG Class B Common Stock
that have the right to designate nominees for director, shall designate two
individuals as nominees for director who are neither employed by nor
affiliated with TCG or any holder of TCG Class B Common Stock. Under the
Stockholders' Agreement, a holder of TCG Class B Common Stock generally is
entitled to designate one director nominee for each 9% of the outstanding
shares of TCG Class B Common Stock held by it and its affiliates. The effect
of the Stockholders' Agreement is that the holders of the TCG Class A Common
Stock do not have the effective voting power, as a class, to nominate any
individuals for election to the TCG Board.
The DGCL permits the certificate of incorporation of a corporation or a by-
law adopted by the stockholders to provide that directors be divided into one,
two or three classes. The term of office of one class of directors shall
expire each year with the terms of office of no two classes expiring the same
year. TCG does not have a classified board of directors.
Subject to certain limitations, the NYBCL permits the number of directors of
a corporation to be fixed by its by-laws, by action of the stockholders or by
action of the board under the specific provision of a by-law adopted by the
stockholders. At each annual meeting of the stockholders, directors are to be
elected to hold office until the next annual meeting, except as described
below for corporations with classified boards. The AT&T Certificate of
Incorporation provides that the number of directors shall be as provided for
in the AT&T By-Laws. The AT&T By-Laws provide that the number of directors
shall be not less than 10 nor more than 25, the exact number of directors
within such minimum and maximum limits to be fixed and determined by the vote
of a majority of the entire AT&T Board.
The NYBCL permits the certificate of incorporation or the specific
provisions of a by-law adopted by the stockholders to provide that directors
be divided into either two, three or four classes. All classes must be as
nearly equal in number as possible, and no class may include less than three
directors. The term of office of one class of directors shall expire each
year, with the terms of office of no two classes expiring the same year. The
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<PAGE>
new amendments to the NYBCL delete the requirement of at least three directors
in any class. AT&T does not have a classified board of directors.
REMOVAL OF DIRECTORS
The DGCL provides that a director or directors may be removed with or
without cause by the holders of a majority of the shares then entitled to vote
at an election of directors, except that (i) members of a classified board may
be removed only for cause, unless the certificate of incorporation provides
otherwise and (ii) in the case of a corporation having cumulative voting, if
less than the entire board is to be removed, no director may be removed
without cause if the votes cast against such director's removal would be
sufficient to elect such director if then cumulatively voted at an election of
the entire board of directors or of the class of directors of which such
director is a part.
The TCG By-Laws provide that a director or directors may be removed with or
without cause at any time by vote of the holders of record of a majority of
the voting power of the capital stock, or by written consent of the holders of
record of a majority of the voting power of the capital stock.
The Stockholders' Agreement provides that each holder of the TCG Class B
Common Stock will vote its shares for the removal (with or without cause) of
any director designated by such holder or group of affiliated holders, if (i)
requested by such group of affiliated holders that designated such director,
(ii) a reduction in such group's ownership of TCG Class B Common Stock results
in a reduction in the number of directors such group may designate or (iii)
such group is no longer entitled to designate any directors. Each holder of
TCG Class B Common Stock will vote its shares, and will take all other actions
necessary, to ensure that the TCG Certificate of Incorporation and By-laws
facilitate and do not conflict with the provisions of the Stockholders'
Agreement.
The NYBCL provides that any or all of the directors may be removed for cause
by vote of the stockholders and, if the certificate of incorporation or the
specific provisions of a by-law adopted by the stockholders provide, directors
may be removed by action of the board of directors. If the certificate of
incorporation or the by-laws so provide, any or all of the directors may be
removed without cause by vote of the stockholders. The removal of directors,
with or without cause, is subject to the following: (i) in the case of a
corporation having cumulative voting, no director may be removed when the
votes cast against such director's removal would be sufficient to elect the
director if voted cumulatively and (ii) if a director is elected by the
holders of shares of any class or series, such director may be removed only by
the applicable vote of the holders of the shares of that class or series
voting as a class. An action to procure a judgment removing a director for
cause may be brought by the attorney general or by the holders of 10% of the
outstanding shares, whether or not entitled to vote.
Neither the AT&T Certificate of Incorporation nor the AT&T By-Laws provide
that directors may be removed without cause by action of the stockholders.
VACANCIES
Under the DGCL, unless otherwise provided in the certificate of
incorporation or the by-laws, vacancies on the board of directors and newly
created directorships resulting from an increase in the authorized number of
directors may be filled by a majority of the directors then in office,
although less than a quorum, or by the sole remaining director, provided that,
in the case of a classified board, such vacancies and newly created
directorships may be filled by a majority of the directors elected by such
class, or by the sole remaining director so elected. In the case of a
classified board, directors elected to fill vacancies or newly created
directorships shall hold office until the next election of the class for which
such directors have been chosen, and until their successors have been duly
elected and qualified. In addition, if, at the time of the filling of any such
vacancy or newly created directorship, the directors in office constitute less
than a majority of the whole board (as constituted immediately prior to any
such increase), the Delaware Court of Chancery may, upon application of any
stockholder or stockholders holding at least 10% of the total number of
outstanding shares entitled to vote
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<PAGE>
for such directors, summarily order an election to fill any such vacancy or
newly created directorship, or replace the directors chosen by the directors
then in office.
The TCG By-Laws provide that all directors elected to fill vacancies or
newly created directorships shall remain in office until the next annual
election and until their successors are duly elected and qualified unless
sooner displaced.
Under the NYBCL, newly created directorships resulting from an increase in
the number of directors and vacancies occurring on the board for any reason
except the removal of directors without cause may be filled by vote of the
board of directors. However, the certificate of incorporation or by-laws may
provide that such newly created directorships or vacancies are to be filled by
vote of the stockholders. Unless the certificate of incorporation or the
specific provisions of a by-law adopted by the stockholders provide that the
board may fill vacancies occurring on the board by reason of the removal of
directors without cause, such vacancies may be filled only by vote of the
stockholders. A director elected to fill a vacancy, unless elected by the
stockholders, will hold office until the next meeting of stockholders at which
the election of directors is in the regular order of business and until his or
her successor has been elected and qualified.
The AT&T Certificate of Incorporation does not provide for the removal of
directors without cause. The AT&T By-Laws provide that any vacancy on the AT&T
Board may be filled by a majority vote of the remaining directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the DGCL, a corporation may not indemnify any director, officer,
employee or agent made or threatened to be made party to any threatened,
pending or completed proceeding unless such person acted in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal proceeding,
had no reasonable cause to believe that his or her conduct was unlawful. The
TCG Certificate of Incorporation and the TCG By-Laws contain provisions which
require TCG to indemnify such persons to the full extent permitted by the
DGCL.
The DGCL also establishes several mandatory rules for indemnification. In
the case of a proceeding by or in the right of the corporation to procure a
judgment in its favor (e.g., a stockholder derivative suit), a corporation may
indemnify an officer, director, employee or agent if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the corporation; provided, however, that no person
adjudged to be liable to the corporation may be indemnified unless, and only
to the extent that, the Delaware Court of Chancery or the court in which such
action or suit was brought determines upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which such court deems proper. A director or officer who is successful, on the
merits or otherwise, in defense of any proceeding subject to the DGCL's
indemnification provisions must be indemnified by the corporation for
reasonable expenses incurred therein, including attorneys' fees.
The DGCL and the TCG By-Laws state that a determination must be made that a
director or officer has met the required standard of conduct before the
director or officer may be indemnified. The determination may be made by (i) a
majority vote of a quorum of disinterested directors, (ii) independent legal
counsel in a written opinion if a majority of disinterested directors so
directs, or (iii) the stockholders.
The DGCL and the TCG By-Laws require TCG to advance reasonable expenses to a
director or officer after such person provides an undertaking to repay TCG if
it is determined that the required standard of conduct has not been met. In
addition, the TCG By-Laws permit TCG to advance expenses to other employees
and agents in a similar manner.
Under the NYBCL, a corporation may indemnify its directors and officers
made, or threatened to be made, a party to any action or proceeding, except
for stockholder derivative suits, if such director or officer acted in
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<PAGE>
good faith, for a purpose which he or she reasonably believed to be in or, in
the case of service to another corporation or enterprise, not opposed to the
best interests of the corporation, and, in criminal proceedings, had no
reasonable cause to believe his or her conduct was unlawful. In the case of
stockholder derivative suits, the corporation may indemnify a director or
officer if he or she acted in good faith for a purpose which he or she
reasonably believed to be in or, in the case of service to another corporation
or enterprise, not opposed to the best interests of the corporation, except
that no indemnification may be made in respect of (i) a threatened action, or
a pending action which is settled or otherwise disposed of, or (ii) any claim,
issue or matter as to which such person has been adjudged to be liable to the
corporation, unless and only to the extent that the court in which the action
was brought, or, if no action was brought, any court of competent
jurisdiction, determines upon application that, in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such portion of the settlement amount and expenses as the court
deems proper.
Any person who has been successful on the merits or otherwise in the defense
of a civil or criminal action or proceeding will be entitled to
indemnification. Except as provided in the preceding sentence, unless ordered
by a court pursuant to the NYBCL, any indemnification under the NYBCL pursuant
to the above paragraph may be made only if authorized in the specific case and
after a finding that the director or officer met the requisite standard of
conduct by (i) the disinterested directors if a quorum is available, (ii) the
board upon the written opinion of independent legal counsel or (iii) the
stockholders.
The indemnification described above under the NYBCL is not exclusive of
other indemnification rights to which a director or officer may be entitled,
whether contained in the certificate of incorporation or by-laws or when
authorized by (i) such certificate of incorporation or by-laws, (ii) a
resolution of stockholders, (iii) a resolution of directors or (iv) an
agreement providing for such indemnification, provided that no indemnification
may be made to or on behalf of any director or officer if a judgment or other
final adjudication adverse to the director or officer establishes that his or
her acts were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action so adjudicated,
or that he or she personally gained in fact a financial profit or other
advantage to which he or she was not legally entitled.
The AT&T By-Laws provide that AT&T is authorized, by (i) a resolution of
stockholders, (ii) a resolution of directors or (iii) an agreement providing
for such indemnification, to the fullest extent permitted by applicable law,
to provide indemnification and to advance expenses to its directors and
officers in respect of claims, actions, suits or proceedings based upon,
arising from, relating to or by reason of the fact that any such director or
officer serves or served in such capacity with the corporation or at the
request of AT&T in any capacity with any other enterprise. AT&T has entered
into indemnification agreements with certain of its officers and directors in
accordance with the AT&T By-Laws.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling AT&T or TCG
pursuant to the foregoing provisions, AT&T and TCG have been informed that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
The DGCL provides that a corporation's certificate of incorporation may
include a provision limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. However, no such provision can eliminate or limit the
liability of a director for (i) any breach of the director's duty of loyalty
to the corporation or its stockholders, (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the
law, (iii) violation of certain provisions of the DGCL, (iv) any transaction
from which the director derived an improper personal benefit or (v) any act or
omission prior to the adoption of such a provision in the certificate of
incorporation. The TCG Certificate of Incorporation contains a provision
eliminating the personal liability for monetary damages of its directors to
the full extent permitted under Delaware law.
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The NYBCL provides that a corporation's certificate of incorporation may
contain a provision eliminating or limiting the personal liability of
directors to the corporation or its stockholders for damages for any breach of
duty in such capacity. However, no such provision can eliminate or limit the
liability of any director (i) if a judgment or other final adjudication
adverse to such director establishes that such director's acts or omissions
were in bad faith, or involved intentional misconduct or a knowing violation
of law, or that the director personally gained in fact a financial profit or
other advantage to which such director was not legally entitled or that the
director's acts violated certain provisions of the NYBCL or (ii) for any act
or omission prior to the adoption of such a provision in the certificate of
incorporation.
The AT&T Certificate of Incorporation provides that no director will be
personally liable to AT&T or any of its stockholders for damages for any
breach of duty as a director; provided, however, that the liability of a
director will not be eliminated or limited (i) if a judgment or other final
adjudication adverse to him or her establishes that his or her acts or
omissions were in bad faith or involved intentional misconduct or a knowing
violation of law or that he or she personally gained in fact a financial
profit or other advantage to which he or she was not legally entitled or that
his or her acts violated Section 719 of the NYBCL (which includes declaration
of dividends, purchase of capital stock, distribution of assets to
stockholders after dissolution of the corporation and loans to directors to
the extent contrary to New York law) or (ii) for any act or omission prior to
the adoption of this provision by the AT&T stockholders.
LEGAL OPINIONS
The legality of the AT&T Common Shares to be issued in connection with the
Merger is being passed upon for AT&T by Marilyn J. Wasser, Secretary and Vice
President-Law of AT&T. As of March 31, 1998, Ms. Wasser owned 2,171 AT&T
Common Shares and held options to purchase an additional 70,093 AT&T Common
Shares.
Certain of the tax consequences of the Merger will be passed upon at the
Effective Time, as a condition to the Merger, by Wachtell, Lipton, Rosen &
Katz, New York, New York, on behalf of AT&T, and by Dow, Lohnes & Albertson,
PLLC, Washington, D.C., on behalf of TCG. See "THE MERGER--Certain Federal
Income Tax Consequences."
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1996 and the
consolidated statements of income, changes in shareowners' equity, and cash
flows for each of the three years in the period ended December 31, 1997,
incorporated by reference in this Information Statement/Prospectus, have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The financial statements of TCG as of December 31, 1997 and 1996 and for the
two years then ended and of TCG and TCG Partners for the year ended December
31, 1995, incorporated by reference in this Information Statement/Prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated by reference in this Information
Statement/Prospectus, and have been so incorporated by reference in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
AT&T and TCG file annual, quarterly and special reports, proxy statements
and other information with the Commission. You may read and copy any reports,
statements or other information that the companies file with the Commission at
the Commission's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for
further information on the public reference rooms. These Commission filings
are also available to the public from commercial document retrieval services
and at the Internet web site maintained by the Commission at
"http://www.sec.gov". Reports, proxy statements and other information should
also be available for inspection at the offices of the NASD (for TCG) and the
NYSE (for AT&T).
AT&T filed a Registration Statement on Form S-4 to register with the
Commission the AT&T Common Shares to be issued to TCG stockholders in the
Merger. This Information Statement/Prospectus is a part of that Registration
Statement and constitutes a prospectus of AT&T. Although this Information
Statement/Prospectus is a filing of AT&T as well as TCG, the words "we" and
"us" refer only to TCG, and not to AT&T. As allowed by Commission rules, this
Information Statement/Prospectus does not contain all the information you can
find in AT&T's Registration Statement or the exhibits to that Registration
Statement.
The Commission allows TCG and AT&T to "incorporate by reference" information
into this Information Statement/Prospectus, which means that the companies can
disclose important information to you by referring you to another document
filed separately with the Commission. The information incorporated by
reference is considered part of this Information Statement/Prospectus, except
for any information superseded by information contained directly in this
Information Statement/Prospectus or in later filed documents incorporated by
reference in this Information Statement/Prospectus.
This Information Statement/Prospectus incorporates by reference the
documents set forth below that TCG and AT&T have previously filed with the
Commission. These documents contain important information about TCG and AT&T
and their finances. Some of these filings have been amended by later filings,
which are also listed.
<TABLE>
<CAPTION>
TCG COMMISSION FILINGS (FILE NO. 0-
20913) PERIOD
----------------------------------- ------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1997
Current Reports on Form 8-K January 8, January 26 and February 9, 1998
<CAPTION>
AT&T COMMISSION FILINGS (FILE NO. 1-
1105) PERIOD
------------------------------------ ------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1997
Current Reports on Form 8-K January 8 and March 2, 1998
</TABLE>
TCG and AT&T also incorporate by reference additional documents that may be
filed with the Commission between the date of this Information
Statement/Prospectus and the consummation of the Merger or the termination of
the Merger Agreement. These include periodic reports, such as Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K,
as well as proxy statements.
AT&T has supplied all information contained or incorporated by reference in
this Information Statement/Prospectus relating to AT&T, and TCG has supplied
all such information relating to TCG and to any of the Cable Stockholders.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through the
companies, the Commission or the Commission's Internet web site as described
above. Documents incorporated by reference are available from the companies
without charge, excluding all exhibits, except that if the companies have
specifically incorporated by reference an exhibit in this Information
Statement/Prospectus, the exhibit will also be available without charge.
Stockholders may obtain
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documents incorporated by reference in this Information Statement/Prospectus
by requesting them in writing or by telephone from the appropriate company at
the following addresses:
AT&T Corp. Teleport Communications Group Inc.
32 Avenue of the Americas 437 Ridge Road, Executive Building 3
New York, NY 10013-2412 Dayton, NJ 08810
Tel: (212) 387-5400 Tel: (732) 392-2154
Attn: Corporate Secretary's Attn: Investor Relations
Department
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS INFORMATION STATEMENT/PROSPECTUS. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS
CONTAINED IN THIS INFORMATION STATEMENT/PROSPECTUS. THIS INFORMATION
STATEMENT/PROSPECTUS IS DATED APRIL , 1998. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS INFORMATION STATEMENT/PROSPECTUS IS ACCURATE AS
OF ANY DATE OTHER THAN THAT DATE. NEITHER THE MAILING OF THIS INFORMATION
STATEMENT/PROSPECTUS TO STOCKHOLDERS NOR THE ISSUANCE OF AT&T COMMON SHARES IN
THE MERGER CREATES ANY IMPLICATION TO THE CONTRARY.
55
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
ACC........................................................................ 13
ACC Agreement.............................................................. 13
ACC Merger................................................................. 13
ACC Stock.................................................................. 13
Acquisition Proposal....................................................... 27
ACSI....................................................................... 19
Affiliates................................................................. 32
AIT........................................................................ 20
AT&T....................................................................... 12
AT&T Common Shares......................................................... 13
Base Case.................................................................. 19
BEL........................................................................ 20
BFP........................................................................ 19
BLS........................................................................ 20
Cable Stockholders......................................................... 13
Certificates............................................................... 23
CLEC....................................................................... 12
Closing.................................................................... 16
Code....................................................................... 22
Comcast.................................................................... 13
Commission................................................................. 13
Comparable Acquisitions.................................................... 19
Conservative Case.......................................................... 19
Cox........................................................................ 13
Delaware Business Combination Law.......................................... 24
DGCL....................................................................... 23
EBITDA..................................................................... 20
Effective Time............................................................. 22
ELI........................................................................ 19
Excel...................................................................... 20
Excess Shares.............................................................. 23
Exchange Agent............................................................. 23
Exchange Ratio............................................................. 13
Existing Facilities Agreements............................................. 15
Expected Synergies......................................................... 18
FCC........................................................................ 31
Frontier................................................................... 20
FTC........................................................................ 31
Gross PP&E................................................................. 19
GST........................................................................ 19
GTE........................................................................ 20
HSR Act.................................................................... 31
ICG........................................................................ 19
Incorporate by Reference................................................... 52
Intermedia................................................................. 19
IXCs First Tier............................................................ 20
IXCs Second Tier........................................................... 20
Joint 13D.................................................................. 42
LCI........................................................................ 20
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
LTIP....................................................................... 33
McLeod..................................................................... 19
Master Facilities Agreement................................................ 15
Merger..................................................................... 13
Merger Agreement........................................................... 13
Merger Sub................................................................. 12
Merrill Lynch.............................................................. 14
NASD....................................................................... 45
Nasdaq..................................................................... 41
New York Business Combination Law.......................................... 44
NEXTLINK................................................................... 19
NYBCL...................................................................... 43
NYSE....................................................................... 13
Option..................................................................... 22
Option Plans............................................................... 22
Pacific Gateway............................................................ 20
Pension Account............................................................ 33
Performance Awards......................................................... 33
Pooling of Interests....................................................... 7
Prohibited Effect.......................................................... 38
Registrable Securities..................................................... 38
Registration Period........................................................ 38
Registration Rights Agreement.............................................. 15
Request.................................................................... 38
Request Registration....................................................... 38
Run Rate Revenue........................................................... 19
SBC........................................................................ 20
Securities Act............................................................. 13
Special Pension............................................................ 33
Sprint..................................................................... 20
Stock Incentive Right...................................................... 22
Stock Unit................................................................. 23
Stockholders Consent....................................................... 15
Stockholders' Agreement.................................................... 43
Surviving Corporation...................................................... 22
TCG........................................................................ 1
TCG Board.................................................................. 14
TCG By-Laws................................................................ 22
TCG Certificate of Incorporation........................................... 22
TCG Class A Common Stock................................................... 13
TCG Class B Common Stock................................................... 13
TCG Common Stock........................................................... 13
TCI........................................................................ 13
Tel-Save................................................................... 20
Usage Agreement............................................................ 14
Usage Amendments........................................................... 15
Voting Agreement........................................................... 15
WorldCom................................................................... 19
</TABLE>
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
AMONG
AT&T CORP.,
TA MERGER CORP.
AND
TELEPORT COMMUNICATIONS GROUP INC.
DATED AS OF JANUARY 8, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS..................................................... A-1
ARTICLE II THE MERGER; EFFECTIVE TIME; CLOSING............................ A-5
2.1.The Merger........................................................... A-5
2.2.Effective Time....................................................... A-5
2.3.Closing.............................................................. A-5
ARTICLE III TERMS OF MERGER............................................... A-5
3.1.Certificate of Incorporation......................................... A-5
3.2.The By-Laws.......................................................... A-6
3.3.Directors............................................................ A-6
3.4.Officers............................................................. A-6
ARTICLE IV SHARE CONSIDERATION; CONVERSION OR CANCELLATION OF SHARES IN
THE MERGER.................................................... A-6
4.1.Share Consideration; Conversion or Cancellation of Shares in the
Merger.................................................................. A-6
4.2.Payment for Shares in the Merger..................................... A-7
4.3.Fractional Shares.................................................... A-9
4.4.Transfer of Shares after the Effective Time.......................... A-9
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... A-9
5.1.Organization, Etc. of the Company.................................... A-9
5.2.Subsidiaries......................................................... A-9
5.3.Agreement............................................................ A-9
5.4.Permits; Compliance.................................................. A-10
5.5.Fairness Opinion..................................................... A-10
5.6.Capital Stock........................................................ A-10
5.7.Litigation........................................................... A-11
5.8.Compliance with Other Instruments, Etc............................... A-11
5.9.Employee Benefit Plans............................................... A-11
5.10.Taxes............................................................... A-13
5.11.Intellectual Property............................................... A-13
5.12.Reports and Financial Statements.................................... A-13
5.13.Absence of Certain Changes or Events................................ A-14
5.14.Affiliated Transactions and Certain Other Agreements................ A-14
5.15.Brokers and Finders................................................. A-14
5.16.S-4 Registration Statement and Information Statement/Prospectus..... A-15
5.17.ACC Agreement....................................................... A-15
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........ A-15
6.1.Organization, Etc. of Parent......................................... A-15
6.2.Subsidiaries......................................................... A-15
6.3.Agreement............................................................ A-16
6.4.Permits; Compliance.................................................. A-16
6.5.Capital Stock........................................................ A-16
6.6.Parent Common Shares................................................. A-16
6.7.Litigation........................................................... A-16
6.8.Compliance with Other Instruments, Etc............................... A-17
6.9.Taxes................................................................ A-17
6.10.Intellectual Property............................................... A-17
6.11.Reports and Financial Statements.................................... A-17
6.12.Brokers and Finders................................................. A-18
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
6.13.S-4 Registration Statement and Information Statement/Prospectus...... A-18
6.14.Ownership of Merger Sub; No Prior Activities; Assets of Merger Sub... A-19
6.15.Ownership of Company or ACC Stock.................................... A-19
ARTICLE VII ADDITIONAL COVENANTS AND AGREEMENTS............................ A-19
7.1.Conduct of Business of the Company.................................... A-19
7.2.Other Transactions.................................................... A-22
7.3.Stockholder Approval.................................................. A-22
7.4.Registration Statement................................................ A-23
7.5.Reasonable Efforts.................................................... A-23
7.6.Access to Information................................................. A-24
7.7.Indemnification of Directors and Officers............................. A-24
7.8.Registration and Listing of Parent Common Shares...................... A-25
7.9.Affiliates of Parent and the Company.................................. A-26
7.10.Tax Matters.......................................................... A-26
7.11.New York Real Property Transfer Tax.................................. A-26
7.12.Employee Matters..................................................... A-26
7.13.Certain Covenants of Parent.......................................... A-27
7.14.Right of First Offer................................................. A-27
ARTICLE VIII CONDITIONS.................................................... A-27
8.1.Conditions to Each Party's Obligations................................ A-27
8.2.Conditions to Obligations of Parent and Merger Sub.................... A-28
8.3.Conditions to Obligations of the Company.............................. A-29
ARTICLE IX TERMINATION..................................................... A-30
9.1.Termination by Mutual Consent......................................... A-30
9.2.Termination by Either Parent or the Company........................... A-30
9.3.Termination by the Company............................................ A-30
9.4.Termination by Parent and Merger Sub.................................. A-30
9.5.Effect of Termination and Abandonment................................. A-30
ARTICLE X MISCELLANEOUS AND GENERAL........................................ A-30
10.1.Expenses............................................................. A-30
10.2.Notices, Etc......................................................... A-31
10.3.Amendments, Waivers, Etc............................................. A-31
10.4.No Assignment........................................................ A-32
10.5.Entire Agreement..................................................... A-32
10.6.Specific Performance................................................. A-32
10.7.Remedies Cumulative.................................................. A-32
10.8.No Waiver............................................................ A-32
10.9.No Third Party Beneficiaries......................................... A-32
10.10.Jurisdiction........................................................ A-32
10.11.Public Announcements................................................ A-32
10.12.Governing Law....................................................... A-33
10.13.Name, Captions, Etc. ............................................... A-33
10.14.Counterparts........................................................ A-33
10.15.Survival of Representations, Warranties, Covenants and Agreements... A-33
10.16.Severability........................................................ A-33
10.17.Disclosure Statements............................................... A-33
</TABLE>
EXHIBITS
<TABLE>
<C> <S>
A Form of Affiliate Agreement
B Employees Entering into Employment Agreements
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of January 8,
1998, among AT&T Corp., a New York corporation ("Parent"), TA Merger Corp., a
Delaware corporation and a direct wholly owned subsidiary of Parent ("Merger
Sub"), and Teleport Communications Group Inc., a Delaware corporation (the
"Company").
RECITALS
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company each
have determined that it is in the best interests of their respective
stockholders for Merger Sub to merge with and into the Company, upon the terms
and subject to the conditions of this Agreement (the "Merger");
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger shall qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Code (as defined herein);
WHEREAS, it is intended that the Merger shall be recorded for accounting
purposes as a pooling of interests;
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger; and
WHEREAS, Parent and Merger Sub have required, as a condition to their
willingness to enter into this Agreement, that the Cable Stockholders (as
defined herein) contemporaneously enter into the Voting Agreement and execute
and deliver the Stockholders Consent (as defined herein) immediately following
the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, Parent, Merger Sub and the Company
hereby agree as follows:
ARTICLE I
Definitions
As used in this Agreement, the following terms shall have the respective
meanings set forth below:
"ACC": ACC Corp., a Delaware corporation.
"ACC Agreement": The Agreement and Plan of Merger by and among the Company,
TCG Merger Co., Inc. and ACC dated as of November 26, 1997, as it may be
amended from time to time.
"Acquisition Proposal": As defined in Section 7.2.
"Affiliate": As defined in Rule 12b-2 under the Exchange Act.
"Authorization": Any consent, approval or authorization of, expiration or
termination of any waiting period requirement (including pursuant to the HSR
Act) by, or filing, registration, qualification, declaration or designation
with, any Governmental Body.
"Benefit Arrangement": As defined in Section 5.9(a).
"Cable Stockholder": Each of Comcast Corporation, Comcast Teleport, Inc.,
Comcast Communications Properties, Inc., Cox Communications, Inc., Cox
Teleport Partners, Inc., Tele-Communications, Inc. and TCI Teleport, Inc.
(which, collectively, shall be referred to herein as the "Cable
Stockholders").
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"Certificate of Merger": The certificate of merger with respect to the
merger of Merger Sub with and into the Company, containing the provisions
required by, and executed in accordance with, Section 251 of the DGCL.
"Certificates": As defined in Section 4.2(b).
"Claim": As defined in Section 7.7(a).
"Class A Common Stock": Class A Common Stock, par value $.01 per share, of
the Company.
"Class B Common Stock": Class B Common Stock, par value $.01 per share, of
the Company.
"Closing": The closing of the Merger.
"Closing Date": The date on which the Closing occurs.
"Code": The Internal Revenue Code of 1986, as amended, and all regulations
promulgated thereunder, as in effect from time to time.
"Company": Teleport Communications Group Inc., a Delaware corporation.
"Company Disclosure Statement": The disclosure statement, dated the date of
this Agreement, delivered by the Company to Parent.
"Company Option": As defined in Section 4.1(e).
"Company Permits": As defined in Section 5.4.
"Company SEC Reports": As defined in Section 5.12.
"Company Stock Incentive Right": As defined in Section 4.1(f).
"Company Stock Purchase Plan": As defined in Section 4.1(h).
"Company Stock Unit": As defined in Section 4.1(g).
"Controlled Group Liability": As defined in Section 5.9(e).
"DGCL": The Delaware General Corporation Law.
"Effective Time": As defined in Section 2.2.
"Employee Plan": As defined in Section 5.9(a).
"Employees": As defined in Section 5.9(a).
"ERISA": The Employee Retirement Income Security Act of 1974, as amended,
and all regulations promulgated thereunder, as in effect from time to time.
"ERISA Affiliates": Any trade or business, whether or not incorporated, that
is now or has at any time in the past five years been treated as a single
employer with the Company or any of its Subsidiaries under Section 414(b) or
(c) of the Code and the Treasury Regulations thereunder.
"Excess Shares": As defined in Section 4.3.
"Exchange Act": The Securities Exchange Act of 1934, as amended.
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"Exchange Agent": As defined in Section 4.2(a).
"Exchange Fund": As defined in Section 4.2(a).
"Exchange Ratio": As defined in Section 4.1(a).
"FCC": The Federal Communications Commission.
"FCC Consent": Actions by the FCC granting its consent to the transfer of
control of the FCC Licenses in connection with the consummation of the
transactions contemplated hereby.
"FCC Licenses": All licenses, permits, construction permits and other
authorizations issued by the FCC in connection with the business and
operations of the Company and its Subsidiaries.
"Fractional Securities Fund": As defined in Section 4.3.
"Governmental Body": Any federal, state, municipal, political subdivision or
other governmental department, court, commission, board, bureau, agency or
instrumentality, domestic or foreign.
"HSR Act": The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"Indemnified Parties": As defined in Section 7.7(a).
"Information Statement/Prospectus": As defined in Section 7.4.
"Intellectual Property": All industrial and intellectual property rights,
including Proprietary Technology, patents, patent applications, trademarks,
trademark applications and registrations, service marks, service mark
applications and registrations, copyrights, know-how, licenses, trade secrets,
proprietary processes, formulae and customer lists. "Proprietary Technology"
means all proprietary processes, formulae, inventions, trade secrets, know-
how, development tools and other proprietary rights used by the Company and
its Subsidiaries or Parent and its Subsidiaries, as the case may be,
pertaining to any product, software or service manufactured, marketed,
licensed or sold by the Company and its Subsidiaries or Parent and its
Subsidiaries, as the case may be, in the conduct of their business or used,
employed or exploited in the development, license, sale, marketing,
distribution or maintenance thereof, and all documentation and media
constituting, describing or relating to the above, including manuals,
memoranda, know-how, notebooks, software, records and disclosures.
"knowledge": With respect to the Company, the actual knowledge of any
executive officer (determined in accordance with Rule 16a-1(f) under the
Exchange Act as in effect on the date hereof) of the Company and, with respect
to Parent or Merger Sub, the actual knowledge of any executive officer
(determined in accordance with Rule 16a-1(f) under the Exchange Act as in
effect on the date hereof) of Parent or Merger Sub, as the case may be.
"Law": Any foreign or domestic law, statute, code, ordinance, rule,
regulation promulgated, or order, judgment, writ, stipulation, award,
injunction or decree entered by a Governmental Body.
"LEC": A local exchange carrier.
"Material Adverse Effect": On any Person, a material adverse effect on the
business, properties, operations or financial condition of such Person and its
Subsidiaries taken as a whole, other than any such effect (i) arising out of
or resulting from general economic conditions, (ii) arising out of or
resulting from changes in or affecting the telecommunications business
generally, or, in the case of a determination with respect to Parent and its
Subsidiaries, the long distance telecommunications business generally, or, in
the case of a determination with respect to the Company and its Subsidiaries,
the competitive local exchange carrier business generally, or (iii) arising
out of or resulting from, in the case of a determination with respect to the
Company and its Subsidiaries,
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any loss of customer revenues attributable to the announcement of this
Agreement and the transactions contemplated hereby, or, in the case of a
determination with respect to Parent and its Subsidiaries, the entry of the
Regional Bell Operating Companies into the long distance telecommunications
business.
"Merger": The merger of Merger Sub with and into the Company as contemplated
by Section 2.1.
"Merger Sub": TA Merger Corp., a Delaware corporation.
"NYSE": The New York Stock Exchange, Inc.
"Parent": AT&T Corp., a New York corporation.
"Parent Common Shares": Shares of common stock, par value $1.00 per share,
of Parent.
"Parent Disclosure Statement": The disclosure statement, dated the date of
this Agreement, delivered by Parent to the Company.
"Parent Option": As defined in Section 4.1(e).
"Parent Permits": As defined in Section 6.4.
"Parent Representatives": As defined in Section 7.6.
"Parent SEC Reports": As defined in Section 6.10(a).
"Parent Stock Incentive Right": As defined in Section 4.1(f).
"Parent Stock Unit": As defined in Section 4.1(g).
"Permit": Any franchise, grant, authorization, license, permit, easement,
variance, exception, consent, certificate, approval, clearance or order of any
Governmental Body.
"Person": Any individual or corporation, company, partnership, trust,
incorporated or unincorporated association, joint venture or other entity of
any kind.
"Proposed Financing": As defined in Section 7.14.
"Rule 145 Affiliate": As defined in Section 7.9.
"S-4 Registration Statement": As defined in Section 7.4.
"SEC": The Securities and Exchange Commission.
"Securities Act": The Securities Act of 1933, as amended.
"Share Consideration": As defined in Section 4.1(b).
"Shares": Collectively, the shares of Class A Common Stock and the shares of
Class B Common Stock.
"Stockholders' Agreement": The Amended and Restated Stockholders' Agreement,
dated June 26, 1996, by and among the Company and Comcast Teleport, Inc.,
Comcast Communications Properties, Inc., Cox Teleport Partners, Inc., and TCI
Teleport, Inc.
"Stockholders Consent": As defined in Section 7.3.
"Subsidiary": As to any Person, any other Person of which at least 50% of
the equity and voting interests are owned, directly or indirectly, by such
first Person.
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"Surviving Corporation": The surviving corporation in the Merger.
"Tax": As defined in Section 5.10(d).
"Tax Return": As defined in Section 5.10(d).
"US Wats": US Wats, Inc., a New York corporation.
"US Wats Agreement": The Agreement and Plan of Merger, dated as of October
28, 1997, by and among ACC, ACC Acquisition--Blue Corp. and US Wats.
"Voting Agreement": The Voting Agreement, dated the date hereof, by and
among Parent and each of the Cable Stockholders.
"Wholly-Owned Subsidiary": As to any Person, a Subsidiary of such Person
100% of the equity and voting interest in which is owned, directly or
indirectly, by such Person.
ARTICLE II
The Merger; Effective Time; Closing
2.1. The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time, Merger Sub shall be merged with and into the Company in
accordance with the provisions of Section 251 of the DGCL and with the effect
provided in Sections 259 and 261 of the DGCL. The separate corporate existence
of Merger Sub shall thereupon cease and the Company shall be the Surviving
Corporation and shall continue its corporate existence as a Subsidiary of
Parent and shall continue to be governed by the laws of the State of Delaware.
At the election of Parent, any direct Wholly-Owned Subsidiary of Parent with
respect to which the representation and warranty set forth in Section 6.14 is
true and correct may be substituted for Merger Sub as a constituent
corporation in the Merger.
2.2. Effective Time. The Merger shall become effective on the date and at
the time (the "Effective Time") that the Certificate of Merger shall have been
accepted for filing by the Secretary of State of the State of Delaware (or
such later date and time as may be specified in the Certificate of Merger by
mutual agreement of Parent, Merger Sub and the Company), which shall be on the
Closing Date or as soon as practicable thereafter.
2.3. Closing. Subject to the fulfillment or waiver of the conditions set
forth in Article VIII, the Closing shall take place (a) at the offices of
Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York, at
10:00 a.m. on the earliest practicable date (but no later than the fifth
business day) following the satisfaction or waiver of the conditions set forth
in Article VIII (other than those conditions to be satisfied or waived at the
Closing) or (b) at such other place and/or time and/or on such other date as
Parent, Merger Sub and the Company may agree.
ARTICLE III
Terms of Merger
3.1 Certificate of Incorporation. As of the Effective Time, the Certificate
of Incorporation of the Company shall be amended pursuant to the Certificate
of Merger to be identical to the Certificate of Incorporation of Merger Sub in
effect immediately prior to the Effective Time, except that Article FIRST
thereof shall read as follows: "The name of the Corporation (which is
hereinafter called the "Corporation") is Teleport Communications Group Inc."
Such Certificate of Incorporation as so amended shall be the Certificate of
Incorporation of the Surviving Corporation, until duly amended in accordance
with the terms thereof and of the DGCL. Prior to the Effective Time, Parent
shall take such steps as are necessary so that immediately prior to the
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<PAGE>
Effective Time the Certificate of Incorporation of Merger Sub shall include
the provisions of Articles V.B. and VIII of the Certificate of Incorporation
of the Company.
3.2 The By-Laws. The By-Laws of the Company shall be amended as of the
Effective Time to be identical to the By-Laws of Merger Sub in effect
immediately prior to the Effective Time and, in such amended form, shall be
the By-Laws of the Surviving Corporation, until duly amended in accordance
with the terms thereof, of the Certificate of Incorporation of the Surviving
Corporation and of the DGCL.
3.3 Directors. The directors of Merger Sub at the Effective Time shall, from
and after the Effective Time, be the directors of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-Laws.
3.4. Officers. The officers of the Company at the Effective Time shall, from
and after the Effective Time, be the officers of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-Laws.
ARTICLE IV
Share Consideration; Conversion or Cancellation of Shares in the Merger
4.1 Share Consideration; Conversion or Cancellation of Shares in the
Merger. Subject to the provisions of this Article IV, at the Effective Time,
by virtue of the Merger and without any action on the part of the holders
thereof, the shares of the constituent corporations shall be converted or
cancelled as follows:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares owned by Parent or the Company or any of their
respective Wholly-Owned Subsidiaries) shall be converted into .943 of a
Parent Common Share (the "Exchange Ratio"). If, prior to the Effective
Time, Parent should split or combine the Parent Common Shares, or pay a
stock dividend or other stock distribution in Parent Common Shares, or
otherwise change the Parent Common Shares into any other securities, or
make any other dividend or distribution on the Parent Common Shares (other
than normal quarterly dividends as the same may be adjusted from time to
time in the ordinary course), then the Exchange Ratio will be appropriately
adjusted to reflect such split, combination, dividend or other distribution
or change.
(b) All Shares to be converted into Parent Common Shares pursuant to this
Section 4.1 shall cease to be outstanding, shall be canceled and retired
and shall cease to exist, and each holder of a certificate representing any
such Shares shall thereafter cease to have any rights with respect to such
Shares, except the right to receive for each of the Shares, upon the
surrender of such certificate in accordance with Section 4.2, the amount of
Parent Common Shares specified above (the "Share Consideration") and cash
in lieu of fractional Parent Common Shares as contemplated by Section 4.3.
(c) Each Share issued and outstanding and owned by Parent or the Company,
or any of their respective Wholly-Owned Subsidiaries, immediately prior to
the Effective Time shall cease to be outstanding, shall be canceled and
retired without payment of any consideration therefor and shall cease to
exist.
(d) Each share of Common Stock, par value $0.01 per share, of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into one share of common stock of the Surviving Corporation.
(e) At the Effective Time, each of the then outstanding stock options, if
any, to purchase Shares (each, a "Company Option") issued by the Company
pursuant to any stock option or similar plan of the Company, and any non-
plan options set forth in Section 5.6 of the Company Disclosure Statement
issued by the Company pursuant to an option agreement or otherwise, shall,
by virtue of the Merger, and without any further action on the part of any
holder thereof, be assumed by Parent and converted into an option (a
"Parent Option") to purchase that number of Parent Common Shares determined
by multiplying the
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number of Shares subject to such Company Option at the Effective Time by
the Exchange Ratio, at an exercise price per Parent Common Share equal to
the exercise price per share of such Company Option immediately prior to
the Effective Time divided by the Exchange Ratio, rounded down to the
nearest whole cent. If the foregoing calculation results in an assumed
Company Option being exercisable for a fraction of a Parent Common Share,
then the number of Parent Common Shares subject to such option shall be
rounded up to the nearest whole number of shares, with no cash being
payable for such fractional share. The terms and conditions of each Parent
Option shall otherwise remain as set forth in the Company Option converted
into such Parent Option. The adjustment provided herein with respect to any
options which are "incentive stock options" (as defined in Section 422 of
the Code) shall be and is intended to be effected in a manner which is
consistent with Section 424(a) of the Code.
(f) At the Effective Time, each of the then outstanding stock incentive
rights to acquire Shares (each, a "Company Stock Incentive Right") held by
any Person as a result of the consummation of the transactions contemplated
by the ACC Agreement shall, by virtue of the Merger, and without any
further action on the part of any holder thereof, be assumed by Parent and
converted into a right (a "Parent Stock Incentive Right") to acquire that
number of Parent Common Shares determined by multiplying the number of
Shares subject to such Company Stock Incentive Right at the Effective Time
by the Exchange Ratio. If the foregoing calculation results in an assumed
Company Stock Incentive Right providing the right to acquire a fraction of
a Parent Common Share, then the number of Parent Common Shares subject to
such right shall be rounded up to the nearest whole number of shares, with
no cash being payable for such fractional share. The terms and conditions
of each Parent Stock Incentive Right shall otherwise remain as set forth in
the Company Stock Incentive Right converted into such Parent Stock
Incentive Right.
(g) At the Effective Time, each of the then outstanding share units under
the Company's 1996 Equity Incentive Plan (each, a "Company Stock Unit")
shall, by virtue of the Merger, and without any further action on the part
of any holder thereof, be assumed by Parent and converted into a right (a
"Parent Stock Unit") to receive that number of Parent Common Shares
determined by multiplying the number of Shares subject to such Company
Stock Unit at the Effective Time by the Exchange Ratio. If the foregoing
calculation results in an assumed Company Stock Unit providing the right to
acquire a fraction of a Parent Common Share, then the number of Parent
Common Shares subject to such right shall be rounded up to the nearest
whole number of shares, with no cash being payable for such fractional
share. The terms and conditions of each Parent Stock Unit shall otherwise
remain as set forth in the Company Stock Unit converted into such Parent
Stock Unit. The Company shall take all necessary action prior to the
Effective Time to amend the Company's 1996 Equity Incentive Plan to permit
the assumption and conversion described in this Section 4.1(g) and to
provide that all determinations made by reference to Shares shall be made
by reference to Parent Common Shares.
(h) The Company shall terminate the Company's 1997 Employee Stock
Purchase Plan (the "Company Stock Purchase Plan") effective as of no later
than two business days prior to the Closing Date.
4.2. Payment for Shares in the Merger. The manner of making payment for
Shares in the Merger shall be as follows:
(a) At the Effective Time, Parent shall make available to an exchange
agent selected by Parent and reasonably acceptable to the Company (the
"Exchange Agent"), for the benefit of those Persons who immediately prior
to the Effective Time were the holders of Shares, a sufficient number of
certificates representing Parent Common Shares required to effect the
delivery of the aggregate Share Consideration required to be issued
pursuant to Section 4.1 (the certificates representing Parent Common Shares
comprising such aggregate Share Consideration being hereinafter referred to
as the "Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the Parent Common Shares contemplated to be issued
pursuant to Section 4.1 and effect the sales provided for in Section 4.3
out of the Exchange Fund. The Exchange Fund shall not be used for any other
purpose.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to
each holder of record (other than holders of certificates for Shares
referred to in Section 4.1(c)) of a certificate or certificates which
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immediately prior to the Effective Time represented outstanding Shares (the
"Certificates") (i) a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent) and (ii) instructions for use in effecting the
surrender of the Certificates for payment therefor. Upon surrender of
Certificates for cancellation to the Exchange Agent, together with such
letter of transmittal duly executed and any other required documents, the
holder of such Certificates shall be entitled to receive for each of the
Shares represented by such Certificates the Share Consideration and the
Certificates so surrendered shall forthwith be canceled. Until so
surrendered, Certificates shall represent solely the right to receive the
Share Consideration and any cash in lieu of fractional Parent Common Shares
as contemplated by Section 4.3 with respect to each of the Shares
represented thereby. No dividends or other distributions that are declared
on the Parent Common Shares and payable to the holders of record thereof
after the Effective Time will be paid to Persons entitled by reason of the
Merger to receive Parent Common Shares until such Persons surrender their
Certificates. Upon such surrender, there shall be paid to the Person in
whose name the Parent Common Shares are issued any dividends or other
distributions having a record date after the Effective Time and payable
with respect to such Parent Common Shares between the Effective Time and
the time of such surrender. After such surrender, there shall be paid on
the applicable payment date, to the Person in whose name the Parent Common
Shares are issued, any dividends or other distributions on such Parent
Common Shares which shall have a record date after the Effective Time and
prior to such surrender and a payment date after such surrender. In no
event shall the Persons entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or other
distributions. If any cash or any certificate representing Parent Common
Shares is to be paid to or issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the
Person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of certificates
for such Parent Common Shares in a name other than that of the registered
holder of the Certificate surrendered, or shall establish to the reasonable
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent nor
any party hereto shall be liable to a holder of Shares for any Parent
Common Shares or dividends thereon or other distributions with respect
thereto or, in accordance with Section 4.3, proceeds of the sale of
fractional interests, delivered to a public official pursuant to applicable
escheat law. The Exchange Agent shall not be entitled to vote or exercise
any rights of ownership with respect to the Parent Common Shares held by it
from time to time hereunder, except that, subject to applicable escheat
law, it shall receive and hold all dividends or other distributions paid or
distributed with respect to such Parent Common Shares for the account of
the Persons entitled thereto.
(c) Certificates surrendered for exchange by any Person constituting a
Rule 145 Affiliate of the Company shall not be exchanged for certificates
representing Parent Common Shares until Parent has received a written
agreement from such Person as provided in Section 7.9.
(d) Any portion of the Exchange Fund and the Fractional Securities Fund
(and any dividends or other distributions with respect to such portion of
the Exchange Fund) which remains unclaimed by the former stockholders of
the Company for one year after the Effective Time shall be delivered to
Parent, upon demand of Parent, and any former stockholders of the Company
shall thereafter look only to Parent for payment of their claim for the
Share Consideration (and any such dividends or other distributions) or for
any cash in lieu of fractional Parent Common Shares.
(e) In the event that any Certificate has been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as Parent may direct as indemnity against any claim that
may be made against it with respect to such Certificate, Parent will, in
exchange for such lost, stolen or destroyed Certificate, issue or cause to
be issued the number of Parent Common Shares and pay or cause to be paid
any amounts deliverable in respect thereof pursuant to this Article IV.
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4.3. Fractional Shares. No fractional Parent Common Shares shall be issued
in the Merger. In lieu of any such fractional securities, each holder of
Shares who would otherwise have been entitled to a fraction of a Parent Common
Share upon surrender of Certificates for exchange pursuant to this Article IV
will be paid an amount in cash (without interest) equal to such holder's
proportionate interest in the net proceeds from the sale or sales in the open
market by the Exchange Agent, on behalf of all such holders, of the aggregate
fractional Parent Common Shares issued pursuant to this Article IV. As soon as
practicable following the Effective Time, the Exchange Agent shall determine
the excess of (a) the number of full Parent Common Shares delivered to the
Exchange Agent by Parent over (b) the aggregate number of full Parent Common
Shares to be distributed to holders of Shares (such excess being herein called
the "Excess Shares"), and the Exchange Agent, as agent for the former holders
of Shares, shall sell the Excess Shares at the prevailing prices on the NYSE.
The sale of the Excess Shares by the Exchange Agent shall be executed on the
NYSE through one or more member firms of the NYSE and shall be executed in
round lots to the extent practicable. Parent shall pay all commissions,
transfer taxes and other out-of-pocket transaction costs, including the
expenses and compensation of the Exchange Agent, incurred in connection with
such sale of Excess Shares. Until the net proceeds of such sale have been
distributed to the former stockholders of the Company, the Exchange Agent will
hold such proceeds in trust for such former stockholders (the "Fractional
Securities Fund"). As soon as practicable after the determination of the
amount of cash to be paid to former stockholders of the Company in lieu of any
fractional interests, the Exchange Agent shall make available in accordance
with this Agreement such amounts to such former stockholders.
4.4 Transfer of Shares after the Effective Time. No transfers of Shares
shall be made on the stock transfer books of the Company after the close of
business on the day prior to the date of the Effective Time.
ARTICLE V
Representations and Warranties of the Company
The Company hereby represents and warrants to Parent and Merger Sub that,
except as set forth in the Company Disclosure Statement (each section of which
qualifies the correspondingly numbered representation and warranty or covenant
as specified therein):
5.1. Organization, Etc. of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted and
proposed by the Company to be conducted. The Company is duly qualified and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary and where the failure to be so qualified or in good
standing has or would have, individually or in the aggregate, a Material
Adverse Effect on the Company.
5.2. Subsidiaries. Section 5.2 of the Company Disclosure Statement contains
a complete and accurate list of all of the Subsidiaries of the Company as of
the date hereof. Each Subsidiary of the Company is a corporation or other
legal entity duly organized, validly existing and (if applicable) in good
standing under the laws of the jurisdiction of its organization and has all
requisite corporate, partnership or similar power and authority to own its
properties and conduct its business and operations as currently conducted,
except where the failure to be duly organized, validly existing and in good
standing or to have such power and authority does not and would not have,
individually or in the aggregate, a Material Adverse Effect on the Company,
and is duly qualified and in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure
to be so qualified or in good standing does not and would not have,
individually or in the aggregate, a Material Adverse Effect on the Company.
5.3. Agreement. The Company has all necessary corporate power and authority
to execute and deliver this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. This
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Agreement and the consummation of the transactions contemplated hereby have
been unanimously approved by the Board of Directors of the Company and have
been duly authorized by all other necessary corporate action on the part of
the Company, except, in the case of the Merger only, for the approval of the
Company's stockholders contemplated by Section 7.3. This Agreement has been
duly executed and delivered by a duly authorized officer of the Company and
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms. The Board of Directors of the
Company has unanimously approved the transactions contemplated by this
Agreement and the Voting Agreement, including the Merger, so as to render the
provisions of Section 203 of the DGCL inapplicable to the transactions
contemplated by this Agreement and to Parent and Merger Sub in connection with
this Agreement and the Voting Agreement. The Board of Directors of the Company
has directed that this Agreement be submitted to the stockholders of the
Company for their approval. The affirmative approval, by vote or written
consent, of the holders of Shares representing a majority of the votes that
may be cast by the holders of all outstanding Shares (voting as a single
class) is the only vote of the holders of any class or series of capital stock
of the Company necessary to adopt this Agreement and approve the Merger.
5.4. Permits; Compliance. Each of the Company and its Subsidiaries is in
possession of all Permits from appropriate Governmental Bodies (including the
FCC) necessary for the Company or any of its Subsidiaries to own, lease and
operate its properties or to carry on their respective businesses as they are
now being conducted (the "Company Permits"), and all such Company Permits are
valid, and in full force and effect, except where the failure to have, or the
suspension or cancellation of, any of the Company Permits does not and would
not, individually or in the aggregate, (a) have a Material Adverse Effect on
the Company or (b) prevent or materially delay the performance of this
Agreement by the Company. No suspension or cancellation of any of the Company
Permits is pending or, to the knowledge of the Company, threatened, except
where the failure to have, or the suspension or cancellation of, any of the
Company Permits does not and would not, individually or in the aggregate, (x)
have a Material Adverse Effect on the Company or (y) prevent or materially
delay the performance of this Agreement by the Company. Neither the Company
nor any of its Subsidiaries is in conflict with, or in default or violation
of, (i) any Law applicable to the Company or any of its Subsidiaries or by
which any property, asset or operation of the Company or any of its
Subsidiaries is bound or affected or (ii) any Company Permits, except for such
conflicts, defaults or violations that do not and would not, individually or
in the aggregate, (A) have a Material Adverse Effect on the Company or (B)
prevent or materially delay the performance of this Agreement by the Company.
5.5. Fairness Opinion. The Board of Directors of the Company has received
the opinion, dated as of the date hereof, of Merrill Lynch, Pierce, Fenner &
Smith Incorporated to the effect that the Exchange Ratio is fair to the
stockholders of the Company from a financial point of view.
5.6. Capital Stock. The authorized capital stock of the Company consists of
(a) 450,000,000 shares of Class A Common Stock, of which 61,273,746 shares
were outstanding as of the close of business on the day prior to the date
hereof, (b) 300,000,000 shares of Class B Common Stock, of which 113,489,040
shares were outstanding as of the close of business on the day prior to the
date hereof, and (c) 150,000,000 shares of preferred stock, par value $.01 per
share, none of which is outstanding. All outstanding Shares are duly
authorized, validly issued, fully paid and nonassessable, and no class of
capital stock of the Company is entitled to preemptive rights. There are no
options, warrants or other rights to acquire capital stock (or securities
convertible into or exercisable or exchangeable for capital stock) from the
Company, other than (a) the issuance of up to a maximum of 23,239,673 shares
of Class A Common Stock pursuant to the ACC Agreement (including with respect
to options or other rights to acquire common stock of ACC that are or may
become outstanding and that will be converted into similar rights to acquire
shares of Class A Common Stock upon consummation of the transactions
contemplated by the ACC Agreement), (b) the right of the holders of Class B
Common Stock to convert shares of Class B Common Stock into Class A Common
Stock pursuant to the Certificate of Incorporation of the Company, (c) options
or other rights outstanding as of the close of business on the day prior to
the date hereof representing in the aggregate the right to purchase or
otherwise acquire up to 6,278,000 shares of Class A Common Stock pursuant to
Employee Plans or Benefit Arrangements (plus any options granted in accordance
with Section 7.1(a) after the date hereof), and (d) the right of eligible
employees to purchase shares of Class A
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Common Stock pursuant to the terms of the Company Stock Purchase Plan as in
effect on the date hereof. From the close of business on the day prior to the
date hereof until the execution of this Agreement, the Company has not issued
any capital stock or any options, warrants or other rights to acquire capital
stock (or securities convertible into or exercisable or exchangeable for
capital stock) other than the issuance of shares of Class A Common Stock
pursuant to options referred to in clause (c) of the immediately preceding
sentence that were outstanding as of the close of business on the day prior to
the date hereof. All outstanding shares of capital stock of, or other equity
or voting interest in, the Subsidiaries of the Company are owned by the
Company or a direct or indirect Wholly-Owned Subsidiary of the Company, free
and clear of all liens, charges, encumbrances, claims and options of any
nature and no Person has any right to acquire any shares of capital stock of,
or other equity or voting interest in, any Subsidiary of the Company.
5.7. Litigation. Except as disclosed in the Company SEC Reports filed prior
to January 1, 1998, there are no actions, suits, investigations or proceedings
(adjudicatory, rulemaking or otherwise) pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries (or any
Employee Plan or Benefit Arrangement), or any property of the Company or any
such Subsidiary (including Intellectual Property), before any arbitrator of
any kind or in or before or by any Governmental Body, except actions, suits,
investigations or proceedings which, individually or in the aggregate, do not
and would not have a Material Adverse Effect on the Company or prevent or
materially delay the performance of this Agreement by the Company.
5.8. Compliance with Other Instruments, Etc. Neither the Company nor any
Subsidiary of the Company is in violation of any term of its charter, by-laws,
other organizational documents or the Stockholders' Agreement, or any
agreement or instrument related to indebtedness for borrowed money or any
other agreement to which it is a party or by which it is bound, the
consequences of which violation, whether individually or in the aggregate, do
or would have a Material Adverse Effect on the Company or prevent or
materially delay the performance of this Agreement by the Company. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not result in any violation of or
conflict with, constitute a default under, require any consent, waiver or
notice under any term of, or result in the reduction or loss of any benefit or
the creation or acceleration of any right or obligation under, (a) the
charter, by-laws or other organizational document of the Company (or any of
its Subsidiaries) or (b) any agreement, note, bond, mortgage, indenture,
contract, lease, Permit or other obligation or right (excluding options,
restricted stock, employment contracts and other employee related obligations
or rights which are addressed in Section 5.9(f)) to which the Company or any
of its Subsidiaries is a party or by which any of the assets or properties of
the Company or any of its Subsidiaries is bound, or any instrument or Law, or
result in the creation of (or impose any obligation on the Company or any of
its Subsidiaries to create) any mortgage, lien, charge, security interest or
other encumbrance upon any of the properties or assets of the Company or any
of its Subsidiaries pursuant to any such term, except in the case of clause
(b) where any of the foregoing, individually or in the aggregate, does not and
would not (i) have a Material Adverse Effect on the Company or (ii) prevent or
materially delay the performance of this Agreement by the Company.
5.9. Employee Benefit Plans.
(a) The Company Disclosure Statement sets forth as of the date hereof a true
and complete list of each "employee benefit plan" (as defined in Section 3(3)
of ERISA) of the Company and its Subsidiaries in which current or former
employees, agents, directors, or independent contractors of the Company or its
Subsidiaries ("Employees") participate or pursuant to which the Company or any
of its Subsidiaries may have a liability with respect to Employees (each, an
"Employee Plan"), and each other plan, program, policy, contract or
arrangement of the Company and its Subsidiaries providing for bonuses,
pensions, deferred pay, stock or stock related awards, severance pay, salary
continuation or similar benefits, hospitalization, medical, dental or
disability benefits, life insurance or other employee benefits, or
compensation to or for any Employees or any beneficiaries or dependents of any
Employees (other than directors' and officers' liability policies), whether or
not insured or funded (each, a "Benefit Arrangement"). Except as disclosed on
the Company Disclosure
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Statement, neither the Company nor any of its Subsidiaries has any commitment
to establish any additional Employee Plans or Benefit Arrangements or to
modify or change any existing Employee Plan or Benefit Arrangement. The
Company has made available to Parent with respect to each Employee Plan and
Benefit Arrangement: (i) a true and complete copy of all written documents
comprising such Employee Plan or Benefit Arrangement (including amendments and
individual agreements relating thereto) or, if there is no such written
document, an accurate and complete description of such Employee Plan or
Benefit Arrangement; (ii) the most recent Form 5500 or Form 5500-C (including
all schedules thereto), if applicable; (iii) the most recent financial
statements and actuarial reports, if any; (iv) the summary plan description
currently in effect and all material modifications thereof, if any; and (v)
the most recent Internal Revenue Service determination letter, if any.
(b) Each Employee Plan and Benefit Arrangement has been established and
maintained in accordance with its terms and in compliance with all applicable
Laws, including ERISA and the Code (and the prohibited transaction provisions
of ERISA and the Code), and all contributions required to be made to the
Employee Plans and Benefit Arrangements have been made in a timely fashion,
except where such failure to establish, maintain or comply, or to make such
contributions, individually or in the aggregate, does not and would not have a
Material Adverse Effect on the Company. Each Employee Plan that is intended to
be qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service, and, to the knowledge
of the Company, no event has occurred which results or would result in a
revocation of such letter.
(c) No Employee Plan is subject to Title IV of ERISA.
(d) No Employee Plan is a "multiemployer plan" (as defined in Section 3(37)
of ERISA) or a "multiple employer plan" described in Section 4063(a) of ERISA,
and the Company has not at any time in the past five years, contributed to or
been obligated to contribute to such a multiemployer plan or multiple employer
plan.
(e) Neither the Company nor any ERISA Affiliate has any material Controlled
Group Liability, nor do any circumstances exist that could result in any of
them having any Controlled Group Liability. "Controlled Group Liability" means
any and all liabilities under (i) Title IV of ERISA, (ii) Section 302 of
ERISA, (iii) Sections 412 and 4971 of the Code, or (iv) the continuation
coverage requirements of Sections 601 et seq. of ERISA and section 4980B of
the Code.
(f) None of the execution or delivery of this Agreement, the Voting
Agreement, stockholder approval of the Merger by the stockholders of the
Company pursuant to the Stockholders Consent or otherwise, or the consummation
of the transactions contemplated hereby or thereby (either alone or together
with any additional or subsequent events), constitutes an event under any
Employee Plan, Benefit Arrangement, loan to, or individual agreement or
contract with, an Employee that may result in any payment (whether of
severance pay or otherwise), restriction or limitation upon the assets of any
Employee Plan or Benefit Agreement, acceleration of payment or vesting,
increase in benefits or compensation, or required funding, with respect to any
Employee, or the forgiveness of any loan or other commitment of any Employees.
(g) There are no actions, suits, arbitrations, inquiries, investigations or
other proceedings (other than routine claims for benefits) pending or, to the
Company's knowledge, threatened, with respect to any Employee Plan or Benefit
Arrangement, except for any of the foregoing that do not and would not have,
individually or in the aggregate, a Material Adverse Effect on the Company.
(h) Except as disclosed on the Company Disclosure Statement, no amounts paid
or payable by the Company or any Subsidiary to or with respect to any Employee
(including any such amounts that may be payable as a result of the execution
and delivery of this Agreement or the Voting Agreement or the consummation of
the transactions contemplated hereby or thereby) will fail to be deductible
for United States federal income tax purposes by reason of Section 280G of the
Code.
(i) No Employees and no beneficiaries or dependents of Employees are
entitled under any Employee Plan or Benefit Arrangement to post-employment
welfare benefits of any kind, including death or medical benefits, other than
coverage mandated by Section 4980B of the Code.
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(j) There are no agreements with, or pending petitions for recognition of, a
labor union or association as the exclusive bargaining agent for any of the
employees of the Company or any of its Subsidiaries; no such petitions have
been pending at any time within two years of the date of this Agreement and,
to the knowledge of the Company, there has not been any organizing effort by
any union or other group seeking to represent any employees of the Company or
any of its Subsidiaries as their exclusive bargaining agent at any time within
two years of the date of this Agreement. There are no labor strikes, work
stoppages or other labor troubles, other than routine grievance matters, now
pending, or, to the Company's knowledge, threatened, against the Company or
any of its Subsidiaries which have or would have, individually or in the
aggregate, a Material Adverse Effect on the Company, and there have not been
any such labor strikes, work stoppages or other labor troubles, other than
routine grievance matters, with respect to the Company or any of its
Subsidiaries at any time within two years of the date of this Agreement.
5.10. Taxes.
(a) The Company and its Subsidiaries have filed all income Tax Returns and
all material other United States federal, state, county, local and foreign Tax
Returns required to be filed by them. The Company and its Subsidiaries have
paid all material Taxes due, other than Taxes appropriate reserves for which
have been made in the Company's financial statements (and, to the extent
material, such reserves have been accurately described to Parent). There are
no material assessments or adjustments that have been asserted in writing
against the Company or its Subsidiaries for any period for which the Company
has not made appropriate reserves in the Company's financial statements
included in the Company SEC Reports.
(b) There are no material claims or assessments pending against the Company
or any of its Subsidiaries for any alleged deficiency in any Tax, and the
Company has not been notified in writing of any proposed material Tax claims
or assessments against the Company or any of its Subsidiaries (other than, in
each case, claims or assessments for which adequate reserves in the Company
financial statements have been established or which are being contested in
good faith or are immaterial in amount).
(c) There are no liens for Taxes on the assets of the Company or any of its
Subsidiaries, except for statutory liens for current Taxes not yet due and
payable (and except for liens which do not and would not, individually or in
the aggregate, have a Material Adverse Effect on the Company).
(d) For purposes of this Agreement, the term "Tax" means any United States
federal, state, county or local, or foreign or provincial income, gross
receipts, property, sales, use, license, excise, franchise, employment,
payroll, value added, alternative or added minimum, ad valorem or transfer
tax, or any other tax, custom, duty or governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or
penalty imposed by any Governmental Body. The term "Tax Return" means a
report, return or other information (including any attached schedules or any
amendments to such report, return or other information) required to be
supplied to or filed with a Governmental Body with respect to any Tax,
including an information return, claim for refund, amended return or
declaration or estimated Tax.
5.11. Intellectual Property. The Company and its Subsidiaries own, or have
the defensible right to use, the Intellectual Property used in their
respective businesses, except where the failure to own or have the right to
use such Intellectual Property, individually or in the aggregate, does not and
would not have a Material Adverse Effect on the Company.
5.12. Reports and Financial Statements.
(a) The Company has filed all reports (including proxy statements) and
registration statements required to be filed with the SEC since its initial
public offering (collectively, the "Company SEC Reports"). The Company has
previously furnished or made available to Parent true and complete copies of
all the Company SEC Reports filed prior to the date hereof. None of the
Company SEC Reports, as of their respective dates, contained any untrue
statement of material fact or omitted to state a material fact required to be
stated therein or necessary to
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make the statements therein, in light of the circumstances under which they
were made, not misleading. Each of the balance sheets (including the related
notes) included in the Company SEC Reports presents fairly, in all material
respects, the consolidated financial position of the Company and its
Subsidiaries as of the respective dates thereof, and the other related
statements (including the related notes) included in the Company SEC Reports
present fairly, in all material respects, the results of operations and the
changes in financial position of the Company and its Subsidiaries for the
respective periods or as of the respective dates set forth therein, all in
conformity with generally accepted accounting principles consistently applied
during the periods involved, except as otherwise noted therein and subject, in
the case of the unaudited interim financial statements, to normal year-end
adjustments. All of the Company SEC Reports, as of their respective dates,
complied as to form in all material respects with the requirements of the
Exchange Act, the Securities Act and the applicable rules and regulations
thereunder.
(b) The Company and its Subsidiaries have not made any misstatements of
fact, or omitted to disclose any fact, to any Governmental Body, or taken or
failed to take any action, which misstatements or omissions, actions or
failures to act, individually or in the aggregate, subject or would subject
any Company Permits referred to in Section 5.4 to revocation or failure to
renew, except where such revocation or failure to renew, individually or in
the aggregate, does not and would not have a Material Adverse Effect on the
Company.
(c) Except (i) as and to the extent disclosed or reserved against on the
balance sheet of the Company as of September 30, 1997 included in the Company
SEC Reports, or (ii) as incurred after the date thereof in the ordinary course
of business consistent with prior practice and not prohibited by this
Agreement, the Company does not have any liabilities or obligations of any
nature, absolute, accrued, contingent or otherwise and whether due or to
become due, that, individually or in the aggregate, have or would have a
Material Adverse Effect on the Company.
5.13. Absence of Certain Changes or Events. During the period since
September 30, 1997, except as disclosed in the Company SEC Reports filed prior
to January 1, 1998, the business of the Company and its Subsidiaries has been
conducted only in the ordinary course, consistent with past practice, except
for the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and except as otherwise expressly permitted
by this Agreement, neither the Company nor any of its Subsidiaries has taken
any action or omitted to take any action, or entered into any contract,
agreement, commitment or arrangement to take any action or omit to take any
action, which, if taken or omitted after the date hereof, would violate
Section 7.1 (other than paragraphs (a), (d), (l) or (p) thereof), and there
has not been, and nothing has occurred that would have, a Material Adverse
Effect on the Company.
5.14. Affiliated Transactions and Certain Other Agreements. Set forth in
Section 5.14 of the Company Disclosure Statement is an accurate and complete
listing, as of the date hereof, of (a) all contracts, leases, agreements or
understandings, whether written or oral, that are material to the Company and
its Subsidiaries taken as a whole, with or on behalf of any Affiliate of the
Company (other than its Wholly-Owned Subsidiaries) or any of the Cable
Stockholders or any of their respective Affiliates, to which the Company or
any of its Subsidiaries is a party or is otherwise bound, or by which any of
their respective properties or assets is subject or bound, (b) all contracts,
leases, agreements or understandings, whether written or oral, to which the
Company or any of its Subsidiaries is a party or is otherwise bound which
contain any restriction or limitation on the ability of the Company or any of
its Affiliates (other than the Cable Stockholders and their non-Company
Affiliates) to engage in any business anywhere in the world, other than any
such contracts, leases, agreements or understandings the loss or breach of
which, individually or in the aggregate, does not and would not have a
Material Adverse Effect on the Company, and (c) all contracts, leases,
agreements or understandings, whether written or oral, giving any Person the
right to require the Company to register Shares or to participate in any
registration of Shares. The Company has previously provided or made available
to Parent true and complete copies of each of the foregoing agreements.
5.15. Brokers and Finders. Except for the fees and expenses payable to
Merrill Lynch, Pierce, Fenner & Smith Incorporated, which fees and expenses
are reflected in its agreements with the Company, copies of which
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have been furnished to Parent, the Company has not employed any investment
banker, broker, finder, consultant or intermediary in connection with the
transactions contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or similar fee or commission in
connection with this Agreement or the transactions contemplated hereby.
5.16. S-4 Registration Statement and Information Statement/Prospectus. None
of the information supplied or to be supplied by the Company in writing for
inclusion or incorporation by reference in the S-4 Registration Statement or
the Information Statement/Prospectus will (a) in the case of the S-4
Registration Statement, at the time it becomes effective, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading or (b) in the case of the Information Statement/Prospectus, at the
time of the mailing thereof, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading. If at any time prior to the Effective
Time any event with respect to the Company, its officers and directors or any
of its Subsidiaries shall occur which is required to be described in an
amendment of, or a supplement to, the Information Statement/Prospectus or the
S-4 Registration Statement, the Company shall notify Parent thereof by
reference to this Section 5.16 and such event shall be so described. Any such
amendment or supplement shall be promptly filed with the SEC and, as and to
the extent required by law, disseminated to the stockholders of the Company,
and such amendment or supplement shall comply in all material respects with
all provisions of applicable Law. The Information Statement/Prospectus will
(with respect to the Company) comply as to form in all material respects with
the requirements of the Exchange Act.
5.17. ACC Agreement. As of the date hereof, to the knowledge of the Company,
ACC is not in breach in any material respect of any of its representations,
warranties, covenants or agreements contained in the ACC Agreement. None of
the Company or any of its Subsidiaries is in breach in any material respect of
any of their respective representations, warranties, covenants or agreements
contained in the ACC Agreement.
ARTICLE VI
Representations and Warranties of Parent and Merger Sub
Parent and Merger Sub each represents and warrants to the Company that,
except as set forth in the Parent Disclosure Statement (each section of which
qualifies the correspondingly numbered representation and warranty or covenant
as specified therein):
6.1. Organization, Etc. of Parent. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York
and has all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and proposed by
Parent to be conducted. Parent is duly qualified and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary and
where the failure to be so qualified or in good standing has or would have,
individually or in the aggregate, a Material Adverse Effect on Parent.
6.2. Subsidiaries. Each Subsidiary of Parent is a corporation or other legal
entity duly organized, validly existing and (if applicable) in good standing
under the laws of the jurisdiction of its organization and has all requisite
corporate, partnership or similar power and authority to own its properties
and conduct its business and operations as currently conducted, except where
the failure to be duly organized, validly existing and in good standing or to
have such power and authority does not and would not have, individually or in
the aggregate, a Material Adverse Effect on Parent, and is duly qualified and
in good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified or in
good standing does not and would not have, individually or in the aggregate, a
Material Adverse Effect on Parent.
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6.3. Agreement. Each of Parent and Merger Sub has all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
This Agreement and the consummation of the transactions contemplated hereby
have been approved by the respective Boards of Directors of Parent and Merger
Sub and by Parent as the sole stockholder of Merger Sub, and have been duly
authorized by all other necessary corporate action on the part of Parent or
Merger Sub. This Agreement has been duly executed and delivered by a duly
authorized officer of Parent and of Merger Sub and constitutes a valid and
binding agreement of Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with its terms. Neither Parent nor Merger Sub, nor
any of their respective Subsidiaries was an "interested stockholder" of the
Company, as defined for purposes of Section 203 of the DGCL, immediately prior
to the approval of the transactions contemplated by this Agreement and the
Voting Agreement by the Board of Directors of the Company.
6.4. Permits; Compliance. Each of Parent and its Subsidiaries is in
possession of all Permits from appropriate Governmental Bodies (including the
FCC) necessary for Parent or any of its Subsidiaries to own, lease and operate
its properties or to carry on their respective businesses as they are now
being conducted (the "Parent Permits"), and all such Parent Permits are valid,
and in full force and effect, except where the failure to have, or the
suspension or cancellation of, any of the Parent Permits does not and would
not, individually or in the aggregate, (a) have a Material Adverse Effect on
Parent or (b) prevent or materially delay the performance of this Agreement by
Parent or Merger Sub. No suspension or cancellation of any of the Parent
Permits is pending or, to the knowledge of Parent, threatened, except where
the failure to have, or the suspension or cancellation of, any of the Parent
Permits does not and would not, individually or in the aggregate, (x) have a
Material Adverse Effect on Parent or (y) prevent or materially delay the
performance of this Agreement by Parent or Merger Sub. Neither Parent nor any
of its Subsidiaries is in conflict with, or in default or violation of, (i)
any Law applicable to Parent or any of its Subsidiaries or by which any
property, asset or operation of Parent or any of its Subsidiaries is bound or
affected or (ii) any Parent Permits, except for such conflicts, defaults or
violations that do not and would not, individually or in the aggregate, (A)
have a Material Adverse Effect on Parent or (B) prevent or materially delay
the performance of this Agreement by Parent or Merger Sub.
6.5. Capital Stock. As of the date hereof, the authorized capital stock of
Parent consists of (a) 2,000,000,000 Parent Common Shares and (ii) 100,000,000
shares of preferred stock, $1.00 par value per share. All of the outstanding
shares of capital stock of Parent are duly authorized, validly issued, fully
paid and nonassessable, and no class of capital stock of Parent is entitled to
preemptive rights. As of the close of business on January 1, 1998, (i)
1,624,213,505 Parent Common Shares and no shares of Parent preferred stock
were issued and outstanding and (ii) 1,269,953 Parent Common Shares were held
in the treasury of Parent. Except as disclosed in the Parent SEC Reports, all
outstanding shares of capital stock of the Significant Subsidiaries (as
defined for purposes of Regulation S-X under the Exchange Act) of Parent are
owned by Parent or a direct or indirect Wholly-Owned Subsidiary of Parent,
free and clear of all liens, charges, encumbrances, claims and options of any
nature. As of the close of business on January 1, 1998, there were outstanding
options to acquire no more than 69,000,000 Parent Common Shares.
6.6. Parent Common Shares. The Parent Common Shares to be issued pursuant to
Article IV will, when issued, be duly authorized, validly issued, fully paid
and nonassessable and no stockholder of Parent will have any preemptive right
of subscription or purchase in respect thereof. The Parent Common Shares to be
issued in the Merger will, when issued, be registered under the Securities Act
and the Exchange Act and registered or exempt from registration under any
applicable state securities laws.
6.7. Litigation. Except as disclosed in the Parent SEC Reports filed prior
to January 1, 1998, there are no actions, suits, investigations or proceedings
(adjudicatory, rulemaking or otherwise) pending or, to the knowledge of
Parent, threatened against Parent or any of its Subsidiaries or any Benefit
Plans of Parent or any of its Subsidiaries, or any property of Parent or any
such Subsidiary (including Intellectual Property), in any court or before any
arbitrator of any kind or in or before or by any Governmental Body, except
actions, suits, investigations or proceedings or which, individually or in the
aggregate, do not and would not (a) have a Material
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Adverse Effect on Parent or (b) prevent or materially delay the performance of
this Agreement by Parent or Merger Sub.
6.8. Compliance with Other Instruments, Etc. Neither Parent nor any
Subsidiary of Parent is in violation of any term of (a) its charter, by-laws
or other organizational documents, or (b) any agreement or instrument related
to indebtedness for borrowed money or any other agreement to which it is a
party or by which it is bound, the consequences of which violation, whether
individually or in the aggregate, do or would have a Material Adverse Effect
on Parent or prevent or materially delay the performance of this Agreement by
Parent or Merger Sub. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will
not result in any violation of or conflict with, constitute a default under,
require any consent, waiver or notice under any term of, or result in the
reduction or loss of any benefit or the creation or acceleration of any
obligation under, (a) the charter, by-laws or other organizational document of
Parent (or any of its Subsidiaries) or (b) any agreement, note, bond,
mortgage, indenture, contract, lease, Permit or other obligation or any
instrument to which Parent or any of its Subsidiaries is a party or by which
any of the assets or properties of Parent or any of its Subsidiaries is bound
or any instrument or Law, or result in the creation of (or impose any
obligation on Parent or any of its Subsidiaries to create) any mortgage, lien,
charge, security interest or other encumbrance upon any of the properties or
assets of Parent or any of its Subsidiaries pursuant to any such term, except
in the case of clause (b) where any of the foregoing, individually or in the
aggregate, does not and would not (i) have a Material Adverse Effect on Parent
or (ii) prevent or materially delay the performance of this Agreement by
Parent or Merger Sub.
6.9. Taxes.
(a) Parent and its Subsidiaries have filed all income Tax Returns and all
material other United States federal, state, county, local and foreign Tax
Returns required to be filed by them. Parent and its Subsidiaries have paid
all material Taxes due, other than Taxes appropriate reserves for which have
been made in Parent's financial statements (and, to the extent material, such
reserves have been accurately described to the Company). There are no material
assessments or adjustments that have been asserted in writing against Parent
or its Subsidiaries for any period for which Parent has not made appropriate
reserves in Parent's financial statements included in Parent SEC Reports.
(b) There are no material claims or assessments pending against Parent or
any of its Subsidiaries for any alleged deficiency in any Tax, and Parent has
not been notified in writing of any proposed material Tax claims or
assessments against Parent or any of its Subsidiaries (other than, in each
case, claims or assessments for which adequate reserves in Parent financial
statements have been established or which are being contested in good faith or
are immaterial in amount).
(c) There are no liens for Taxes on the assets of Parent or any of its
Subsidiaries, except for statutory liens for current Taxes not yet due and
payable (and except for liens which do not and would not, individually or in
the aggregate, have a Material Adverse Effect on Parent).
6.10. Intellectual Property. Parent and its Subsidiaries own, or have the
defensible right to use, the Intellectual Property used in their respective
businesses, except where the failure to own or have the right to use such
Intellectual Property, individually or in the aggregate, does not and would
not have a Material Adverse Effect on Parent.
6.11. Reports and Financial Statements.
(a) Parent has filed all reports (including proxy statements) and
registration statements required to be filed with the SEC since January 1,
1996 (collectively, the "Parent SEC Reports"). Parent has previously furnished
or made available to the Company true and complete copies of all Parent SEC
Reports filed prior to the date hereof. None of the Parent SEC Reports, as of
their respective dates, contained any untrue statement of material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein,
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in light of the circumstances under which they were made, not misleading. Each
of the balance sheets (including the related notes) included in the Parent SEC
Reports presents fairly, in all material respects, the consolidated financial
position of Parent and its Subsidiaries as of the respective dates thereof,
and the other related statements (including the related notes) included in the
Parent SEC Reports present fairly, in all material respects, the results of
operations and the changes in financial position of Parent and its
Subsidiaries for the respective periods or as of the respective dates set
forth therein, all in conformity with generally accepted accounting principles
consistently applied during the periods involved, except as otherwise noted
therein and subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments. All of the Parent SEC Reports, as
of their respective dates, complied as to form in all material respects with
the requirements of the Exchange Act, the Securities Act and the applicable
rules and regulations thereunder.
(b) Parent and its Subsidiaries have not made any misstatements of fact, or
omitted to disclose any fact, to any Governmental Body, or taken or failed to
take any action, which misstatements or omissions, actions or failures to act,
individually or in the aggregate, subject or would subject any Parent Permits
referred to in Section 6.4 to revocation or failure to renew, except where
such revocation or failure to renew, individually or in the aggregate, does
not and would not have a Material Adverse Effect on Parent.
(c) Except (i) as and to the extent disclosed or reserved against on the
balance sheet of Parent as of September 30, 1997 included in the Parent SEC
Reports, or (ii) as incurred after the date thereof in the ordinary course of
business consistent with prior practice and not prohibited by this Agreement,
Parent does not have any liabilities or obligations of any nature, absolute,
accrued, contingent or otherwise and whether due or to become due, that,
individually or in the aggregate, have or would have a Material Adverse Effect
on Parent.
(d) During the period since September 30, 1997, except as disclosed in the
Parent SEC Reports filed prior to January 1, 1998, there has not been, and
nothing has occurred that would have, a Material Adverse Effect on Parent.
6.12. Brokers and Finders. Except for the fees and expenses payable to CS
First Boston Corporation and Goldman Sachs & Co., which fees and expenses will
be paid by Parent, Parent has not employed any investment banker, broker,
finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to any investment
banking, brokerage, finder's or similar fee or commission in connection with
this Agreement or the transactions contemplated hereby.
6.13. S-4 Registration Statement and Information Statement/Prospectus. None
of the information to be supplied by Parent or Merger Sub in writing for
inclusion or incorporation by reference in the S-4 Registration Statement or
the Information Statement/Prospectus will (a) in the case of the S-4
Registration Statement, at the time it becomes effective, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading or (b) in the case of the Information Statement/Prospectus, at the
time of the mailing thereof, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading. If at any time prior to the Effective
Time any event with respect to Parent, its officers and directors or any of
its Subsidiaries shall occur which is required to be described in an amendment
of, or a supplement to, the Information Statement/Prospectus or the S-4
Registration Statement, Parent shall notify the Company thereof by reference
to this Section 6.13 and such event shall be so described. Any such amendment
or supplement shall be promptly filed with the SEC and, as and to the extent
required by law, disseminated to the stockholders of the Company, and such
amendment or supplement shall comply in all material respects with all
provisions of applicable Law. The S-4 Registration Statement will comply (with
respect to Parent and Merger Sub and information provided in writing therefor
by Parent or Merger Sub) as to form in all material respects with the
provisions of the Securities Act.
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6.14. Ownership of Merger Sub; No Prior Activities; Assets of Merger Sub.
(a) Merger Sub was formed by Parent solely for the purpose of engaging in
the transactions contemplated hereby.
(b) As of the date hereof and the Effective Time, the capital stock of
Merger Sub is and will be owned 100% by Parent directly. Further, there are
not as of the date hereof and there will not be at the Effective Time any
outstanding or authorized options, warrants, calls, rights, commitments or any
other agreements of any character to or by which Merger Sub is a party or may
be bound requiring it to issue, transfer, sell, purchase, redeem or acquire
any shares of capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire, any
shares of capital stock of Merger Sub.
(c) As of the date hereof and immediately prior to the Effective Time,
except for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated hereby and by
the Voting Agreement, Merger Sub has not and will not have incurred, directly
or indirectly through any Subsidiary or Affiliate, any obligations or
liabilities or engaged in any business or activities of any type or kind
whatsoever or entered into any agreements or arrangements with any Person.
(d) Parent will take all action necessary to ensure that Merger Sub at no
time prior to the Effective Time owns any material assets other than an amount
of cash necessary to incorporate Merger Sub and to pay the expenses of the
Merger attributable to Merger Sub if the Merger is consummated.
6.15. Ownership of Company or ACC Stock. Neither Parent nor any Subsidiary
of Parent (excluding any employee benefit plan, or related trust, of Parent or
its Subsidiaries) owns or, to the knowledge of Parent, has owned within the
last two years, any shares of the capital stock of either the Company or ACC.
Between the date of this Agreement and the Effective Time, neither Parent nor
any Subsidiary of Parent (excluding any employee benefit plan, or related
trust, of Parent or its Subsidiaries) will purchase or otherwise acquire any
shares of the capital stock of either the Company or ACC (except pursuant to
the terms of this Agreement or as provided in the ACC Agreement).
ARTICLE VII
Additional Covenants and Agreements
7.1. Conduct of Business of the Company. Except as set forth in Section 7.1
of the Company Disclosure Statement, as expressly permitted by this Agreement,
as required by any change in applicable Law, or as otherwise agreed by Parent
in writing, during the period from the date of this Agreement to the Effective
Time, (i) the Company will, and will cause each of its Subsidiaries to,
conduct its operations according to its ordinary course of business consistent
with past practice, and (ii) to the extent consistent with the foregoing, the
Company will, and will use all reasonable efforts to cause each of its
Subsidiaries to, seek to preserve intact its current business organizations,
keep available the service of its current officers and employees, and preserve
its relationships with customers, suppliers and others having business
dealings with it, with the objective that their goodwill and ongoing
businesses shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, from and including the date hereof to the
Effective Time, the Company will not, and will not permit any of its
Subsidiaries to, without the prior written consent of Parent (except to the
extent set forth in Section 7.1 of the Company Disclosure Statement):
(a) except for (i) Shares issued upon exercise of options or other rights
outstanding as of the date hereof under Employee Plans or Benefit
Arrangements, (ii) (A) options to purchase, and awards of, no more than an
aggregate of 300,000 Shares, granted in connection with new hires or
promotions, directors' retainers, and bonus award programs, in the ordinary
course of business consistent with past practice under currently existing
Employee Plans or Benefit Arrangements, and (B) options to purchase no more
than an aggregate of 700,000 Shares issued pursuant to or in accordance
with the terms of the ACC Agreement (which options are included within the
aggregate maximum number of Shares issuable pursuant to the ACC
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Agreement as set forth in Section 5.6), and the issuance of Shares upon the
exercise thereof, (iii) Shares issued pursuant to the terms of the ACC
Agreement (a copy of which, as in effect on the date hereof, has been
provided to Parent), (iv) Shares issued in accordance with the terms of the
Company Stock Purchase Plan as in effect on the date hereof, and (v) shares
of Class A Common Stock issued upon conversion of shares of Class B Common
Stock outstanding on the date hereof, in accordance with the terms of the
Company's Certificate of Incorporation as in effect on the date hereof,
issue, deliver, sell, dispose of, pledge or otherwise encumber, or
authorize or propose the issuance, sale, disposition or pledge or other
encumbrance of (A) any additional shares of its capital stock of any class
(including the Shares), or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for any shares of
its capital stock, or any rights, warrants, options, calls, commitments or
any other agreements of any character to purchase or acquire any shares of
its capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of
its capital stock, or (B) any other securities in respect of, in lieu of,
or in substitution for, Shares outstanding on the date hereof;
(b) redeem, purchase or otherwise acquire, or propose to redeem, purchase
or otherwise acquire, any of its outstanding securities (including the
Shares);
(c) except for conversions of shares of Class B Common Stock outstanding
on the date hereof into shares of Class A Common Stock, in accordance with
the terms of the Company's Certificate of Incorporation as in effect on the
date hereof, split, combine, subdivide or reclassify any shares of its
capital stock or declare, set aside for payment or pay any dividend, or
make any other actual, constructive or deemed distribution in respect of
any shares of its capital stock or otherwise make any payments to
stockholders in their capacity as such (other than dividends or
distributions paid by any Wholly-Owned Subsidiary of the Company);
(d) (i) grant any increases in the compensation of any of its directors,
officers or employees, except in the ordinary course of business consistent
with past practice, (ii) pay or award or agree to pay or award any pension,
retirement allowance, or other nonequity incentive awards, or other
employee benefit, not required by any of the Employee Plans or Benefit
Arrangements to any current or former director, officer or employees,
whether past or present, or to any other Person, except for payments or
awards that are in the ordinary course of business, consistent with past
practice, and that are not material, (iii) pay or award or agree to pay or
award any stock option or equity incentive awards except as expressly
permitted by Section 7.1(a), (iv) enter into any new or amend any existing
employment agreement with any director, officer or employee, except for
employment agreements with new employees entered into in the ordinary
course of business consistent with past practice and except for amendments
in the ordinary course of business, consistent with past practice, that do
not materially increase benefits or payments, (v) enter into any new or
amend any existing severance agreement with any current or former director,
officer or employee, except for agreements or amendments in the ordinary
course of business, consistent with past practice, that do not provide for
material benefits, or (vi) become obligated under any new Employee Plan or
Benefit Arrangement, which was not in existence on the date hereof, or
amend or exercise discretion pursuant to any such Employee Plan or Benefit
Arrangement in existence on the date hereof, except for any such amendment
or exercise of discretion in the ordinary course of business, consistent
with past practice, that does not provide for material benefits;
(e) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
the Company or any of its Subsidiaries not constituting an inactive
Subsidiary (other than the Merger, and other than (i) with respect to any
Subsidiary of the Company such of the foregoing as do not change the
beneficial ownership interest of the Company in such Subsidiary and (ii)
with respect to the Company, any such merger, consolidation, restructuring,
recapitalization or other reorganization that is used to effect an
acquisition permitted pursuant to Section 7.1(f) and which does not result
in a change of control of the Company or change the Shares into a different
number or kind of securities);
(f) make any acquisition, by means of merger, consolidation or otherwise,
of (i) any direct or indirect ownership interest in or assets comprising
any business enterprise or operation or (ii) except in the ordinary
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course and consistent with past practice, any other assets; provided,
however, that the Company may make such acquisitions for cash in an amount
not to exceed $10 million in the case of any single acquisition or $100
million for all such acquisitions in the aggregate; provided further that
such acquisitions do not and would not prevent or materially delay the
consummation of the Merger; and provided further that the foregoing shall
not prevent the Company from exploring on a preliminary basis and
conducting diligence investigations (including having discussions with any
potential acquisition target) with respect to any potential acquisition
that would require Parent's consent hereunder, for the purpose of
determining the desirability of such potential acquisition and developing
the basis on which to seek Parent's consent, so long as the Company does
not submit any formal proposal or indication of interest to such
acquisition target, or make any binding commitments with respect to such
potential acquisition, without obtaining Parent's consent;
(g) (i) dispose of any direct or indirect ownership interest in any CLEC
system or in any other local services or access system (including any
shares of capital stock of any Subsidiary holding any such interest) or any
controlling interest in any other material business enterprise or
operation, (ii) make any other disposition of any other direct or indirect
ownership interest in or assets comprising any CLEC system or any other
local service or access system or other material business enterprise or
operation (except for the replacement or upgrade of assets, or disposition
of unnecessary assets, in the ordinary course and consistent with past
practice), or (iii) except in the ordinary course and consistent with past
practice, dispose of any other assets;
(h) adopt any amendments to its Certificate of Incorporation or By-Laws
or alter through merger, liquidation, reorganization, restructuring or in
any other fashion the corporate structure or ownership of any Subsidiary
not constituting an inactive Subsidiary of the Company;
(i) incur any indebtedness for borrowed money or guarantee any
indebtedness of any other Person or make any loans, advances or capital
contributions to, or investments in, any other Person (other than to the
Company or any Wholly-Owned Subsidiary of the Company), except that if the
Company shall have complied with the provisions of Section 7.14 hereof with
respect thereto, the Company may incur additional indebtedness after the
date hereof, under existing credit facilities (or any renewals thereof) or
in the high yield debt market, resulting in aggregate net proceeds to the
Company from such additional indebtedness not exceeding $350 million;
(j) engage in the conduct of any business other than telecommunications
and related businesses;
(k) enter into any agreement or exercise any discretion providing for
acceleration of payment or performance as a result of a change of control
of the Company or its Subsidiaries;
(l) enter into any contracts, arrangements or understandings requiring in
the aggregate the purchase of equipment, materials, supplies or services in
excess of $35 million more than the amounts set forth for capital
expenditures in the Company's 1998 operating plan approved by the Company's
Board of Directors prior to the date hereof, a copy of which has been
provided by the Company to Parent;
(m) enter into or amend or waive any right under any agreement with any
Affiliates of the Company (other than its Subsidiaries) or with any Cable
Stockholder or any Affiliate of any Cable Stockholder, other than any of
the foregoing as may be done in the ordinary course of business and that is
not material, individually or in the aggregate, to the Company and its
Subsidiaries;
(n) settle or compromise any material litigation or waive, release or
assign any material rights or claims, except in the ordinary course of
business consistent with past practice;
(o) amend, modify, supplement, or waive any right or condition under, the
ACC Agreement or consent to ACC doing any of the foregoing under the US
Wats Agreement, except, in either case, for amendments, modifications,
supplements or waivers which are not adverse to Parent or the Company in
any material respect and which in any event do not (i) increase the
consideration payable per share or in the aggregate to shareholders of ACC
under the ACC Agreement or US Wats under the US Wats Agreement, (ii)
otherwise increase the maximum aggregate number of Shares that may be
issuable under the ACC Agreement, or (iii) extend the "drop-dead" date
under either such agreement beyond November 26, 1998; or
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(p) authorize, recommend or propose (other than to Parent), or announce
an intention to do any of the foregoing, or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing.
7.2. Other Transactions. Prior to the Effective Time, the Company and its
Subsidiaries shall not, and shall use all reasonable efforts to cause their
respective officers, employees, representatives, agents and Affiliates not to,
directly or indirectly, encourage, solicit or engage in discussions or
negotiations with any third party (other than Parent) concerning any merger,
consolidation, share exchange or similar transaction involving the Company or
any of its Subsidiaries, or any purchase of all or a significant portion of
the assets of or equity interest in the Company or any of its Subsidiaries, or
any other transaction that would involve the transfer or potential transfer of
control of the Company or any of its Subsidiaries (an "Acquisition Proposal"),
or provide any confidential information relating to the Company or any of its
Subsidiaries in connection with or in contemplation of an Acquisition
Proposal, other than the transactions contemplated hereby. The Company shall
immediately request that any Person that has received any confidential
information involving the Company or any of its Subsidiaries in connection
with an Acquisition Proposal return all copies thereof to the Company, and the
Company and its Subsidiaries shall, and shall use all reasonable efforts to
cause their respective officers, employees, representatives, agents and
Affiliates to, terminate all discussions or negotiations with any Person with
respect to any Acquisition Proposal. The Company will notify Parent promptly
of any written inquiries or proposals with respect to any such transaction
that are received by, or any such negotiations or discussions that are sought
to be initiated with, the Company or any of its Subsidiaries after the date
hereof, will advise Parent of the identity of any Person making any such
Acquisition Proposal and of the material terms thereof, and shall keep Parent
apprised with respect to all material matters relating thereto. Nothing
contained in this Agreement shall prohibit or restrict the Company's Board of
Directors from taking and disclosing to the Company's stockholders a position
in accordance with Rules 14d-9 and 14e-2 under the Exchange Act with respect
to a tender offer or an exchange offer for Shares commenced by a third party,
provided that Parent shall be given reasonable advance notice thereof, and
provided, further, that nothing in this Agreement shall be deemed to relieve
the Cable Stockholders from their obligations under the Voting Agreement.
7.3. Stockholder Approval.
(a) Pursuant to the Voting Agreement, each of the Cable Stockholders has
agreed to execute, or cause to be executed, immediately following execution
and delivery of this Agreement a written consent with respect to all Shares
owned by it or which it has the right to vote or consent in favor of approval
and adoption of the Merger and this Agreement (the "Stockholders Consent").
Notwithstanding the foregoing, if Parent so requests, the Company will take
all action necessary in accordance with applicable law and its Certificate of
Incorporation and By-Laws to convene a meeting of its stockholders to consider
and vote upon the approval and adoption of this Agreement and the transactions
contemplated hereby, and to submit this Agreement to the stockholders of the
Company for their approval, or to solicit a further written consent, in lieu
of a stockholders' meeting, of its stockholders approving and adopting this
Agreement and the transactions contemplated hereby, and the Company and its
Board of Directors shall take all lawful reasonable action to solicit, and use
all reasonable efforts to obtain, such approval.
(b) Notwithstanding the provisions of Section 7.3(a), after the adoption of
this Agreement by the stockholders of the Company, without the affirmative
approval, by vote or written consent, of the holders of Shares representing a
majority of the votes that may be cast by the holders of all then outstanding
Shares, the Company will not (i) enter into any amendment to this Agreement
that would alter or change any of the terms and conditions of this Agreement
if such alteration or change would adversely affect the holders of Shares,
(ii) waive any condition set forth in Section 8.1 or Section 8.3 if such
waiver would materially adversely affect the holders of Shares or (iii)
consummate the Merger after a time at which the Company would be entitled to
terminate the Agreement pursuant to Section 9.2(a) (without regard to any
amendment of such Section not approved pursuant to this Section 7.3(b)).
(c) Parent, as the sole stockholder of Merger Sub, hereby consents to the
adoption of this Agreement by Merger Sub and agrees that such consent shall be
treated for all purposes as a vote duly adopted at a meeting of the
stockholders of Merger Sub held for this purpose.
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7.4. Registration Statement. Parent will, as promptly as practicable,
prepare and file with the SEC a registration statement on Form S-4 (the "S-4
Registration Statement"), containing an information statement/prospectus, in
connection with the registration under the Securities Act of the Parent Common
Shares issuable upon conversion of the Shares and the other transactions
contemplated hereby. The Company will, as promptly as practicable, prepare and
file with the SEC an information statement that will be the same information
statement/prospectus contained in the S-4 Registration Statement (such
information statement/prospectus together with any amendments thereof or
supplements thereto, in the form or forms mailed to the Company's
stockholders, "Information Statement/Prospectus"). Parent and the Company will
use all reasonable efforts to have or cause the S-4 Registration Statement to
be declared effective as promptly as practicable, and also will take any other
action reasonably required to be taken under federal or state securities laws,
and the Company will use all reasonable efforts to cause the Information
Statement/Prospectus to be mailed to stockholders of the Company at the
earliest practicable date. If, pursuant to Section 7.3, Parent requests a
meeting of the stockholders of the Company, then the S-4 Registration
Statement shall include a proxy statement/prospectus meeting the requirements
of the Exchange Act and all references herein to the Information
Statement/Prospectus shall be deemed to refer to such proxy
statement/prospectus. Each party hereto agrees to cooperate reasonably with
each other party in connection with the preparation and filing of the S-4
Registration Statement and Information Statement/Prospectus, and of the
registration statement and the proxy statement/prospectus to be used in
connection with the ACC Agreement, including providing information to the
other party with respect to itself as may be reasonably required in connection
therewith.
7.5. Reasonable Efforts.
(a) Subject to Section 7.5(c), the Company and Parent shall, and shall use
all reasonable efforts to cause their respective Subsidiaries, as applicable,
to: (i) promptly make all filings and seek to obtain all Authorizations
required under all applicable Laws with respect to the Merger and the other
transactions contemplated hereby and will reasonably consult and cooperate
with each other with respect thereto; (ii) not take any action (including
effecting or agreeing to effect or announcing an intention or proposal to
effect, any acquisition, business combination or other transaction) which
would impair the ability of the parties to consummate the Merger (regardless
of whether such action would otherwise be permitted or not prohibited
hereunder); and (iii) use all reasonable efforts to promptly take, or cause to
be taken, all other actions and do, or cause to be done, all other things
necessary, proper or appropriate to satisfy the conditions set forth in
Article VIII (unless waived) and to consummate and make effective the
transactions contemplated by this Agreement on the terms and conditions set
forth herein (including seeking to remove promptly any injunction or other
legal barrier that may prevent such consummation); provided, however, that
nothing in this sentence shall prohibit the Company from effecting the
transactions contemplated by the ACC Agreement in accordance with its terms.
Each party shall promptly notify the other party of any communication to that
party from any Governmental Body in connection with any required filing with,
or approval or review by, such Governmental Body in connection with the Merger
and permit the other party to review in advance any proposed communication to
any Governmental Body in such connection to the extent permitted by applicable
law. Notwithstanding the foregoing, in connection with any filing or
submission required or action to be taken by either the Company or Parent or
any of their respective Subsidiaries to effect the Merger and to consummate
the other transactions contemplated hereby, (A) neither the Company nor any of
its Subsidiaries shall, without Parent's prior written consent, commit to any
divestiture or hold separate or similar transaction and each of the Company
and its Subsidiaries shall commit to, and shall use reasonable efforts to
effect, such thereof (which may, at the Company's option, be conditioned upon
and effective as of the Effective Time) as Parent shall request, and (B)
neither Parent nor any of its Subsidiaries shall be required to divest or hold
separate or otherwise take (or refrain from taking) or commit to take (or
refrain from taking) any action that limits its freedom of action with respect
to, or its ability to retain, the Company or any of its Subsidiaries or any
material portion of the assets of the Company and its Subsidiaries, or any of
the business, product lines or assets of Parent or any of its Subsidiaries, if
any of the foregoing, individually or in the aggregate, would have a Material
Adverse Effect on the Company (or an effect on Parent and its Subsidiaries
that, were such effect applied to the Company and its Subsidiaries, would
constitute a Material Adverse Effect on the Company).
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(b) The Company and its Subsidiaries shall use their reasonable best efforts
(i) not to take any action (regardless of whether such action would otherwise
be permitted or not prohibited hereunder) that, to the Company's knowledge
based on consultation with its independent accountants (which consultation
shall be required before the Company may use its lack of knowledge as a
defense), prevents or would prevent Parent from accounting for the Merger as a
pooling of interests and (ii) to take any action necessary to cure any action
previously taken by or any condition relating to the Company or any of its
Subsidiaries that, to the Company's knowledge based on consultation with its
independent accountants (which consultation shall be required before the
Company may use its lack of knowledge as a defense), prevents or would prevent
Parent from accounting for the Merger as a pooling of interests, in each case
unless Parent shall have irrevocably and unconditionally waived in writing the
condition set forth in Section 8.2(e).
(c) Notwithstanding anything to the contrary in this Agreement, nothing in
this Agreement shall prevent or restrict Parent and its Subsidiaries from
engaging in any merger, acquisition, business combination or other transaction
(whether or not Parent is the surviving corporation); provided that such
merger, acquisition, business combination or other transaction would not (i)
prevent, or delay beyond March 31, 1999, the ability of Parent to consummate
the Merger or (ii) cause the Merger, or the merger contemplated by the ACC
Agreement, to fail to qualify as a tax-free reorganization.
7.6. Access to Information. Subject to currently existing contractual and
legal restrictions applicable to the Company (which the Company represents and
warrants are not material), and upon reasonable notice, the Company shall (and
shall cause each of its Subsidiaries to) afford to officers, employees,
counsel, accountants and other authorized representatives of Parent ("Parent
Representatives") reasonable access, during normal business hours throughout
the period prior to the Effective Time, to its properties, books and records
(including, subject to execution of appropriate access letters, the work
papers of independent accountants), such access not to unreasonably interfere
with the Company's business or operations, and, during such period, shall (and
shall cause each of its Subsidiaries to) furnish promptly to such Parent
Representatives all information concerning its business, properties and
personnel as may reasonably be requested, provided that no investigation
pursuant to this Section 7.6 shall affect or be deemed to modify any of the
respective representations or warranties made by the Company. Parent agrees
that it will not, and will cause the Parent Representatives not to, use any
information obtained pursuant to this Section 7.6 for any purpose unrelated to
the consummation of the transactions contemplated by this Agreement. Subject
to the requirements of law, Parent will keep confidential, and will cause the
Parent Representatives to keep confidential, all information and documents
obtained pursuant to this Section 7.6 except as otherwise consented to by the
Company; provided, however, that Parent shall not be precluded from making any
disclosure which it deems required by law in connection with the Merger. In
the event Parent is required to disclose any information or documents pursuant
to the immediately preceding sentence, Parent shall promptly give prior
written notice of such disclosure that is proposed to be made to the Company
so that Parent and the Company can work together to limit the disclosure to
the greatest extent possible and, in the event that Parent is legally
compelled to disclose any information, to seek a protective order or other
appropriate remedy or both. Upon any termination of this Agreement, Parent
will collect and deliver to the Company all documents obtained pursuant to
this Section 7.6 or otherwise from the Company or its Subsidiaries by Parent
or the Parent Representatives then in their possession and any copies thereof.
All requests for access to the Company and their Subsidiaries pursuant to this
Section 7.6 shall be made through the representatives of the Company named in
Section 7.6 of the Company Disclosure Statement.
7.7. Indemnification of Directors and Officers.
(a) From and after the Effective Time, Parent and the Surviving Corporation
shall jointly and severally indemnify, defend and hold harmless the present
and former officers, directors and employees of the Company and any of its
Subsidiaries, and any Person who is or was serving at the request of the
Company as an officer, director or employee or agent of another Person,
against all losses, expenses, claims, damages or liabilities arising out of
actions or omissions occurring on or prior to the Effective Time (including
the transactions contemplated by this Agreement) to the fullest extent
permitted under applicable Law (and shall also, subject to
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Section 7.7(b), advance expenses as incurred to the fullest extent permitted
under applicable Law, provided that the Person to whom expenses are advanced
provides an undertaking to repay such advances if it is ultimately determined
that such Person is not entitled to indemnification); provided, however, that
such indemnification shall be provided only to the extent any directors' and
officers' liability insurance policy of the Company or its Subsidiaries does
not provide coverage and actual payment thereunder with respect to the matters
that would otherwise be subject to indemnification hereunder (it being
understood that the Surviving Corporation shall, subject to Section 7.7(b),
advance expenses on a current basis as provided in this paragraph (a)
notwithstanding such insurance coverage to the extent that payments thereunder
have not yet been made, in which case Parent or the Surviving Corporation, as
the case may be, shall be entitled to repayment of such advances from the
proceeds of such insurance coverage). Parent and Merger Sub agree that all
rights to indemnification, including provisions relating to advances of
expenses incurred in defense of any action, suit or proceeding, whether civil,
criminal, administrative or investigative (each, a "Claim"), existing in favor
of the present or former directors, officers, employees, fiduciaries and
agents of the Company or any of its Subsidiaries, and any Person who is or was
serving at the request of the Company as an officer, director or employee or
agent of another Person (collectively, the "Indemnified Parties") as provided
in the Company's Certificate of Incorporation or By-Laws or pursuant to other
agreements, or certificates of incorporation or by-laws or similar documents
of any of the Company's Subsidiaries, as in effect as of the date hereof, with
respect to matters occurring through the Effective Time, shall survive the
Merger and shall continue in full force and effect for a period of not less
than six years from the Effective Time; provided, however, that all rights to
indemnification in respect of any Claim asserted, made or commenced within
such period shall continue until the final disposition of such Claim. The
Surviving Corporation shall maintain in effect for not less than six years
after the Effective Time the current policies of directors' and officers'
liability insurance maintained by the Company and the Company's Subsidiaries
with respect to matters occurring prior to the Effective Time; provided,
however, that (i) the Surviving Corporation may substitute therefor policies
of at least the same coverage containing terms and conditions which are no
less advantageous to the Indemnified Parties with an insurance company or
companies, the claims paying ability of which is substantially equivalent to
the claims paying ability of the insurance company or companies providing such
insurance coverage for directors and officers of Parent and (ii) the Surviving
Corporation shall not be required to pay an annual premium for such insurance
in excess of three times the last annual premium paid prior to the date
hereof, but in such case shall purchase as much coverage as possible for such
amount.
(b) In the event that any Claim relating hereto or to the transactions
contemplated by this Agreement is commenced, before the Effective Time, the
parties hereto agree to cooperate and use their respective reasonable efforts
to vigorously defend against and respond thereto. Any Indemnified Party
wishing to claim indemnification under paragraph (a) of Section 7.7, upon
learning of any such claim, action, suit, proceeding or investigation, shall
promptly notify Parent thereof, whereupon Parent or the Surviving Corporation
shall have the right, from and after the Effective Time, to assume and control
the defense thereof, and upon such assumption, the Surviving Corporation shall
not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof. The Surviving Corporation
shall not be liable for any settlement effected without its prior written
consent.
(c) This Section 7.7 is intended to benefit the Indemnified Parties and
shall be binding on all successors and assigns of Parent, Merger Sub and the
Surviving Corporation.
7.8. Registration and Listing of Parent Common Shares.
(a) Parent will use all reasonable efforts to register the Parent Common
Shares to be issued pursuant to this Agreement, and upon exercise of stock
options granted to employees of the Company and its Subsidiaries, under the
applicable provisions of the Securities Act and, if required, under any
applicable state securities laws.
(b) Parent will use all reasonable efforts to cause the Parent Common Shares
to be issued pursuant to this Agreement and upon exercise of stock options
granted to employees of the Company and its Subsidiaries, to be listed for
trading on the NYSE.
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7.9. Affiliates of Parent and the Company. Concurrently with the execution
of this Agreement, each of the directors of the Company has executed an
agreement to the effect set forth in this Section 7.9. Prior to the Effective
Time, the Company shall deliver to Parent a letter identifying all other
Persons who, to the Company's knowledge, at the time of the execution and
delivery of the Stockholders Consent or at the Effective Time, may be deemed
to be "affiliates" of the Company for purposes of Rule 145 under the
Securities Act or who may otherwise be deemed to be Affiliates of the Company
(the "Rule 145 Affiliates"). The Company shall use all reasonable efforts to
cause each Person who is identified as a Rule 145 Affiliate in such list to
deliver to Parent on or prior to the 30th day prior to the Effective Time, a
written agreement, in the form attached hereto as Exhibit A, that such Rule
145 Affiliate will not (a) sell, pledge, transfer or otherwise dispose of any
Parent Common Shares issued to such Rule 145 Affiliate pursuant to the Merger,
except pursuant to an effective registration statement or in compliance with
Rule 145 under the Securities Act or an exemption from the registration
requirements of the Securities Act, or (b) sell, pledge, transfer or otherwise
dispose of, or hedge or otherwise reduce its risk with respect to, any Shares
or any Parent Common Shares, in each case from the 30th day prior to the
Effective Time to the time that results covering at least 30 days of combined
operations of the Company and Parent have been published by Parent in the form
of a quarterly earnings report, an effective registration statement filed with
the SEC, a report to the SEC on Form 10-K, 10-Q or 8-K, or any other public
filing or announcement which includes the combined results of operations.
7.10. Tax Matters. Each of the parties shall use all reasonable efforts to
cause each of (i) the Merger and (ii) the merger contemplated by the ACC
Agreement to constitute a tax-free "reorganization" under Section 368(a) of
the Code. None of the parties will knowingly take any action, and none of the
parties will permit any of its Subsidiaries or Affiliates knowingly to take
any action, that would cause either (i) the Merger or (ii) the merger
contemplated by the ACC Agreement to fail to qualify as tax-free
reorganizations under Section 368(a) of the Code. Each of the parties shall
use all reasonable efforts to permit Wachtell, Lipton, Rosen & Katz and Dow,
Lohnes & Albertson, PLLC to issue their opinions provided in Sections 8.2(d)
and 8.3(d), respectively, and to permit Dow, Lohnes & Albertson, PLLC to issue
its opinion pursuant to Section 6.3.7 of the ACC Agreement as in effect on the
date hereof. If so requested by Wachtell, Lipton, Rosen & Katz or Dow, Lohnes
& Albertson, PLLC, the Company shall deliver to each such counsel a
certificate signed by an officer of the Company to the effect that, except to
the extent set forth and identified in such certificate, to the knowledge of
the Company, there is no plan or intention by the stockholders of the Company
who own 5% or more of the issued and outstanding Shares, and, to the knowledge
of the Company, there is no present plan or intention on the part of the
remaining stockholders of the Company to sell, exchange, or otherwise dispose
of Parent Common Shares received in the Merger (it being understood that
Shares exchanged for cash in lieu of fractional Parent Common Shares and
Shares and Parent Common Shares held by stockholders of the Company and
otherwise sold, redeemed or disposed of prior or subsequent to the Merger will
be considered in making this representation). Each party agrees to report the
Merger on all tax returns and other filings as a tax-free reorganization under
Section 368(a) of the Code.
7.11. New York Real Property Transfer Tax. Any liability arising out of New
York State and/or New York City Real Property Transfer Taxes, with respect to
interests in real property owned, directly or indirectly, by the Company
immediately prior to the Merger, if applicable and due with respect to the
Merger, shall be borne by the Company and expressly shall not be a liability
of the stockholders of the Company.
7.12. Employee Matters. As soon as practicable following the Closing (using
reasonable best efforts to accomplish the transition by the later of January
1, 1999 or 90 days after Closing), all employees of the Company and its
Subsidiaries who remain employed by the Company or its Subsidiaries (or who
become employed by Parent or its Subsidiaries) immediately after the Closing
("Company Employees"), and their dependents and beneficiaries if applicable,
shall be eligible to participate in the employee benefit and compensation
arrangements, plans, programs and practices of the Parent generally applicable
to other similarly situated employees of the Parent (the "Parent Plans").
Company Employees shall be credited with all service with the Company and its
Subsidiaries and their predecessors prior to the Closing for purposes of
determining eligibility to participate, vesting and benefit accrual (to the
extent applicable) in the Parent Plans, but not for (i) purposes
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of benefit accruals under any of the Parent's defined benefit pension plans,
or the schedule of benefits under Parent's severance pay and short-term
disability plans and programs, (ii) eligibility to receive post-retirement
ancillary benefits (consisting at this time of medical, dental, death and
telephone concession benefits) or (iii) calculating Parent service for
purposes of "bridging" prior Parent service under Parent Plans. In the event
any Company Employee's employment with Parent or its Subsidiaries is
involuntarily terminated (other than for cause) prior to the first anniversary
of the Closing, such Company Employee shall receive a severance benefit
calculated in accordance with the schedule of benefits set forth in Section
7.12 of the Company Disclosure Statement, taking into account all years of
such Company Employee's service, including service with the Company or its
Subsidiaries and their predecessors prior to the Closing. Thereafter, Company
Employees who remain employed by Parent or its Subsidiaries shall be eligible
to participate in the applicable Parent severance pay plan, and benefits
payable under the terms of such plan shall be based on such Company Employee's
actual service with Parent or its Subsidiaries from and after Closing.
7.13. Certain Covenants of Parent. Except as otherwise permitted in this
Agreement, prior to the Effective Time Parent will not, without the prior
written consent of the Company, adopt a plan of complete or partial
liquidation or dissolution, or authorize, recommend, propose or announce an
intention to do so or enter into any contract, agreement, commitment or
arrangement to do so.
7.14. Right of First Offer. Whenever the Company or any of its Subsidiaries
intends to incur any indebtedness for borrowed money as permitted pursuant to
Section 7.1(i) hereof, the Company shall notify Parent in writing of the
expected terms, conditions, amount, uses, lenders or other alternative
financing sources and other material provisions thereof (the "Proposed
Financing") and shall provide Parent with the opportunity to provide all of
the Proposed Financing on the same terms and conditions. Parent shall notify
the Company of its determination to provide all of the Proposed Financing on
such terms and conditions within seven business days of receipt of such notice
from the Company. If Parent so elects to provide all of the Proposed
Financing, the Company shall not enter into any alternative financing
arrangements with respect thereto. If Parent does not elect to provide all of
the Proposed Financing, the Company and its Subsidiaries may enter into the
Proposed Financing with any Person other than Parent on terms and conditions
no less favorable in any material respect to the Company and its Subsidiaries
than those offered to Parent pursuant to this Section 7.14. Nothing in this
Section 7.14 shall require Parent to accept any offer or to provide any
Proposed Financing to the Company.
ARTICLE VIII
Conditions
8.1 Conditions to Each Party's Obligations. The respective obligations of
each party to consummate the transactions contemplated by this Agreement are
subject to the fulfillment at or prior to the Effective Time of each of the
following conditions, any or all of which may be waived in whole or in part by
the party being benefitted thereby, to the extent permitted by applicable Law:
(a) Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been duly approved and adopted or ratified
by the requisite holders of Shares in accordance with applicable Law and
the Certificate of Incorporation and By-Laws of the Company and the
provisions of Section 7.3(b) hereof (it being agreed that the condition set
forth in this Section 8.1(a) shall not be waived by the parties);
(b) HSR Act; FCC. Any waiting period applicable to the Merger under the
HSR Act shall have expired or early termination thereof shall have been
granted, and the FCC Consent shall have been granted, in each case without
limitation, restriction or condition that has or would have a Material
Adverse Effect on the Company (or an effect on Parent and its Subsidiaries
that, were such effect applied to the Company and its Subsidiaries, would
constitute a Material Adverse Effect on the Company).
(c) No Injunction. There shall not be in effect any judgment, writ,
order, injunction or decree of any court or Governmental Body of competent
jurisdiction, restraining, enjoining or otherwise preventing consummation
of the transactions contemplated by this Agreement or permitting such
consummation only
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subject to any condition or restriction that has or would have a Material
Adverse Effect on the Company (or an effect on Parent and its Subsidiaries
that, were such effect applied to the Company and its Subsidiaries, would
constitute a Material Adverse Effect on the Company).
(d) Registration Statement. The S-4 Registration Statement shall have
been declared effective and shall be effective at the Effective Time, and
no stop order suspending effectiveness shall have been issued, no action,
suit, proceeding or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
approvals under state securities laws or the Securities Act or Exchange Act
relating to the issuance or trading of the Parent Common Shares shall have
been received.
(e) Listing of Parent Common Shares on NYSE. The Parent Common Shares
required to be issued hereunder shall have been approved for listing on the
NYSE, subject only to official notice of issuance.
(f) Information Statement. At least twenty business days shall have
elapsed from the mailing of the Information Statement/Prospectus to the
stockholders of the Company.
8.2. Conditions to Obligations of Parent and Merger Sub. The respective
obligations of Parent and Merger Sub to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or prior to
the Effective Time of each of the following additional conditions, any or all
of which may be waived in whole or part by Parent and Merger Sub, as the case
may be, to the extent permitted by applicable Law:
(a) Representations and Warranties True. The representations and
warranties of the Company contained herein or otherwise required to be made
after the date hereof in a writing expressly referred to herein by or on
behalf of the Company pursuant to this Agreement, to the extent qualified
by materiality or Material Adverse Effect, shall have been true and, to the
extent not qualified by materiality or Material Adverse Effect, shall have
been true in all material respects, in each case when made and on and as of
the Closing Date as though made on and as of the Closing Date (except for
representations and warranties made as of a specified date, which need be
true, or true in all material respects, as the case may be, only as of the
specified date).
(b) Performance. The Company shall have performed or complied in all
material respects with all agreements and conditions contained herein
required to be performed or complied with by it prior to or at the time of
the Closing.
(c) Compliance Certificate. The Company shall have delivered to Parent a
certificate, dated the date of the Closing, signed by the President or any
Vice President of the Company (but without personal liability thereto),
certifying as to the fulfillment of the conditions specified in Sections
8.2(a) and 8.2(b).
(d) Tax Opinion. Parent shall have received an opinion of Wachtell,
Lipton, Rosen & Katz, dated the Effective Time, to the effect that (i) the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code; (ii) each of Parent,
Merger Sub and the Company will be a party to the reorganization within the
meaning of Section 368(b) of the Code; (iii) no gain or loss will be
recognized by the Company, Parent or Merger Sub as a result of the Merger;
and (iv) no gain or loss will be recognized by a stockholder of the Company
as a result of the Merger with respect to the Shares converted solely into
Parent Common Shares. In rendering such opinion, Wachtell, Lipton, Rosen &
Katz may receive and rely upon representations contained in certificates of
the Company, Parent, Merger Sub, the Cable Stockholders and others, in each
case in form and substance reasonably acceptable to Wachtell, Lipton, Rosen
& Katz.
(e) Pooling Covenant. The Company and its Subsidiaries shall have
complied with the covenant contained in Secion 7.5(b) hereof.
(f) Other Authorizations. All Authorizations (other than those specified
in Section 8.1(b) hereof) required in connection with the execution and
delivery of this Agreement and the performance of the obligations hereunder
shall have been made or obtained, without any limitation, restriction or
condition that has or would have a Material Adverse Effect on the Company
(or an effect on Parent and its Subsidiaries that, were such effect applied
to the Company and its Subsidiaries, would constitute a Material Adverse
Effect on the Company), except for such Authorizations the failure of which
to have been made or obtained
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does not and would not, individually or in the aggregate, have a Material
Adverse Effect on the Company (or an effect on Parent and its Subsidiaries
that, were such effect applied to the Company and its Subsidiaries, would
constitute a Material Adverse Effect on the Company).
(g) Employment Agreements. Each of the employment agreements between the
Company and each employee of the Company identified in Exhibit B hereto
(which employment agreements are being executed concurrently with the
execution of this Agreement) shall be in full force and effect, and each
such employee shall be employed thereunder, unless the failure of such
employee to be employed thereunder results from the death or disability of
such employee.
(h) Consents Under Facilities Agreements. All required authorizations,
consents or approvals of any third parties (other than a Governmental Body)
with respect to any contracts, leases, agreements or understandings between
the Company and/or any of its Subsidiaries, on the one hand, and any other
Person, on the other, relating to the use of or access to the facilities of
such Person for the purpose of providing telecommunications services, the
failure to obtain which has or would have, individually or in the
aggregate, a Material Adverse Effect on the Company, shall have been
obtained.
(i) Voting Agreement. There shall not have been a material breach of the
Voting Agreement by any of the Cable Stockholders.
(j) Other Transactions. The transactions contemplated by the ACC
Agreement shall have been consummated in accordance with the terms of such
agreement or such agreement shall have been terminated and, prior thereto,
the transactions contemplated by the US Wats Agreement shall have been
consummated in accordance with the terms of such agreement or such
agreement shall have been terminated.
8.3. Conditions to Obligations of the Company. The obligations of the
Company to consummate the transactions contemplated by this Agreement are
subject to the fulfillment at or prior to the Effective Time of each of the
following conditions, any or all of which may be waived in whole or in part by
the Company to the extent permitted by applicable Law:
(a) Representations and Warranties True. The representations and
warranties of Parent and Merger Sub contained herein or otherwise required
to be made after the date hereof in a writing expressly referred to herein
by or on behalf of Parent and Merger Sub pursuant to this Agreement, to the
extent qualified by materiality or Material Adverse Effect, shall have been
true and, to the extent not qualified by materiality or Material Adverse
Effect, shall have been true in all material respects, in each case when
made and on and as of the Closing Date as though made on and as of the
Closing Date (except for representations and warranties made as of a
specified date, which need be true, or true in all material respects, as
the case may be, only as of the specified date).
(b) Performance. Parent shall have performed or complied in all material
respects with all agreements and conditions contained herein required to be
performed or complied with by it prior to or at the time of the Closing.
(c) Compliance Certificate. Parent shall have delivered to the Company a
certificate, dated the date of the Closing, signed by the President or any
Vice President of Parent (but without personal liability thereto),
certifying as to the fulfillment of the conditions specified in Sections
8.3(a) and 8.2(b).
(d) Tax Opinion. The Company shall have received an opinion of Dow,
Lohnes & Albertson, PLLC, dated the Effective Time, to the effect that (i)
the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code; (ii) each
of Parent, Merger Sub and the Company will be a party to the reorganization
within the meaning of Section 368(b) of the Code; (iii) no gain or loss
will be recognized by the Company as a result of the Merger; and (iv) no
gain or loss will be recognized by a stockholder of the Company as a result
of the Merger with respect to the Shares converted solely into Parent
Common Shares. In rendering such opinion, Dow, Lohnes & Albertson, PLLC may
receive and rely upon representations contained in certificates of Parent
and Merger Sub, the Company, the Cable Stockholders and others, in each
case in form and substance reasonably acceptable to Dow, Lohnes &
Albertson, PLLC.
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ARTICLE IX
Termination
9.1. Termination by Mutual Consent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by holders of Shares, either by the mutual written consent
of Parent and the Company, or by mutual action of their respective Boards of
Directors.
9.2. Termination by Either Parent or the Company. This Agreement may be
terminated (upon notice from the terminating party to the other parties) and
the Merger may be abandoned by action of the Board of Directors of either
Parent or the Company if (a) the Merger shall not have been consummated by
December 31, 1998, provided that the right to terminate this Agreement under
this clause (a) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of or resulted in the
failure of the Merger to occur on or before such date, and provided, further,
that such date shall be extended to March 31, 1999 in the event that the
failure of the Merger to occur on or before December 31, 1998 is the result of
(i) a delay attributable to any transaction permitted pursuant to Section
7.5(c) or (ii) the failure of any of the conditions set forth in Section
8.1(b), 8.1(c), 8.2(f) or 8.2(j) to be satisfied or waived prior to December
31, 1998, or (b) any court of competent jurisdiction in the United States or
Governmental Body in the United States shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable. In addition, this Agreement
may be terminated by Parent (upon notice from Parent to the Company) and the
Merger may be abandoned by action of the Board of Directors of Parent if any
of the Cable Stockholders shall have breached any of its representations,
covenants or obligations under the Voting Agreement in any material respect
and such breach shall not be curable.
9.3. Termination by the Company. This Agreement may be terminated (upon
notice to Parent) by the Company and the Merger may be abandoned by action of
the Board of Directors of the Company if Parent or Merger Sub breaches or
fails in any material respect to perform or comply with its covenants and
agreements contained herein or breaches its representations and warranties, in
each case that is not curable, such that the conditions set forth in Sections
8.3(a) and (b) cannot be satisfied.
9.4. Termination by Parent and Merger Sub. This Agreement may be terminated
(upon notice to the Company) by Parent and Merger Sub, and the Merger may be
abandoned by action of the Board of Directors of Parent if the Company
breaches or fails in any material respect to perform or comply with its
covenants and agreements contained herein or breaches its representations and
warranties, in each case that is not curable, such that the conditions set
forth in Section 8.2(a) and (b) cannot be satisfied.
9.5. Effect of Termination and Abandonment. In the event of termination of
this Agreement and abandonment of the Merger pursuant to this Article IX, no
party hereto (or any of its directors or officers) shall have any liability or
further obligation to any other party to this Agreement, except as provided in
Section 7.6 and except that nothing herein will relieve any party from
liability for any breach of this Agreement.
ARTICLE X
Miscellaneous and General
10.1. Expenses. Except as set forth in Section 7.11, each party shall bear
its own expenses, including the fees and expenses of any attorneys,
accountants, investment bankers, brokers, finders or other intermediaries or
other Persons engaged by it, incurred in connection with this Agreement and
the transactions contemplated hereby; provided, however, that the costs and
expenses of filing the Information Statement/Prospectus with the SEC and any
other applicable Governmental Body or securities regulatory authority, and of
printing the Information Statement/Prospectus, shall be paid by Parent.
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10.2. Notices, Etc. All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing
and shall be deemed to have been duly given to any party when delivered
personally (by courier service or otherwise), when delivered by telecopy and
confirmed by return telecopy, or upon receipt after being mailed by first-
class mail, postage prepaid and return receipt requested in each case to the
applicable addresses set forth below:
If to the Company:
Teleport Communications Group Inc.
429 Ridge Road
Dayton, New Jersey 08810
Attn: Chairman, President and CEO
Facsimile: (732) 392-3600
with a copy to:
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Washington, D.C.
Attn: Leonard J. Baxt, Esq.
Timothy J. Kelley, Esq.
Facsimile: (202) 776-2222
and a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Philip T. Ruegger, Esq.
Michael Wolfson, Esq.
Facsimile: (212) 455-2502
If to Parent or Merger Sub:
AT&T Corp.
295 North Maple Avenue
Basking Ridge, New Jersey 07920
Attn: Vice President--Law
and Corporate Secretary
Facsimile: (908) 221-6618
with a copy to:
Watchtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Richard D. Katcher, Esq.
Steven A. Rosenblum, Esq.
Facsimile: (212) 403-2000
or to such other address as such party shall have designated by notice so
given to each other party.
10.3. Amendments, Waivers, Etc. This Agreement may be amended, changed,
supplemented, waived or otherwise modified only by an instrument in writing
signed by the party (or, in the case of Section 7.7, the Indemnified Party)
against whom enforcement is sought; provided that, after the adoption of this
Agreement by the stockholders of the Company, no such amendment, change,
supplement or waiver shall be made without the further requisite approval of
such stockholders if such amendment, change, supplement or waiver by law
requires the further approval by such stockholders.
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10.4. No Assignment. This Agreement shall be binding upon and shall inure to
the benefit of and be enforceable by the parties and their respective
successors and assigns; provided that, except as otherwise expressly set forth
in this Agreement, neither the rights nor the obligations of any party may be
assigned or delegated without the prior written consent of the other party.
10.5. Entire Agreement. Except as otherwise provided herein, this Agreement
(together with the Confidentiality Agreement between Parent and the Company
and the other agreements expressly contemplated hereby) embodies the entire
agreement and understanding between the parties relating to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter. There are no representations, warranties or covenants by the
parties hereto relating to such subject matter other than those expressly set
forth in this Agreement (including the Company Disclosure Statement and the
Parent Disclosure Statement) and any writings expressly required hereby.
10.6. Specific Performance. The parties acknowledge that money damages are
not an adequate remedy for violations of this Agreement and that any party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable Law, each party waives any
objection to the imposition of such relief.
10.7. Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or beginning of the
exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
10.8. No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
10.9. No Third Party Beneficiaries. This Agreement is not intended to be for
the benefit of and shall not be enforceable by any Person or entity who or
which is not a party hereto, except for the indemnification provisions
contained in Section 7.7, which provisions may be enforced by any Indemnified
Party referred to therein and except that the provisions of Section 7.3(b) may
be enforced by holders of Shares. Notwithstanding anything to the contrary
contained in this Agreement, the provisions of Section 7.7 of this Agreement
may not be amended or altered in any manner with respect to any Indemnified
Party without the written consent of such Indemnified Party. No assignment of
this Agreement shall relieve Parent from its obligations to any Indemnified
Party contained in Section 7.7 of this Agreement.
10.10. Jurisdiction. Each party hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court for the District of Delaware
or the Chancery Court of the State of Delaware in any action, suit or
proceeding arising in connection with this Agreement, and agrees that any such
action, suit or proceeding shall be brought only in such court (and waives any
objection based on forum non conveniens or any other objection to venue
therein); provided, however, that such consent to jurisdiction is solely for
the purpose referred to in this Section 10.10 and shall not be deemed to be a
general submission to the jurisdiction of said courts or in the State of
Delaware other than for such purpose. Parent, Merger Sub and the Company
hereby waive any right to a trial by jury in connection with any such action,
suit or proceeding.
10.11. Public Announcements. Parent and the Company will agree upon the
timing and content of the initial press release to be issued describing the
transactions contemplated by this Agreement, and will not make any public
announcement thereof prior to reaching such agreement unless required to do so
by applicable Law or regulation. To the extent reasonably requested by either
party, each party will thereafter consult with and provide reasonable
cooperation to the other in connection with the issuance of further press
releases or other public documents describing the transactions contemplated by
this Agreement.
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10.12. Governing Law. This Agreement and all disputes hereunder shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Delaware, without regard to principles of conflict of laws.
10.13. Name, Captions, Etc. The name assigned this Agreement and the section
captions used herein are for convenience of reference only and shall not
affect the interpretation or construction hereof. Unless otherwise specified,
(a) the terms "hereof", "herein" and similar terms refer to this Agreement as
a whole and (b) references herein to Articles or Sections refer to articles or
sections of this Agreement. Wherever appearing herein, the word "including"
shall be deemed to be followed by the words "without limitation."
10.14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one instrument. Each counterpart may consist
of a number of copies each signed by less than all, but together signed by
all, the parties hereto.
10.15. Survival of Representations, Warranties, Covenants and
Agreements. The respective representations and warranties of the parties
contained herein or in any certificates or other documents delivered prior to
or at the Closing shall survive the execution and delivery of this Agreement,
notwithstanding any investigation made or information obtained by the other
parties, but shall terminate at the Effective Time. The respective covenants
and agreements of the parties contained herein or in any certificates or other
documents delivered prior to or at the Closing shall survive the execution and
delivery of this Agreement and shall only terminate in accordance with their
respective terms.
10.16. Severability. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable in a jurisdiction, such provision shall be
modified or deleted, as to the jurisdiction involved, only to the extent
necessary to render the same valid, legal and enforceable, and the validity,
legality and enforceability of the remaining provisions hereof shall not in
any way be affected or impaired thereby nor shall the validity, legality or
enforceability of such provision be affected thereby in any other
jurisdiction.
10.17. Disclosure Statements. The parties acknowledge that the Company
Disclosure Statement and the Parent Disclosure Statement to this Agreement (i)
relate to certain matters concerning the disclosures required and transactions
contemplated by this Agreement, (ii) are qualified in their entirety by
reference to specific provisions of this Agreement, (iii) are not intended to
constitute and shall not be construed as indicating that such matter is
required to be disclosed, nor shall such disclosure be construed as an
admission that such information is material with respect to the Company or
Parent, as the case may be, except to the extent required by this Agreement,
and (iv) disclosure of the information contained in one section or part of the
Company Disclosure Statement or the Parent Disclosure Statement shall be
deemed as proper disclosure for all sections or parts of the Company
Disclosure Statement or the Parent Disclosure Statement, as the case may be,
only if appropriately cross-referenced or if the relevance thereof is clearly
apparent from the context in which it appears.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties set forth below.
Teleport Communications Group Inc.
/s/ Robert Annunziata
By: _________________________________
Name: Robert Annunziata
Title: Chairman, President and CEO
AT&T Corp.
/s/ C. Michael Armstrong
By: _________________________________
Name: C. Michael Armstrong
Title: Chairman and CEO
TA Merger corp.
/s/ Daniel E. Somers
By: _________________________________
Name: Daniel E. Somers
Title: President
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APPENDIX B
VOTING AGREEMENT
AGREEMENT, dated as of January 8, 1998, by and among AT&T Corp., a New York
corporation ("Parent"), on the one hand, and Comcast Corporation, Comcast
Teleport, Inc., Comcast Communications Properties, Inc. (Comcast Corporation,
Comcast Teleport, Inc., Comcast Communications Properties, Inc., collectively,
"Comcast"), Tele-Communications, Inc., TCI Teleport, Inc. (together with Tele-
Communications, Inc., "TCI"), Cox Communications, Inc. and Cox Teleport
Partners, Inc. (together with Cox Communications, Inc., "Cox"), on the other
hand. Comcast, TCI and Cox shall be referred to herein each as a "Stockholder"
(each reference to a "Stockholder" referring to the two or three companies
collectively constituting Comcast, TCI or Cox, as the case may be), and
Comcast, TCI or Cox together are collectively referred to as the
"Stockholders". Each Stockholder is executing this Agreement only in its
capacity as a stockholder of Teleport Communications Group Inc., a Delaware
corporation (the "Company"). The Company is executing this Agreement solely
with respect to Section 6(e) and Annex B.
WHEREAS, concurrently herewith, Parent, TA Merger Corp., a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and the
Company are entering into an Agreement and Plan of Merger (the "Merger
Agreement"; capitalized terms used without definition herein having the
meanings ascribed thereto in the Merger Agreement);
WHEREAS, each Stockholder is the record and beneficial owner of the number
of Shares set forth opposite such Stockholder's name in Schedule I hereto;
WHEREAS, approval of the Merger Agreement by the Company's stockholders is a
condition to the consummation of the Merger;
WHEREAS, the Board of Directors of the Company has, prior to the execution
of this Agreement, duly and validly approved and adopted the Merger Agreement
and approved this Agreement, and such approvals and adoption have not been
withdrawn; and
WHEREAS, Parent is unwilling to enter into the Merger Agreement unless the
Stockholders enter into this Agreement concurrently with the execution of the
Merger Agreement and execute and deliver the Stockholders Consent immediately
thereafter, and the Stockholders desire and are willing to induce Parent to
enter into the Merger Agreement by their entry into this Agreement and their
agreement to execute and deliver the Stockholders Consent;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
Section 1. Consent; Agreement to Vote.
(a) Each Stockholder agrees (for itself and not as to any other Stockholder)
that, immediately following the execution and delivery of this Agreement and
the Merger Agreement, it shall execute and deliver, or cause to be executed
and delivered by the record owner thereof, in accordance with Section 228 of
the DGCL, the Stockholders Consent in the form attached hereto as Annex A with
respect to all Shares that are owned beneficially or of record by such
Stockholder or as to which such Stockholder has, directly or indirectly, the
right to vote or direct the voting.
(b) Unless one of the events specified in clause (i), (ii) or (iii) of
Section 7.3(b) of the Merger Agreement has occurred or Parent has breached
Section 6(d) below in any material respect, each Stockholder hereby further
agrees (for itself and not as to any other Stockholder) that, during the term
of this Agreement, it shall, from time to time, at the request of Parent, (i)
timely execute and deliver (or cause to be timely executed and delivered) an
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additional written consent with respect to, or (ii) vote, or cause to be
voted, at any meeting of stockholders of the Company held prior to the earlier
of the Effective Time (as defined in the Merger Agreement) and the termination
of this Agreement or at any adjournment or postponement thereof, in person or
by proxy, all Shares, and any other voting securities of the Company (whether
acquired heretofore or hereafter), that are beneficially owned by such
Stockholder or its Affiliates or as to which such Stockholder or any of its
Affiliates has, directly or indirectly, the right to vote or direct the
voting, (x) in favor of approval and adoption of the Merger Agreement, the
Merger, and any action required in furtherance thereof, (y) against any action
or agreement that would result in a material breach of any representation,
warranty, covenant or obligation of the Company contained in the Merger
Agreement, and (z) against any Competing Transaction (as defined below). Each
Stockholder agrees, during the period commencing on the date hereof and ending
on the earlier of the Effective Time and the termination of this Agreement,
not to, and not to permit any of its Affiliates to, execute any written
consent in lieu of a stockholders meeting or vote of the Company, if such
consent or vote by the stockholders of the Company would be inconsistent with
or frustrate the purposes of the other agreements of such Stockholder pursuant
to this paragraph (it being understood that the Stockholders may vote for or
consent to transactions expressly permitted by the Merger Agreement). A
"Competing Transaction" means any Acquisition Proposal, other than the
transactions contemplated or expressly permitted by the Merger Agreement, or
any amendment to the certificate of incorporation of the Company or any other
proposal that frustrates or hinders the Merger or the other transactions
contemplated by the Merger Agreement.
(c) Each Stockholder agrees that it will not, and will not permit any of its
Affiliates to, contract to sell, sell or otherwise pledge, encumber, transfer
or dispose of any of the Shares owned beneficially or of record by it or any
interest therein or securities convertible thereinto or any voting rights with
respect thereto, other than (i) pursuant to the Merger, (ii) pursuant to
Section 3(b) hereof or (iii) with Parent's prior written consent.
(d) Each Stockholder hereby revokes any and all previous proxies with
respect to such Person's Shares or any other voting securities of the Company.
(e) Each Stockholder hereby agrees to, and to cause its Affiliates to,
cooperate reasonably with Parent and the Company in connection with the Merger
Agreement and consummation of the transactions contemplated thereby. Parent
agrees to cooperate reasonably with each Stockholder in connection with any
filings required to be made by such Stockholder pursuant to the HSR Act in
connection with the Merger Agreement and consummation of the transactions
contemplated thereby. Each Stockholder agrees that it and its Affiliates will
not, and will use reasonable best efforts to cause their respective officers,
employees, representatives and agents not to, directly or indirectly,
encourage, solicit or engage in discussions or negotiations with any third
party (other than Parent) concerning any Acquisition Proposal, other than the
transactions contemplated hereby and by the Merger Agreement. Each such
Stockholder shall immediately request that any Person (other than such
Stockholder's agents, advisors and representatives) that has received directly
or indirectly from such Stockholder any confidential information relating to
the Company or any of its Subsidiaries in connection with an Acquisition
Proposal within the past 180 days return all copies thereof to the Company.
Each Stockholder and its Affiliates shall, and shall use reasonable best
efforts to cause their respective officers, employees, representatives and
agents to, terminate all discussions or negotiations with any Person with
respect to any Acquisition Proposal. Each such Stockholder will notify Parent
immediately of any Acquisition Proposal (or inquires with respect thereto)
that are received by, or any negotiations or discussions with respect thereto
of which it is aware that are sought to be initiated with, such Stockholder or
any of its Affiliates or the Company or any of its Subsidiaries, will advise
Parent of the identity of any Person making any such Acquisition Proposal and
of the terms thereof and shall keep Parent apprised with respect to all
matters relating thereto.
Section 2. Securities Act Covenants and Representations. In addition to, and
not in lieu of, the other covenants and representations set forth herein, each
Stockholder hereby agrees and represents to Parent as follows:
(a) Such Stockholder understands that, to the extent such Stockholder is
considered an "affiliate" of the Company at the time the Merger Agreement is
submitted for a vote of the stockholders of the Company or for
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action by written consent of stockholders of the Company, any public offering,
sale or other disposition by such Stockholder or any of its Affiliates of any
Parent Common Shares received by such Person in the Merger (collectively, the
"Restricted Sales") will, under current law, require any of (i) the further
registration under the Securities Act of any Parent Common Shares to be sold
by such Person, (ii) compliance with applicable provisions of Rule 145
promulgated by the SEC under the Securities Act or (iii) the availability of
another exemption from such registration under the Securities Act. Each
Stockholder agrees not to, or permit any of its Affiliates to, make any
Restricted Sale unless the conditions of clause (i), (ii) or (iii) are met.
(b) Such Stockholder also understands that stop transfer instructions will
be given to Parent's transfer agents with respect to the Parent Common Shares,
and that a legend will be placed on the certificates for the Parent Common
Shares, issued to such Stockholder, or any substitutions therefor to reflect
the restrictions referred to in Sections 2(a) and 3 hereof on such
Stockholder's ability to sell Parent Common Shares.
Section 3. Pooling Covenants and Representations. In addition to, and not in
lieu of, the other covenants and representations set forth herein, each
Stockholder hereby agrees and represents to Parent that:
(a) from and after the date hereof, such Stockholder will not, and will not
permit any of its Affiliates to, sell, transfer, hedge, or otherwise dispose
of or reduce its rights with respect to any Shares (whether owned as of the
date hereof or hereafter acquired) or any Parent Common Shares received by
such Stockholder in the Merger or other shares of capital stock of Parent
until after such time as results covering at least 30 days of combined
operations of the Company and Parent have been published by Parent, in the
form of a quarterly earnings report, an effective registration statement filed
with the SEC, a report to the SEC on Form 10-K, 10-Q or 8-K, or any other
public filing or announcement which includes the combined results of
operations, except for transfers or other dispositions that, in the reasonable
opinion of Parent's independent accountants, will not prevent Parent from
accounting for the Merger as a pooling of interests, taking into account the
actions of other Affiliates of the Company or the Stockholders; and
(b) upon Parent's request, in connection with the transactions contemplated
by the ACC Agreement (as defined in the Merger Agreement) and in order to
permit such transaction to be accounted for on a pooling of interests basis,
such Stockholder shall, or shall cause its Affiliates to, convert into Class A
Common Stock such number of shares of Class B Common Stock as will constitute
its pro rata portion (rounded up to the nearest whole share) of that number of
shares of Class B Common Stock that would be necessary, when taken together
with such conversions of all of the other Stockholders, to permit the
Company's pending business combination with Ace to be accounted for as a
pooling of interests.
Section 4. Tax Covenants and Representations. In addition to, and not in
lieu of, the other covenants and representations set forth herein, each
Stockholder hereby represents and warrants to Parent that, as of the date
hereof and as of the Closing Date, such Stockholder has and shall have no
present plan or intention to sell, exchange or otherwise dispose of Parent
Common Shares to be received by such Stockholder in the Merger having a value,
as of the Effective Time, greater than (a) 50 percent of the value as of the
Effective Time of all of such Stockholder's Shares as of the Effective Time
minus (b) such Stockholder's pro rata portion of the value of any Excess
Parent Common Shares identified in the certificate required pursuant to
Section 7.10 of the Merger Agreement (which amount shall not be less than
zero). For purposes of the foregoing, "Excess Parent Common Shares" shall mean
50% of the number of Parent Common Shares owned by Persons other than the
Stockholders, and "pro rata portion" as to any Stockholder shall mean the
number of Parent Common Shares owned by such Stockholder divided by the total
number of Parent Common Shares owned by all Stockholders. For purposes of this
representation, Shares exchanged for cash in lieu of fractional Parent Common
Shares will be treated as outstanding Shares on the Effective Time. Moreover,
Shares and Parent Common Shares held by stockholders of the Company and
otherwise sold, redeemed or disposed of prior or subsequent to the Merger will
be considered in making this representation. Each Stockholder agrees to
deliver to Parent's counsel, if so requested by Parent's counsel, and to the
Company's counsel, if so requested by the Company's counsel, a certificate
setting forth the above representations in this Section 4 by such Stockholder,
which certificate (and
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the representations therein) may be relied upon by Parent's counsel and by the
Company's counsel in connection with the opinions contemplated by Sections
8.2(d) and 8.3(d) of the Merger Agreement.
Section 5. Registration Rights. The Registration Rights Agreement shall be
executed by the parties set forth therein as signatories thereto immediately
following execution of this Agreement, and shall become effective as of the
Effective Time.
Section 6. Other Covenants and Agreements.
(a) Consent to this Agreement. Each Stockholder hereby consents, for
purposes of the Stockholders' Agreement, to the execution of this Agreement
and the Stockholders Consent by each other Stockholder and the consummation of
the transactions contemplated hereby (and waives any rights such Stockholder
would otherwise have pursuant to the Stockholders' Agreement by virtue of the
execution of this Agreement and the Stockholders Consent).
(b) Further Assurances. Unless one of the events specified in clause (i),
(ii) or (iii) of Section 7.3(b) of the Merger Agreement has occurred or Parent
has breached Section 6(d) below in any material respect, each party shall
execute and deliver such additional instruments and other documents and shall
take such further actions as may be necessary or appropriate to effectuate,
carry out and comply with all of its obligations under this Agreement. Without
limiting the generality of the foregoing, none of the parties hereto shall
enter into any agreement or arrangement (or alter, amend or terminate any
existing agreement or arrangement) if such action would materially impair the
ability of such party to effectuate, carry out or comply with all of the terms
of this Agreement.
(c) Release of Certain Restrictions. Effective as of the Effective Time,
each Stockholder hereby releases the Company and its Affiliates (other than
the Stockholders and their other Affiliates) from, and waives in all respects,
any obligation that may exist to such Stockholder or any other agreement with
such Stockholder (i) not to compete with such Stockholder or any of its
Affiliates anywhere in the world, (ii) not to engage, or to refrain from
engaging, in any activity anywhere in the world, or (iii) that otherwise
restricts or limits the ability of the Company or any of its Affiliates to
engage in any business anywhere in the world; provided however that the
foregoing shall not apply to (x) any provision of the Restated Facilities
Agreements (as defined in Annex B) or (y) the Agreement entered into as of the
18th day of April 1996 among Teleport and Comcast Corporation, provided that
as of the Effective Time paragraph 2(e) of such agreement is hereby amended to
be inapplicable to the extent and for so long as compliance therewith by the
Company would violate existing legal obligations of Parent and its Affiliates.
(d) Other Matters. Parent will not agree to the inclusion, in any
Authorization required in connection with the Merger, of the imposition by any
Governmental Body of any restriction on any Stockholder's exercise and
enjoyment of full rights of ownership of Parent Common Shares to be acquired
by such Stockholder in the Merger, any material modification of any license,
franchise or permit held by such Stockholder or any of its Affiliates, the
imposition of any requirement relating to the divestiture or rearrangement of
the composition of any material assets of such Stockholder or any of its
Affiliates, material limitation on such Stockholder's or any of its
Affiliate's freedom of action with respect to future acquisitions of assets or
with respect to any existing or future business activities or relationship or
the enjoyment by such Stockholder or any of its Affiliates of the full rights
of ownership, possession and use of any material asset now owned or hereafter
acquired by such Stockholder or any of its Affiliates (including the Parent
Common Shares to be acquired by such Shareholder in the Merger), or any other
material restrictions, limitations, requirements, or conditions which are
reasonably likely to be burdensome on such Stockholder or its Affiliates (any
of the foregoing, a "Prohibited Effect"), in the case of any of the foregoing
that is unacceptable to such Stockholder in its reasonable judgment.
Notwithstanding anything in this Agreement to the contrary, no Stockholder
shall be required to consent to any Prohibited Effect that is unacceptable to
such Stockholder in its reasonable judgment.
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(e) Facilities Arrangements. Each of the Stockholders agrees that the
Existing Arrangements (as defined in Annex B hereto) between such Stockholder
and/or any of its Affiliates, on the one hand, and the Company and/or any of
its Affiliates, on the other hand, shall be amended as specified in Annex B
hereto, effective immediately (which Annex B is incorporated herein by
reference).
Section 7. Representations and Warranties of Parent. Parent represents and
warrants to each Stockholder as follows:
(a) This Agreement and the Registration Rights Agreement have been approved
by the Board of Directors of Parent, representing all necessary corporate
action on the part of Parent for the execution and performance hereof and
thereof by Parent (no action by the stockholders of Parent being required).
(b) This Agreement has been, and the Registration Rights Agreement will be,
duly executed and delivered by a duly authorized officer of Parent.
(c) This Agreement constitutes, and the Registration Rights Agreement when
duly executed and delivered will constitute, a valid and binding agreement of
Parent, enforceable against Parent in accordance with its terms.
(d) The execution and delivery of this Agreement by Parent does not, and the
execution and delivery of the Registration Rights Agreement by Parent will
not, violate or breach, and will not give rise to any violation or breach, of
Parent's charter or bylaws, or, except as will not materially impair its
ability to effectuate, carry out or comply with all of the terms of this
Agreement and the Registration Rights Agreement, any law, contract,
instrument, arrangement or agreement by which Parent is bound.
Section 8. Representations and Warranties of the Stockholders. Each
Stockholder, as to such Stockholder only, represents and warrants to Parent as
follows:
(a) Schedule I sets forth, opposite such Stockholder's name, the number and
type of Shares of which such Stockholder is the record or beneficial owner.
Such Stockholder is the lawful owner of such Shares, free and clear of all
liens, charges, encumbrances, voting agreements and commitments of every kind,
other than this Agreement, the Stockholders' Agreement and as disclosed on
Schedule I. Except as set forth in Schedule I and except for the Stockholders'
Agreement, neither such Stockholder nor any of its Affiliates owns or holds
any rights to acquire any additional Shares or other securities of the Company
or any interest therein or any voting rights with respect to any additional
Shares or any other securities of the Company.
(b) This Agreement has been approved by the Board of Directors and, to the
extent necessary, the stockholders of such Stockholder, representing all
necessary corporate action on the part of such Stockholder for the execution
and performance hereof by such Stockholder.
(c) This Agreement has been duly executed and delivered by a duly authorized
officer of such Stockholder.
(d) This Agreement constitutes the valid and binding agreement of such
Stockholder, enforceable against such Person in accordance with its terms.
(e) The execution and delivery of this Agreement by such Stockholder does
not violate or breach, and will not give rise to any violation or breach, of
such Stockholder's charter or bylaws, or, except as will not materially impair
the ability of such Stockholder to effectuate, carry out or comply with all of
the terms of this Agreement, any law, contract, instrument, arrangement or
agreement by which such Stockholder is bound.
(f) The execution and delivery of this Agreement by such Stockholder does
not create or give rise to any right in such Stockholder or any of their
respective Affiliates with respect to the Shares or any other security of the
Company (including, without limitation voting rights and rights to purchase or
sell any such Shares or other securities) pursuant to the Stockholders'
Agreement, other than any such right as is duly and validly waived pursuant to
Section 6(a) of this Agreement.
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(g) The execution and delivery of the Stockholders Consent by the
Stockholders are adequate to approve and adopt the Merger Agreement and the
Merger without the vote or consent of any other stockholder of the Company.
(h) The Reorganization (as defined in the Company's prospectus dated
November 6, 1997) of the Company under the Reorganization Agreement dated as
of April 18, 1996 among the Company, the Stockholders and Continental
Cablevision, Inc. (the "Reorganization Agreement") has been completed in
accordance with the terms thereof. Each Stockholder, on behalf of itself and
its Affiliates, hereby waives all defaults and executory rights under the
Reorganization Agreement or any partnership agreement of any Local Market
Partnership (as defined in the Reorganization Agreement) to any of Continental
Cablevision, Inc. or any of the Stockholders or any of their respective
Affiliates.
Section 9. Effectiveness and Termination. In the event the Merger Agreement
is terminated in accordance with its terms (other than pursuant to the last
sentence of Section 9.2 thereof), this Agreement shall automatically terminate
and be of no further force or effect. Upon such termination, except for any
rights any party may have in respect of any breach by any other party of its
obligations hereunder, none of the parties hereto shall have any further
obligation or liability hereunder. The provisions of Section 6(e) hereof shall
survive the Merger.
Section 10. Miscellaneous.
(a) Notices, Etc. All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing
and shall be deemed to have been duly given to any party when delivered
personally (by courier service or otherwise), when delivered by telecopy and
confirmed by return telecopy, or seven days after being mailed by first-class
mail, postage prepaid in each case to the applicable addresses set forth
below:
If to Parent:
AT&T Corp.
295 North Maple Ave.
Basking Ridge, NJ 07920
Attention: Vice President-Law
and Corporate Secretary
Facsimile: (908) 221-6618
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn:Richard D. Katcher, Esq. and
Steven A. Rosenblum, Esq.
Telecopy: (212) 403-2000
If to the Company:
Teleport Communications Group Inc.
429 Ridge Road
Dayton, New Jersey 08810
Attention:Chairman, President and CEO
Facsimile: (732) 392-3600
B-6
<PAGE>
with a copy to:
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Washington, D.C. 20036
Attention:Leonard J. Baxt, Esq.
Timothy J. Kelley, Esq.
Facsimile: (202) 776-2222
and with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention:Philip T. Ruegger, Esq.
Michael Wolfson, Esq.
Facsimile: (212) 455-2502
If to Comcast:
Comcast Corporation
1500 Market Street
Philadelphia, PA 19102
Attention:General Counsel
Facsimile: (215) 981-7794
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Dennis Hersch, Esq.
Facsimile: (212) 450-4800
If to TCI:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, CO 80111-3000
Attention: Leo J. Hendery, Jr.
Facsimile: (303) 488-3200
with a copy to:
Baker & Botts, L.L.P.
599 Lexington Avenue
29th Floor
New York, New York 10022-6030
Attention: Elizabeth M. Markowski, Esq.
Facsimile: (212) 705-5125
If to Cox:
Cox Enterprises, Inc.
1400 Lake Hearn Drive
Atlanta, GA 30319
Attention: David M. Woodrow
Facsimile: (404) 847-6029
B-7
<PAGE>
with a copy to:
Dow, Lohnes & Albertson
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036
Attention: Stuart A. Sheldon, Esq.
Facsimile: (202) 776-2222
or to such other address as such party shall have designated by notice
received by each other party.
(b) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or, except as expressly set forth
in Section 9, terminated, except by an instrument in writing signed by each
party hereto.
(c) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns; provided that, except as contemplated by the Merger
Agreement, neither the rights nor the obligations of any party may be assigned
or delegated without the prior written consent of the other parties except
that Parent may assign its rights under Section 6(e) to any Subsidiary (as
defined in the Merger Agreement).
(d) Entire Agreement. This Agreement (together with the Merger Agreement and
the other agreements and documents expressly contemplated hereby and thereby)
embodies the entire agreement and understanding among the parties relating to
the subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter. There are no representations,
warranties or covenants by the parties hereto relating to such subject matter
other than those expressly set forth in this Agreement and the Merger
Agreement.
(e) Severability. If any term of this Agreement or the application thereof
to any party or circumstance shall be held invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such term to
the other parties or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by applicable law, provided that, in
such event, the parties shall negotiate in good faith in an attempt to agree
to another provision (in lieu of the term or application held to be invalid or
unenforceable) that will be valid and enforceable and will carry out the
parties' intentions hereunder.
(f) Specific Performance. The parties acknowledge that money damages are not
an adequate remedy for violations of this Agreement and that any party may, in
its sole discretion, apply to a court of competent jurisdiction for specific
performance or injunctive or such other relief as such court may deem just and
proper in order to enforce this Agreement or prevent any violation hereof and,
to the extent permitted by applicable law, each party waives any objection to
the imposition of such relief or any requirement for a bond.
(g) Remedies Cumulative. All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall
be cumulative and not alternative, and the exercise or beginning of the
exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
(h) No Waiver. The failure of any party hereto to exercise any right, power
or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(i) No Third Party Beneficiaries. This Agreement is not intended to be for
the benefit of and shall not be enforceable by any person or entity who or
which is not a party hereto.
B-8
<PAGE>
(j) Jurisdiction. Each party hereby irrevocably submits to the exclusive
jurisdiction of the Court of Chancery in the State of Delaware or the United
States District Court of Delaware or any court of the State of Delaware in any
action, suit or proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding shall be brought only in such
court (and waives any objection based on forum non conveniens or any other
objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this paragraph (j) and
shall not be deemed to be a general submission to the jurisdiction of said
Courts or in the State of Delaware other than for such purposes. Each party
hereto hereby waives any right to a trial by jury in connection with any such
action, suit or proceeding.
(k) Governing Law. This Agreement and all disputes hereunder shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Delaware, without regard to principles of conflicts of law.
(l) Name, Captions, Gender. The name assigned this Agreement and the section
captions used herein are for convenience of reference only and shall not
affect the interpretation or construction hereof. Whenever the context may
require, any pronoun used herein shall include the corresponding masculine,
feminine or neuter forms.
(m) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one instrument. Each counterpart may consist
of a number of copies each signed by less than all, but together signed by
all, the parties hereto.
(n) Expenses. Each of Parent and each Stockholder shall bear its own
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, except that in the event of a dispute concerning the
terms or enforcement of this Agreement, the prevailing party in any such
dispute shall be entitled to reimbursement of reasonable legal fees and
disbursements from the other party or parties to such dispute.
(o) Action in Stockholder Capacity Only. No Stockholder makes any agreement
or understanding herein as a director or officer of the Company. Each
Stockholder signs solely in its capacity as a record holder and beneficial
owner of Shares and nothing herein shall limit or affect any actions taken by
a representative of such Stockholder in such representative's capacity as an
officer or director of the Company (it being understood and agreed that the
provisions of this paragraph shall not affect the rights and obligations of
any party to the Merger Agreement or any other agreement).
(p) Obligations Several. The obligations of each Stockholder under this
Agreement (including Annex B hereto) shall be several and not joint. No
Stockholder shall have any liability, duty or obligation arising out of or
resulting from any failure by any other Stockholder (or any Affiliate thereof)
to comply with the terms and conditions of this Agreement.
B-9
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
AT&T Corp.
/s/ John D. Zeglis
By: _________________________________
Name: John D. Zeglis
Title: President
Comcast Corporation
/s/ Lawrence S. Smith
By: _________________________________
Name: Lawrence S. Smith
Title: Executive Vice President
Cox Communications, Inc.
/s/ Jimmy W. Hayes
By: _________________________________
Name: Jimmy W. Hayes
Title: Senior Vice President
of Finance; Chief Financial
Officer
Tele-Communications, Inc.
/s/ Bernard W. Schotters
By: _________________________________
Name: Bernard W. Schotters
Title: Senior Vice President
Finance & Treasurer
Comcast Teleport, Inc.
/s/ Lawrence S. Smith
By: _________________________________
Name: Lawrence S. Smith
Title: Executive Vice President
TCI Teleport, Inc.
/s/ Bernard W. Schotters
By: _________________________________
Name: Bernard W. Schotters
Title: Senior Vice President
Finance and Treasurer
B-10
<PAGE>
Cox Teleport Partners, Inc.
/s/ Jimmy W. Hayes
By: _________________________________
Name: Jimmy W. Hayes
Title: Senior Vice President of
Finance; Chief Financial
Officer
Comcast Communications Properties,
Inc.
/s/ Lawrence S. Smith
By: _________________________________
Name: Lawrence S. Smith
Title: Executive Vice President
Teleport Communications Group Inc. hereby acknowledges its agreement with the
provisions of Annex B hereto.
Teleport Communications Group Inc.
/s/ Robert Annunziata
By: _________________________________
Name: Robert Annunziata
Title: Chairman, President and CEO
B-11
<PAGE>
SCHEDULE I
Share Ownership
<TABLE>
<CAPTION>
SHARES OWNED BENEFICIALLY
-----------------------------------------------
CLASS A COMMON STOCK CLASS B COMMON STOCK
-----------------------------------------------
NAME OF STOCKHOLDER SHARES OPTIONS SHARES OPTIONS
------------------- ------------ ----------------------- ----------
<S> <C> <C> <C> <C>
Comcast Corporation.................. None None 25,622,058 None
Tele-Communications, Inc. ........... 1,011,528 None 48,779,388 None
Cox Communications, Inc. ............ None None 39,087,594 None
Total............................
<CAPTION>
SHARES OWNED OF RECORD
-----------------------------------------------
CLASS A COMMON STOCK CLASS B COMMON STOCK
-----------------------------------------------
NAME OF STOCKHOLDER OF RECORD SHARES OPTIONS SHARES OPTIONS
----------------------------- ------------ ----------------------- ----------
<S> <C> <C> <C> <C>
TCI Teleport, Inc. .................. 1,011,528 None 48,779,388 None
Comcast Teleport, Inc. .............. None None 25,438,036 None
Comcast Communications Properties,
Inc. ............................... None None 184,022 None
Cox Teleport Partners, Inc. ......... None None 39,087,594 None
Total............................
</TABLE>
B-12
<PAGE>
APPENDIX C
[Merrill Lynch, Pierce, Fenner & Smith Incorporated Letterhead]
January 8, 1998
Board of Directors
Teleport Communications Group Inc.
429 Ridge Road
Dayton, New Jersey 08810
Members of the Board of Directors:
Teleport Communications Group Inc. (the "Company"), and AT&T Corp. (the
"Acquiror") and TA Merger Corp., a newly formed, wholly owned subsidiary of
the Acquiror (the "Acquisition Sub"), propose to enter into an Agreement and
Plan of Merger (the "Agreement") pursuant to which the Acquisition Sub will be
merged with and into the Company in a transaction (the "Merger") in which each
outstanding share of the Company's Class A common stock, par value $.01 per
share, and the Company's Class B common stock, par value $.01 per share
(collectively, the "Company Shares"), will be converted into the right to
receive 0.943 shares (the "Exchange Ratio") of the common stock of the
Acquiror, par value $1.00 per share (the "Acquiror Shares").
You have asked us whether, in our opinion, the Exchange Ratio is fair from a
financial point of view to the holders of the Company Shares.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the Company and the Acquiror that we deemed to be
relevant;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets, liabilities and
prospects of the Company furnished to us by the Company, as well as
the amount and timing of the cost savings and related expenses and
synergies expected to result from the Merger (the "Expected
Synergies") furnished to us by the Company and the Acquiror;
(3) Conducted discussions with members of senior management of the Company
and the Acquiror concerning the matters described in clauses 1 and 2
above, as well as their respective businesses and prospects before and
after giving effect to the Merger and the Expected Synergies;
(4) Reviewed the market prices and valuation multiples for the Company
Shares and the Acquiror Shares and compared them with those of certain
publicly traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and compared them
with those of certain publicly traded companies that we deemed to be
relevant;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions that we deemed to be relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company, including TCI Communications, Inc.,
Cox Communications, Inc. and Comcast Corporation (collectively, the
"Shareholders"), and the Acquiror and their financial and legal
advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed drafts dated January 7, 1998 of the Agreement, the Voting
Agreement, the Registration Rights Agreement and the Amended and
Restated Facilities Agreement; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
C-1
<PAGE>
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have
not assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or the Acquiror or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct, nor have we conducted, any physical inspection of the properties or
facilities of the Company or the Acquiror. With respect to the financial
forecast information and the Expected Synergies furnished to or discussed with
us by the Company and/or the Acquiror, we have assumed that they have been
reasonably prepared and reflect the best currently available estimates and
judgment of the Company's and/or the Acquiror's management as to the expected
future financial performance of the Company or the Acquiror, as the case may
be, and the Expected Synergies. We have further assumed that the Merger will
be accounted for as a pooling of interests under generally accepted accounting
principles and that it will qualify as a tax-free reorganization for U.S.
federal income tax purposes. We have also assumed that the final form of the
Agreement, the Voting Agreement, the Registration Rights Agreement and the
Amended and Restated Facilities Agreement will be substantially similar to the
last draft of each reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available
to us as of, the date hereof. We have assumed that in the course of obtaining
the necessary regulatory or other consents or approvals (contractual or
otherwise) for the Merger, no restrictions, including any divestiture
requirements or amendments or modifications, will be imposed that will have a
material adverse effect on the contemplated benefits of the Merger.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company for our services, a significant
portion of which is contingent upon the consummation of the Merger. In
addition, the Company has agreed to indemnify us for certain liabilities
arising out of our engagement. We are currently advising the Company in
connection with its acquisition of ACC Corp. and are providing financial
advisory services to the Acquiror and the Shareholders in connection with
other potential transactions. We have, in the past, provided financial
advisory and financing services to the Company, the Acquiror and the
Shareholders and may continue to do so and have received, and may receive,
fees for the rendering of such services. In addition, in the ordinary course
of our business, we may actively trade the Company Shares and other securities
of the Company, as well as the Acquiror Shares and other securities of the
Acquiror, for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Merger and does not constitute a recommendation
to any shareholder as to how such shareholder should vote on the proposed
Merger.
We are not expressing any opinion herein as to the prices at which the
Acquiror Shares will trade following the announcement or consummation of the
Merger.
On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Exchange Ratio is fair from a financial point of view
to the holders of the Company Shares.
Very truly yours,
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
C-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the statutes of the State of New York, a director or officer of
a corporation is entitled, under specified circumstances, to indemnification
by the corporation against reasonable expenses, including attorneys' fees,
incurred by him in connection with the defense of a civil or criminal
proceeding to which he has been made, or threatened to be made, a party by
reason of the fact that he was such director or officer. In certain
circumstances, indemnity is provided against judgments, fines and amounts paid
in settlement. In general, indemnification is available where the director or
officer acted in good faith, for a purpose such director or officer reasonably
believed to be in the best interests of the corporation. Specific court
approval is required in some cases. The foregoing statement is qualified in
its entirety by reference to Sections 715, 717 and 721 through 725 of the New
York Business Corporation Law ("NYBCL").
The by-laws of the Registrant provide that the Registrant is authorized, by
(i) a resolution of shareholders, (ii) a resolution of directors or (iii) an
agreement providing for such indemnification, to the fullest extent permitted
by applicable law, to provide indemnification and to advance expenses to its
directors and officers in respect of claims, actions, suits, or proceedings
based upon, arising from, relating to, or by reason of the fact that any such
director or officer serves or served in such capacity with the corporation or
at the request of the Registrant in any capacity with any other enterprise.
The Registrant has entered into contracts with its officers and directors,
pursuant to the provisions of NYBCL Section 721, by which it will be obligated
to indemnify such persons, to the fullest extent permitted by the NYBCL,
against expenses, fees, judgments, fines, and amounts paid in settlement in
connection with any present or future threatened, pending or completed action,
suit or proceeding based in any way upon or related to the fact that such
person was an officer or director of the Registrant or, at the request of the
Registrant, an officer, director or other partner, agent, employee, or trustee
of another enterprise. The contractual indemnification so provided will not
extend to any situation where a judgment or other final adjudication adverse
to such person establishes that his acts were committed in bad faith or were
the result of active and deliberate dishonesty or that there inured to such
person a financial profit or other advantage.
The directors and officers of the Registrant are covered by insurance
policies indemnifying them against certain liabilities, including certain
liabilities arising under the Securities Act, which might be incurred by them
in such capacities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith or incorporated herein by
reference:
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C> <S>
2.01 Agreement and Plan of Merger, dated as of January 8, 1998, among
the Registrant, TA Merger Corp. and Teleport Communications Group
Inc. (included as Appendix A to the Information
Statement/Prospectus). The Registrant agrees to furnish
supplementally a copy of any omitted schedule to the Commission
upon request.
2.02 Voting Agreement, dated as of January 8, 1998, among the
Registrant, Comcast Corporation, Comcast Teleport, Inc., Comcast
Communications Properties, Inc., Tele-Communications, Inc., TCI
Teleport, Inc., Cox Communications, Inc. and Cox Teleport
Partners, Inc. (incorporated by reference to Exhibit 9 to the
Registrant's Current Report on Form 8-K dated January 8, 1998).
4.01 No instrument which defines the rights of holders of long term
debt, of the Registrant and all of its consolidated subsidiaries,
is filed herewith pursuant to Regulation S-K, Item
601(b)(4)(iii)(A). Pursuant to this regulation, the Registrant
hereby agrees to furnish a copy of any such instrument to the
Commission upon request.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C> <S>
5.01 Opinion of Marilyn J. Wasser, Secretary and Vice President-Law of
the Registrant, as to the legality of the securities being
registered.
8.01 Opinion of Wachtell, Lipton, Rosen & Katz as to certain U.S.
federal income tax matters.
8.02 Opinion of Dow, Lohnes & Albertson, PLLC as to certain U.S.
federal income tax matters.
23.01 Consent of Marilyn J. Wasser (included in Exhibit 5.01).
23.02 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
23.03 Consent of Coopers & Lybrand LLP.
23.04 Consent of Deloitte & Touche LLP.
23.05 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit
8.01).
23.06 Consent of Dow, Lohnes & Albertson, PLLC (included in Exhibit
8.02).
24.01 Powers of attorney.
99.01 Registration Rights Agreement, dated as of January 8, 1998, among
the Registrant, Tele-Communications, Inc., Cox Communications,
Inc. and Comcast Corporation (incorporated by reference to
Exhibit 10 to the Registrant's Current Report on Form 8-K dated
January 8, 1998).
</TABLE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
That for purposes of determining any liability under the Securities Act,
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
That prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this Registration Statement, by
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition
to the information called for by the other items of the applicable form.
That every prospectus: (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to this Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered will,
II-2
<PAGE>
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
this Registration Statement through the date of responding to the request.
To supply by means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved therein, that was not
the subject of and included in this Registration Statement when it became
effective.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS
DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW
YORK, ON APRIL 3, 1998.
AT&T Corp.
/s/ Marilyn J. Wasser
By: __________________________________
Marilyn J. Wasser
Vice President--Law and Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATE INDICATED.
SIGNATURE CAPACITY
Chairman and Chief Executive
PRINCIPAL EXECUTIVE OFFICER: Officer
C. Michael Armstrong*
PRINCIPAL FINANCIAL OFFICER: Senior Executive Vice President &
Chief Financial Officer
Daniel E. Somers*
Vice President and Controller
PRINCIPAL ACCOUNTING OFFICER:
Maureen B. Tart*
DIRECTORS
C. Michael Armstrong*
Kenneth T. Derr*
M. Kathryn Eickhoff*
Walter Y. Elisha*
George M.C. Fisher*
Donald V. Fites*
Ralph S. Larsen*
Donald F. McHenry*
Michael I. Sovern*
Thomas H. Wyman*
John D. Zeglis*
/s/ Marilyn J. Wasser
*By: _____________________________
Marilyn J. Wasser
(Attorney-in-Fact)
April 3, 1998
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT DESCRIPTION PAGE NO.
----------- -------------------- --------
<C> <S> <C>
2.01 Agreement and Plan of Merger, dated as of January 8,
1998, among the Registrant, TA Merger Corp. and
Teleport Communications Group Inc. (included as
Appendix A to the Information Statement/Prospectus).
The Registrant agrees to furnish supplementally a copy
of any omitted schedule to the Commission upon request.
2.02 Voting Agreement, dated as of January 8, 1998, among
the Registrant, Comcast Corporation, Comcast Teleport,
Inc., Comcast Communications Properties, Inc., Tele-
Communications, Inc., TCI Teleport, Inc., Cox
Communications, Inc. and Cox Teleport Partners, Inc.
(incorporated by reference to Exhibit 9 to the
Registrant's Current Report on Form 8-K dated January
8, 1998).
4.01 No instrument which defines the rights of holders of
long term debt, of the Registrant and all of its
consolidated subsidiaries, is filed herewith pursuant
to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to
this regulation, the Registrant hereby agrees to
furnish a copy of any such instrument to the Commission
upon request.
5.01 Opinion of Marilyn J. Wasser, Secretary and Vice
President-Law of the Registrant, as to the legality of
the securities being registered.
8.01 Opinion of Wachtell, Lipton, Rosen & Katz as to certain
U.S. federal income tax matters.
8.02 Opinion of Dow, Lohnes & Albertson, PLLC as to certain
U.S. federal income tax matters.
23.01 Consent of Marilyn Wasser (included in Exhibit 5.01).
23.02 Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
23.03 Consent of Coopers & Lybrand LLP.
23.04 Consent of Deloitte & Touche LLP.
23.05 Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 8.01).
23.06 Consent of Dow, Lohnes & Albertson, PLLC (included in
Exhibit 8.02).
24.01 Powers of attorney.
99.01 Registration Rights Agreement, dated as of January 8,
1998, among the Registrant, Tele-Communications, Inc.,
Cox Communications, Inc. and Comcast Corporation
(incorporated by reference to Exhibit 10 to the
Registrant's Current Report on Form 8-K dated
January 8, 1998).
</TABLE>
<PAGE>
Exhibit 5.01
April 3, 1998
AT&T Corp.
32 Avenue of the Americas
New York, New York 10013
Dear Sirs:
With reference to the registration statement on Form S-4 (the "Registration
Statement") that AT&T Corp. (the "Company") proposes to file with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, relating
to the 192,644,565 shares of the Company's common stock, par value $1.00 per
share (the "Common Stock"), to be issued pursuant to the Agreement and Plan of
Merger, dated as of January 8, 1998, by and among the Company, Teleport
Communications Group Inc. and TA Merger Corp., I am of the opinion that:
1. the Company is a duly organized and validly existing corporation under
the laws of the State of New York;
2. the issuance of the Common Stock has been duly authorized by
appropriate corporate action of the Company; and
3. when the Common Stock has been issued and delivered pursuant to a sale
in the manner described in the Registration Statement, such Common
Stock will be validly issued, fully paid and non-assessable.
In giving the foregoing opinion, I have relied as to matters of the laws of
the State of New York on an opinion of Robert S. Feit, General Attorney, AT&T
Corp., to the undersigned and the Company, dated as of the date hereof.
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission in connection with the filing of the Registration Statement.
I also consent to the making of the statement with respect to me in the related
prospectus under the heading "Legal Opinions".
Very truly yours,
/s/ Marilyn J. Wasser
Marilyn J. Wasser
Vice President - Law and Secretary
<PAGE>
EXHIBIT 8.01
[Letterhead of Wachtell, Lipton, Rosen & Katz]
April 3, 1998
AT&T Corp.
295 North Maple Avenue
Basking Ridge, New Jersey
07920
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") of AT&T Corp., a New York corporation ("AT&T),
relating to the registration of shares of common stock, par value $1.00 per
share, of AT&T ("AT&T Common Stock") to be issued pursuant to an Agreement and
Plan of Merger, dated as of January 8, 1998, among AT&T, TA Merger Corp.,
Delaware corporation and wholly owned subsidiary of AT&T, and Teleport
Communications Group Inc., a Delaware corporation ("TCG").
The discussion set forth under the heading "THE MERGER - Certain Federal
Income Tax Consequences" in the Information Statement/Prospectus that is part of
the Registration Statement describes our opinion regarding certain tax issues,
which is a condition to AT&T's obligations to consummate the Merger. Such
description is accurate in all material respects.
We consent to the use of this opinion as Exhibit 8.01 to the
Registration Statement and to the reference to our firm under the heading "THE
MERGER - Certain Federal Income Tax Consequences" in the Information
Statement/Prospectus that is part of the Registration Statement. In giving such
consent, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Wechtell, Lipton, Rosen & Katz
<PAGE>
EXHIBIT 8.02
[LETTERHEAD OF DOW, LOHNES & ALBERTSON, PLLC]
April 3, 1998
Teleport Communications Group Inc.
One Teleport Drive
Staten Island, New York 10311
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4 (the
"Registration Statement") of AT&T Corp. ("AT&T"), a New York corporation,
relating to the registration of shares of common stock, par value $1.00 per
share, of AT&T to be issued pursuant to the Agreement and Plan of Merger, dated
as of January 8, 1998, among AT&T, TA Merger Corp., a Delaware corporation, and
Teleport Communications Group inc., a Delaware corporation.
The discussion set forth under the heading "THE MERGER--Certain Federal
Income Tax Consequences" in the Information Statement/Prospectus that is part of
the Registration Statement describes our opinion regarding certain tax matters
and is accurate in all material respects.
We consent to the use of this letter as Exhibit 8.02 to the Registration
Statement and to the reference to our firm under the heading "THE
MERGER--Certain Federal Income Tax Consequences" in the Information
Statement/Prospectus that is part of the Registration Statement. In giving such
consent, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Dow, Lohnes & Albertson, PLLC
<PAGE>
EXHIBIT 23.02
CONSENT OF
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
April 3, 1998
The Board of Directors
Teleport Communications Group Inc.
We hereby consent to the use in the Registration Statement on Form S-4
of AT&T Corp. ("AT&T") and in the related Information Statement/Prospectus of
AT&T and Teleport Communications Group Inc. ("Teleport") of our opinion dated
January 8, 1998, appearing as Appendix C to the Information
Statement/Prospectus, to the description therein of such opinion and of our
presentation to the Board of Directors of Teleport on January 8, 1998, and to
references therein to us under the headings "SUMMARY -- Fairness Opinion," "THE
MERGER -- Background." "THE MERGER -- TCG's Reasons for the Merger;
Recommendation of the TCG Board" and "THE MERGER -- Opinion of the Financial
Advisor to the TCG Board."
In giving such consent, we do not admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder, nor do we thereby admit that we are experts with respect
to any part of such Registration Statement within the meaning of the term
"experts" as used in the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
/s/ Hugh O'Hare
<PAGE>
EXHIBIT 23.03
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
AT&T Corp. (the "Company") on Form S-4 of our report dated January 26, 1998, on
our audits of the consolidated financial statements and financial statements
schedule of the Company, as of December 31, 1997 and 1996, and for the years
ended December 31, 1997, 1996, and 1995, which report is incorporated by
reference into the Company's Annual Report on Form 10-K for the year ended
December 31, 1997. We also consent to the references to our firm under the
captions "Experts" and "Selected Financial Data."
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
New York, New York
April 3, 1998
<PAGE>
EXHIBIT 23.04
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of AT&T Corp. on Form S-4 of our report dated March 3, 1998, appearing
in the Annual Report on Form 10-K of Teleport Communications Group Inc., and to
the reference to us under the headings "Selected Historical Financial
Information - TCG; and "Experts" in the Information Statement/Prospectus, which
is part of this Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
April 3, 1998
<PAGE>
Exhibit 24.01
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter referred to as the
"Company"), proposes to file with the Securities and Exchange Commission, under
the provisions of the Securities Act of 1933, as amended, a registration
statement on Form S-4 with respect to common shares to be used in connection
with the merger of a wholly owned subsidiary of the Company with Teleport
Communications Group, Inc.; and
WHEREAS, the undersigned is both a director and an officer of the Company,
as indicated below his signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints D. E.
SOMERS, M. B. TART and M. J. WASSER and each of them, as attorneys for him and
in his name, place and stead, and in his capacity as both a director and an
officer of the Company, to execute and file any such registration statement, and
thereafter to execute and file any amendments or amendments thereto, hereby
giving and granting to said attorneys, and each of them, full power and
authority to do and perform each and every act and thing whatsoever requisite
and necessary to be done in and about the premises, as fully, to all intents and
purposes, as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall lawfully
do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 20th day of February, 1998.
/s/ C. Michael Armstrong
------------------------------------
C. Michael Armstrong
Chairman of the Board and Director
<PAGE>
STATE OF New Jersey )
) ss.
COUNTY OF Somerset )
On the 20th day of February, 1998, personally appeared before me C. Michael
Armstrong, to me known, and known to me to be the person described in and who
executed the foregoing instrument and duly acknowledged that he executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 20th day of February 1998.
/s/ Janet M. Kirpan
Janet M. Kirpan
Notary Public
<PAGE>
Exhibit 24.01
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter referred to as the
"Company"), proposes to file with the Securities and Exchange Commission, under
the provisions of the Securities Act of 1933, as amended, a registration
statement on Form S-4 with respect to common shares to be used in connection
with the merger of a wholly owned subsidiary of the Company with Teleport
Communications Group, Inc.; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints D. E.
SOMERS, M. B. TART and M. J. WASSER and each of them, as attorneys for him and
in his name, place and stead, and in his capacity as a director of the Company,
to execute and file any such registration statement, and thereafter to execute
and file any amendments or amendments thereto, hereby giving and granting to
said attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever requisite and necessary to be done in
and about the premises, as fully, to all intents and purposes, as he might or
could do if personally present at the doing thereof, hereby ratifying and
confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 26th day of February, 1998.
/s/ Kenneth T. Derr
----------------------------
Kenneth T. Derr
Director
<PAGE>
STATE OF New Jersey )
) ss.
COUNTY OF Somerset )
On the 26th day of February, 1998, personally appeared before me Kenneth T.
Derr, to me known, and known to me to be the person described in and who
executed the foregoing instrument and duly acknowledged that he executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 26th day of February 1998.
/s/ Janet M. Kirpan
Janet M. Kirpan
Notary Public
<PAGE>
Exhibit 24.01
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter referred to as the
"Company"), proposes to file with the Securities and Exchange Commission, under
the provisions of the Securities Act of 1933, as amended, a registration
statement on Form S-4 with respect to common shares to be used in connection
with the merger of a wholly owned subsidiary of the Company with Teleport
Communications Group, Inc.; and
WHEREAS, the undersigned is a director of the Company, as indicated below
her signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints D. E.
SOMERS, M. B. TART and M. J. WASSER and each of them, as attorneys for her and
in her name, place and stead, and in her capacity as a director of the Company,
to execute and file any such registration statement, and thereafter to execute
and file any amendments or amendments thereto, hereby giving and granting to
said attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever requisite and necessary to be done in
and about the premises, as fully, to all intents and purposes, as she might or
could do if personally present at the doing thereof, hereby ratifying and
confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 26th day of February, 1998.
/s/ M. Kathryn Eickhoff
--------------------------------
M. Kathryn Eickhoff
Director
<PAGE>
STATE OF New Jersey )
) ss.
COUNTY OF Somerset )
On the 26th day of February, 1998, personally appeared before me M. Kathryn
Eickhoff, to me known, and known to me to be the person described in and who
executed the foregoing instrument and duly acknowledged that she executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 26th day of February 1998.
/s/ Janet M. Kirpan
Janet M. Kirpan
Notary Public
<PAGE>
Exhibit 24.01
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter referred to as the
"Company"), proposes to file with the Securities and Exchange Commission, under
the provisions of the Securities Act of 1933, as amended, a registration
statement on Form S-4 with respect to common shares to be used in connection
with the merger of a wholly owned subsidiary of the Company with Teleport
Communications Group, Inc.; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints D. E.
SOMERS, M. B. TART and M. J. WASSER and each of them, as attorneys for him and
in his name, place and stead, and in his capacity as a director of the Company,
to execute and file any such registration statement, and thereafter to execute
and file any amendments or amendments thereto, hereby giving and granting to
said attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever requisite and necessary to be done in
and about the premises, as fully, to all intents and purposes, as he might or
could do if personally present at the doing thereof, hereby ratifying and
confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 19th day of February, 1998.
/s/ Walter Y. Elisha
---------------------------------
Walter Y. Elisha
Director
<PAGE>
STATE OF South Carolina )
) ss.
COUNTY OF York )
On the 19th day of February, 1998, personally appeared before me Walter Y.
Elisha, to me known, and known to me to be the person described in and who
executed the foregoing instrument and duly acknowledged that he executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 19th day of February 1998.
/s/ Patricia M. Kimbrell
Patricia M. Kimbrell
Notary Public
<PAGE>
Exhibit 24.01
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter referred to as the
"Company"), proposes to file with the Securities and Exchange Commission, under
the provisions of the Securities Act of 1933, as amended, a registration
statement on Form S-4 with respect to common shares to be used in connection
with the merger of a wholly owned subsidiary of the Company with Teleport
Communications Group, Inc.; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints D. E.
SOMERS, M. B. TART and M. J. WASSER and each of them, as attorneys for him and
in his name, place and stead, and in his capacity as a director of the Company,
to execute and file any such registration statement, and thereafter to execute
and file any amendments or amendments thereto, hereby giving and granting to
said attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever requisite and necessary to be done in
and about the premises, as fully, to all intents and purposes, as he might or
could do if personally present at the doing thereof, hereby ratifying and
confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 22nd day of February, 1998.
/s/ George M. C. Fisher
-------------------------------
George M. C. Fisher
Director
<PAGE>
STATE OF New York )
) ss.
COUNTY OF Monroe )
On the 22nd day of February, 1998, personally appeared before me George M.
C. Fisher, to me known, and known to me to be the person described in and who
executed the foregoing instrument and duly acknowledged that he executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 22nd day of February 1998.
/s/ Karen J. Bruno
Karen J. Bruno
Notary Public
<PAGE>
Exhibit 24.01
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter referred to as the
"Company"), proposes to file with the Securities and Exchange Commission, under
the provisions of the Securities Act of 1933, as amended, a registration
statement on Form S-4 with respect to common shares to be used in connection
with the merger of a wholly owned subsidiary of the Company with Teleport
Communications Group, Inc.; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints D. E.
SOMERS, M. B. TART and M. J. WASSER and each of them, as attorneys for him and
in his name, place and stead, and in his capacity as a director of the Company,
to execute and file any such registration statement, and thereafter to execute
and file any amendments or amendments thereto, hereby giving and granting to
said attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever requisite and necessary to be done in
and about the premises, as fully, to all intents and purposes, as he might or
could do if personally present at the doing thereof, hereby ratifying and
confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 20th day of February, 1998.
/s/ Donald V. Fites
-----------------------------------
Donald V. Fites
Director
<PAGE>
STATE OF Illinois )
) ss.
COUNTY OF Peoria )
On the 20th day of February, 1998, personally appeared before me Donald V.
Fites, to me known, and known to me to be the person described in and who
executed the foregoing instrument and duly acknowledged that he executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 20th day of February 1998.
/s/ Sara L. Malmberg
Sara L. Malmberg
Notary Public
<PAGE>
Exhibit 24.01
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter referred to as the
"Company"), proposes to file with the Securities and Exchange Commission, under
the provisions of the Securities Act of 1933, as amended, a registration
statement on Form S-4 with respect to common shares to be used in connection
with the merger of a wholly owned subsidiary of the Company with Teleport
Communications Group, Inc.; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints D. E.
SOMERS, M. B. TART and M. J. WASSER and each of them, as attorneys for him and
in his name, place and stead, and in his capacity as a director of the Company,
to execute and file any such registration statement, and thereafter to execute
and file any amendments or amendments thereto, hereby giving and granting to
said attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever requisite and necessary to be done in
and about the premises, as fully, to all intents and purposes, as he might or
could do if personally present at the doing thereof, hereby ratifying and
confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 26th day of February, 1998.
/s/ Ralph S. Larsen
--------------------------------
Ralph S. Larsen
Director
<PAGE>
STATE OF New Jersey )
) ss.
COUNTY OF Somerset )
On the 26th day of February, 1998, personally appeared before me Ralph S.
Larsen, to me known, and known to me to be the person described in and who
executed the foregoing instrument and duly acknowledged that he executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 26th day of February 1998.
/s/ Janet M. Kirpan
Janet M. Kirpan
Notary Public
<PAGE>
Exhibit 24.01
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter referred to as the
"Company"), proposes to file with the Securities and Exchange Commission, under
the provisions of the Securities Act of 1933, as amended, a registration
statement on Form S-4 with respect to common shares to be used in connection
with the merger of a wholly owned subsidiary of the Company with Teleport
Communications Group, Inc.; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints D. E.
SOMERS, M. B. TART and M. J. WASSER and each of them, as attorneys for him and
in his name, place and stead, and in his capacity as a director of the Company,
to execute and file any such registration statement, and thereafter to execute
and file any amendments or amendments thereto, hereby giving and granting to
said attorneys, and each of them, full power and authority to do and perform
each and every act and thing whatsoever requisite and necessary to be done in
and about the premises, as fully, to all intents and purposes, as he might or
could do if personally present at the doing thereof, hereby ratifying and
confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 26th day of February, 1998.
/s/ Donald F. McHenry
--------------------------------
Donald F. McHenry
Director
<PAGE>
STATE OF New Jersey )
) ss.
COUNTY OF Somerset )
On the 26th day of February, 1998, personally appeared before me Donald F.
McHenry, to me known, and known to me to be the person described in and who
executed the foregoing instrument and duly acknowledged that he executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 26th day of February 1998.
/s/ Janet M. Kirpan
Janet M. Kirpan
Notary Public
<PAGE>
Exhibit 24.01
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter referred to as the
"Company"), proposes to file with the Securities and Exchange Commission, under
the provisions of the Securities Act of 1933, as amended, a registration
statement on Form S-4 with respect to common shares to be used in connection
with the merger of a wholly owned subsidiary of the Company with Teleport
Communications Group, Inc.; and
WHEREAS, the undersigned is an officer of the Company, as indicated below
his signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints M. B. TART
and M. J. WASSER and each of them, as attorneys for him and in his name, place
and stead, and in his capacity as an officer of the Company, to execute and file
any such registration statement, and thereafter to execute and file any
amendments or amendments thereto, hereby giving and granting to said attorneys,
and each of them, full power and authority to do and perform each and every act
and thing whatsoever requisite and necessary to be done in and about the
premises, as fully, to all intents and purposes, as he might or could do if
personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do, or cause to be done, by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 20th day of February, 1998.
/s/ Daniel E. Somers
------------------------------------
Daniel E. Somers
Senior Vice President and
Chief Financial Officer
<PAGE>
STATE OF New Jersey )
) ss.
COUNTY OF Somerset )
On the 20th day of February, 1998, personally appeared before me Daniel E.
Somers, to me known, and known to me to be the person described in and who
executed the foregoing instrument and duly acknowledged that he executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 20th day of February 1998.
/s/ Janet Kirpan
Janet Kirpan
Notary Public
<PAGE>
Exhibit 24.01
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter referred to as the
"Company"), proposes to file with the Securities and Exchange Commission, under
the provisions of the Securities Act of 1933, as amended, a registration
statement on Form S-4 with respect to common shares to be used in connection
with the merger of a wholly owned subsidiary of the Company with Teleport
Communications Group, Inc.; and
WHEREAS, the undersigned is a director of the Company, as indicated below his
signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints D. E. SOMERS,
M. B. TART and M. J. WASSER and each of them, as attorneys for him and in his
name, place and stead, and in his capacity as a director of the Company, to
execute and file any such registration statement, and thereafter to execute and
file any amendments or amendments thereto, hereby giving and granting to said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he might or could do if
personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do, or cause to be done, by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this
26th day of February, 1998.
/s/ Michael I. Sovern
-------------------------
Michael I. Sovern
Director
<PAGE>
STATE OF New Jersey )
) ss.
COUNTY OF Somerset )
On the 26th day of February, 1998, personally appeared before me Michael I.
Sovern, to me known, and known to me to be the person described in and who
executed the foregoing instrument and duly acknowledged that he executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 26th day of February 1998.
/s/ Janet M. Kirpan
Janet M. Kirpan
Notary Public
<PAGE>
Exhibit 24.01
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter referred to as the
"Company"), proposes to file with the Securities and Exchange Commission, under
the provisions of the Securities Act of 1933, as amended, a registration
statement on Form S-4 with respect to common shares to be used in connection
with the merger of a wholly owned subsidiary of the Company with Teleport
Communications Group, Inc.; and
WHEREAS, the undersigned is an officer of the Company, as indicated below her
signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints D. E. SOMERS
and M. J. WASSER and each of them, as attorneys for her and in her name, place
and stead, and in her capacity as an officer of the Company, to execute and file
any such registration statement, and thereafter to execute and file any
amendments or amendments thereto, hereby giving and granting to said attorneys,
and each of them, full power and authority to do and perform each and every act
and thing whatsoever requisite and necessary to be done in and about the
premises, as fully, to all intents and purposes, as she might or could do if
personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do, or cause to be done, by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this
26th day of February, 1998.
/s/ Maureen Tart
----------------------------------
Maureen Tart
Vice President and Controller
<PAGE>
STATE OF New Jersey )
) ss.
COUNTY OF Somerset )
On the 26th day of February, 1998, personally appeared before me Maureen Tart,
to me known, and known to me to be the person described in and who executed the
foregoing instrument and duly acknowledged that she executed and delivered the
same for the purpose therein expressed.
WITNESS my hand and official seal this 26th day of February 1998.
/s/ Janet M. Kirpan
Janet M. Kirpan
Notary Public
<PAGE>
Exhibit 24.01
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter referred to as the
"Company"), proposes to file with the Securities and Exchange Commission, under
the provisions of the Securities Act of 1933, as amended, a registration
statement on Form S-4 with respect to common shares to be used in connection
with the merger of a wholly owned subsidiary of the Company with Teleport
Communications Group, Inc.; and
WHEREAS, the undersigned is a director of the Company, as indicated below his
signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints D. E. SOMERS,
M. B. TART and M. J. WASSER and each of them, as attorneys for him and in his
name, place and stead, and in his capacity as a director of the Company, to
execute and file any such registration statement, and thereafter to execute and
file any amendments or amendments thereto, hereby giving and granting to said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing whatsoever requisite and necessary to be done in and about
the premises, as fully, to all intents and purposes, as he might or could do if
personally present at the doing thereof, hereby ratifying and confirming all
that said attorneys may or shall lawfully do, or cause to be done, by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this
20th day of February, 1998.
/s/ Thomas H. Wyman
-----------------------------
Thomas H. Wyman
Director
<PAGE>
STATE OF New Jersey )
) ss.
COUNTY OF Somerset )
On the 20th day of February, 1998, personally appeared before me Thomas H.
Wyman, to me known, and known to me to be the person described in and who
executed the foregoing instrument and duly acknowledged that he executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 20th day of February 1998.
/s/ Janet M. Kirpan
Janet M. Kirpan
Notary Public
<PAGE>
Exhibit 24.01
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, AT&T CORP., a New York corporation (hereinafter referred to as the
"Company"), proposes to file with the Securities and Exchange Commission, under
the provisions of the Securities Act of 1933, as amended, a registration
statement on Form S-4 with respect to common shares to be used in connection
with the merger of a wholly owned subsidiary of the Company with Teleport
Communications Group, Inc.; and
WHEREAS, the undersigned is both a director and officer of the Company, as
indicated below his signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints D. E. SOMERS,
M. B. TART and M. J. WASSER and each of them, as attorneys for him and in his
name, place and stead, and in his capacity as both a director and officer of the
Company, to execute and file any such registration statement, and thereafter to
execute and file any amendments or amendments thereto, hereby giving and
granting to said attorneys, and each of them, full power and authority to do and
perform each and every act and thing whatsoever requisite and necessary to be
done in and about the premises, as fully, to all intents and purposes, as he
might or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this
21st day of February, 1998.
/s/ John D. Zeglis
----------------------------------
John D. Zeglis
President and Director
<PAGE>
STATE OF New Jersey )
) ss.
COUNTY OF Somerset )
On the 21st day of February, 1998, personally appeared before me John D.
Zeglis, to me known, and known to me to be the person described in and who
executed the foregoing instrument and duly acknowledged that he executed and
delivered the same for the purpose therein expressed.
WITNESS my hand and official seal this 21st day of February 1998.
/s/ Janet M. Kirpan
Janet M. Kirpan
Notary Public
